CVS May Take 23 Million Walgreen Purchases, Boosting Profit

CVS Caremark Corp. (CVS) said the end of Walgreen Co. (WAG)’s agreement to provide drugs for Express Scripts Inc. (ESRX) customers may give it as many as 23 million prescription sales and boost profit as much as 11 cents a share next year. CVS shares advanced the most in more than three years.

Walgreen and Express Scripts, an employee-benefits manager, have failed to replace a contract expiring at the end of the year, putting about 90 million prescriptions up for grabs. CVS may gain 16.9 million to 23 million prescriptions, the company said in slides presented to analysts today.

The impasse “could present a very significant opportunity for us,” CVS Chief Financial Officer Dave Denton told analysts in New York. “We think many customers are more likely to move to another major chain.”

About 43 percent of CVS stores are within one mile of a Walgreen drugstore and 85 percent are within five miles, CVS said.

Walgreen, the largest U.S. drugstore chain, won’t comment on CVS’s projection, Michael Polzin, a company spokesman, said today by e-mail. The Deerfield, Illinois-based company reports first-quarter financial results tomorrow.

CVS’s projection for gaining 23 million prescriptions assumes Walgreen would lose 85 percent of the prescriptions it sells through Express Scripts and that CVS would get 30 percent of those customers.

Drug Sales

CVS, based in Woonsocket, Rhode Island, said it may earn $3.15 a share to $3.25 a share in 2012. That forecast doesn’t include possible benefits from the dispute between Walgreen and Express Scripts. Analysts projected $3.21, the average of 21 estimates in a Bloomberg survey.

Walgreen’s contract with Express Scripts is valued at more than $5 billion in annual drug sales. The six-month dispute revolves around how much St. Louis-based Express Scripts would reimburse Walgreen.

CVS rose 8.9 percent to $39.80 at the close in New York, the biggest advance since Oct. 30, 2008. Walgreen climbed 2.3 percent to $33.50.

-- Editors: Kevin Orland, James Callan

To contact the reporter on this story: Chris Burritt in Greensboro at cburritt@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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