Executives from CVS Health Corp. said last week that they still expect the Rhode Island-based pharmacy giant to complete an acquisition this year to expand its healthcare services platform and further capitalize on its growing sales business by retail.
President and CEO Karen Lynch and her team have been considering a major primary care platform for several quarters and also want to add a technology platform and home care provider to their portfolio. But their quest for growth has been hampered – Guertin three months ago cited price as a major impediment – even as the company was able to sell more services to customers/patients who came to its stores for the COVID-19 testing.
In an Aug. 3 conference call following CVS’s second-quarter earnings report, Lynch said his team remained hopeful they could reach a deal in the coming months.
“You don’t necessarily design exactly how these deals and what’s announced,” Lynch said. “We are very encouraged and confident that we will take the next step on this journey by the end of this year.”
Guertin added that CVS’s quest to add more health services to its retail, pharmacy and health insurance businesses is something the market hasn’t seen much before “and so, it doesn’t there is no single asset there”. But CVS’s foundation and opportunity to convert store traffic into patient services is growing: Its MinuteClinic sites handled more than 2.8 million patient visits in the first half, a 12% increase from 2021.
Lynch and Guertin’s comments speak to a healthcare M&A market finding new footing after a spring in which financial markets tightened and the financial impact of the COVID pandemic on suppliers has become clearer. As Burk Lindsey of Raymond James Financial Inc. said. Healthcare Innovation in June, “buyers’ valuation expectations tend to adjust much faster” than sellers in high-risk environments, throwing sand in the gears of trading.
During the three months ended June 30, CVS produced net profits of nearly $3.0 billion, 6% higher than the second quarter of 2021. Revenue increased 11% from the prior year period to $80.6 billion and adjusted operating income was $4.8 billion, down slightly from the same period a year earlier. These figures exceeded the company’s forecasts and led its management to raise their forecasts for the full year.
CVS Actions (Ticker: SVC) ended on August 10 around $104, slightly higher on the day. Over the past six months, they’ve been essentially flat.