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Matria Mashed by Contract Loss

Matria (MATR - Get Report) has suffered a major relapse.

Just as the healthcare company appeared to be getting back on its feet, Matria announced that its big contract with Wellmark -- meant to validate its ambitious acquisition of CorSolutions -- has been canceled. The company's stock, which hit a 52-week high of $32.49 a share just last week, slid 6% on Wednesday to $29.44.

For its part, Matria said that it has reached a mutual agreement with Wellmark to terminate the contract and that it foresees no financial hit this year. Still, Matria has been touting that deal for some time. The arrangement called for Matria to provide disease management services to a major health plan -- expanding the company's reach well beyond its core employer-based business -- and promised significant growth opportunities down the road.

Wall Street clearly seemed stunned by the development. After all, analysts have been counting on Matria's giant contract with Wellmark to start paying off handsomely and help the company hit its aggressive financial targets going forward.

To be fair, however, Matria itself stopped short of offering the reassurance that analysts were seeking when questioned about the company's relationship with Wellmark six weeks ago.

"We're working hard to enroll those people, to reach out to them with additional accounts," President Richard Hassett stated during April's first-quarter conference call. But "I think that, consistent with the lesson we learned at this time last year -- when one of our real marquee Fortune 20 accounts was up for renewal and we answered a lot of very specific questions, and that client sort of slapped us on the wrist -- we announced that we were going to be very constrained with respect to getting into details on specific clients.
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