(Reuters) - CVS Caremark Corp (CVS.N) raised its full-year forecast on Wednesday after reporting a sharp rise in first-quarter sales as the drugstore operator and pharmacy benefits manager continued to win over former patrons of Walgreen Co WAG.N stores.
CVS, which operates the CVS drugstore chain and the CVS Caremark pharmacy benefits management business, said sales rose 19.9 percent to $30.8 billion in the quarter, helped by an 8.4 percent increase in sales at drugstores open at least a year and more business from Medicare recipients.
Its shares rose 2.5 percent to $45.85 in premarket trading.
Walgreen, the largest U.S. drugstore chain, stopped filling prescriptions for patients of Express Scripts (ESRX.O), a pharmacy benefits manager, at the end of 2011. CVS, with more than 7,352 U.S. stores, is among the retailers benefiting as Express Scripts patients go elsewhere.
CVS Chief Executive Larry Merlo told Reuters that the boost from his rivals’ fallout could be long lasting.
“The longer the impasse lasts, the stickier that customer is going to be,” Merlo said. “They’re going to have an opportunity to visit a CVS multiple times and begin to establish a relationship with the CVS pharmacists.”
CVS raised its full-year profit forecast by 5 cents per share at both ends of its prior forecast, to between $3.23 and $3.33 per share. Analysts were expecting it to earn $3.27 per share, according to Thomson Reuters I/B/E/S.
In the current quarter, it expects the Walgreen-Express Scripts rift impasse to lift earnings by 3 to 4 cents per share, and CVS forecast adjusted earnings of 78 to 80 cents per share.
CVS earned $776 million, or 59 cents a share, in the first quarter, up from $713 million, or 52 cents a share, a year earlier.
On an adjusted basis, CVS earned 65 cents per share, beating analysts’ average forecast by 2 cents.
Pharmacy services revenue rose 32.3 percent to $18.3 billion. Drugstore revenue rose 9.9 percent to $16 billion.
The only things that slowed down the company’s pharmacy sales were a weak flu season and new generic drugs, which carry lower prices than brand name drugs.
CVS’s purchase of Universal American Corp’s UAM.N Medicare prescription plan last year has brought in more patients getting their prescriptions filled. Medicare is the U.S. government’s health coverage plan for senior citizens.
Pharmacy benefit managers, or PBMs, such as Express Scripts and CVS Caremark administer drug benefits for employers and health plans and run mail-order pharmacies. CVS can add the ability to pick up prescriptions at its namesake drugstores.
Merlo said he was “optimistic” at this early stage of the so-called PBM “selling season,” the annual campaign to land more corporate accounts.
Its two largest PBM rivals, Express Scripts and Medco, merged last month, but at least one analyst does not expect that deal to hurt CVS Caremark’s ability to win new contracts.
“It doesn’t pose a threat. In many ways this can be good for CVS because they’re the clear alternative,” said Judson Clark, an analyst with Edward Jones.
Reporting By Phil Wahba in New York and Jessica Wohl in Chicago; Editing by Gerald E. McCormick, John Wallace, Dave Zimmerman