Healthcare Update
by Tim Meyer (MF Attila)

McLean, VA (April 28, 1997) -- It was another big week for earnings announcements. I have received a few requests from Fools who would like to have this weekly update forwarded to their e-mail address. I don't mind doing that (unless there are tens of thousands of you out there). If you would like the update sent to your email address, please send a request to TMF [email protected] and I'll start a mailing list.

OUR POLITICAL HEALTH

WE WILL ALL BE SAFER SOON

It appears the Clinton administration will soon nominate the director of the Centers for Disease Control and Prevention, Dr. David Satcher, to serve as both the nation's Surgeon General and Assistant Secretary of Health. I know I'll sleep better at night once we have a Surgeon General again.

A GREAT AMERICAN SMOKEOUT UPDATE

The Associated Press reported that among the lawyers on both sides of the tobacco company negotiations that briefed White House aide Bruce Lindsey last week was Hugh Rodham, brother of Hillary Rodham Clinton, "who is on the plaintiff's team." (There was no mention as to whether the First Lady's brother got to spend the night at the White House).

Meanwhile, representatives from The American Heart Association, The American Lung Association, The American Cancer Society, former Surgeon General C. Everett Koop and former U.S. Food and Drug Administration (FDA) Commissioner and soon-to-be Dean of the Yale Medical School David Kessler joined Congressman Henry Waxman (D- Calif.) at a press conference to voice opposition to any deal that grants the tobacco industry immunity from further legal action.

Finally, Pennsylvania became the 24th state to sue the tobacco industry this week, seeking recovery of Medicaid funds spent treating sick smokers. Missouri said it plans to file soon and Nebraska says it wants to be a part of any settlement even though it hasn't sued. Me, too!

JUST LOOKING FOR A SLICE OF THE PIE

The American Association of Retired Persons (AARP) is going to have to delay the launch of its managed-care offering, probably until the beginning of 1998. AARP announced last November that it had selected nine HMOs to offer managed-care products. There is one small problem. It seems in order to receive the AARP endorsement, the HMOs would have to pay a royalty of $20 a month to AARP for each member enrolled under the program. Unfortunately (or fortunately depending on your point of view), since federal Medicare dollars pay the HMOs for seniors' care, the AARP arrangement appears to be in violation of federal antikickback laws. The Health Care Financing Administration (HCFA) raised concerns that the payments to AARP would amount to payments for patient referrals. According to The Wall Street Journal, AARP "is developing an alternate basis for receiving revenue from the program." So, the offering has been delayed until they figure out how to get their cut.

IT IS TIME FOR ACTION

For the second year in a row, the Medicare Hospital Trust Fund trustees have reported that the fund will go broke in 2001 unless changes are made. Health and Human Services Secretary Donna Shalala, one of the trustees, said, "It is time for action." (What was it last year?)

HEALTHCARE STOCKS IN THE NEWS

MCDONALD'S CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MCD)") else Response.Write("(NYSE: MCD)") end if %> (I know. You're thinking this is the health care area. Why am I talking about the folks that bring us Big Macs? Read on!). According to a snippet in Investor's Business Daily, Union workers at New York's Elmhurst Hospital in Queens are protesting the hospital's plans to outsource its food service to McDonald's. I didn't know the Golden Arches folks knew how to make lime Jello. For the week, McDonald's was up $3/4 closing on Monday at $51 3/4.

Last week we reported that HUMANA INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HUM)") else Response.Write("(NYSE: HUM)") end if %> felt compelled to issue a statement in response to a story in the press the company felt was misleading and incorrect. This week, Wyeth-Ayerst Laboratories and INTERNEURON PHARMACEUTICALS, INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IPIC)") else Response.Write("(Nasdaq: IPIC)") end if %> issued a statement in response to an article run by the Associated Press (AP).

The story was on Redux, a prescription treatment for obesity developed by Interneuron and marketed by Wyeth-Ayerst, a subsidiary of AMERICAN HOME PRODUCTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AHP)") else Response.Write("(NYSE: AHP)") end if %>. The story talked about a "120-pound Redux patient who died inexplicably" after using Redux for two months. Everybody now agrees no such incident took place.

The source of the information was an FDA official contacted by AP. The FDA said it was an unintentional mistake, "a misreading of the dead person's actual weight." The individual weighed 220 pounds. The official also failed to notice that the woman's death was judged to be a homicide by a coroner's inquest jury and that her use of Redux did not contribute to her death. An FDA spokesman said, "The data to date regarding Redux do not raise any red flags." (The president wants to mobilize volunteers and AmeriCorps to make sure every child can read by the end of third grade. Could we get a few to help out with FDA officials)?

