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 Express Scripts shares tumbled more than 15 percent in extended
trading on Monday.
Anthem had sued Express Scripts in March last year, accusing it of
charging too much for drugs and operational failures. It also sought
the right to terminate the 10-year contract.
"The company was recently told by Anthem management that Anthem
intends to move its business when the company's current contract
with Anthem expires on December 31, 2019, and that Anthem is not
interested in continuing discussions regarding pricing concessions,"
Express Scripts said.
Anthem had also started soliciting proposals for a new service
provider, in which Express Scripts was not participating, the
company added.
Anthem could not be immediately reached for comment.
"While the headline that Anthem is leaving Express Scripts is in of
itself not surprising, the timing is highly unexpected," Evercore
ISI analyst Ross Muken said in a client note.
Express Scripts, which is the No. 1 pharmacy benefit manager (PBM)
in the United States, has been preparing for the loss of the
contract or its renewal on less favorable terms, since the lawsuit
began.
As of March 2016, Express Scripts began amortizing the contract over
10 years, rather than over 15 years as it had been doing, the
company said in its annual filing in February.
Anthem's contribution to Express Scripts' revenue has been
increasing, from 14 percent in 2014 to 18 percent in the latest
first quarter, in line with the company's expectation of a bigger
contribution as the contract neared its end.
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Besides the U.S. Department of Defense, Anthem is Express Scripts'
only client that accounts for more than 10 percent of its revenue,
according to a filing.
Express Scripts said on Monday that its core PBM business, excluding
Anthem, was well-positioned for future growth.
The company also reported a first-quarter profit that just beat
analysts' average estimate, while revenue fell slightly short. The
company forecast a better-than-expected profit for the second
quarter.
However, investors looked past the results and forecast, sending
Express Scripts' stock down to $56.97 in trading after the bell.
"The only thing investors will remember from tonight is the shocking
Anthem news," Muken said, adding that Express Scripts' stock could
trade at about $50.
(Reporting by Sweta Singh and Divya Grover in Bengaluru; Editing by
Martina D'Couto and Savio D'Souza)
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