Back to top

Press Releases

The Zacks Analyst Blog Highlights: Express Scripts, CVS Caremark, Amerigroup, Molina Healthcare, Aetna, Walgreen, Catamaran and Eli Lilly

ESRX CVS MOH AET WAG CTRX LLY

 ZacksTrade Now

 

For Immediate Release

Chicago, IL – August 29, 2012 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Express Scripts (ESRX - Analyst Report), CVS Caremark (CVS - Analyst Report), Amerigroup Corporation , Molina Healthcare (MOH - Analyst Report), Aetna (AET - Analyst Report), Walgreen (WAG - Analyst Report), Catamaran Corporation (CTRX - Snapshot Report) and Eli Lilly and Company (LLY - Analyst Report).

                                

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513

Here are highlights from Tuesday’s Analyst Blog:

PBM: A Growing Industry

 

Pharmacy Benefit Management ("PBM") solutions play a significant part in the U.S. economy. The companies in this sector have a vital function in controlling prescription drug costs and improving chronic care management.

PBMs work on improving the prescription drug therapy management for patients and help industry players by supplying them with a variety of tools to contain drug costs.

Empirical evidence indicates that PBMs deliver cost savings for consumers, labor unions, employers, health plans and government programs alike. As per the Congressional Budget Office (CBO) estimate, PBMs have the potential to save as much as 30% in total drug spending relative to unmanaged purchasing.

The researchers claim that PBM providers control drug spending by virtue of their advanced technology platforms, encouraging use of generics and other lower-cost medications. The studies also demonstrate that PBMs can limit other health-related costs and improve health outcomes by boosting a patient’s adherence to drug therapies.

Patient non-adherence is currently estimated to cost up to $290 billion per year, which represents about 13% of all health expenditures.

Post Medco-Express Scripts Merger Scenario

The mega merger of two of the three largest pharmacy benefit managers – Express Scripts (ESRX - Analyst Report) and Medco Health Solutions has been the hottest topic in the sector in recent times. The third largest player in this niche was CVS Caremark (CVS - Analyst Report). These 3 PBMs used to hold roughly 50% of the market (80% after taking into account the contractual arrangements with large plan sponsors).

Following the merger, the combined entity (Express Scripts Holdings Company) has therefore emerged as the dominant player in the PBM market space, catering to more than 150 million prescription drug consumers and 50% of the large employer market.

Both CVS and Express Scripts stand to benefit from increased generic utilization, the shift toward mail orders, strong specialty growth and an aging population. Due to the economic slowdown, a large number of people are moving toward low-priced generic drugs and adopting cost-saving initiatives like mail orders.

The use of generic drugs should increase significantly over the next few years as several branded prescription drugs are scheduled to lose patent protection. Increased generic uptake and higher use of mail orders should help the company improve its margins and profitability.

Between 2008 and 2015, several drugs (annual U.S. sales of about $90 billion) are going off-patent. Additionally, it is estimated that $70 billion worth of major branded drugs will go generic within 2015.

According to the 2010 U.S. health reform legislation, over 30 million uninsured Americans will gain coverage and the U.S. government will increase expense on prescription drugs pursuant to the expansion of Medicaid and Medicare Part D plans. This will help drive prescription sales going forward.

CVS in this regard, entered into deals with 3 large Medicaid players, Amerigroup Corporation (    , Molina Healthcare (MOH - Analyst Report) andAetna (AET - Analyst Report). These three major health insurers are engaged with numerous small players which should help CVS drive growth in its PBM business.

Express Scripts on the other hand, is portraying solid growth after the Medco integration with an encouraging 2013 selling season and a generic tailwind that is expected to persist through 2014. The company also expects to generate savings of $1 billion on the complete integration of Medco Health's operations into Express Scripts' business adding further synergies to the operation.

Moreover, the favorable resolution of Express Scripts’ long-standing dispute with retail giant Walgreen's (WAG - Analyst Report) in July, has been a major positive for the company.

With this resolution, Express Scripts will extend its services to over 64,000 pharmacies across the U.S. Per the new agreement, Walgreen's will start filling prescriptions from Express Scripts’ customers from September 15, 2012. The favorable resolution has removed a major overhang on Express Scripts shares.

Another Consolidation in PBM Space

The PBM Institute’s directory lists more than 40 members.  However, the successful acquisition of Express Scripts and Medco motivated others in the field to integrate. In July this year, another standalone PBM company Catalyst Health Solutions was acquired by its arch rival SXC Health Solutions Corp.

With this acquisition, a new company -- Catamaran Corporation (CTRX - Snapshot Report) -- was formed. While these PBM providers work independently, others are affiliated with major health insurers or health plans like those from United Health and Aetna.

Conclusion

As health care costs continue to climb despite the current economic doldrums and severe budget pressures, the need for innovative solutions like PBM continues to grow. PBM’s growing role in the clinical management of chronic diseases or complex health conditions is undeniable given that these patients account for approximately 96% of drug spending and 75% of total health care expenditures nationwide.

Over the long term, we have an Outperform recommendation on Express Scripts with short-term Zacks #1 Rank (Strong Buy). However, we remain Neutral on CVS and Catamaran Corporation. Both these companies retain a Zacks #3 Rank (short-term Hold rating).

 

Lilly’s Alzheimer’s Candidate Fails

 

Eli Lilly and Company (LLY - Analyst Report) recently announced much awaited top-line results on Alzheimer’s disease candidate, solanezumab (LY2062430). Eli Lilly said that solanezumab failed to meet its primary endpoints in both the phase III EXPEDITION studies. However, the candidate demonstrated promising potential in slowing cognitive decline.

The identical multi-center, randomized, double-blind, placebo-controlled EXPEDITION studies (EXPEDITION1 and EXPEDITION 2) enrolled more than 2,050 patients suffering from mild-to-moderate Alzheimer's disease. Results showed that solanezumab failed to achieve the primary endpoints namely change in cognitive and functional performance compared to placebo.

The company plans to discuss the data with the US Food and Drug Administration (FDA) to determine the future developmental path for solanezumab. The Alzheimer's Disease Cooperative Study (ADCS) is conducting an independent analysis of the EXPEDITION study results, which will be presented at various upcoming scientific meetings in October 2012. An open-label extension study, EXPEDITION-EXT, is ongoing.

Our Take

Solanezumab has always been a high risk-return candidate for Eli Lilly. While disappointed with the phase III results, solanezumab’s failure did not come as a major surprise as chances of success were pretty low.

The successful development of therapies for the treatment of Alzheimer’s disease is challenging and we note that several companies have failed in developing treatments for the same. In fact, Eli Lilly has faced failure before in this field. The company suffered a major setback in August 2010 when it had to halt the development of another phase III Alzheimer’s candidate semagacestat (LY450139).

 

 

                                                          

Want more from Zacks Equity Research? Subscribe to the free Profit from the Pros newsletter: http://at.zacks.com/?id=5515.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5517

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leon Zacks. As a PhD from MIT Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Follow us on Twitter: http://twitter.com/zacksresearch

Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Media Contact
Zacks Investment Research

800-767-3771 ext. 9339

support@zacks.com

http://www.zacks.com

 

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
CENTURY ALU… CENX 22.53 +4.50%
ERBA DIAGNO… ERB 2.91 +4.30%
PLANAR SYST… PLNR 4.31 +3.86%
MALLINCKROD… MNK 72.17 +3.83%
GTT COMMUNI… GTT 12.06 +3.52%