Medco 2010 profit outlook is near Street estimates

(AP) — Pharmacy benefits manager Medco Health Solutions Inc. said Tuesday it expects to renew 99 percent of its expiring contracts with clients in 2010, and it forecast a profit about equal to Wall Street estimates.

The Franklin Lakes, N.J., company handles drug benefits for health plan sponsors and members. It forecast about $15 billion in contract renewals for the year, including clients who renew early. It said it has booked a bit more than $4 billion in revenue with new clients for the year ending in December 2010, and is continuing to book new business.

The company disclosed its 2010 forecasts at a JPMorgan health care conference in San Francisco.

Medco expects to earn $3.05 to $3.15 per share for the year. Excluding amortization charges from its 2003 spinoff from Merck & Co., it forecast a profit of $3.28 to $3.38.

Analysts surveyed by Thomson Reuters, who usually exclude one-time items, on average expect Medco to earn $3.36 per share for 2009. The company has not yet reported its full-year results but expects to see profit of $2.58 to $2.60 — or $2.80 to $2.82 excluding one-time items.

Medco expects to report more than $8 billion in revenue from new clients for 2009.

The company's 2010 forecast includes profit of 25 cents per share from new generic drugs — almost two-thirds of it realized in the second half of the year. It expects to report profit of 13 cents per share from new generics in 2009.

The company expects to profit more from generics in coming years as growing numbers of blockbuster drugs lose patent protection and low-cost generics reach the market. Generic drugs sell at lower prices. But, as a benefits manager, Medco makes a larger profit on them.

Medco expects profit from its Accredo specialty pharmacy business to rise to $450 million from about $355 million, with revenue topping $11 billion, up from $9.5 billion. The specialty pharmacy business handles prescriptions for drugs intended to treat chronic or complex diseases.

It also expects to fill 107 million to 109 million 90-day prescriptions by mail order this year, up from 103 million in 2009.

The number fell from 2008 as Medco won accounts with different clients and the economy cut into demand.

In afternoon trading, Medco shares slipped 46 cents to $65.03.