Catamaran Earnings Up; Pharmacy-Benefit Firm Adds New Business
08/01/2012| 11:09am US/Eastern
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By Jon Kamp
Pharmacy-benefit manager Catamaran Corp. (>> Catamaran Corp) reported a 27% increase in second-quarter earnings, fueled by its growing customer base and an acquisition, while setting its sights on continued business wins.
The Lisle, Ill., company also announced Wednesday that it signed Blue Cross Blue Shield of Arizona to a five-year deal worth about $350 million in annual drug spending. Chief Executive Mark Thierer said Catamaran has already added $1.9 billion in new business in the current selling season for PBM services, which is still ongoing, and is aiming for more.
"Typically, when a company announces a merger, you might expect the lukewarm selling season, but that is not the case here," Mr. Thierer said, speaking on a conference call.
Catamaran's quarterly earnings and fresh 2012 guidance were tempered by transaction-related costs, making match-ups with Wall Street estimates tricky, but shares were buoyed by the new-business prospects. Catamaran rose 4.1% to $88 in recent trading.
"It's the growth opportunity and expectations longer term for the ability to consistently take market share," said Michael Cherny, an analyst with ISI Group.
Catamaran was formed a month ago when SXC Health Solutions bought competitor Catalyst Health Solutions, creating the fourth-largest pharmacy-benefit manager by prescription volume. These companies, known as PBMs, handle drug benefits for corporate clients and health plans.
Catamaran aims to wield its new-found bulk to compete for the biggest corporate clients, and Mr. Thierer indicated the company is already in the hunt for such business. These clients have traditionally gravitated to big PBMs like Medco, which Express Scripts Holding Co. (>> Express Scripts Holding Co) recently bought to form the largest PBM, and CVS Caremark Corp. (>> CVS Caremark Corporation). Catamaran also ranks in size behind OptumRx, a PBM owned by UnitedHealth Group Inc. (>> UnitedHealth Group Inc.).
For the second quarter, before SXC wrapped up the Catalyst acquisition, Catamaran reported earnings of $27.3 million, or 41 cents a share. This was up from $21.6 million, or 34 cents a share, a year earlier. On an adjusted basis, excluding transaction-related amortization costs, earnings rose to 49 cents from 38 cents, Catamaran said.
Analysts estimated earnings of 58 cents a share after backing out transaction and tax expenses pegged to the Catalyst deal. Analysts surveyed by Thomson Reuters were expecting, on average, earnings of 54 cents in the recent quarter.
Revenue surged 40% to $1.7 billion, although this was below analysts' $1.74 billion forecast. The company derived the vast majority of revenue from its PBM business, where sales were up 40% behind prescription volume from new customers and the addition of PBM HealthTran, which SXC Health acquired on Jan. 1. Catamaran also has a health-care IT business.
Looking ahead, Catamaran provided fresh 2012 guidance for the newly formed company. It expects revenue of $9.9 billion to $10 billion and adjusted per-share earnings of $2.14 to $2.17 per share. While below analysts' $2.33 per share target, Mr. Cherny, the ISI Group analyst, estimated the company's forecast includes 20 cents of transaction and integration costs.
Write to Jon Kamp at jon.kamp@dowjones.com
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