O.C. Health Care Firms’ Profits Are in the Pink

Three of Orange County’s health care giants, PacifiCare Health Systems Inc., Allergan Inc. and Bergen Brunswig Corp., each reported double-digit gains in quarterly profits Wednesday.

The news sent Allergan stock up 7% and PacifiCare up nearly 10%, making them among the top gainers on Wall Street on Wednesday.

PacifiCare, the nation’s largest operator of Medicare health-maintenance organizations, said second-quarter earnings rose 41% as it increased premiums for its commercial plans. But the company had previously warned analysts to lower their expectations, partly because of tightening Medicare reimbursement policies.

Net income rose to $68.9 million, or $1.49 a share, from $48.9 million, or $1.06, in the year-earlier period. Revenue rose 2.4% to $2.45 billion from $2.4 billion.

While the results were in line with forecasts, estimates had declined since late last month, when the Santa Ana-based company warned it would miss the then-average forecast of $1.58 of analysts polled by First Call Corp. That caused the stock to lose about a third of its value.

“This quarter should go a long way to making this stock a little less controversial than it’s been in recent weeks,” said Kevin Risen, a fund manager with Neuberger & Berman, which holds 1.3 million PacifiCare shares.

PacifiCare shares rose $6.06, to $68.13, in Nasdaq trading.

Eye and skin-care products maker Allergan said second-quarter profits rose 35% to $46.9 million, or 69 cents a share, from $34.8 million, or 52 cents, a year ago. The average estimate of analysts surveyed by First Call Corp. was 61 cents a share.

Part of the increase was attributed to a 5-cents-a-share gain from sales of investments and other credits.

Nevertheless, the profit gains helped send Irvine-based Allergan’s stock up $6.44, to $94.38, in New York Stock Exchange trading.

Net sales at the company rose 13% to $367.8 million for the quarter.

Orange-based Bergen Brunswig, the nation’s third-largest drug wholesaler, said third-quarter earnings rose 21%, but poor performance at its PharMerica unit cut into profitability.

Bergen’s net income rose to $32.8 million, or 26 cents a share, from $27.2 million, or 26 cents, a year earlier. Revenue rose to $4.5 billion, from $3.51 billion.

Bergen warned earlier this month that it would miss analyst expectations for the quarter and the year because of problems at PharMerica, the supplier of pharmacy services to nursing homes it bought for $1.1 billion in April. Medicare changes are hurting revenue at the unit because nursing homes are accepting fewer seriously ill patients, cutting drug usage.

“The financial statement gives me the heebie-jeebies,” said Michael Krensavage, an analyst with Brown Brothers Harriman & Co. “The wholesalers are getting pushed into wackier and wackier acquisitions.”

Bergen Brunswig shares rose 56 cents, to $15.56, in New York Stock Exchange trading.

Bloomberg News and Times staff writer Edmund Sanders contributed to this report.

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To Their Health

Three Orange County health care companies significantly improved both sales and profits for the latest earnings period. All three recorded double-digit profit increases from the year earlier. Sales and earnings trends, in millions:

Allergan Inc:

Net sales

2nd qtr., ‘98: $331.3

2nd qtr., ‘99: $367.8

Earnings

2nd qtr., ‘98: $34.8

2nd qtr., ‘99: $46.9

Bergen Brunswig Corp.

Net sales

3rd qtr., ‘98: $4,459.6

3rd qtr., ‘99: $5,503.3

Earnings

3rd qtr., ‘98: $27.2

3rd qtr., ‘99: $32.8

Pacificare Health Systems

Net sales

2nd qtr., ‘98: $2,396.3

2nd qtr., ‘99: $2,454.8

Earnings

2nd qtr., ‘98: $48.9

2nd qtr., ‘99: $68.9

Source: Bloomberg News