Healthways Inc., a manager of diabetes and heart disease services, fell 44 percent, a record drop, after the company said it expected to lose a contract with insurer Cigna Corp., cutting into revenue.
Healthways plummeted to $6.31 at 4 p.m. New York time for the biggest decline since the company first sold shares to the public in August 1991. Franklin, Tennessee-based Healthways is down 43 percent this year.
Cigna, the fifth-largest U.S. insurer, told Healthways it will begin to wind down its contract next year before it expires in February 2013, Healthways said in a statement yesterday. That will reduce revenue by $60 million to $65 million, the company said. Cigna said yesterday it agreed to buy health-maintenance organization Healthspring Inc. for $3.8 billion.
“The loss of the Cigna contract could reduce earnings per share by 50 cents to 65 cents by 2013, potentially eliminating over half the company’s earnings base,” Scott Fidel, an analyst with Deutsche Bank Securities Inc., wrote in a research note today. It “creates a major headwind to 2012-2013 prospects.”