May 3, 2012 / 10:30 AM / in 6 years

UPDATE 3-SXC Health fails to raise full-year outlook, shares fall

* Still sees 2012 adjusted EPS of $2.37-$2.45

* Reaffirms full year rev view of $6.8 bln to $6.9 bln

* Adj EPS $0.52 vs est $0.50

* PBM revenue jumps 56 pct

* Shares fall 5 pct on Nasdaq, Toronto

May 3 (Reuters) - Pharmacy benefit manager SXC Health Solutions Corp posted a bigger-than-expected quarterly profit, but disappointed investors when it did not raise its full-year forecast as it usually does.

Shares of SXC, which raised its full-year forecast thrice last year, fell 5 percent on Thursday on Nasdaq and Toronto stock exchanges.

The company, which is buying rival Catalyst Health Solutions Inc for $4.4 billion, said it still sees adjusted income of $2.37 per share to $2.45 per share for the year.

“I think they tried to be a little conservative since it is the first quarter, and the point that they did not raise guidance ... was slightly disappointing to investors,” said Maxim Group analyst Anthony Vendetti.

Analysts also noted that the No. 4 U.S. pharmacy benefit manager (PBM) did not announce any new deal apart from its $1.2 billion contract with health insurance provider Blue Cross & Blue Shield from two months ago.

Catalyst Health’s weaker quarterly profit despite a 30 percent rise in revenue, reported earlier on Thursday, was also a drag on the SXC stock, analysts said.

“The growth is fine. The concern is what are they going to win as a combined company,” said Oppenheimer & Co analyst Brett Jones.

The company posted a 56 percent jump in PBM revenue as it handled more prescription claims.

Adjusted quarterly profit rose 61 percent to 52 cents per share, topping analysts’ average expectation of 50 cents per share, according to Thomson Reuters I/B/E/S.

“We would use this weakness (in the stock) on very strong numbers as a buying opportunity,” said Maxim’s Vendetti, who has a “buy” rating on the stock. He sees a 40 percent revenue growth in the second quarter for SXC.

PRICING WORRIES

The recent spate of consolidation in the pharmacy benefit management (PBM) market has also raised some pricing concerns.

SXC’s deal in mid-April came two weeks after Express Scripts Inc closed its $29 billion acquisition of Medco Health Solutions.

“The contracts that are changing hands are generally changing at lower gross margins and we are seeing some pricing pressure as competition increases and everyone tries to get bigger,” said Oppenheimer’s Jones.

The PBMs help cut cost of medicines for health plan clients, in large part by encouraging the use of generic drugs.

The sector’s importance has grown since the new U.S. healthcare law heightened focus on reducing costs throughout the healthcare system.

Shares of SXC, which has a market value of $5.75 billion, were down C$4.60 at C$90.40 on the Toronto Stock Exchange. The stock has risen more than 19 percent since the Catalyst deal was announced last month. On Nasdaq, it was trading down at $90.58.

Catalyst Health shares fell 3 percent to $80.73 on the Nasdaq.

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