For the week, Humana finished down $1/8 closing on Monday at $20 1/4, Interneuron was up $1/4 closing at $13 1/8, and American Home Products was up $3 3/8 closing at $64 3/4 (the company's reported earnings are listed below).

PHARMACIA & UPJOHN <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PNU)") else Response.Write("(NYSE: PNU)") end if %> announced that sales for the first quarter were 6% below the same period in 1996 and that it anticipates earnings per share (before non-recurring charges) will be approximately 16% below the same period in 1996. The company attributed the shortfall to continued negative exchange-rate developments, weak European sales, and generic competition in the United States. For the week, Pharmacia & Upjohn was down $7 3/8 closing at $28 5/8 (yep, down 20%).

CRA MANAGED CARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CRAA)") else Response.Write("(Nasdaq: CRAA)") end if %> and OCCUSYSTEMS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: OSYS)") else Response.Write("(Nasdaq: OSYS)") end if %> announced that they will merge in a tax-free stock-for-stock exchange to be accounted for as a pooling of interests. Each share of OccuSystems will be exchanged for 0.56 of a share of CRA. The merged company will be named Concentra Managed Care and will be headquarted in Boston with regional offices in Dallas. For the week, OccuSystems was up $5/8 closing at $19 3/4 while CRA was down $2 3/4 closing at $35 1/8 (the company's reported earnings are listed below).

UROHEALTH SYSTEMS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: UROH)") else Response.Write("(Nasdaq: UROH)") end if %> will acquire IMAGYN MEDICAL INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IGYN)") else Response.Write("(Nasdaq: IGYN)") end if %> for approximately $70 million. Imagyn shareholders will receive 1.0358 shares of Urohealth for each share of Imagyn. For the week, Imagyn was down $1/2 closing at $7 while Urohealth was down $3/8 closing at $7 5/8.

EARNINGS REPORTS

PHYCOR INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PHYC)") else Response.Write("(Nasdaq: PHYC)") end if %> reported first quarter net income of $12.3 million, or $0.19 a share (meeting estimates), on revenues of $250.7 million, compared to 1996 first quarter net income of $7.7 million, or $0.13 a share, on revenues of $162.5 million. For the week, PhyCor was down $1 closing Monday at $23 1/8.

VENCOR <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VC)") else Response.Write("(NYSE: VC)") end if %> reported first quarter net income of $34.0 million (excluding extraordinary charges of $2.3 million, or 3 cents a share), or $0.48 a share (a cent higher than estimates), on revenues of $680.7 million, compared to 1996 first quarter net income of $27.6 million, or $0.39 a share, on revenues of $626.3 million. For the week, Vencor was up $7/8 closing Monday at $38 7/8.

MEDCATH INCORPORATED <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MCTH)") else Response.Write("(Nasdaq: MCTH)") end if %> reported second quarter net income of $2.1 million, or $0.18 a share (a cent higher than estimates), on revenues of $26.7 million, compared to 1996 second quarter net income of $1.3 million, or $0.14 a share, on revenues of $17.3 million. For the week, MedCath was down $1/8 closing Monday at $13 1/8.

NATIONAL SURGERY CENTERS, INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NSCI)") else Response.Write("(Nasdaq: NSCI)") end if %> reported first quarter net income of $2.6 million, or $0.21 a share (meeting estimates), on revenues of $22.1 million, compared to 1996 first quarter net income of $1.5 million, or $0.16 a share, on revenues of $16.2 million. For the week, National Surgery was down $1 5/8 closing Monday at $28 7/8.

LASERSCOPE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LSCP)") else Response.Write("(Nasdaq: LSCP)") end if %> reported first quarter net income of $.88 million, or $0.07 a share (a cent below estimates), on revenues of $15.8 million, compared to 1996 first quarter net income of $.14 million, or$0.02 a share, on revenues of $7.7 million. For the week, Laserscope was down $5/8 closing Monday at $6.

BEVERLY ENTERPRISES, INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BEV)") else Response.Write("(NYSE: BEV)") end if %> reported first quarter net income of $18.5 million, or $0.19 a share (two cents higher than estimates), on revenues of $820.3 million, compared to 1996 first quarter net income of $13.7 million, or $0.14 a share, on revenues of $814.5 million. For the week, Beverly was up $1/4, closing Monday at $13 5/8.

