Medco climbs on strong 3Q results and outlook

NEW YORK - Shares of Medco Health Solutions Inc. jumped Wednesday after the pharmacy benefits manager reported third-quarter results that beat analyst estimates, and forecast further growth in 2009.

Medco's adjusted profit and sales were slightly better than Wall Street expected, as prices for branded drugs rose and the company won new clients. Demand for low-cost generic drugs continued to grow, and Medco reported more patients are ordering drugs by mail. Sales of specialty drugs — or treatments for chronic and complex illnesses — also were strong.

Medco also backed its profit forecast for the year, and its outlook for 2009 is in line with analyst expectations.

Shares of the Franklin Lakes, N.J., company rose $3.47, or 9.1 percent, to $41.47.

In a client note, Citi Investment Research analyst Charles Boorady said recently acquired businesses were responsible for most of the gains in the third quarter. He pointed to Medco's three big acquisitions in the last year-plus: the PolyMedica diabetes supply business; Critical Care Systems; and Europa Apotheek Venlo, a Germany-based clinical health care and mail-order pharmacy services company.

Medco bought PolyMedica, a supplier of diabetes treatment products, in August 2007, and acquired Critical Care systems, an infusion services provider, in November 2007. It then bought a majority stake in EAV in April 2008.

Tuesday night's presidential election, which went to Democratic nominee Barack Obama, may have also been a factor in the stock movement. Obama advocated measures to expand coverage of the uninsured, and Medco said in its conference call that a universal health care bill would benefit the company by allowing it to reach for million uninsured people it does not currently serve.

If Obama successfully moved his health care proposals through the Democrat-led Congress, Medco said such a push could spur greater use of electronic health records, increased generic substitution and a pathway to generic versions of biotech drugs.

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