JP Morgan Comments On Walgreen Company During "Walgreen's Week"

Walgreens WAG filled 695 million prescriptions in FY10, up 6.8% y/y, and equating to about 20% of the total retail prescriptions filled in the U.S. In 2002-2010, script volume grew at an 8.5% CAGR, far exceeding the overall market, despite no large acquisitions. Growth has generally decelerated over the past few years, as we point to market factors, and company-specific factors. Pharmacy same store sales growth rates have improved in recent months, though scripts will likely be the more relevant indicator going forward, as we point to the volatility caused by the dampening effect of generics as the next generic wave is entered. JP Morgan believes an improving economy and lower unemployment rates could drive a reacceleration in script growth going forward. Walgreens is looking to drive additional 90-day at retail scripts, pointing to higher adherence and generic utilization, which can improve outcomes and lower costs. Walgreens sees immunization as a significant opportunity going forward and has indicated plans to expand into other vaccine types beyond flu. Clinics represent another way to leverage the store box, while also helping to solve the access issue and drive down healthcare costs, as it has 357 across the country. WAG closed Tuesday at $40.94