Accredo Health, Inc. Announces Second Quarter Results and Increases Fiscal 2005 Estimates

Business Wire, Jan 31, 2005

MEMPHIS, Tenn. -- Accredo Health, Incorporated (NASDAQ: ACDO) today reported results for its second quarter ended December 31, 2004. Revenues for the quarter increased 29% to $503,946,000 compared to $389,781,000 for the same period in fiscal 2004. Net earnings increased 2% to $20,212,000 for the quarter ended December 31, 2004 compared to $19,909,000 for the same period in fiscal 2004. Earnings per diluted share were $0.41 for the quarter ended December 31, 2004, and the quarter ended December 31, 2003. In addition, gross profit margins were 17.8% for the quarter ended December 31, 2004.

David D. Stevens, Accredo's chairman and chief executive officer, remarked, "This was a very strong quarter for Accredo from both a revenue and earnings standpoint. An important milestone was achieved during the second quarter as we exceeded $500 million in total revenues for the first time in the Company's history. These results were driven by sequential revenue growth of 20% over our September quarter performance. In terms of our expanded relationship with Medco Health Solutions, Inc. (Medco), we surpassed our initial transfer estimate of 10,000 patients during the December quarter. We continue to be excited about the future market opportunities that exist as part of this strategic alliance."

Joel R. Kimbrough, Accredo's chief financial officer, added, "We are pleased with the breadth of our continued revenue growth across our product lines, as evidenced by exceeding the current quarter growth rate for two of our pulmonary hypertension products (Remodulin(R) and Tracleer(R)) and several of our more established core product lines such as growth hormone, Avonex(R), and hemophilia. In addition, our seven new products launched since 2003 continue to meet or exceed our revenue expectations. We believe this revenue expansion, coupled with our recent selection by CoTherix, Inc. to distribute Ventavis(TM), provides further validation of our restricted access model with biopharmaceutical manufacturers. We further view the resolutions pertaining to the Medicare reimbursement levels for hemophilia, IVIG and Remodulin(R) as important for us, the manufacturers, and most importantly, the patient constituents. In addition, we are very pleased that we exceeded the crossover point in terms of quarter over quarter net income comparisons after reducing our estimates in August 2004."

Mr. Kimbrough continued, "Based upon our results to date and the near-term outlook, we are reiterating our previous revenue estimate range for our fiscal year ending June 30, 2005 of $1.85 billion to $1.90 billion and increasing our previous diluted earnings per share estimates from a range of $1.53 to $1.60 to a range of $1.56 to $1.61. In addition, we estimate that for our fiscal year ending June 30, 2006, we will achieve revenues in the $2.150 billion to $2.225 billion range and diluted earnings per share in a range of $1.78 to $1.84. These estimates assume no new indications for current product lines, potential new product lines, or future acquisitions, and are predicated on various assumptions related to the timing of the loss of the Aetna revenue."

In addition to the previous discussions, we are providing the following questions and answers related to our operating results and our on-going business:

Q1) What is the effect of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA) on the reimbursement for hemophilia clotting factor?

A1) Under the MMA, there were major changes in the Medicare payment rates for blood clotting factor that became effective January 1, 2005. Prior to this effective date, Medicare payments for blood clotting factor furnished by pharmacies and physician offices were calculated as 95% of AWP in 2004. Under Medicare Part B, the Company received 80% of this amount directly from Medicare and the remaining 20% was the patient's co-payment obligation. Effective January 1, 2005, the Company will be paid for blood clotting factor based on the new ASP methodology. The resulting payment rates will be lower than the historical rates for these products. Congress has directed the Centers for Medicare and Medicaid Services (CMS) to make a separate payment to the entity that provides blood clotting factor to a Medicare beneficiary for items and services related to the furnishing of such products. In the recently issued fee schedule and final rule, CMS increased the proposed rate and enacted a separate payment amount of $0.14 per unit of blood clotting factor. Our previously revised fiscal 2005 estimates assumed that the proposed separate payment of $0.05 per unit of blood clotting factor went into effect, along with the ASP payment methodology, on January 1, 2005.

Q2) What is the Company's latest outlook for the fiscal 2005 Synagis(R) season?

A2) In the September and December 2004 quarters, we experienced sales of Synagis(R) significantly above those levels obtained during the same quarters last year. Based on our results through the December quarter, we expect to achieve revenue growth from Synagis(R) in fiscal 2005 greater than 20%, which was the top end of our previously released range of 15% to 20%. As a reminder, sales of Synagis(R) primarily occur in the second and third quarters of our fiscal year.