Goldman Sachs Downgrades Omnicare, 'Revisiting Valuation'

In a report published Thursday, Goldman Sachs analyst Stephan Stewart downgraded the rating on

from Buy to Neutral, while maintaining the $92 price target. The analyst believes that the key catalyst for the stock has fully played out, following the announcement by

regarding the agreement to acquire Omnicare for $98 per share via an all-stock deal. The transaction is expected to close by the end of the year. The analyst had earlier viewed Omnicare as an attractive investment option, given that it was a "(1) unique Specialty asset (SCG) with attractive scarcity value, (2) (had) concentrated exposure to the aging demographic, and (3) overlapping business models with each of the sub-groups within the Supply Chain." However, there still are a variety of profit growth drivers for the company, such as its acceleration in generic launches. Ability went generic in April to become the second-largest branded drug in the U.S. The company also stands to benefit from its operating efficiency initiatives. Omnicare's management expect continued improvements in this arena. The continuing significant growth of the Specialty Care asset is also expected to drive an acceleration in profit growth.