Prescription Manager Medco Posts Profit

FRANKLIN LAKES, N.J. - Medco Health Solutions Inc., the country's biggest manager of prescription drug benefits, posted a 10 percent increase in fourth-quarter profit, as gross margins rose slightly due to increased use of generic medicines and operating efficiency.

The company said late Wednesday that net income was $118.3 million, or 43 cents per share. That compares with $107.2 million, or 40 cents per share, a year earlier.

Excluding a 5-cent charge for a write-down on decreased value of assets, Medco earned 48 cents per share. That beat by 2 cents the consensus forecast of analysts surveyed by Thomson First Call, who were expecting 46 cents.

Revenue increased 5.4 percent to $9 billion, from $8.54 billion in 2003's fourth quarter.

The Franklin Lakes, N.J.-based company said its gross margin, - always razor thin in the highly competitive industry - increased to 4.6 percent from 4.2 percent.

For the full year, net income rose 18 percent to $425.8 million, or $1.57 per share, from $361.6 million, or $1.34 per share, in 2002. Revenues edged up 4 percent, to $34.26 billion from $32.96 billion.

"We closed 2003 in a position of financial and operational strength," president and chief executive David Snow said.

He noted that net income grew strongly despite $69 million in pretax expenses for realigning and streamlining customer service, dispensing pharmacy and corporate functions last year.

Medco said it expects earnings per share this year of $2.03 to $2.14, excluding planned asset write-downs totaling 28 cents per share. Analysts had been expecting $2.02.

Medco, which was spun off by pharmaceutical giant Merck & Co. in August, processes prescription claims for about 60 million Americans. It negotiates medication price discounts for members' health plans and provides other health services for the plans.

Medco shares rose 79 cents, or just over 2 percent, to close at $37.99 on the New York Stock Exchange.

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On the Net: http://www.medcohealth.com