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Consumer discretionary

CVS Health Corporation (CVS) Recommended at Buy on EpiPen Associated Weakness: Leerink

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The drugmaker will have to seek more options to remain in the main frame of pharmaceutical industry and to face fierce competition

CVS Health Corp (NYSE:CVS) and Express Scripts Holding Company (NASDAQ:ESRX) shares plunged during the trading session on Thursday. This was because in recent news, Mylan NV (NASDAQ:MYL) was accused of dramatically raising the price of EpiPen during the past few years. Due to this, questions are arising about the difference between what consumers are being charged for EpiPen and what the company is earning. However, Leerink recommended buying the shares of CVS Health as the retail company is likely to benefit following the launch of generic EpiPen in the market.

Leerink analyst David Larsen believes that the healthcare company would be at an advantage amid rising pressure on Mylan due to EpiPen leading to changes in the way the pharmaceutical delivers the medicine. The West Virginia-based enterprise was recently questioned about the dramatic price hikes of EpiPen. It has been reported that the price of EpiPen has increased by approximately 548% to $608 since FY07 from just being $100 a few years ago.

Following this, the pharma company’s CEO stated that the net price that the $22.92 billion company receives is $274. It stated that such a large discrepancy occurs because the drug has to go through five hands before it actually reaches the patient. This implies that CVS health and Express Scripts and other pharmacy benefit managers are enjoying huge profits from EpiPen, despite their shares coming under pressure.

EpiPen is a life-saving drug used for treating allergic reactions. Due to the sensitivity of the drug, company’s CEO heather Bresch acknowledges that it is hard for patients to pay such huge amounts and they deserve more affordable care. As a result, the pharma company quickly responded that it is taking actions to improve consumer access to the drug by designing an effective patient assistance program. It said it would cover out-of-pocket cost at different pharmacies, leading to a decline in price for the patients. Also, it is further planning to provide the injection directly to the patients. However, the details are not so apparent and are subject to much criticism according to federal laws.

Even if Mylan carries on with its patient assistance programs and subsidizes the drugs, or new generic EpiPen is launched, either way, CVS pharmacies are in for reaping huge profits. Due to this, analysts are bullish on the pharma retailer. FactSet Fundamentals has readily given 17 Buy, three Overweight, and five Hold ratings for CVS pharmacies recommending investors to buy the shares of the retailer. The median price target of $112.76 depicts an upside potential of 20.24% above the closing price of Thursday.

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