Catalyst Health 1st-qtr earnings fall 5 percent

Associated Press

ROCKVILLE, Md. (AP) — Pharmacy benefits manager Catalyst Health Solutions Inc.'s first-quarter earnings fell 5 percent as costs related to an acquisition and infrastructure improvements soared.

The Rockville, Md., company, which is being acquired by SXC Health Solutions Corp., earned $19.2 million, or 39 cents per share, in the three months that ended March 31. That compares with earnings of $20.3 million, or 45 cents per share, in the previous year's quarter. Adjusted earnings were 62 cents per share.

Revenue climbed about 30 percent to $1.45 billion.

Analysts surveyed by FactSet expected, on average, earnings of 59 cents per share on $1.52 billion in revenue.

The company's stock tumbled nearly 3 percent, or $2.63, to $87.26 in afternoon trading while broader trading indexes were down less than 1 percent.

Catalyst said its revenue climbed due in part to additional prescription volume it received from its acquisition of Walgreen Co.'s pharmacy benefits management business. New clients and price inflation from branded drugs also increased revenue.

Pharmacy benefits managers, or PBMs, run prescription drug plans for employers, government agencies and other clients, using their large purchasing power to negotiate lower drug prices. They make money by reducing costs for health plan sponsors and members.

Catalyst said its selling, general and administrative expenses soared to $67.7 million from $27.5 million in the first quarter. That included about $8.8 million in transition and integration expenses tied to the PBM business purchase.

Direct expenses also climbed 28 percent to $1.36 billion.

Last month, SXC Health Solutions, another PBM, announced plans to buy Catalyst in a deal worth more than $4 billion.

SXC Health will pay $28 in cash and a portion of its stock valued at $53.02 per share for each share of Catalyst. That equals a purchase price of $81.02 per share, a premium of about 28 percent over Catalyst's closing price the day before the deal was announced.

The companies expect the deal to close in the second half of this year.