Inside Wall Street
WHO WILL PICK UP MEDI-MAIL?
Medi-Mail was one of the many drug-related stocks that has been under severe downside pressure for more than a year. It slumped from about 9 early last year to 21 8 in late July. But then the stock went pop--to nearly 4--when Merck announced on July 28 that it was acquiring Medco Containment Services for a cool $6 billion.
What's the connection? With sales of $2.2 billion, Medco is a leader in mail-order prescription drugs. Medi-Mail is "a Medco-look-alike," argues investment adviser John Westergaard.
He suspects that Medi-Mail will "inevitably be bought out, too," by a large drug company "for the same reasons that Merck acquired Medco." The pharmaceutical giants "will pay almost any price to get into the mail-order medicine business," says Westergaard, since it's the best way to gain a foothold in the low-cost, mass marketing of drugs, a business sure to get a boost from the kind of managed-care system envisioned by the Clinton Administration.
Westergaard expects Medi-Mail's revenues to jump to $25 million this year and to $70 million in 1994 from $10.3 million in 1992. The rise to $70 million will come mainly from a contract that Medi-Mail obtained recently from Illinois to supply mail-order drugs to retired state employees. "I value the stock at 10 to 13 a share over the next 18 months on a buyout deal," declares Westergaard, based on Merck's paying three times Medco's sales.GENE G. MARCIAL