Jefferies Comments on Impact of CIGNA's (CI) Pending HealthSpring (HS) Acquisition on SCX (SXCI)

Jefferies is reaffirming its Buy rating and $60 price target on shares of SXC Health Solutions (NASDAQ: SXCI) stating that yesterdays 23 percent sell off offers a compelling entry point.

The firm notes that SXCI's contract with HealthSpring (NYSE: HS) does not have a "change of control" clause, and as a result CIGNA (NYSE: CI) is not able to legally move the HealthSpring PBM book inhouse until January 1, 2014.

Jefferies feels SXCI's track record with Medicare PDPs and MA plans combined with the HS-SXC contract's extremely small margins could encourage CI to leave the business with SXCI in 2016. Until then, the firm believes SXCI will continue to make strategic acquisitions.

An analyst at Jefferies comments, "CI will have to compensate SXCI for the contract's remaining value if it chooses to bring the HS PBM book of business in-house before 1/1/2016. So realistically, we do not expect CI to move the HealthSpring book of business, if it chooses to do so, until January 1, 2016."

For more ratings news on SXC Health Solutions click here and for the rating history of SXC Health Solutions click here.

Shares of SXC Health Solutions closed at $43.37 yesterday.

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