November 1, 2012 / 11:44 AM / 5 years ago

UPDATE 2-Catamaran raises profit forecast on Catalyst buy

* Now sees full-year adjusted profit of $1.09-$1.13/share

* Signs 3-year PBM contract with Target

* Q3 adj EPS $0.25 vs $0.22 year earlier

* Catamaran shares rose as much as 9 pct

Nov 1 (Reuters) - Pharmacy benefit manager Catamaran Corp raised its earnings forecast for the year betting that it will benefit from the U.S. healthcare reform through its $4.4 billion acquisition of rival Catalyst Health Solutions.

Catamaran, formerly known as SXC Health Solutions, said third-quarter revenue more than doubled to $3.2 billion as it added new customers and integrated the existing customers of Catalyst and HealthTran LLC, a pharmacy benefit manager (PBM) it bought earlier this year.

Catamaran shares rose 9 percent to C$51.18 on the Toronto Stock Exchange, pushing the benchmark S&P/TSX composite index higher on Thursday. Catamaran shares have risen 64 percent so far this year.

PBMs administer health plans and drug benefits for employers and run mail-order pharmacies. They help cut costs of medication by encouraging more use of generic drugs.

The PBM sector is expected to gain from the Affordable Care Act, or Obamacare, as the most sweeping overhaul of the U.S. healthcare system since the 1960s is expected to provide health insurance for an additional 30 million people.

Catamaran has signed a three-year PBM contract with U.S. discount retailer Target Corp, Chief Executive Mark Thierer said on a conference call with analysts, adding that the contract will go live on April 1, 2013.

Target, the No. 2 U.S. discounter after Wal-Mart Stores Inc , had about 365,000 full-time, part-time and seasonal employees as on Jan. 28.

“The fact that they have got the PBM contract with Target supports the thesis that the company is now better positioned to win large employer contracts, which had historically been the sweet spot for some traditional PBMs like CVS Caremark Corp ,” analyst Gabriel Leung of Paradigm Capital said.

Leung said Catamaran will now be able to go after larger employer groups. “As a combined company we are going to see some much larger deals and possible quicker pace of deal close as well,” he added.

ROBUST OUTLOOK

Catamaran raised its full-year adjusted profit forecast to between $1.09 and $1.13 per share, from its earlier expected range of $1.07 to $1.09 per share.

Analysts on average were expecting earnings of $1.09 per share, according to Thomson Reuters I/B/E/S.

Net income attributable to the company fell 19 percent to $20.5 million, or 10 cents per share, in the third quarter, due to higher interest expenses, partly because of loans taken to finance the Catalyst deal, the company said.

On an adjusted basis, the company earned 25 cents per share, slightly above analysts’ estimates of 24 cents.

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