Shares of pharmacy benefits mangers Express Scripts Inc. and Medco Health Solutions Inc. both rose higher than the broader market Tuesday morning, a day after the companies said they now expect their combination to close early in the second quarter.
THE SPARK: Express Scripts and Medco said Monday after markets closed that they expected their deal to be completed "by the earlier part of the second quarter," which begins in April. The companies had previously said they expected their $29.1 billion combination to close in the first half of this year, a longer time frame that runs through June.
The companies said they agreed with the Federal Trade Commission not to close the deal Monday, even though a 30-day waiting period required under the Hart-Scott-Rodino Act had expired. The waiting period started after the companies complied with a second request for information from the FTC, and they were free to close the deal if they had not heard back from regulators by the time it expired.
Express Scripts spokesman Brian Henry said the companies want to make sure regulators have the time and information they need to evaluate the deal.
THE BIG PICTURE: Express Scripts announced in July a $29.1 billion deal to buy Medco, a combination that would create a company that handles the prescriptions of about 135 million people, or more than one in three Americans. It offered $28.80 in cash and a portion of an Express Scripts share valued at $42.56 for each Medco share.
Shareholders from both Medco, which is based in Franklin Lakes, N.J., and Express Scripts, headquartered in St. Louis, have approved the deal, which has stirred some concern about competition and drawn opposition from independent pharmacies.
The new company would become the largest U.S. pharmacy benefits manager, or PBM, by far. Express Scripts and Medco have touted the savings and efficiency that would be created by the combination.
PBMs run prescription drug plans for employers, government agencies and other clients, using their large purchasing power to negotiate lower drug prices and make money by reducing costs for health plan sponsors and members.
THE ANALYSIS: The more specific forecast for a closing time frame suggests that the companies have a "high conviction" that the deal will be completed, Jefferies analyst Arthur I. Henderson said in a phone interview.
"That suggests that the issues the FTC is looking at are not deal breakers, and (any) conditions are going to be suitable to Express Scripts and Medco," he said, noting that if regulators had a clear-cut reason to block the deal they would have done so already.
SHARE ACTION: Express Scripts shares climbed 49 cents, or nearly 1 percent, to $53.91, while Medco advanced more than 2 percent, or $1.47, to $69.82. Broader trading indexes climbed less than 1 percent.