UPDATE 3-Medco profit tops views, sees strong 2010 growth

* Q3 EPS ex items of 75 cents vs 72-cent Wall St view

* Raises 2009 view to $2.80-$2.82, ex items

* Sees 2010 EPS of $3.28-$3.38, ex items

* Shares rise 2.5 pct (Recasts, adds details from results, analyst comment)

NEW YORK, Nov 3 - Pharmacy benefit manager Medco Health Solutions Inc posted a better-than-expected third-quarter profit on Tuesday, helped by greater use of higher-margin generic drugs and specialty medicines and new business.

Medco projected earnings could rise more than 20 percent next year, as it said it had already won more than $4 billion in new business for next year while retaining 99 percent of its clients.

"Medco delivered another strong, high-quality quarter... with very little to pick at," JP Morgan analyst Lisa Gill said in a research note. "Given the strength in the third quarter and the better-than-expected 2010 guidance, we expect the stock to react positively."

Medco shares rose 2.5 percent in light premarket trading.

Net income rose 13.5 percent to $335.6 million, or 69 cents per share, from $295.7 million, or 58 cents per share, a year earlier.

Excluding amortization of intangible assets, earnings were 75 cents per share. Analysts on average had expected 72 cents per share, according to Thomson Reuters I/B/E/S.

Revenue rose about 18 percent to $14.79 billion. Analysts had expected $14.68 billion.

Pharmacy benefit managers, or PBMs, administer prescription drug benefit for employers and health plans and operate large mail-order pharmacies.

Medco's rate of dispensing generic drugs, which have higher profit margins for PBMs than more expensive brand name medicines, rose 3.3 percentage points to a record 67.7 percent.

Prescription volume increased 14.1 percent to 220.2 million. However, the volume of drugs delivered by mail fell 2.3 percent to 25.5 million, reflecting a decline in brand-name drug volume.

Generic drugs delivered by mail are particularly profitable for Medco. It can take advantage of low prices from generic manufacturers and capture more profit by dispensing the drugs itself.

Revenue from Medco's specialty pharmacy unit, which includes drugs that are infused, jumped 19.2 percent to more than $2.4 billion.

Medco raised its 2009 forecast, excluding items, to a range of $2.80 per share to $2.82 per share, up from $2.76 to $2.81 previously. Analysts were expecting $2.80. The 2009 forecast equates to growth of 20 percent to 21 percent.

On that basis, it expects 2010 profit of $3.28 per share to $3.38 per share, or growth of 16 percent to 21 percent. Analysts were looking for $3.28.

"Medco continues to take market share from competitors," Wells Fargo analyst Matt Perry said in a research note.

Through Monday, Medco shares had risen about 37 percent this year, less than the 51 percent rise for rival Express Scripts Inc.