Glenview Capital, a significant CVS Well being shareholder, is predicted to fulfill with firm management on Monday to put out proposed fixes for the struggling enterprise, in accordance with individuals conversant in the matter, a possible precursor to an activist push.
The hedge fund has established a large place within the firm, mentioned a number of the individuals. Glenview invests in quite a lot of sectors, however its most up-to-date regulatory filings present it holds positions in Centene, CVS and Teva Prescription drugs amongst different names.
Specifics about Glenview’s proposals couldn’t be discovered. The Wall Avenue Journal first reported that Glenview could be assembly with CVS administration, together with CEO Karen Lynch.
A CVS spokesperson mentioned the corporate “maintains a daily dialogue with the funding group as a part of our sturdy shareholder and analyst engagement program.”
“Past that, we can not touch upon engagement with particular companies or people,” the spokesperson mentioned.”
Shares of CVS rose about 2% in early buying and selling Monday. Earlier than Monday’s open, the inventory was down about 22% year-to-date.
The assembly with Glenview shouldn’t be CVS’ first brush with an activist. Earlier this 12 months, Sachem Head Capital Administration, the well-known activist fund run by Scott Ferguson, disclosed by way of regulatory filings that it had amassed a place within the firm.
Jeff Smith’s Starboard Worth additionally constructed a stake within the firm in 2019, and engaged in dialogue with the corporate’s management as nicely.
Investor confidence in CVS has soured after three straight quarters of full-year steerage cuts.
The corporate’s backside line is getting battered by greater medical prices in its insurance coverage phase – a difficulty dogging the broader health-care business as extra seniors endure procedures they’d delayed in the course of the Covid-19 pandemic.
CVS owns Aetna, the nation’s third-largest well being insurer by market share, in accordance with The American Medical Affiliation. The corporate’s insurance coverage unit contains plans by Aetna for the Reasonably priced Care Act, Medicare Benefit and Medicaid, together with dental and imaginative and prescient.
In its second-quarter ends in August, CVS unveiled a brand new plan to chop $2 billion in bills over a number of years, which it mentioned would contain streamlining operations and growing using synthetic intelligence, amongst different efforts. The corporate can also be wrapping up a three-year plan to shut 900 of its shops, with 851 areas closed as of August.
CVS is slashing lower than 1% of its workforce, or roughly 2,900 jobs, as a part of the brand new cost-cutting plan, an organization spokesperson mentioned in a press release on Monday. The spokesperson mentioned the cuts would primarily influence company roles, not staff within the firm’s retail shops, pharmacies and distribution facilities.
Nearly all of impacted staff will probably be notified this week and can obtain severance pay and different advantages, in accordance with the spokesperson. Aside from layoffs, CVS has closed some job openings, they mentioned.
“Our business faces continued disruption, regulatory pressures, and evolving client wants and expectations, so it’s crucial that we stay aggressive and function at peak efficiency,” the spokesperson informed CNBC.
The Wall Avenue Journal first reported the cuts on Monday.
Additionally in August, CVS introduced a management shakeup based mostly on the efficiency and outlook of its insurance coverage unit. The corporate mentioned CEO Lynch would substitute the president of the phase, Brian Kane, efficient instantly.
In the meantime, CVS faces elevated stress in its retail pharmacy enterprise. Reimbursement charges for prescribed drugs have plunged during the last a number of years, whereas inflation and softer client spending are making it troublesome for CVS areas to show a revenue on the entrance of the shop.