Shoppers Drug Mart: Unaffected by New Drug Prices

In the wake of a new policy report on drug prices from the Ontario government,  Shoppers Drug Mart Corp. (SHDMF.PK)  analyst Keith Howlett of Desjardins Securities is maintaining a buy rating on the stock.

In a note to clients, the analyst wrote:

It appears the government is satisfied with the results of [its 2007 drug-pricing] reforms and does not intend to reopen the controversial issues related to pharmacy reimbursement.

Shoppers Drug Mart did not appear to be affected by the C$260-million of annual savings the government states it achieved...[and] ultimately [the reforms] did not appear to impact Shoppers' financial performance. Our reading of the Ontario government's plans for 2008 is that there are no dramatic changes scheduled for implementation.

Mr. Howlett maintained his C$60 target price on the stock, noting that Shoppers has executed well against its strategic plan and it has grown earnings "impressively" in the face of increasingly restrained consumers.