Omnicare Outlook Dicey

Omnicare (OCR) investors might want to break out the painkillers.

They could suffer a fresh blow when the geriatric pharmaceutical services outfit delivers its third-quarter update on Tuesday. Recent developments seem to threaten the company's current and future performance alike.

For starters, one of Omnicare's big repackaging facilities remains shut due to quality-control issues that have triggered drug recalls. Costs continue to climb as a result.

For another, Omnicare's future profits could take a hit due to proposed changes in the "average wholesale pricing" system for brand-name drugs. Express Scripts (ESRX) got hammered last week on this very concern.

Omnicare faces plenty of challenges -- including multiple government investigations -- already.

The company actually identified problems involving mislabeled drugs at its Heartland Repack Services center several months ago. The government's list of the drugs involved stretches on for nearly 120 pages. The company was still sending out urgent letters to its clients -- seeking return of the drugs -- in late October.

By now, even bullish analysts sound worried about the shut-down facility and the setbacks it has caused.

"In our view, one of the main risks to the quarter is the impact of incremental costs incurred as a result of the Heartland repackaging facility being offline," JPMorgan analyst Lisa Gill wrote last week. Meanwhile, "we are conservatively lowering our Street-high estimates, as we have admittedly maintained overly aggressive assumptions."