Shares of CVS Well being rose 2% Monday on information that investor Glenview Capital Administration would meet with high executives to suggest enhancements for the struggling healthcare big.
Whereas specifics concerning the hedge fund’s proposals weren’t obtainable, The Wall Road Journal reported the assembly would come with Glenview founder Larry Robbins and CVS CEO Karen Lynch.
CVS could also be a family identify due to its namesake pharmacies, however it is usually the nation’s largest pharmacy profit supervisor. That phase was one in every of three drug middlemen lately sued by the Federal Commerce Fee, which has accused the businesses of illegally driving up the worth of insulin.
The inventory has fallen almost 23% this 12 months, leading to a $26 billion drop in market cap. The corporate has lower its full-year earnings steerage for 3 straight quarters, with the newest quantity in August coming in 23% decrease than the unique determine given in December.
CVS can be the mum or dad of Aetna, the nation’s third-largest medical insurance supplier by market share and the phase largely accountable for the corporate’s current woes.
Whereas revenues within the phase final quarter rose 21% 12 months over 12 months, working revenue fell by 40% after of venture by Aetna to draw a whole bunch of 1000’s of seniors to its Medicare plans backfired. These new enrollees have generated a lot larger prices than anticipated, a development that has hit the whole business as extra seniors lastly bear procedures delayed in the course of the COVID-19 pandemic.
Former Aetna president Brian Kane left the corporate after the disappointing outcomes final quarter. The corporate introduced that Lynch, who led the medical insurance firm for six years, would assume direct management of the phase together with CVS CFO Tom Cowhey.
Glenview has activist historical past in healthcare
In keeping with the Journal, Glenview owns roughly $700 million of CVS inventory, or about 1% of the corporate’s excellent shares. Latest regulatory filings confirmed Glenview elevated its holding of CVS by 440% within the second quarter, in response to the info from S&P World.
Robbins has cooperated with varied healthcare corporations up to now, and the Journal mentioned he was assured he might persuade management to pursue a brand new path.
Glenview, which has roughly $5.6 billion in property underneath administration, per PitchBook, has not been afraid to use activist stress up to now, nonetheless. In 2017, the hedge fund pressed for the ouster of 4 board members at Tenet Healthcare, whose chief govt finally resigned.
Whereas the hedge fund invests in quite a lot of industries, Tenet, CVS and fellow healthcare insurer Cigna make up its three largest public holdings.
Family names throughout a number of industries have been focused by activist buyers in current months. Elliott Administration, the $70 billion hedge fund based by Paul Singer, helped pressure out the CEO of Starbucks in August and continues to push for the ouster of Southwest Airways CEO Bob Jordan.
