Shares of pharmacy benefits manager Catalyst Health Solutions Inc. rose to an annual high Wednesday after an analyst upgraded the stock, saying the industry should continue to grow and Catalyst will be able to win more business.
Catalyst handles drug benefits for health plan sponsors and clients, helping the plan operators keep their costs down and members get their medications. Analyst Dave Shove of BMO Capital Markets was positive about Catalyst's mail-order business, and said Catalyst will be able to compete for larger contracts over the next few years, including state-sponsored plans.
"We believe that Catalyst Health's focus on transparency is aligned with reform efforts to incentivize cost savings through increased accountability and suspect this will continue to bring state sponsored business to Catalyst," he said.
Shove upgraded Catalyst stock to "Outperform" from "Market Perform." He raised his price target on the company to $40 per share from $32, and also raised his targets on three larger rivals: Medco Health Solutions Inc., Express Scripts Inc., and CVS Caremark Corp.
In morning trading, Catalyst shares rose $1.29, or 3.7 percent, to $35.99. Earlier, the stock rose to $36.32. That was its highest price since March of 2006, when the Rockville, Md., company was called HealthExtras Inc.
The PBM business has benefited over the last few years from a greater focus on managing health care costs, increased sales of specialty drugs, and rising use of low-cost generic medications. Shove, like other analysts, expects that to continue into 2011, when some of the best selling drugs in the world will lose patent protection and face generic competition.
He raised his price target on Express Scripts to $100 per share from $85, while his target on Medco went to $65 per share from $60 and his target on CVS was increased to $33 per share from $29.