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Express Scripts Strikes Bullish Tone As Selling Season Picks Up

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05/11/2012 | 06:28pm CET

--Express Scripts shares rise a day after company reports first-quarter top line growth above Wall Street's target

--Analyst says first-quarter results should allay fears surrounding a contract dispute with Walgreen

--Express Scripts says as year progresses it can better ascertain how Medco acquisition affects client movement

   By John Kell 

NEW YORK (Dow Jones) -- Express Scripts Holding Co. (ESRX) struck a bullish tone Friday, saying a move to break ties with Walgreen Co. (>> Walgreen Company) has been well received and touting its position for the key selling season.

The pharmacy-benefit manager's shares were up 3.6% to $56.29 at midday Friday, a day after the company reported first-quarter top line growth above Wall Street's expectations and higher adjusted claims -- a measure that takes into account monthly prescriptions filled in retail pharmacies and 90-day fills through Express Scripts' mail-order business.

Chief Executive George Paz gave the market a hint of how Express Scripts views the current selling season, a time when PBMs solicit new business, telling analysts his company's ability to remove unnecessary health-care costs was a message that had been "very well received." The selling period lasts until late summer or early fall.

Paz added Express Scripts was "well positioned" as prescription count grew last year.

The PBM sector has been tumultuous lately, as Walgreen's decision to leave Express Scripts' network at the beginning of the year due to a contract-rate dispute led some customers to transfer their prescriptions to rival drug-store chains, including CVS Caremark Corp. (>> CVS Caremark Corporation) and Rite Aid Corp. (RAD).

Express Scripts closed on the $29.1 billion purchase of fellow PBM Medco Health Solutions Inc. in early April. More consolidation for the industry, which handles drug benefits for health plans and corporate customers, could be on the horizon as midsized PBM SXC Health Solutions Corp. (SXCI) recently agreed to buy rival Catalyst Health Solutions Inc. (>> Catalyst Health Solutions, Inc.).

Paz said that since Walgreen decided to leave the Express Scripts network, his company has reached out to clients to tout the convenience of home delivery. That business saw claims volume and generic-fill rates jump in the first quarter.

Meanwhile, Walgreen has notched notable same-store sales declines each month this year as prescriptions filled by the chain have dropped with the exit of some Express Scripts clients. Walgreen's shares were down 1.2% to $33.63 in recent trading and have underperformed the broader market's gain in 2012.

J.P. Morgan analyst Lisa Gill said Express Scripts' first-quarter results should allay fears surrounding the dispute with Walgreen, which has gotten a sizable amount of attention in recent weeks. Gill said prescription volumes came in above the firm's expectations and showed solid year-over-year growth, despite concerns in the market that the dispute would lead to account losses.

Paz said Express Scripts typically aims to retain 95% of its business, as the company gains and loses clients over the course of the year. He said as the year unfolds, Express Scripts can better ascertain how the Medco merger affects client movement and give better guidance.

"I've personally been in front of many, many of the Medco clients," said Paz. "I think they're excited about what we have to offer."

-By John Kell, Dow Jones Newswires; 212-416-2480; [email protected]

(Jon Kamp contributed to this article.)

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