TTA’s Finally 2025: Walgreens loses, stock up; fundings for Cera, Qventus, Solera; General Catalyst picks AWS; 3 consolidations; senior social companions at CES, more!

 

 

Now that we’re officially past the ‘happy new year’ greetings, it’s time for the 2024 financial reports and 2025 forecasts–some good, some not. Companies are scoring decent raises for the first time in two years, while PE General Catalyst is cutting deals with AWS. M&A activity concentrates on consolidation and integration. And we highlight two social companions for seniors’ tabletops.

2024 earnings roundup: UnitedHealth Group and Masimo (Closing out an annus horribilis)
Short takes: UK’s Cera raises $150M, $105M for Qventus, Solera Health’s $40M; General Catalyst’s AWS deal, Virta Health hits $100M in revenue, powered by GLP-1 maintenance; VirtuAlly’s JC telehealth accreditation
M&A consolidation + integration continues with Health Catalyst-Upfront Healthcare, New Mountain-Access Healthcare and Machinify, SuperDial-Major Boost (As predicted)
Walgreens’ kicks off FY 2025 with a wider net loss of $265M; shares rise 25% as closures, sales, and cost-cutting continue (Prelude to a sale?)
AI-powered senior companions hit the tabletops at CES: ElliQ’s Caregiver Solution, ONSCREEN Joy (Making social communication easier for older people)

Our opening was devoted to rounding up the inter-holiday period and looking forward to 2025. 2024’s end held a few sneaky surprises such as NeueHealth going private via investor NEA, another General Catalyst consolidation, and a few more under the wire fundings. Not surprising was UHG and Amedisys extending their runway–as well as VA with Oracle Health rollouts. Looking at 2025, Walgreens and their inevitable sale, experts predict, and Glen Tullman’s Transcarent buys up the competition. 

News roundup #2: why Walgreens is considering selling to a PE, December fundings, 2024’s surprises, M&A ’25 predictions, Transcarent buying Accolade for $621M (Why should Glen Tullman wait on a big buy?)
News roundup #1: UHG-Amedisys extended, NeueHealth going private in NEA’s ‘deal deal’, Commure buying Memora Health, VA resuming Oracle rollouts–now mid-’26 (NeueHealth continues to defy gravity and Reality)

We wound it up for 2025 with a year’s end newsletter to our Readers with a few Quirky Predictions and some Santa Wishes. A lot of news around telehealth in the continuing US budget wrangle that was finally passed for a few months, raises making it inside the 2024 wire, UHG sued by Nebraska over Change and insider trading, Redesign Health’s fresh funding, Withings’ new BPM, removing language barriers using telehealth, and quite a bit more.

A year’s end newsletter to our Readers: a few wishes for Under the Tree, a few Quirky Predictions for 2025  (We stay true to being opinionated!)
News roundup: Precision’s $102M raise, more on BCI; Withings clears BPM Pro 2; Nebraska 1st state to sue Change/UHG, related insider trading update; VA Oracle go-lives may resume; ATA intros CODE; ClearDATA HITRUST certified (UHG’s Mound of Misery grows)
Rounding up last of 2024’s M&A/fundings: Redesign Health’s $175M, HEALWELL AI buys Orion Health, startup Tuva Health’s $5M (In the bank for 2024)
Federal budget continuing resolution battle could derail or delay telehealth extensions, physician fee increase, PBM reforms (updated 19 Dec) (Cut down by 90%, it may pass)
Perspectives: How Telehealth is Transforming Access for Limited English Proficiency (LEP) Patients (Removing a critical barrier)

The countdown to the holiday continues, with Walgreens working on a sale to a PE, kiosks reemerging, investigating a Masimo proxy war player, and shareholders sue HealthTap. CareMax sells the rest of itself, benefiting a 15% investor–and leaves 530 workers with coal in their stockings. Maternal monitoring in Malawi and healthcare workplace violence may make virtual nursing more attractive. And the tragedy of UnitedHealthcare’s CEO murder deepens with the suspect’s capture.