CRA MANAGED CARE INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CRAA)") else Response.Write("(Nasdaq: CRAA)") end if %> reported first quarter net income of $3.1 million, or $0.34 a share (meeting estimates), on revenues of $54.5 million, compared to 1996 first quarter net income of $2.0 million, or $0.27 a share, on revenues of $40.2 million. For the week, CRA was down $2 3/4 closing Monday at $35 1/8.

BRISTOL-MYERS SQUIBB CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BMY)") else Response.Write("(NYSE: BMY)") end if %> reported first quarter net income of $810 million, or $0.81 a share (a cent higher than estimates), on revenues of $4.05 billion, compared to 1996 first quarter net income of $726 million, or $0.72 a share, on revenues of $3.67 billion. For the week, Bristol-Myers was up $2 5/8, closing Monday at $62 1/2.

AMERICAN HOME PRODUCTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AHP)") else Response.Write("(NYSE: AHP)") end if %> reported first quarter net income of $576.7 million, or $0.90 a share (a cent higher than estimates), on revenues of $3.6 billion, compared to 1996 first quarter net income of $489.4 million, or $0.78 a share, on revenues of $3.65 billion. For the week, American Home Products was up $3 3/8 closing Monday at $64 3/4.

WARNER-LAMBERT CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WLA)") else Response.Write("(NYSE: WLA)") end if %> reported first quarter net income of $204 million, or $0.75 a share (a cent below estimates), on revenues of $1.78 billion, compared to 1996 first quarter net income of $249.5 million, or $0.92 a share, on revenues of $1.83 billion (1996 results include a gain on the sale of the company's Warner Chilcott generic pharmaceutical business ($46 million after-tax, or $0.17 a share) and provisions for certain legal matters ($9 million after-tax, or 4 cents a share). For the week, Warner-Lambert was down $4 1/4 closing Monday at $94 7/8.

CARDINAL HEALTH, INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CAH)") else Response.Write("(NYSE: CAH)") end if %> reported third quarter net income of $36.2 million (including a $27.5 million non-recurring charge related to merger with Owen Healthcare), or $0.33 a share (meeting estimates), on revenues of $2.8 billion, compared to 1996 third quarter net income of $48.4 million, or $0.46 a share, on revenues of $2.4 billion. For the week, Cardinal was down $1 1/2, closing Monday at $52.

HCIA, INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HCIA)") else Response.Write("(Nasdaq: HCIA)") end if %> reported first quarter net income of $2.5 million, or $0.21 a share (meeting estimates), on revenues of $25.7 million, compared to 1996 first quarter net income of $1.3 million, or $0.14 a share, on revenues of $14.2 million. For the week, HCIA was up $1 3/8, closing Monday at $19 1/16.

COHERENT INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COHR)") else Response.Write("(Nasdaq: COHR)") end if %> reported second quarter net income of $8.9 million, or $0.76 a share, on revenues of $91.0 million, compared to 1996 first quarter net income of $7.4 million, or $0.64 cents a share, on revenues of $90.6 million. For the week, Coherent was down $3/4, closing Monday at $39 1/4.

INTEGRATED HEALTH SERVICES, INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IHS)") else Response.Write("(NYSE: IHS)") end if %> reported first quarter net income of $18.4 million, or $0.61 a share (4 cents higher than estimates), on revenues of $461.1 million, compared to 1996 first quarter net income of $13.8 million, or $0.54 a share, on revenues of $327.6 million. For the week, Integrated Health was up $7/8, closing Monday at $30 5/8.

CVS CORPORATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CVS)") else Response.Write("(NYSE: CVS)") end if %> reported first quarter net income of $58.4 million, or $0.51 a share (6 cents higher than estimates), on revenues of $1.52 billion, compared to 1996 first quarter net income of $40.6 million, or $0.35 cents a share, on revenues of $1.26 billion. For the week, CVS was up $1/4, closing Monday at $48 5/8.

HEALTHSOUTH CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HRC)") else Response.Write("(NYSE: HRC)") end if %> reported first quarter net income of $64.6 million (including non-recurring charges of $11.5 million), or $0.18 a share ($0.22 a share before charges, which was a cent higher than estimates), on revenues of $691.6 million, compared to 1996 first quarter net income of $39.7 million (including non-recurring charges of $17.9 million), or $0.12 a share ($0.17 a share before charges), on revenues of $612.2 million. For the week, HealthSouth was up $7/8, closing Monday at $19 1/4.

That will wrap it up for this week. Please share any comments/suggestions on how to improve this feature via e-mail (TMF [email protected]). Also let me know if you would like the update forwarded to your email address. In the meantime, here is hoping your investments are healthy!

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