The CVS Pharmacy logo is seen in a store in the Florida Keys, United States, on May 7, 2024.
Jakub Purzycki | norphoto | Getty Images
Glenview Capital, Specialty CVS Health Shareholders are expected to meet with company leadership on Monday to lay out proposed fixes for the struggling business, according to people familiar with the matter, a potential precursor to an activist campaign.
The hedge fund built a large position in the company, some of the people said. Glenview invests in a variety of sectors, but its latest regulatory filings show it holds positions in them Two centsCVS and Teva Pharmaceuticals Among other names.
Details of Glenview's proposals could not be learned. The Wall Street Journal first reported that Glenview would meet with CVS management, including CEO Karen Lynch.
A CVS spokesperson said the company “maintains a regular dialogue with the investment community as part of our robust shareholder and analyst engagement program.”
“Furthermore, we cannot comment on dealings with specific companies or individuals,” the spokesperson said.
CVS shares are down 22% year to date. The encounter with Glenview is not the first encounter between CVS and an activist. Earlier this year, Sachem Head Capital Management, the well-known activist fund run by Scott Ferguson, revealed through regulatory filings that it had taken a position in the company.
Jeff Smith's Starboard Value also built a stake in the company in 2019, and has been involved in discussions with company leadership as well.
Investor confidence in CVS has deteriorated after three straight quarters of full-year guidance cuts.
The company's bottom line is being battered by rising medical costs in its insurance segment — an issue haunting the broader health care industry, as more seniors undergo procedures they've delayed during the COVID-19 pandemic.
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 offered by Aetna for the Affordable Care Act, Medicare Advantage, and Medicaid, along with dental and vision.
In its second-quarter results in August, CVS announced a leadership change based on the performance and outlook of its insurance unit. The company said CEO Lynch will replace segment president Brian Kane, effective immediately.
Meanwhile, CVS is facing increasing pressure in its retail pharmacy business. Prescription drug reimbursement rates have declined over the past few years, while inflation and declining consumer spending make it difficult for CVS locations to turn a profit on the front of the store.
In August, CVS unveiled a new cost-cutting plan worth $2 billion over several years, which will include streamlining its operations and increasing the use of artificial intelligence, among other efforts. The company is also ending a three-year plan to close 900 of its stores, with 851 locations closed as of August.
