Glenview Capital to Propose Fixes to Struggling CVS Health, Potential Activist Push Looming

Glenview Capital, a significant stakeholder in CVS Health, is gearing up for discussions with the company's leadership on Monday to propose solutions for its struggling operations, signaling a possible activist intervention. The hedge fund has made substantial investments in CVS, Centene, and Teva Pharmaceuticals, among other sectors, according to regulatory filings. While details about Glenview's proposals remain under wraps, the engagement with CEO Karen Lynch and the management team underscores the increasing scrutiny on CVS.

Investor Concerns and Activist Involvement

The meeting is taking place against the backdrop of CVS's shares experiencing a 22% decline year-to-date.The company's challenges have not gone unnoticed in the investment community, with other activist funds, including Sachem Head Capital Management and Starboard Value, also taking stakes in CVS and engaging with its leadership in the past.Investor sentiment in CVS has been adversely affected by consecutive quarterly reductions in full-year guidance, coupled with mounting pressures in its insurance and retail pharmacy segments. The rising medical costs in the insurance sector, fueled by increased procedures among seniors post-Covid-19, have weighed heavily on the company's bottom line. CVS's ownership of Aetna, the third-largest health insurer in the nation by market share, adds another layer of complexity to its operational challenges.

Leadership Changes and Operational Adjustments

In light of the underperformance of its insurance unit, CVS implemented a leadership overhaul in its second-quarter results, with CEO Lynch assuming immediate control from the segment's president, Brian Kane. This move reflects the company's acknowledgment of the need for a strategic shift to navigate the evolving dynamics of the insurance landscape.

Retail Pharmacy and Cost-Cutting Initiatives

Furthermore, CVS's retail pharmacy sector is facing intensified pressure, exacerbated by plummeting reimbursement rates for prescription drugs and external economic factors impacting consumer spending. The company has recognized the urgency of addressing these challenges and has introduced a comprehensive plan aimed at cutting $2 billion in expenses over the next several years. This initiative encompasses streamlining operations and integrating artificial intelligence to enhance efficiency and reduce costs.