Glenview Capital, a significant shareholder of CVS Health, is scheduled to meet with the company’s leadership on Monday to propose solutions for the company’s struggling business, according to sources familiar with the matter. This meeting could potentially signal the inception of an activist push.
The hedge fund has reportedly acquired a substantial stake in CVS Health. Glenview Capital invests across various sectors, and its latest regulatory filings reveal holdings in companies such as Centene, CVS Health, and Teva Pharmaceuticals, among others.
While the specifics of Glenview’s proposals remain undisclosed, The Wall Street Journal initially reported on the anticipated meeting with CVS management, including CEO Karen Lynch.
A spokesperson for CVS stated that the company maintains regular communication with the investment community as part of its comprehensive shareholder and analyst engagement program. However, beyond this, the company could not comment on engagements with specific firms or individuals.
Year-to-date, CVS shares have declined by 22%. This planned meeting with Glenview is not CVS Health’s first encounter with activist investors. Earlier in the year, Sachem Head Capital Management, led by Scott Ferguson, disclosed it had taken a position in the company. Additionally, in 2019, Starboard Value, managed by Jeff Smith, also built a stake and engaged in discussions with CVS leadership.
Investor confidence in CVS Health has waned following three consecutive quarters of reductions in full-year guidance. The company’s financial performance has been negatively impacted by higher medical costs within its insurance segment, an issue affecting the broader healthcare industry as a result of seniors undergoing delayed medical procedures from the Covid-19 pandemic.
CVS Health owns Aetna, the third-largest health insurer in the United States by market share, according to the American Medical Association. Aetna provides various plans under the Affordable Care Act, Medicare Advantage, and Medicaid, along with dental and vision plans.
In response to its second-quarter performance and future outlook, CVS announced changes in its leadership, including CEO Lynch replacing the president of the insurance segment, Brian Kane, effective immediately.
Simultaneously, CVS Health faces mounting pressures in its retail pharmacy business, where reimbursement rates for prescription drugs have significantly decreased in recent years. This challenge, coupled with inflation and decreased consumer spending, has made it challenging for CVS stores to maintain profitability.
In August, CVS unveiled a strategy to cut $2 billion in expenses over several years, comprising operational streamlining and the enhanced use of artificial intelligence. The company is also nearing the completion of a three-year plan to close 900 stores, with 851 locations shut down as of August.
