Option Care Health downgraded to Neutral at Goldman on Stelara headwinds

Goldman Sachs downgraded Option Care Health (OPCH) to Neutral from Buy with a $27 price target. The firm had previously held the view that Option Care’s drugs, including Stelara, were less exposed to gross profit pressure as drugs went generic, but on the Q3 earnings call, management disclosed that Stelara’s manufacturer, Johnson & Johnson (JNJ) had negotiated for a significant and rapid decline in the drug-spread on Stelara for OptionCare in 2025, the analyst tells investors. While Stelara is “unique in size,” its inclusion within the Inflation Reduction Act, the expected pace of pricing declines, and the spread compression precedent created by this situation add incremental risk that other drugs across the portfolio could face similar pressure, notes the firm, which expects these risks will be heightened around several loss-of-exclusivity events upcoming between 2025-2029.