Why Maverick Capital eliminated position in Catamaran



Maverick Capital’s new positions

Lee Ainslie’s Maverick Capital added positions in Dollar General Corp. (DG), McKesson Corp. (MCK), Allison Transmission Holdings (ALSN), AbbVie Inc. (ABBV), and Sabre Corp. (SABR). The fund’s notable exits during the quarter included Capital One Financial (COF), Catamaran Corp. (CTRX), Citrix Systems (CTXS), and Monsanto (MON).

Maverick Capital exited a position in Catamaran Corp. (CTRX), which accounted for 3.17% of the fund’s first quarter portfolio. Maverick Capital initiated the position in 4Q13.


Catamaran overview

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Catamaran is a provider of pharmacy benefit management (or PBM) services and technology. The PBM services include electronic point-of-sale pharmacy claims management, retail pharmacy network management, mail service pharmacy, specialty service pharmacy, Medicare Part D services, benefit design consultation, preferred drug management programs, drug review and analysis, consulting services, data access and reporting, and information analysis.

The company also provides health care information technology (or HCIT) solutions and services to providers, payors, and other participants in the pharmaceutical supply chain in the U.S. and Canada.

The company’s customers include many of the largest organizations in the pharmaceutical supply chain like pharmacy benefit managers, managed care organizations, self-insured employer groups, unions, third-party healthcare plan administrators, and state and federal government entities.

Catamaran sees a sell-off in March

Catamaran has a ~$9.26 billion market cap and competes with larger players Express Scripts (ESRX) and CVS Caremark (CVS). The stock witnessed a sell-off in March over negative earnings estimates. However, Jefferies analyst Brian Tanquilut commented in April that “we believe the recent, steep sell-off in the name — on concerns about its ability to meet Q1 consensus and win new contracts in the current selling season—is overdone.” The stock is down 3% year-to-date.

Catamaran’s revenue up 58% from pharmacy benefit management

Catamaran posted a 58% increase in revenue to $5.4 billion in 2Q14. Net income was up 13% to $71.4 million, or $0.34 per share.

Catamaran said in its latest quarterly filing that the “ramp-up of the Cigna contract implementation, continued integration of Restat acquisition, increased mail and specialty volumes and new client implementations during 2014 have driven the overall growth in its revenue.”

Last year, the company said Cigna selected Catamaran to be its exclusive pharmacy benefit partner in a strategic 10-year agreement. Catamaran said it also continues to benefit from better management of drug ingredient costs through increased competition among generic manufacturers.

PBM revenue increased 58% to $5.4 billion due to organic growth from increased claim volume added through new customer implementations, including the Cigna contract, as well as additional claim volume related to the Restat acquisition. HCIT revenue decreased 1% to $34.8 million due to lower professional services revenue.

Catamaran updates financial guidance

Catamaran said it is updating its 2014 financial guidance and anticipates revenue of $20.5 to $21 billion. The company forecasts GAAP EPS (fully-diluted) of $1.40 to $1.50 for the full year 2014.


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