Express Scripts Holding Company (ESRX), Rite Aid Corporation (RAD): Can Walgreen Company (WAG)’s Stock Rise 200%?

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Shares of Walgreen Company (NYSE:WAG) were all over the map last year. The company’s fallout with pharmacy benefits manager Express Scripts Holding Company (NASDAQ:ESRX), as well as increased competition from CVS Caremark Corporation (NYSE:CVS) and Rite Aid Corporation (NYSE:RAD), left Walgreen Company (NYSE:WAG) in poor shape in 2012.

However, 2013 is shaping up to be a moneymaking year for the country’s largest drugstore chain. Let’s take a closer look at what Walgreen Company (NYSE:WAG) has planned for the year ahead, and what catalysts are needed to push the stock into two-bagger territory.

Rite Aid Corporation (NYSE:RAD)A brief flashback
There’s no denying that the past few years have been challenging for the drugstore chain. The company’s messy breakup with PBM Express Scripts Holding Company (NASDAQ:ESRX) resulted in billions of lost revenue for Walgreen Company (NYSE:WAG). In fact, before the dispute, Express Scripts Holding Company (NASDAQ:ESRX) accounted for about $5 billion in annual sales for the pharmacy retailer.

Express Scripts Holding Company (NASDAQ:ESRX) provides a variety of pharmacy services to its clients, including patient care and benefit management care. However, when Walgreen Company (NYSE:WAG) dropped its contract with Express Scripts Holding Company (NASDAQ:ESRX), it subsequently slammed the door on tens of thousands of customers in the Express Scripts Holding Company (NASDAQ:ESRX) network. That’s not all.

Rivals including CVS and Rite Aid Corporation (NYSE:RAD) jumped at the opportunity to steal customers away from Walgreen Company (NYSE:WAG). As millions of customers left Walgreen Company (NYSE:WAG) for CVS and Rite Aid Corporation (NYSE:RAD), so, too, did investors. However, to its credit, Walgreen ultimately settled the contract dispute with Express Scripts Holding Company (NASDAQ:ESRX). In July, the two companies agreed on a new multiyear deal.

Just what the doctor ordered
Once Express Scripts welcomed Walgreen back into the family, the company began working every angle to win back lost pharmacy customers. However, it wasn’t until January of this year that Walgreen’s prescription volumes finally showed signs of a turnaround. “January prescription volume increased in the low double digits, which was above analyst expectations and followed months of declining prescription sales comparisons,” Barron’s reported.

This is particularly encouraging because prescription sales make up about two-thirds of Walgreen’s total revenue, although Walgreen is hoping its acquisition of Alliance Boots will help boost future sales at the company. Walgreen coughed up $6.7 billion for a 45% stake in the European drugstore chain last year and will take on billions in debt to fund the cash-and-stock deal. Nevertheless, this decision carries both risks and opportunities for the company.

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