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McKesson (MCK) Stock Pares Gains Following Rx Savings Buyout

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Shares of McKesson Corporation (MCK - Free Report) have declined 0.1% in the past two days since Friday’s close. The company’s shares moved up on Monday after it announced an agreement to acquire privately-held prescription price transparency and benefit insight company, Rx Savings Solutions (RxSS). However, the shares pared all gains on Tuesday.

McKesson announced on Sep 19 that it has signed a definitive agreement to acquire RxSS for a total consideration of up to $875 million. The total deal value includes an upfront payment of $600 million and up to $275 million in contingent consideration based on RxSS’ financial performance through the calendar year 2025. McKesson expects to complete the acquisition of RxSS in the second half of fiscal 2023, pending customary closing conditions, including regulatory review.

RxSS offers affordability and adherence solutions to health plans and employers, with more than 17 million patients currently using its solutions. McKesson believes that this acquisition will extend its leadership in access, affordability, and adherence solutions and also leverage its differentiated platform and large-scale ecosystem of provider, pharmacy and biopharma services. McKesson and Rx Savings Solutions share a common goal of making medication therapy more affordable and ensuring medication adherence to improve outcomes for patients.

The acquisition is aligned with McKesson’s strategic growth plan of creating accessible and affordable treatment options by connecting biopharma and payer service to patients. Following the completion of the deal, RxSS will be part of McKesson’s Prescription Technology Solutions business, which will help the company to provide next-generation patient access, affordability and adherence solutions. RxSS has direct contracts with health plans and large self-funded employers that help it to maximize the effectiveness of benefit design and drive prescription cost savings for members. The company uses an evidence-based, proprietary machine-learning algorithm to identify cost-effective prescription alternatives for therapy under member’s insurance.

Although McKesson shares were almost flat following the acquisition announcement, the company’s shares have gained 39% so far this year, outperforming its industry, which declined 15.5% in the same period. McKesson carries a Zacks Rank #2 (Buy). Earnings estimates for fiscal 2023 and 2024 earnings have been revised upward by 4.9% and 2.5%, respectively, in the past 60 days.

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Other Stocks to Consider

Some other top-ranked stocks in the broader medical space are ShockWave Medical (SWAV - Free Report) , AMN Healthcare Services (AMN - Free Report) and Semler Scientific (SMLR - Free Report) . While ShockWave Medical and AMN Healthcare Services sport a Zacks Rank #1 (Strong Buy), Semler Scientific carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Estimates for ShockWave Medical’s 2022 and 2023 earnings per share rose from $2.02 to $2.57 and from $2.95 to $3.42, respectively, in the past 60 days. SWAV has gained 62.7% so far this year.

ShockWave Medical delivered an earnings surprise of 180.14%, on average, in the last four quarters.

Estimates for AMN Healthcare Services have improved from earnings of $10.41 to $11.26 for 2022 and $7.94 to $8.30 for 2023 in the past 60 days. AMN stock has declined 12.6% so far this year.

AMN Healthcare Services delivered an earnings surprise of 15.66%, on average, in the last four quarters.

Estimates for Semler Scientific’s earnings per share increased from $1.37 to $1.58 for 2022 and $2.39 to $2.42 for 2023 in the past 60 days. SMLR has declined 58.5% so far this year.

Semler Scientific has an earnings yield of 4% against a negative yield for the industry.

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