Last year’s big buy of Cypress-based PacifiCare Health Systems Inc. was part of a surprising second quarter for parent UnitedHealth Group Inc., as predicted by some analysts.
Minnetonka, Minn.-based UnitedHealth, which spent more than $9 billion for PacifiCare, last week posted a second-quarter profit of $974 million, up 27% from a year ago. Revenue was up 57% to $18 billion.
Wall Street expected UnitedHealth to earn $918 million on sales of $18 billion.
UnitedHealth also upped its outlook for the rest of the year.
Before UnitedHealth reported, Carl McDonald of CIBC World Markets told the Street.com that the health insurance giant was set to realize more savings from the PacifiCare deal than it first predicted.
The company initially said it was looking to save $100 million this year and up to $250 million in the next couple of years after buying PacifiCare.
There are other factors, according to McDonald.
UnitedHealth “could post higher margins on its booming new Medicare business than it had anticipated,” he said.
Operating margins for UnitedHealth’s Health Care Services unit, which includes Medicare, were 7.5%, up from 6.7% in the first quarter.
PacifiCare’s Medicare business, a longtime core of the company through the Secure Horizons brand, was considered one of the factors that drew UnitedHealth to the health insurer.
UnitedHealth has raised its prices by more than the projected growth in medical costs, McDonald said. And the company may end up buying back more shares than it’s already promised to buy.
Still, UnitedHealth has had a rough ride in recent months after it came out that Chief Executive William McGuire was granted stock options that handed him about $1.6 billion in unrecognized gains.
UnitedHealth’s shares have lost roughly a quarter of their value since December with a market value of $65 billion early last week.
In May, UnitedHealth said it received a subpoena from the U.S. Attorney for the Southern District of New York and a document request from the Internal Revenue Service concerning a stock options probe.
UnitedHealth hasn’t publicized findings of its own investigation into the matter, and some investors fear that McGuire, who built up UnitedHealth from a regional to national player during his 15 years as chief executive, could be forced out.
Memorial Takes Part in Funding
National Healthcare Services, the Huntington Beach-based investment arm of Long Beach’s MemorialCare Health System, led a $6 million second round of financing for Radianse Inc., a Massachusetts healthcare technology company.
Radianse provides software and equipment to track down medical equipment, patients and staff within hospitals. The company is planning to use the money to expand market share for its existing products, as well as launch a software program that’s designed to enable hospitals to act on the information with what it says will be a greater degree of automation and accuracy.
National Healthcare Services has been operating for 13 years and seeks to invest in private, emerging companies that want to develop relationships with not-for-profit hospitals. It typically invests in early to mid-stage companies that concentrate on biotechnology, medical devices and healthcare technology and services.
Valeant Starts Selling Drug
A month after receiving Food and Drug Administration approval, Valeant Pharmaceuticals International of Costa Mesa is selling Zelapar, its new Parkinson’s disease pill.
Zelapar is used with other drugs to treat the neuromuscular disease, whose symptoms include shaking.
The drug now is set to be used as an additional treatment for patients who use the standard Parkinson’s drug cocktail of levodopa and carbidopa, but aren’t responding as well to the combination.
Zelapar uses a technology called Zydis, which allows it to be dissolved in the mouth, cutting side effects.
Valeant acquired Zelapar two years ago in its buy of London-based Amarin Corp.’s drug business.
Valeant agreed to pay Amarin $8 million upon approval of Zelapar, and an additional $10 million after the drug reaches certain sales milestones.
Bits and Pieces:
Fountain Valley Regional Hospital and Medical Center said it received $2.8 million in funding from parent Tenet Healthcare Corp. of Dallas to design and build an outpatient diagnostic center. The hospital plans to use the money to buy a magnetic resonance imaging machine and to bring radiology outpatient treatments under one roof, as well as creating a centralized scheduling system Separately, Fountain Valley Regional and Hoag Memorial Hospital Presbyterian in Newport Beach were recognized by the American Heart Association and American Stroke Association for their following of cardiac and stroke patient care guidelines issued by the groups. The guidelines encourage hospitals to use evidence-based standards to treat patients who have coronary artery disease, stroke or heart failure Irvine’s VQ OrthoCare said it bought the orthopedic brace business of Vista-based Omni Life Science Inc. Terms weren’t disclosed. VQ OrthoCare also hired Dan Johnson, a former manager for Apria Healthcare Group Inc. in Lake Forest, as its vice president for reimbursement.
