Medco Health Solutions Inc.'s third-quarter net income fell 4 percent because of expenses related to its pending acquisition by competitor Express Scripts Inc.
The pharmacy benefits manager also raised the low end of its full-year adjusted earnings outlook on Wednesday.
After reporting a string of major contract losses, Medco agreed to be acquired by rival Express Scripts in July for $29.1 billion, or $71.36 per share, in cash and stock. The sale would make Express Scripts the largest pharmacy benefits manager in the country by far.
The companies hope to combine in 2012, but regulators are still reviewing the sale. Congress has also turned its attention to the deal, as critics have said that it will reduce choices for patients and health plans.
Medco Chairman and CEO Dave Snow said during a conference call that Medco and Express Scripts are confident that antitrust regulators will approve the sale. He added that customers are reacting to the deal positively because it will reduce their health care costs.
Pharmacy benefits managers manage employee prescription drug benefits for their employer customers, with the goal of saving them money.
Medco reported net income of $355.4 million, or 90 cents per share, for the period ended Sept. 24. That's down from $371.5 million, or 85 cents per share, a year ago. Taking out buyout-related costs and other items, earnings were $1.07 per share.
This beat the $1.05 per share that analysts polled by FactSet expected.
Revenue climbed 4 percent to $16.98 billion from $16.32 billion, mostly because of new customers and higher prices for brand-name pharmaceuticals. But the results missed Wall Street's $17.04 billion forecast.
Specialty pharmacy revenue rose 16.7 percent to a record $3.4 billion.
Medco shares jumped 11.1 percent, or $5.19, to close at $52.13 Wednesday.
The Franklin Lakes, N.J., company says it handled 233.6 million adjusted prescriptions during the quarter, down about 1 percent from last year's quarter. Adjusted prescriptions is a measurement that counts 90-day mail-order prescriptions as three 30-day prescriptions. Express Scripts said Tuesday that its adjusted prescriptions also fell 1 percent in the third quarter.
Retail prescription volumes fell 1.2 percent to 152.2 million and mail-order prescriptions edged up 0.4 percent to 27.4 million. This includes generic mail-order prescriptions, which rose 3.5 percent to 17.7 million.
The overall generic dispensing rate climbed 2.2 percentage points to a record 73.8 percent. While generic drugs are less expensive than brand name drugs, they are more profitable.
For 2011, Medco now expects adjusted earnings of $4.08 to $4.12 per share. Its previous guidance was for earnings between $4.02 and $4.12 per share. Analysts are forecasting expect $4.08 per share on average.
The company expects its revenue will fall about $10 billion in 2012 because of lost business and introductions of new generic drugs. Starting in 2012, Medco will no longer handle the prescription drug benefits for the California Public Employees' Retirement System, MemberHealth LLC, Bravo Health, and the mail order prescription benefit of the Federal Employees Health Benefits Program. Also, health insurer UnitedHealth Group Inc. said it will not renew a contract that expires Dec. 31, 2012 because it will handle its own pharmacy benefits business.