Express Scripts Buys eviCore for $3.6B, Forays Into MBM

Express Scripts Holding CompanyESRX recently completed the buyout of eviCore healthcare for $3.6 billion. Notably, eviCore provides evidence-based and integrated medical benefit management services (MBM) solutions that help reduce costs and provide quality care.

Post acquisition, eviCore will operate as a standalone business unit under Express Scripts and enhance its capacity to provide better clinical outcomes and savings for health plans, purchasers and patients. Express Scripts' pharmacy benefit management coupled with eviCore's complementary MBM platform is likely to build a comprehensive patient benefit management (PBM) solution. This buyout will provide Express Scripts opportunities to cross-sell to both the client bases.

Furthermore, this buyout widens Express Scripts' ability to drive value in the use of Specialty medications. Notably, specialty medications are used to treat complex and chronic conditions. These medicines are exorbitantly expensive and form the fastest growing part of pharmaceutical expenses.

Express Scripts Enters MBM Space

MBM is an exclusive platform that checks specialty-drug spending. MBM also provides care and services to patients ensuring safe, efficient and timely outcomes.

With this deal, Express Scripts aims to eradicate long medical procedures and lack of coordinated and evidence-based care.

It targets the healthcare industry which represents a worth of around $3.4 trillion annually. Per management, this is more than eight times larger than the pharmacy segment.

The PBM market is expected to maintain the solid trend. Per a report by Market Research, the PBM market will see a CAGR of 7.16% between 2014 and 2019. So, the latest development is strategic fit keeping the bountiful opportunities in this niche space in mind.

Financial Impact

The acquisition is expected to prove accretive to Express Scripts' adjusted diluted earnings per share in 2018, excluding transaction-related expenses and amortization of intangibles.

Guidance Raised

Express Scripts increased its previously issued consolidated 2017 full-year adjusted EPS guidance range of $6.97 to $7.05 to $7.00 to $7.08, reflecting a growth of 10% over consolidated 2016 adjusted EPS results at the midpoint of the range.

The company has also provided adjusted earnings per diluted share guidance for 2018 in the range of $7.67 to $7.87, reflecting growth of 9% to 12% from the midpoint of the updated 2017 adjusted EPS guidance range.

Share Price & Estimate Revision Trend

Express Scripts' stock has outperformed the broader industry in the last six months. The stock has gained 11.4% during this period as compared with the industry's gain of 0.7%.

The company's recent earnings estimate revision trend has been encouraging as well. The current quarter has seen seven estimates go up in the last 30 days compared to no revision in the opposite direction.

The consensus estimate for current-quarter earnings has risen to $2.07 from $2.06.

Zacks Rank & Key Picks

Express Scripts carries a Zacks Rank #3 (Hold).

A few better-ranked medical stocks are athenahealth, Inc. ATHN , Align Technology, Inc. ALGN and Luminex Corporation LMNX . Notably, athenahealth, Align Technology and Luminex sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

athenahealth has a long-term expected earnings growth rate of 22.3%. The stock has rallied roughly 18.9% over a year.

Align Technology has a long-term expected earnings growth rate of 28.9%. The stock has gained 132.9% in a year.

Luminex has a long-term expected earnings growth rate of 16.3%. The stock has gained 5.2% over the past three months.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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