NEW YORK (Reuters)—Pharmacy benefit manager Medco Health Solutions reported a higher-than-expected quarterly profit, helped by higher prices for branded drugs and new business, and it raised its full-year forecast. The company now expects to earn $2.76 to $2.81 per share, excluding amortization of intangible assets, up from its prior view of $2.67 to $2.77.
"We are confident in our continued strong performance for the remainder of 2009, despite the weak economy," Chief Executive David Snow said in a statement.
Medco shares rose more than 3% in premarket trading to $53.17. Second-quarter net earnings rose to $312.1 million, or 64 cents per share, from $262.7 million, or 51 cents per share, a year earlier. Excluding items, the company earned 69 cents per share, topping analysts' average expectations by 4 cents, according to Reuters Estimates.
"Medco delivered a strong, high-quality quarter, with very little to pick at," said JPMorgan analyst Lisa Gill. "Gross profit drove the upside, with nice increases of generic utilization."
Use of generic medicines rose 3.6 percentage points to a record 67.3%. Revenue rose 17% to a record $14.9 billion, exceeding Wall Street estimates of $14.6 billion, with specialty pharmacy revenue up 20.3% at $2.4 billion. The increased revenue was helped by sales to new clients and price increases on more expensive branded medicines. Medco also said its client retention rate for 2010 exceeds 98%. Pharmacy benefit managers, or PBMs, administer prescription drug benefit for employers and health plans and operate large mail-order pharmacies. Total prescription volume for the quarter rose 13.5% to 224.9 million.
"Medco's prescription drug volumes did not show any weakness related to the economy," Wells Fargo Securities analyst Matt Perry said in a research note, adding that he had been concerned about the potential for recession-related weakness.