Alere Shares Fall as Unit Loses Medicare Access and Earnings Disappoint -- Update
November 04 2016 - 3:54PM
Dow Jones News
By Anne Steele
Alere Inc. said Friday its diabetes unit's Medicare enrollment
was revoked by the government, which claims the unit submitted
claims for deceased patients, with the announcement coming a day
after a new lawsuit further threatened Alere's merger with
reluctant buyer Abbott Laboratories.
Shares of Alere tumbled 13% Friday to $36.60, a sharp discount
to the agreed-upon merger price of $56 a share, as the company also
posted disappointing financial results for its latest quarter.
Alere said in a filing that its subsidiary Arriva Medical LLC's
Medicare enrollment was revoked by the Centers for Medicare and
Medicaid Services. The CMS letter, dated Oct. 5, identifies 47 of
the 211 claims it alleges Alere made for deceased patients over a
five-year period.
Alere said its initial appeal was denied by CMS on Wednesday,
and therefore Arriva's Medicare enrollment would be revoked
effective Friday, pending the outcome of further appeals. In the
filing, Alere said it doesn't believe Arriva received or retained
improper reimbursement for medical equipment it furnished.
Alere added on Friday it believes the matter is owing to the lag
in timing between when Arriva processes reimbursement requests and
when the CMS system updates patient status, and pointed out that
Arriva processed nearly 5.8 million total claims during the
five-year period.
It said it is continuing to work through the appeals process
toward a goal of Arriva's enrollment status being reactivated
retroactively to Friday.
For the first three quarters of the year, Arriva contributed
about $88 million in revenue to Alere.
Abbott agreed to buy Alere in February for nearly $5 billion.
Since then, Alere disclosed it has received a subpoena regarding a
foreign corruption investigation over payments in Africa, Asia and
Latin America. It also said separately that federal investigators
are seeking information about government-billing practices. The
company was also late in filing its 2015 annual report.
Since agreeing to the deal, Abbott has signaled it may not want
to ultimately go through with it. In late August, Alere escalated
its fight with Abbott by filing a lawsuit against its potential
acquirer to push it to move forward with the deal.
On Thursday, Abbott filed suit under seal against Alere,
alleging breach of contract and seeking documents and information
required by contract, according to a court document. Abbott said
the suit is to obtain important information before the transaction
is completed, and doesn't ask the court to break the deal. Alere
declined to comment on the suit.
Abbott said it filed suit "to get Alere to honor the agreement
and provide information about business practices that are the focus
of criminal and civil investigations that came to light after the
merger agreement around federal anticorruption, anti-kickback and
U.S. health-care laws," the company said in a statement. "Abbott
would be responsible for the company upon close and has the right
to understand these issues so that it can prepare to address them
immediately."
Alere's third-quarter report came as a disappointment to
investors. In all, for the September quarter, Alere earned $21.8
million, or 19 cents a share, compared with a loss of $2.3 million,
or a dime a share, a year earlier. Analysts polled by Thomson
Reuters were looking for earnings of 54 cents a share. The company
blamed the decline on $41 million in merger and legal-related
expenses, $12 million of investments in infrastructure and
performance improvement initiatives, and $5 million in acquisition
costs.
Revenue fell, unexpectedly, by 3.5% to $582.4 million. Analysts
had anticipated an increase to $605.5 million. Foreign currency
dented the top line $4 million and the company said organic revenue
slipped 0.7% during the quarter.
Gross margin was unchanged at 46%.
Write to Anne Steele at Anne.Steele@wsj.com
(END) Dow Jones Newswires
November 04, 2016 15:39 ET (19:39 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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