Short takes: improving healthcare worker safety; CareMax may ax 530 jobs in bankruptcy/sale, finds 2nd buyer; $15M Series A for Evidently, $35M Series B for Hyro AI (Both coal and presents in stockings)
Breaking: Walgreens in talks to sell out to PE Sycamore Partners (A speedy denouement?)
Perspectives: Virtual Nursing Optimism Grows, But Providers Remain in Early Stages (AvaSure guest editorial)
News roundup: OnMed to debut CareStation at January CES, former HealthTap employees sue investor MDV, maternal monitoring spotlight with PeriGen/Texas Children’s in Malawi, Ouma Health-Marani Health partner (Kiosks and lawsuits reemerge)
Breaking: suspect in UnitedHealthcare CEO’s murder arrested in Pennsylvania, to be arraigned tonight (updated) (The tragedy expands)
Masimo update: SEC announces investigation of RTW Investments and role in proxy war voting (Next act in Masimo drama)

Our kickoff towards the holiday season very sadly starts with the shocking murder of UnitedHealthcare’s CEO en route to a meeting in midtown Manhattan. There’s an abundance of other news. Black Basta and Salt Typhoon are hacking telecoms, there’s a brace of M&A action from healthcare staffing to RPM to PR, and technology action includes Neuralink and mood prediction to sleep activity. But the sad trombone continues to play for 23andMe and VillageMD.

Weekend short takes: Merative’s $25M funding, Risant closes on Cone Health, Aya buys Cross Country staffing for $615M, Supreme Group acquires Amendola PR
BT Group hacked by Black Basta, China’s Salt Typhoon breached 8 telecoms in dozens of countries, government records 
News roundup: VA’s 2025 EHR budget + vendor breach, Neuralink robot arm study, linking mood prediction to sleep, CoachCare buys Revolution Health RPM/CCM, Seen Health’s $22M launch, Spectrum.Life in Deloitte Ireland’s Fast 50
Breaking: UnitedHealthcare CEO Brian Thompson murdered in NYC
Wojcicki: I’m transforming 23andMe to be ‘viable’ and thriving–but had ‘no idea why her board resigned’ (Sad Trombone 1)
VillageMD’s co-founder/CEO resigns as Walgreens continues the brush-off after billions in losses (Sad Trombone 2)


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Walgreens’ kicks off FY 2025 with a wider net loss of $265M; shares rise 25% as closures, sales, and cost-cutting continue

Walgreens kicked off their FY 2025 on a sad trombone note–yet Mr. Market liked the music. In one of those contradictions that only make sense to Wall Street, Walgreens’s Q1 2025 earnings report, ending 30 Nov 2024 that reported last Friday, was dismal by any reading–but seemed hopeful to market makers who lifted the shares by over 25% as of midday 14 January. 

US retail pharmacy sales and operating losses were the main drags on WBA’s results.

First, the highlights from the earnings release:

  • Operating loss was $245 million, versus $39 million in Q1 2024. The increased loss was due to lower US retail sales and lapping prior year sale-leaseback gains. Another driver was the US Retail Pharmacy Footprint Optimization Program, unexplained in the release.
  • Net loss was $265 million, versus $67 million in Q1 2024, driven by operating losses.
  • It was a dismal quarter for US Pharmacy, which includes the retail stores, despite gains in pharmacy sales of 10.4% due to drug inflation. Retail sales (the front end of the store) decreased 6.2%.
  • A bright spot was US Healthcare, which includes VillageMD, CareCentrix, and Shields, had a smaller operating loss of $325 million, versus same quarter in FY 2024’s $436 million. VillageMD sales increased 9%, CareCentrix increased 16% and Shields increased 30%.
  • Another bright spot was Boots UK’s performance. Their ‘comparable’ pharmacy sales increased 10.9% versus prior year, retail sales  8.1 percent% and grew across all categories. Boots.com sales–22% of total retail sales–were up 30% boosted by Black Friday.

