More Pressure on Walgreen for Express Scripts Deal
NEW YORK (
) --
CVS Caremark
(CVS) - Get Report
raised its fiscal 2012 guidance on Wednesday adding to the pressure on
Walgreen
(WAG)
to end its standstill with
Express Scripts
(ESRX)
, according to Gabelli analyst Jeff Jonas.
CVS raised its first quarter and full-year 2012 guidance because it anticipates a gain of 3 cents a share from Express Scripts' decision to stop covering in-network prescriptions filled at Walgreen at the start of the year.
.
|
CVS noted in a statement Wednesday that the guidance adjustment "only reflects the potential estimated benefit if the stalemate continues through the end of the first quarter, and does not contemplate any potential benefit beyond the first quarter."
Walgreen lost some of its negotiating strength last week after its January same-store sales fell 4.6%, Jonas said. And while CVS' earnings didn't materially hurt Walgreen's negotiating power with Express Scripts, it didn't help either, Jonas noted.
"There is renewed urgency
for Walgreen," Jonas said, referring to its negotiations with Express Scripts.
An Express Scripts spokesman said the situation between his company and Walgreen remained the same as he
The Street
.
"As has been the case since June, when Walgreens unilaterally stated it would leave our network, we would be open to having Walgreens in our network, but only at rates and terms that are right for our clients and consistent with other pharmacies in our network. That position has remained the same," the spokesman said last week.
A Walgreen spokesman also said that there is no update on possible negotiations with Express Scripts.
, "On Dec. 15, we sent Express Scripts one more proposal in our best attempt to reach a resolution before Jan. 1 and avoid any disruption in patients' care. But Express Scripts didn't accept our offer. Instead, they wanted to wait until sometime in January to continue negotiations, even though that would mean significant disruption in care for patients across the country. As we have said repeatedly, if Express Scripts presents us with a fair and competitive offer, we would consider it."
Despite the stalemate between Walgreen and Express Scripts, Jonas has a buy rating on both companies. In Walgreen's case, he thinks the worst is already priced into the stock and if it settles with Express Scripts he expects to see the stock's price jump 10% to 15%. Jonas has a $40 private market value on Walgreen.
TheStreet Ratings
gives Walgreen a B grade with a buy rating and a
price target. The stock closed Wednesday at $33.13 and has risen slightly year to date.
For Express Scripts, Jonas said he anticipates the
Medco
merger to go through and be accretive to Express Scripts. He has a $60 private market value on Express Scripts this year, and says it can potentially reach $67 in 2013 if the Medco merger is completed.
TheStreet Ratings
gives Express Scripts a B grade and a
price target. The stock closed Wednesday at $50.78 and has risen 13.63% year to date.
-- Written by Alexandra Zendrian
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