Will history repeat itself for Catamaran Corporation (UNKNOWN:CTRX.DL)? Three months ago, the nation's fourth-largest pharmacy benefits manager, or PBM, reported solid financial results for the third quarter of 2014. Catamaran announces its fourth-quarter results on Thursday. Here are three things to watch that could be key in how investors view those results.
1. Specialty business
Expect much of Catamaran's discussion on the earnings call Thursday morning to focus on its specialty pharmacy business. Controlling the cost of high-dollar specialty drugs is among the most pressing concerns for clients. And when it comes to growth, that's where Catamaran's best opportunities lie.
Catamaran's Briova specialty pharmacy unit drove much of the company's revenue growth last quarter and was on track to deliver well over $2 billion in sales for all of 2014. If the strong trend continues, there's a pretty good chance that Catamaran will shine yet again with its fourth-quarter performance.
You can also count on hearing plenty from Catamaran about the recent acquisition of another specialty business, Salveo. However, Salveo won't be a big factor in the PBM's financial results -- at least not yet.
2. Big deals
Catamaran CEO Mark Thierer expressed optimism three months ago when asked about the competitive environment. He specifically mentioned that he liked where the company was positioned with its pipeline, with over $10 billion in new business opportunities for the 2016 selling season.
While landing new accounts won't make any difference for Catamaran's fourth quarter, it could make a huge difference in investors' enthusiasm about the company's stock. Thierer hinted in October that several large deals could be finalized within a couple of months. That couple of months has now come and gone. Positive news on this front should influence Catamaran's earnings guidance for 2015.
3. Integration progress
Certainly, the high-flying specialty business and winning big deals will likely gain the most attention later this week. However, investors should also pay attention to how Catamaran is faring on the integration of customers and acquisitions.
The PBM's management team doesn't like to talk much about individual accounts, but the volume that Cigna brings to Catamaran is worthy of an update. During the fourth quarter, most if not all of Cigna's Medicare business should have been transitioned to Catamaran's platform.
Another integration of note relates to Catamaran's acquisition of Restat. Catamaran purchased Restat, one of the largest privately held PBMs in the country, back in August 2013. Most of the integration efforts for assimilating this new business should have wound down during fourth quarter. Investors will also be interested in how quickly Catamaran can integrate Salveo into its specialty business operations.
Wall Street expects Catamaran to report earnings of $0.61 per share and revenue of $5.57 billion for the fourth quarter. The company bumped its earnings guidance for full-year 2014 upward last quarter due in large part to Briova's strong performance.
The good news for Catamaran shareholders is that the driving factors for the PBM's success earlier in 2014 likely didn't lose steam in the fourth quarter. Customers' desire to keep a lid on specialty drug costs and a generally stronger demand for PBM services resulting partially from healthcare reform should keep Catamaran on the right track.