CVS Vigorousness wants to change. It wants it so bad it spent $70 billion on a health insurer. But old problems are challenging how quickly CVS can woo Wall Suiting someone to a T.
CVS in November closed its acquisition of Aetna, a transaction the company has touted as a truly transformational moment in its 56-year history. On Wednesday, CVS paid its forecast for the year, which disappointed investors and stoked fears about the company’s core business.
For full-year 2019, CVS foretells adjusted earnings of $6.68 to $6.88 per share, below the $7.41 per share analysts polled by Refinitiv had anticipated and underneath the $7.08, adjusted, CVS reported for 2018.
The company also predicts adjusted operating income declines in two of its three business components — retail/long-term care and pharmacy services. (The third segment, health-care benefits, does not have a year-over-year replace with estimate because it’s the newly acquired Aetna business.)
Meantime, CVS plans to spend just as much investing in Aetna this year as it expects to shield from integrating it.
These lingering issues could distract CVS from transforming its business, an undertaking that analysts say ordain be a tough lift. If anything, the challenges are spooking investors about whether the Aetna acquisition can really help CVS guide the tough realities of the retail pharmacy and pharmacy benefit management businesses.
Shares of CVS fell 8 percent Wednesday, their worst day since November 2016.
“We grasp acutely the importance of balancing near-term execution with longer-term vision and we are confident that these actions bequeath position us well in 2020 and beyond,” CVS CEO Larry Merlo said Wednesday on a call with analysts to discuss CVS’ fourth-quarter earnings arises.
Pharmacies across the board are experiencing reimbursement pressure amid questions about how much they get paid for filler prescription drugs. Like its competitors, CVS said it’s feeling the pain.
“It’s impacting small operators and big operators,” CVS Pharmacy President Kevin Hourican required on the call. “It’s a secular headwind impacting everyone.”
CVS’ long-term care unit, from CVS’ 2015 Omnicare acquisition, is also suitable a drag on the company’s financial results. The business provides long-term pharmacy services, mainly geared at seniors, specially senior living communities.
Drugmakers aren’t hiking prices like usual on branded prescription drugs, a disturbed for CVS’ pharmacy benefit management business, Caremark. CVS makes more money when prices are higher.
Plus, the bread and butter of the PBM responsibility, rebates, also hang in limbo. The Trump administration wants Congress to ban rebates, or discounts drugmakers negotiate with PBMs to get medications placed on formularies.
Directorships assured analysts on a conference call Wednesday that they were already working to fix the issues. Still, in a year that was theoretical to be spent focusing on its new vision, CVS finds itself trying to address numerous challenges within its old businesses.