Medco Health 3Q profit rises 38 pct, beats view

Medco reaffirmed its full-year profit guidance and also announced a repurchase of up to $3 billion of stock.

Its shares rose $3.47, or 9.1 percent, to close at $41.47 in Wednesday trading.

The company earned $295.7 million, or 58 cents per share, in the three months ended Sept. 27 compared with $214.7 million, or 39 cents per share, a year earlier. Revenue rose 15 percent to $12.56 billion from $10.92 billion.

Excluding amortization from the company's 2003 spinoff from Merck and Co., it earned 63 cents per share.

Analysts polled by Thomson Reuters expected a profit of 62 cents per share on revenue of $12.53 billion. The earnings estimates typically exclude one-time items, but did include a state income tax benefit worth 5 cents per share.

Medco's retail product revenue grew 8 percent to $6.95 billion, and mail order product revenue rose 26 percent to $5.44 billion. During the quarter, 64.4 percent of the drugs Medco dispensed were low-cost generics, up from 60.3 percent a year ago. While generic drugs bring Medco less revenue per sale, they are more profitable, and save money for the company and its clients.

The makers of branded drugs often raise prices on their products as patent expirations approach, as revenue usually falls sharply once generic competition begins. That aids the company's revenue.

Total adjusted prescriptions rose 6 percent to 193 million. Mail order prescription volume climbed 11 percent while retail prescriptions increased 2 percent. Revenue per prescription was $3.19, compared with $2.61 per prescription a year ago.

"We have seen clients and consumers alike choosing the cost-saving benefits of mail-order and generics in these difficult economic times, and our strong 2009 net-new business growth provides additional evidence that our value proposition is resonating with both current and new clients," said Chairman and Chief Executive David Snow.