JP Morgan Gives Recap Of Conference Call With Walgreen's CFO

Building deeper relationships with patients and plan sponsors were two overarching themes behind Walgreen's WAG healthcare strategy. “High- touch” patient relationships can lead to improved adherence, driving better outcomes, lower payor costs, and potentially greater profitability for Walgreens. Deeper plan sponsor relationships can lead to the cross-selling of other services. Management believes the toughest period for reimbursement is behind it, although Medicaid and AMP were two key caveats, given ongoing uncertainty. However, Medicaid represents just 10% of Walgreen's business. Walgreens provided incremental insight into generic economics. For branded drugs, management pointed to average revenue per script of about $200 and gross profit of roughly $7-8 and average revenue per script for a generic of about $25 and gross profit of roughly $15. On the clinic front, management indicated that while these could be profitable on a stand-alone basis, they won't move the needle dramatically. JP Morgan has a $43 PT and Neutral rating on WAG WAG closed Wednesday at $41.22