April 29, 2009 / 8:47 PM / 9 years ago

UPDATE 2-Express Scripts 1st quarter profit up 21 pct

* Q1 EPS $0.86 vs Wall Street estimate $0.82

* Sees 2009 EPS $3.67 to $3.77

* Shares rise 2 pct after hours (Adds analyst comment, revenue, Medco earnings)

By Bill Berkrot

NEW YORK, April 29 (Reuters) - Express Scripts Inc (ESRX.O) posted a better-than-expected quarterly profit on Wednesday, helped by greater use of more profitable generic drugs, and raised its full-year earnings forecast, boosting the pharmacy benefit manager’s shares by 2 percent.

The St Louis-based company posted a net profit of $214.4 million, or 86 cents per share, in the first quarter, up from $177.2 million, or 69 cents per share, a year ago.

That topped analysts’ average expectations by 4 cents, according to Reuters Estimates.

Earlier on Wednesday, rival Medco Health Solutions Inc MHS.N said its first-quarter profit and revenue rose, driven by new business and greater generic utilization.

Medco posted a profit of 63 cents per share, excluding items. That was 1 cent better than analysts’ expectations. Nonethless, its shares closed down $1.37, or 3.14 percent, to end the day’s trade on the New York Stock Exchange at $42.29.

Express Scripts’ generic utilization rate increased to 67.7 percent from 65.1 percent in the year-ago quarter. Cheap generic drugs have a higher profit margin for PBMs than expensive branded medicines.

“The earnings were stronger than we expected and it’s really being driven by generic dispensing,” Sanford Bernstein analyst Helene Wolk said.

Pharmacy benefit managers, or PBM, administer prescription drug benefits for employers and health plans and operate large mail-order pharmacies.

    Express, which is buying Wellpoint Inc’s WLP.N prescription drug business for $4.68 billion in a deal that will make it the second largest PBM behind Medco, said as a result of that transaction it has suspended its share repurchase program.

    But the company raised its full-year earnings forecast to $3.67 to $3.77 from its prior view of $3.63 to $3.73 despite the lack of the 7 cents to 9 cents benefit it expected to see from fewer outstanding shares.

    Express said strong underlying fundamentals will more than offset the impact of the higher expected share count.

    “The guidance looks like it’s been raised by virtue of the 4-cent beat this quarter, so it’s still fairly conservative,” Wolk said. “If they continue to outpace expectations around generic dispensing, there still might be more here.”

    Revenue for the quarter fell to $5.42 billion from $5.49 billion as overall sales volume was down. But that was slightly ahead of Wall Street estimates of $5.405 billion.

    Express Scripts shares rose to $61.69 in extended trading from their $60.45 Nasdaq close. (Reporting by Bill Berkrot; Editing by Richard Chang, Leslie Gevirtz)

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