This conversation was conducted on March 12th 2008.
Q: What's your take on Express Scripts Inc.?
A: Shares of Express Scripts have come under considerable selling pressure amid worrisome news from managed healthcare companies Wellpoint (WLP) and Humana (HUM). These industry heavyweights have issued somewhat disappointing 2008 financial guidance, blaming the shortfall versus consensus on slower enrollee growth and rising medical costs. Toss in the strong advance of stocks such as Express Scripts (ESRX), Medco Health Solutions (MHS), and McKesson (MCK) over the past 52-weeks and the profit taking by investors really isn't much of a surprise.
Q: So, what is your position on all this?
A: Nonetheless, we continue to be quite positive on the pharmaceutical benefit management industry as these drug middlemen will capitalize on favorable industry dynamics associated with generic and brand drugs. Specifically to Express Scripts, it's increasingly shifting clients to lower cost generic drug alternatives, which is creating an upward trend in the critical gross profit and EBITDA per adjusted claim metrics.
Q: Based on this, what would you tell investors looking to position themselves in this stock?
A: We suspect the company's ability to lower its drug purchasing costs and offer value to clients will lead to strong double-digit percentage earnings growth in 2008.
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