Option Care Health (OPCH, Financial) stock dropped nearly 4% on Monday after Goldman Sachs updated the stock from "Buy" to "Neutral," citing growing concerns regarding prescription cost pressures. Reflecting worries about the impact of the company's portfolio as key products face pricing troubles and impending loss-of-exclusivity (LOE) events, the firm set a price target of $27.
Goldman Sachs said it had earlier thought Option Care's medications, particularly Stelara, were less sensitive to earnings pressure from generics and that LOE-related challenges would be manageable. However, during its Q3 earnings call, Option Care disclosed that the maker of Stelara had negotiated terms for a sharp drop in Option Care's gross profit on Stelara, beginning in 2025.
Though Stelara has a special place in the portfolio, Goldman Sachs pointed out that its inclusion in the Inflation Reduction Act, together with notable pricing cuts, creates a precedent that might affect other pharmaceuticals. Given predicted LOE incidents between 2025 and 2029, analysts estimate additional pressures. Unlike the S&P 500's 20% increase during the same period, Option Care Health shares were trading at $23.12 as of midday Monday, down almost 30% YTD.
