Regulatory uncertainty is rising too high for Baird Equity Research to remain bullish on Express Scripts Holding Co (NASDAQ: ESRX).
Analyst Eric Coldwell downgraded Express Scripts to Neutral with an $81 price target.
Previously, Express Scripts’ improving new business trends, its consistency in core profit and loss statements and a better sentiment for pharmacy benefits managers (PBMs) made for an attractive near-term risk-reward profile.
Now, however, Coldwell considers upside dependent on a successful sale to CIGNA Corporation (NYSE: CI). The deal is seen to have favorable odds, but the risk of downside has “significantly increased.”
“PBMs have been under heavy political attack in recent weeks and the stand-alone trajectory is almost impossible to model right now,” Coldwell wrote in a note.
The risk is primarily in recent advancement of plans for rebate-model reform.
“[It] could be material to ESRX profit model and makes long-term…