PharMerica rises following analyst upgrade

Lehman Brothers analyst Adam Feinstein raised his rating on the institutional pharmacy services provider to "Overweight" from "Equal weight," nudging his price target to $24 per share from $22. He thinks it is more likely PharMerica will surpass its forecast for $1.94 billion to $1.96 billion in full-year revenue.

He added that profit margins should improve as PharMerica LTC and Kindred Pharmacy Services are further integrated. PharMerica was a unit of AmerisourceBergen Corp., but became a solo business in July, when AmerisourceBergen and Kindred Healthcare Inc. combined their institutional pharmacy services businesses and spun them off. The company processes and distributes drugs to facilities including nursing homes.

The growing use of generic drugs also drives higher profit margins for drug distributors.

Feinstein pointed to the expiring patents on Risperdal as a particularly large opportunity. The patents behind the anti-psychotic, which is made by Johnson & Johnson, will expire later this month, allowing generic drug makers to sell their own versions.

The stock rose $1.29, or 6.4 percent, to $21.28