Pharmacy benefits manager Medco Health Solutions Inc. said Tuesday its profit climbed 24 percent in the fourth quarter on rising revenue due to higher prices for brand-name drugs and winning new clients.
The results narrowly topped analysts' expectations and Medco reaffirmed its earnings outlook for 2010. But Wall Street's average earnings estimate for this year is at the high end of Medco's projected range.
Its shares fell $2.46, or 3.8 percent, to $62.25 in morning trading.
The company said profit rose to $341.5 million, or 70 cents per share, in the three months ended Dec. 26, up from $274.4 million, or 54 cents per share, a year ago.
Revenue rose 18 percent to $15.25 billion from $12.96 billion a year ago. At the company's Accredo specialty pharmacy business, revenue jumped 18 percent to $2.46 billion.
Excluding valuation costs still being recognized related to its 2003 spinoff from Merck and Co., Medco said it earned 76 cents per share — a penny more than analysts surveyed by Thomson Reuters expected. Analysts were also looking for lower revenue of $15.09 billion.
Medco said it filled 227.4 million prescriptions during the quarter. That includes standard monthlong prescriptions and three-month prescriptions filled by mail. Prescriptions increased almost 15 percent from last year.
Medco said it has won $4.2 billion in business with new clients for 2010.
With a slew of top selling drugs scheduled to lose patent protection in 2011 and 2012, Deutsche Bank analyst Ross Muken said he is encouraged by Medco's continued success in winning new clients.
"Medco remains a best-in-class PBM with a core focus on improving clinical outcomes in addition to reducing broader healthcare costs," he said.
Billion-dollar drugs that will face generic competition in the next few years include the blood thinner Plavix which is the world's best selling prescription drug, the cholesterol drug Lipitor and the allergy drug Singulair.
For the full year, the company earned $1.28 billion, or $2.61 per share, compared with profit of $1.1 billion, or $2.13 per share, in 2008. Revenue rose to $59.8 billion from $51.26 billion.
The company is planning to do more research comparing the effectiveness of different drugs, which could help its clients save money by choosing the least expensive option. It is in the early stages of a study comparing Plavix to a newer blood thinner, Effient. Medco also bought genetic test consulting company DNA Direct Inc. earlier this month.
The company reaffirmed it expects earnings of $3.28 to $3.38 per share, excluding charges, for this year. Analysts expect $3.36 per share.
Medco said its first-quarter profit and revenue will be greater than its fourth-quarter totals. Analysts expect a profit of 77 cents per share on $15.97 billion in revenue, an increase of about 5 percent from its fourth quarter sales.
Associated Press Writer Damian Troise in New York contributed to this story.
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