Barclays Maintains an 'Underweight' on Walgreen (WAG); Express Scripts' (ESRX) Suit Could Slow Resolution

September 12, 2011 1:29 PM EDT
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Barclays maintains an 'Underweight' on Walgreen (NYSE: WAG) price target of $29.00.

Barclays analyst says, "The dispute between Express Scripts (Nasdaq: ESRX) and Walgreen (WAG) appears to have moved up one notch in intensity with the lawsuit that ESRX filed against WAG in the US District Court for Northern Illinois, Eastern Division on September 7. The suit may be in response to a document titled "The Value of Walgreens" which WAG plans to distribute to various market participants, including ESRX customers, and filed as an 8K on September 6. It has been our view for several weeks that a resolution of this dispute before year-end was unlikely, and we believe the latest actions will make it even more difficult."

"We are also concerned that both companies have already been harmed, WAG most especially, since so many of the patients covered by an ESRX plan have already been notified that WAG will not be part of the network after January 1, 2011. So even if the disagreement were resolved tomorrow, WAG may still have lost some customers and certainly created confusion among them. It may also have damaged its relationship with employers and health plans, though certainly some have been supportive. And its future relationship with ESRX has been harmed. If ESRX's acquisition of Medco is approved by the regulators, it would end up as the largest PBM in the industry, making the future more difficult for WAG."

For more ratings news on Walgreen click here and for the rating history of Walgreen click here.

Shares of Walgreen closed at $35.33 yesterday.

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