Healthcare-focused Glenview Capital Management a major CVS Health shareholder will meet top executives at struggling healthcare company on Monday. Glenview will meet with CVS to propose changes it can make to improve operations as per report on Sunday.
Glenview Capital,, is expected to meet with CVS company leadership on Monday to lay out a strategy fixes for the struggling business, according to people familiar with the matter.
Glenview’s changes for CVS
The hedge fund has established a sizable position in the company, said some of the people. Glenview invests in a variety of sectors, but its most recent regulatory filings show it holds positions in Centene, CVS and Teva Pharmaceuticals among other names to propose changes.
The hedge fund’s founder, Larry Robbins, has built a large position in CVS, which amounts to about $700 million of his $2.5 billion hedge fund, the report said, citing a person familiar with the matter.
Specifics about Glenview’s proposals could not be learned. The Wall Street Journal first reported that Glenview would be meeting with CVS management, including CEO Karen Lynch.
CVS on Glenview push
A CVS spokesperson said the company “maintains a regular dialogue with the investment community as part of our robust shareholder and analyst engagement program.”
“Beyond that, we cannot comment on engagement with specific firms or individuals,” the spokesperson said.”
Activists and CVS
The meeting with Glenview is not CVS’ first brush with an activist. Earlier this year, Sachem Head Capital Management, the well-known activist fund run by Scott Ferguson, disclosed via regulatory filings that it had amassed a position in the company.
Jeff Smith’s Starboard Value also built a stake in the company in 2019, and engaged in discussion with the company’s leadership as well.
Investor confidence in CVS has soured after three straight quarters of full-year guidance cuts.
High medical cost a concern for CVS
The company’s bottom line is getting battered by higher medical costs in its insurance segment.
CVS owns Aetna, the nation’s third-largest health insurer by market share, according to The American Medical Association. The company’s insurance unit includes plans by Aetna for the Affordable Care Act, Medicare Advantage and Medicaid, along with dental and vision.
CVS strategy for profit
In its Q2 results in August, CVS announced a leadership shakeup based on the performance and outlook of its insurance unit. The company said CEO Lynch would replace the president of the segment, Brian Kane, effective immediately.
Meanwhile, CVS faces increased pressure in its retail pharmacy business. Reimbursement rates for prescription drugs have plunged over the last several years, while inflation and softer consumer spending are making it difficult for CVS locations to turn a profit at the front of the store.
CVS in August unveiled a new plan to cut $2 billion in expenses over several years, which will involve streamlining its operations and increasing the use of artificial intelligence, among other efforts. The company is also wrapping up a three-year plan to close 900 of its stores, with 851 locations closed as of August.
Stock update
CVS share price was $ 61.38 up 4.02% today at closure. Share price of CVS Health Corp. are down 22% year-to-date. Overall, S&P 500 rose 0.4% to close in on the 5,800 mark, while the Dow Jones added another 260 points to its tally to close back above the mark of 42,000. The Nasdaq composite also added 0.6% overnight.
