Medco says 2Q profit slipped 4 percent

FRANKLIN LAKES, N.J. (AP) ? Pharmacy benefits manager Medco Health Solutions Inc., which said Thursday it will combine with its biggest competitor, said its profit fell 4 percent in the second quarter.

Medco also said health insurer UnitedHealth Group Inc. will not renew a pharmacy benefit services contract between the companies. That contract expires Dec. 31, 2012.

Medco said it earned 324.8 million, or 85 cents per share. A year ago it earned $356.9 million, or 77 cents per share. Excluding charges related to its spinoff from Merck & Co., Medco’s profit totaled 96 cents per share. Revenue grew 4 percent, to $17.07 billion from $16.41 billion.

Analysts expected a profit of 94 cents per share and $17.11 billion in revenue, according to FactSet.

Medco, which is the largest pharmacy benefits manager in the U.S. in terms of revenue, agreed to be acquired by Express Scripts Inc. for $29 billion, or $71.36 per share in cash and stock. If shareholders and regulators approve, the deal is expected to close in the first half of 2012. Together, the companies reported about $110 billion in revenue in 2010 and handled 1.7 billion prescriptions.

Medco said its second-quarter results were hurt by costs related to its $730 million acquisition of UnitedBioSource Corp., which helps companies run studies of newly-approved drugs and medical devices. The deal closed in September. Medco said the deal bolstered its service revenue, which rose 43 percent in the second quarter.

The company’s specialty pharmacy revenue rose 13 percent to $3.2 billion. Medco said its total adjusted prescriptions rose less than 1 percent to $185.1 million, with 90-day mail order prescriptions up 0.7 percent to 27.7 million and retail prescriptions up 0.4 percent to 157.4 million.

Medco said it has $800 million in new business starting in 2012, but so far, that is less than the business it has lost for the year. The biggest loss was a mail-order drug contract with the Federal Employee Health Benefits program, which brought Medco about $3 billion in annual revenue. That business will go to CVS Caremark Corp. starting Jan 1.

Medco maintained its 2011 forecast of $4.02 and $4.12 per share in profit, excluding spinoff costs. Analysts expect $4.07 per share on average.

In morning trading, shares of Medco rose $8.18, or 15 percent, to $63.96.