UPDATE 2-Catamaran profit rises; lacklustre forecast drags shares

Thu Feb 28, 2013 1:34pm EST

* Expects full-year adjusted profit of $1.81-$1.88/share

* Sees 2013 revenue of $14.2 bln-$14.6 bln

* Fourth-qtr profit $42.5 mln vs $26.7 mln last year

* PBM revenue more than doubles to $3.3 bln

* Shares fall 7 pct in Toronto

Feb 28 (Reuters) - Pharmacy benefit manager Catamaran Corp reported a 59 percent jump in fourth-quarter profit, but the company's forecast for the year and the lack of clarity on its deal pipeline dampened investor sentiment.

Shares of Catamaran, formerly named SXC Health Solutions, fell as much as 7 percent to C$52.81 on Thursday on the Toronto Stock Exchange. The stock has gained 20 percent since the beginning of the year, outperforming the benchmark S&P/TSX composite index.

"If you look at how the stock was trading prior to the release of the results, I think the market might have been expecting a little bit more in terms of the guidance," analyst Gabriel Leung of Paradigm Capital said.

Leung said Catamaran's forecast factored in deals they have already signed, so the company could increase its outlook over the course of the year if it signs additional deals.

Chief Executive Mark Thierer said on a conference call that the company's pipeline was robust.

"The deals we're seeing now are bigger, there are more of them, and they're coming sooner than in the past."

The company raised its forecast last year following its $4.4 billion acquisition of rival Catalyst Health Solutions and announced a three-year contract with U.S. discount retailer Target Corp starting April 1, 2013.

Leung added that some people had hoped to get some tangible contract announcements in conjunction with the results, which did not happen.

The company, which had a market value of C$11.48 billion as of Wednesday's close, competes with pharmacy benefit managers (PBM) Express Scripts Holding Co and CVS Caremark Corp .

Catamaran is growing fast and stealing some market share, but is quite a distance from the top two PBMs, analyst Tom Liston of Cantor Fitzgerald said.

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 year stands to be a busy one for the healthcare sector as the United States prepares for 30 million people to join the ranks of insured patients under the Affordable Care Act, or "Obamacare," starting 2014.

There are also some concerns about Catamaran's contract with Health insurer Cigna Corp.

Cigna had acquired Medicare provider HealthSpring, which was an important customer for Catamaran. That contract is up for renewal this year.

There are concerns whether Cigna will renew that contract as it has an in-house PBM, Leung said, adding that there may possibly be a resolution sometime in the first half of this calendar year.

Analysts did, however, say that it was a low margin contract for Catamaran.

REVENUE FORECAST LAGS ESTIMATES

The company said on Thursday it expects to earn $1.81 to $1.88 per share on an adjusted basis. It forecast 2013 revenue of $14.2 billion to $14.6 billion.

Analysts on average expected earnings of $1.83 per share, on revenue of $15.05 billion, according to Thomson Reuters I/B/E/S.

Net income attributable to the company in the fourth quarter rose to $42.5 million, or 21 cents per share, from $26.7 million, or 21 cents per share, a year earlier.

Catamaran, which grew through its acquisitions of HealthTran LLC and Catalyst, executed a two-for-one stock split on Oct. 1, 2012.

On an adjusted basis, the company earned 39 cents per share.

PBM revenue rose 144 percent to $3.3 billion in the quarter.

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