Alere Inc (NYSE:ALR) Caught in Perfect Storm?

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Investors dumped Alere Inc (NYSE:ALR) after it admitted in a filing that the Medicare enrolment of its diabetes unit was cancelled by the government, allegedly because the unit filed claims in respect of dead patients.

The stock lost 14.52% Friday, closing at $36.10 on volume of 5.5 million.

Adding to investors’ worries was more evidence that Alere’s proposed $7.9 billion merger with Abbott could very likely be a non-starter. Abbott filed a suit Thursday against Alere alleging breach of contract for the failure of the latter to submit certain documents related to the merger.

Adding to the doom and gloom, Alere missed on revenue estimates in its third quarter earnings reported Friday.

Alere Inc (NYSE:ALR) in perfect storm of bad news

Alere said in a Friday filing that its subsidiary, Arriva Medical, LLC, which is in the business of diabetic testing supplies via mail order, received a notice that its Medicare enrollment would be revoked by Centers for Medicare and Medicaid Services (CMS), because, over a five year period, Arriva allegedly submitted claims for 211 deceased patients.

“The CMS letter only identifies 47 of the 211 claims,” the company said. “Our initial appeal of this determination was denied by CMS on November 2, 2016 and, therefore, Arriva’s Medicare enrollment will be revoked effective November 4, 2016, pending the outcome of further appeals.”

Alere Inc (NYSE:ALR) marriage with Abbott is already rocky

Alere’s ill-fated merger with Abbott took a turn for the worse Thursday when the latter filed a suit in the Delaware Chancery Court. Alere says in the same filing that “Abbott asserts a single claim against Alere for breach of contract stemming from Alere’s refusal to provide Abbott with certain categories of documents under the Merger Agreement … Alere believes it has fulfilled its contractual obligations under the merger agreement.”

According to Abbott, however, it has not asked the court to unwind the merger – it has only sought intervention “after months of repeatedly and unsuccessfully attempting to get Alere to honor the agreement and provide information about business practices that are the focus of criminal and civil investigations.”

Investors are regretting the unseemly and bitter discussions with Abbott, and the merger consideration of $56 per share of Alere now seems very lucrative, but equally distant.

Earlier this year, Abbott offered Alere between $30 million and $50 million to terminate the merger but the proposal was shot down by Alere.

Alere Inc (NYSE:ALR) misses on revenue

For its third quarter, Alere reported revenue of $582.35 million, which missed estimates by $23.13 million and was down 3.5% year on year.

It reported net income of $16.5 million and EPS of $0.19.

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