Health Stocks in Motion

Updated from 2:20 p.m. EDT

Shares of OCA ( OCA) were among the worst-performing health-related stocks Tuesday, falling 38.5% after the company said its annual and first-quarter report would be delayed because of accounting errors that occurred during the first three quarters of 2004.

The business services and systems provider to orthodontic and dental practices said that it discovered errors in its calculation of patient receivables for 2004 and that patient receivables that were reported for the first three quarters of 2004 were overstated by material amounts. OCA is also reviewing a number of other accounting issues and accounts. So far, the company has identified a number of potential accounting errors from prior periods.

Lenders have agreed to extend the filing deadlines under OCA's senior credit facility until June 30. The company, however, anticipates that its financial reports will be delayed beyond June 30, which will force it to seek an additional extension of time and waiver. The extension under the credit facility, the company said, limits the amount that OCA may borrow under the line of credit -- at least until the company files its financial reports. As a result, OCA's chief executive, Bart Palmisano Sr., has agreed to extend a $2 million unsecured loan to the company. In an effort to cut costs, the company also said that it would terminate the lease on an aircraft that's owned by an affiliate of Palmisano's. The move is expected to save the company about $1.1 million annually.

Finally, OCA said that it has appointed a special committee to review certain journal entries in the company's general ledger, the circumstances under which they originated, and their impact on the company's financial statements. Moreover, the committee is reviewing certain alleged changes in data provided to the company's registered public accounting firm. Pending completion of the committee's internal review, Bart Palmisano Jr., the company's chief operating officer, has been placed on administrative leave. Shares of OCA traded down $1.55 to $2.48.

Apria Healthcare ( AHG) rose 16.4% after the company confirmed that it has received "expressions of interest" concerning the possibility of an acquisition of the company. The company has hired Morgan Stanley to contact a number of interested parties and offer them the opportunity to review nonpublic information regarding the company. Apria, which provides home respiratory therapy, home infusion therapy and home medical equipment, said that it would consider the possibility of entering into a transaction at an attractive price level. Shares traded up $5.18 to $36.69.

Shares of Analogic ( ALOG) rose 4.5% after the company reported third-quarter results and announced a $25 million share repurchase plan. The health and security imaging equipment maker earned $28.1 million, or $2.07 a share, on sales of $94.2 million. Results included a gain of $43.8 million from the sale of securities and $5.6 million in asset writedowns. A year ago the company earned $1.1 million, or 8 cents a share, on sales of $89 million.

Separately, Analogic announced a $25 million stock repurchase plan. The company expects to repurchase the stock over the next 12 months. "This repurchase program reflects our ongoing commitment to improving the investment value of our stock while at the same time profitably growing our business," the company said. The repurchases will be funded by working capital. Shares traded up $1.94 to $44.92.

NBTY ( NTY) rose 4.9% after the nutritional supplements company said that it would acquire Solgar Vitamin and Herb for $115 million. The acquisition of Solgar, a division of Wyeth Consumer Healthcare, is expected to close by August 2005. Solgar, which makes and distributes premium-branded nutritional supplements, posted 2004 sales of about $64 million. Shares of NBTY traded up $1.09 to $23.55.

Other health care volume movers included Pfizer ( PFE), down 5 cents to $27.96; Elan ( ELN), up 43 cents to $6.77; UnitedHealth Group ( UNH), up 72 cents to $51.71; Teva Pharmaceutical ( TEVA), up 27 cents to $32.25; Amgen ( AMGN), down 81 cents to $60.20; Johnson & Johnson ( JNJ), up 16 cents to $66.54; Biogen Idec ( BIIB), down 30 cents to $35.07; Merck ( MRK), up 5 cents to $32.08; and Schering-Plough ( SGP), up 4 cents to $19.44.

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