Bergen Brunswig Rival Makes Acquisition Play; SBA Lifts Ceiling
What goes up often goes down on Wall Street. And when it gets there, there often are shareholder lawsuits waiting.
PacifiCare Health Systems Inc., Santa Ana, has seen its stock price fall off dramatically in recent months after warning about a jump in medical costs that forced it to curtail Medicare enrollment in some areas and the ongoing conversion of fixed-payment hospital contracts to shared-risk pacts.
That put the health maintenance organization on the radar screen of plaintiffs’ attorneys who specialize in filing lawsuits on behalf of aggrieved shareholders. Several firms, including San Diego’s Milberg Weiss Bershad Hynes & Lerach LLP, have filed federal securities complaints against PacifiCare since the end of November.
Most of the complaints allege that PacifiCare issued false and misleading statements concerning the company’s business and financial condition. A release from Bala Cynwyd, Pa.-based Schiffrin & Barroway LLP alleges that “PacifiCare’s interim results were false and materially misleading due to its failure to properly record medical expenses.”
A PacifiCare spokeswoman said: “We believe any such allegations are patently false and are prepared to vigorously defend ourselves and our company’s reputation accordingly. Sadly, these lawsuits are often simply filed as a matter of course when a company’s stock price falls as ours has.”
Investors hammered PacifiCare’s shares in mid-October, after the company said it might break even or report a loss of up to 10 cents a share for its third quarter. PacifiCare eventually reported third-quarter earnings of $5.2 million, or 15 cents a share, compared with $69.3 million, or $1.54 a share, in the previous third quarter.
Separately, PacifiCare said it will repurchase 750,000 shares of its stock from UniHealth Foundation, its largest stockholder, according to terms of a May 1999 stock purchase. UniHealth exercised its right to sell the block of shares at a price of $15.41 per share. When the transaction is completed, UniHealth will hold 4.7 million shares of PacifiCare, or a 14% stake.
Bergen Rival Aims to Get Bigger
Bergen Brunswig Corp., Orange, has seen its stock price slowly rise as it works to retool its core wholesale drug business and shed some operations. Now Bergen may be getting a larger competitor, if regulators sign off on an announced deal.
Dublin, Ohio-based Cardinal Health Inc. said two weeks ago that it agreed to buy Bindley Western Industries Inc. of Indianapolis for about $1.6 billion in stock and the assumption of $430 million in debt. The deal would leapfrog Cardinal past McKesson HBOC Inc. into the top position in the wholesale drug business.
Two years ago, the Federal Trade Commission quashed a proposed $2.8 billion merger between Bergen Brunswig and Cardinal for antitrust reasons. The FTC also stopped a concurrent effort by McKesson HBOC to purchase AmeriSource Health Corp., the fourth-largest U.S. drug wholesaler.
Cardinal officials have said the Bindley transaction is different because it’s smaller than McKesson, Cardinal, Bergen and AmeriSource. They said that acquiring Bindley would give it entr & #233;e to the $1 billion market for supplying hospitals with radioactive imaging agents and drugs.
SBA Increases Revenue Ceiling
Orange County healthcare businesses that may need services from the U.S. Small Business Administration don’t have to be as small as they used to be, thanks to the agency’s decision to raise its revenue limit for qualifying providers.
Healthcare companies with annual revenue of $5 million or less were previously qualified as small businesses. The SBA’s new standard, however, raises that limit to $25 million for hospitals and dialysis centers, $10 million for nursing homes, laboratories and home healthcare providers and $7.5 million for clinics and doctors’ offices.
Talking Health Reform
Dallas Salisbury, president and chief executive of the Employee Benefits Research Institute in Washington, D.C., is set to talk about federal healthcare reform developments and trends during the Jan. 11 meeting of the Orange County Employee Benefit Council. Salisbury’s organization, founded in 1978, aims to give unbiased information about the employee benefit system and related economic security issues.
The council meeting will begin at 7:30 a.m. Registration is $25 for council members and $35 for non-members before Jan. 5 and $30 and $35, respectively, after Jan. 5. For more information: (714) 573-8605 or www.ocebc.org.
Bits and Pieces:
ChromaVision Medical Systems Inc., San Juan Capistrano, said abstract data from a recent study concerning its cell-imaging system was presented at the San Antonio Breast Cancer Symposium, Dec. 6-9 … TriZetto Group, Newport Beach, said its Erisco subsidiary “completed a successful demonstration” of the ability of Erisco’s Facets system to meet processing demands of the Regence Group, a Portland, Ore.-based Blue Cross/Blue Shield organization with more than 3 million members.
