Jones Lang LaSalle


Medco Health Solutions reports huge earnings

There was nothing generic about the latest earnings from Medco Health Solutions.
The nation’s largest pharmacy benefits manager, which is based in Franklin Lakes, today reported that its fourth-quarter profit rose 33 percent on record-setting revenues, increased use of generic medicines and new contracts.

For the three months ended Dec. 31, net income rose to $176.8 million, or 57 cents a share, compared with $132.8 million, or 48 cents, a year earlier. Revenue jumped 21 percent, to $10.8 billion, up from $8.9 billion in the previous year. Excluding a 9-cent writedown, earnings were 66 cents, beating a Wall Street consensus of 61 cents.

Tom Gallucci, a Merrill Lynch analyst, also noted that Medco processed 24 million prescriptions through its mail-order unit, a better-than-expected showing.

The results boosted Medco shares nearly 6 percent in mid-afternoon trading. The shares stood at $58.98, up $3.26, after hitting a 52-week high earlier in the day.

Investors were also excited at the prospect of still greater returns later this year, when Medco expects further use of generics. In remarks to analysts, Medco executives noted that earnings should "more heavily weighted toward the end of the year," thanks to patent expirations on several big-selling, brand-name prescription medicines.

These include Merck’s Zocor cholesterol pill and Pfizer’s Zoloft antidepressant, which will face increased competition from lower-cost generic rivals that Medco clients prefer.
Contributed by Ed Silverman