Credit Suisse Reiterates Bullish View on Express Scripts (ESRX) as Walgreens (WBA) Thesis Plays Out
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Credit Suisse analyst Robert Willoughby reiterated an Outperform rating and $85 price target on Express Scripts (NASDAQ: ESRX) amid news that it replace CVS (NYSE: CVS) with Walgreens (NYSE: WBA) in the TRICARE retail pharmacy network, as of December 1.
Willoughby commented, "Walgreens had exited the network with its ill-fated dispute with ESRX in 2011, and it did not re-enter after the companies settled their disagreement in 2012. The switch likely contributes to greater savings for TRICARE, a small portion of which may accrue to ESRX, but more importantly, it reduces ESRX's reliance on CVS as a competitor, consistent with our thesis ESRX would seek to do more business with Walgreens under new management."
The firm's thesis is playing out that ESRX will work more closely with Walgreens as a preferred pharmacy network provider to enhance its savings opportunity for payors and downsize CVS's share of its PBM business from over 20% currently and boost profitability.
Shares of Express Scripts closed at $70.53 yesterday.
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