Medco profit tops estimates

(Reuters) - Medco Health Solutions Inc (MHS.N: Quote, Profile, Research) reported better-than-expected quarterly earnings on Tuesday, helped by sales of generic drugs, and the pharmacy benefit manager boosted its full-year profit forecast, sending its shares higher.

Medco, which derives more than half its profit from home delivery of generic medicines by mail, said its rosier outlook reflected confidence in its fundamentals, new business, and more generics becoming available sooner than anticipated.

Pharmacy benefit managers (PBMs), which administer prescription drug benefits for employers and health plans and operate large mail-order pharmacies, have profited from the availability of low-cost generic versions of popular drugs.

Morgan Stanley analyst David Veal said in a research note, "Another quarter of solid growth, when coupled with higher guidance, affirm our positive view of the PBM industry and should offer relief for the high level of investor nervousness around the quarter."

After a huge gain in 2007, Medco shares were down 3 percent this year through Friday's close, compared with a 13 percent drop for rival Express Scripts Inc (ESRX.O: Quote, Profile, Research). Medco shares rose 4 percent to $51 in pre-market trading on Tuesday.

Fourth-quarter net income fell 9 percent to $207.6 million, or 38 cents per share, from $228.8 million, or 39 cents per share, a year earlier.

The latest results were hurt by higher-than-expected costs tied to new clients and expenses related to two acquisitions. The year-earlier earnings were boosted by the temporary availability of a generic version of a popular blood thinner.

 

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