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PacificCare Leads Rebound in Health Care : Stocks: Across-the-board stock surge could continue for several days as investors regain confidence in the industry.

February 25, 1993|JAMES M. GOMEZ | TIMES STAFF WRITER

CYPRESS — Leading an unexpected rebound of health-care stock prices, PacifiCare Health Systems Inc.'s shares jumped nearly 25% in Wednesday's trading on the NASDAQ market.

The sharp increase to $28.25 a share from $22.50 on Tuesday came as the company, based in Cypress, announced that it will buy back 500,000 shares of its class B common stock. Company officials said that the depressed stock, which has lost almost 50% of its value during February because of investor uncertainty about nationwide health-care reform, gives the health-maintenance organization a rare opportunity to take back some of its 15 million outstanding shares--at a bargain price.

"We feel that, with the recent significant decline in the value of PacifiCare Health Systems' stock, there may be attractive opportunities available to us to acquire shares," Chief Executive Terry Hartshorn said in a prepared statement. "Our share repurchases will be made when market and business conditions are deemed favorable."

Nationally, most health-care stocks fared better Wednesday than they have in recent weeks.

Pharmaceuticals company Merck rose 75 cents a share to close at $38.675. Bristol-Myers Squibb Co. gained 75 cents to close at $57.675, and Johnson & Johnson added $2.125 a share to close at $57.375. All three companies are traded on the New York Stock Exchange.

Some analysts said that the across-the-board rise in health-care stocks is likely to continue for at least several days, if not weeks, as the companies regain some of the value that they have lost since President Clinton's Feb. 17 State of the Union address. Shaken by calls for reforms in the health-care system, investors have fled from health-care stocks, driving some down by as much at 50%. As a result, billions of dollars have been lost on paper.

"There's just been this total lack of confidence on the part of the investor about what or how (the Clinton Administration) will reform health care," said John Hindelong, an analyst at brokerage Donaldson Lufkin & Jenrette Inc. in New York. "With that as background, many investors threw up their hands and said, 'I don't want to play.' "

But after the scared bears come the stampeding bulls, analysts said. Many health-care stocks, including PacifiCare, have been so depressed that they have become good buys, even for a jittery investment community.

"These stocks got to the level that, whatever the Clinton Administration is going to do, they are screaming, 'Buy me!' " said Todd B. Richter, an analyst at Dean Witter Reynolds Inc. in New York.

Not all experts, however, are so optimistic.

David Saks, an analysts at Gruntal & Co. in New York, said that the surprise gain is a welcome respite from what he expects to be further selloffs in health-care stocks until the Clinton Administration begins to give details of intended reforms.

"I don't think this is over," Saks said of the selloff. "This run-up is very pleasant. . . . But the issues in the minds of many have not been resolved overnight."

PacifiCare was not the only Orange County stock to rebound.

FHP Inc. in Fountain Valley gained $1.375 a share to close at $20.675; Abbey Healthcare in Costa Mesa, up $1.50 a share to $20; Homedco Group Inc. in Fountain Valley, up $1.50 to $31.125; and Tokos Medical Corp. in Santa Ana, up $1.25 to $10.50. All are traded on the NASDAQ market.

Bergen Brunswig Corp. in Orange closed at $19.75 on the American Stock Exchange, up 50 cents a share. And Allergan Inc. in Irvine gained 27.5 cents a share to close at $22.50 in New York Stock Exchange trading.

ANOTHER BIOTECH SETBACK: Industry leader Amgen Inc. forecast that its first-quarter earnings would be 10% to 15% lower than expected. D2

A Rebound for Medical Stocks

How some major Southland health care stocks rebounded Tuesday and Wednesday, after plunging between Feb. 16 and Monday.

52-week Change in stock price: Stock (market) high 2/16 to Mon. Tues./Wed. Abbey Healthcare (O) 24 3/4 -5 1/8 +2 7/8 Amgen Inc. (O) 78 -12 3/8 +4 3/4 FHP International (O) 29 -4 5/8 + 5/8 Grancare Inc. (O) 24 -6 5/8 + 3/8 Homedco Group (O) 37 -8 5/8 +4 3/4 PacifiCare A (O) 57 1/2 -21 3/4 +8 3/4 Salick Health (O) 16 1/4 -2 3/4 +1 Sunrise Medical (N) 31 3/4 -5 +1 3/8 Tokos Medical (O) 38 1/4 -4 1/2 +1 Wellpoint Health (N) 39 3/4 -8 7/8 +3 7/8

Wed. Stock (market) close Abbey Healthcare (O) 20 Amgen Inc. (O) 46 1/4 FHP International (O) 20 7/8 Grancare Inc. (O) 15 3/4 Homedco Group (O) 31 1/8 PacifiCare A (O) 34 3/4 Salick Health (O) 11 3/4 Sunrise Medical (N) 24 1/8 Tokos Medical (O) 10 1/2 Wellpoint Health (N) 28 1/4

N: NYSE; O: NASDAQ

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