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The leaders of CVS Health Corp. said last week they still expect the Rhode Island-based pharmacy giant to finalize an acquisition this year to build out their health services platform and further capitalize on the growth of their retail business.
President and CEO Karen Lynch and her team have been eyeing a sizable primary care platform for several quarters and also want to add a technology platform and home health provider to their portfolio. But their quest to grow has been stymied – Guertin three months ago cited price as a big obstacle – even as the company has been able to sell more services to customers/patients who have come to its stores for COVID-19 testing.
On an Aug. 3 conference call following CVS’ second-quarter earnings report, Lynch said her team remains hopeful it can strike a deal in the coming months.
“You don’t necessarily design exactly how these deals and what gets announced,” Lynch said. “We are very encouraged and confident that we’ll take the next step on this journey by the end of this year.”
Guertin added that CVS’ quest to add more health services to its retail, pharmacy and health insurance business is something the market hasn’t seen much before “and thus, there is no one-and-done asset there.” But CVS’ 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, which was up 12 percent from 2021.
The comments from Lynch and Guertin speak to a healthcare M&A market that is finding new footing after a spring in which financial markets tightened and the financial impact of the COVID pandemic on providers became clearer. As Burk Lindsey of Raymond James Financial Inc. told Healthcare Innovation in June, “buyer valuation expectations tend to adjust much faster” than those of sellers in higher-risk environments, throwing sand in the gears of dealmaking.
In the three months ended June 30, CVS produced net profits of nearly $3.0 billion, 6 percent higher than in Q2 of 2021. Revenues grew 11 percent from the prior-year period to $80.6 billion and adjusted operating income came in at $4.8 billion, down slightly from the same time a year earlier. Those numbers topped the company’s forecasts and led its leaders to raise their full-year guidance.
Shares of CVS (Ticker: CVS) ended Aug. 10 around $104, up slightly on the day. Over the past six months, they are essentially flat.
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