So why did Mr. Market kvell over this and immediately boost the same shares that fell 63% in 2024? Mostly from the earnings call with CEO Tim Wentworth and other C-levels:

  • Results beat the Street estimates (LSEG survey):
    • Earnings per share: 51 cents adjusted vs. 37 cents expected
    • Revenue: $39.46 billion vs. $37.36 billion expected
  • Guidance for FY 2025 estimates adjusted earnings per share at $1.40 to $1.80 per share with revenue in the $150 billion range.
  • CEO Tim Wentworth confirmed that retail locations will continue to close and will accelerate. 70 were closed in Q1 2025.
    • Their goal is to close 1,200 locations from 2024 through 2026, with 450 to 500 underperforming locations to shutter in 2025. Walgreens currently has around 8,500 retail locations.
  • The sale of VillageMD is underway but no potential acquirers were mentioned on the call.  Separately for Summit Health and CityMD, Walgreens is considering “best options” such as sale or restructuring. These units were snapped up by VillageMD in January 2023.
  • They are working to turn around retail sales which are declining due to consumers restricting spending due to inflation and the value in using online retailers.
    • One measure is around labor scheduling being redesigned to improve the in-store experience. Walgreens is launching a new scheduling model in about 200 locations based on store demand patterns.
  • In pharmacy, they plan to roll out digital and virtual check-in for patients plus micro-fulfillment centers for prescription processing.

Interestingly, Walgreens in the US is not promoting online sales–unlike Boots UK which has done well with it.

There was no comment on the reported consideration of sale to a private equity (PE) firm such as Sycamore Partners [TTA 10 Dec 2024, 8 January], which would remove it from the NYSE.

Street analysts are boosting the stock now, but state that they need to see a few more quarters of stable performance to feel more confident about WBA’s future. Whether that will happen and that the US retail/pharmacy picture improves is to be determined. HIStalk, CNBC, FierceHealthcare, Healthcare Dive

Breaking: Walgreens in talks to sell out to PE Sycamore Partners

The other shoe drops. Clunk. Walgreens Boots Alliance is in talks to sell to private equity firm Sycamore Partners, according to the proverbial “people familiar with the matter” speaking with the Wall Street Journal. The deal could close as early next year.

WBA would exit public markets, where it is currently trading at a little over $10 for a market capitalization just short of $9 billion. Shares rose abruptly at about 1pm Eastern Time (NY).

It is quite a fall from its value even five years ago at close to $60/share. Other factors are their acquisition binge of latter years including Shields Health and VillageMD, as well as declining brick-and-mortar store sales.

According to the article, it would be a very large apple for Sycamore Partners to eat and digest. Sycamore has an aggregate committed capital of approximately $10 billion according to Transacted.  It would be likely that some parts of the present Walgreens and WBA would be sold off or partners would be invited in, according to the WSJ’s ‘people familiar…’.

The house cleaning promised by CEO Tim Wentworth is coming to pass, fast, undoubtedly spurred by Stefano Pessina.

Walgreens is slated to report its next quarterly results on 9 January.

Hat tip to Endpoints. One of their reporters contacted Walgreens and received this response: “We don’t comment on rumors or speculation about our business.” a Walgreens spokesperson told Endpoints News.

This story is developing. 

VillageMD’s co-founder/CEO resigns as Walgreens continues the brush-off after billions in losses

Walgreens’ disposition of VillageMD clarifies with CEO/co-founder/board chair Tim Barry’s sudden and unceremonious departure. The news dropped on Wednesday 27 November, directly into the media black hole of the Thanksgiving holiday.

A tell-tale sign is that Walgreens’ board has appointed only an interim, VillageMD’s chief operating officer Jim Murray. It is not clear from company statements made to media if Mr. Murray will replace Mr. Barry on the board.

Mr. Murray was appointed only last April, having nearly all his experience on the insurance side. He retired from Centene in late March, having come aboard after being COO at Magellan Health when Centene acquired it (now mostly sold off) and with 28 years previously at Humana. [TTA 10 Apr and release] This may suit Mr. Murray, given his age at about 70 (from Centene regulatory filings). 

In a statement to the Chicago Tribune, a Walgreens spokesperson said that “We look forward to continuing to partner with Jim Murray as he assumes day-to-day leadership responsibilities.” (Editor Donna–as if a COO does not already have day-to-day leadership responsibilities?) Murray has been “integral in helping lead the company’s turnaround as VillageMD makes meaningful progress and positions itself for profitable growth.” Neither the Walgreens representative nor VillageMD spokesperson Molly Lynch answered media questions about why Mr. Barry left or the circumstances behind the sudden departure without even a fig leaf (or pumpkin pie) of a cover story or the usual ‘thanks for your service’–which leads to more questions and doubts about What Really Happened.

The larger picture of sinking Walgreens financials. They closed FY 2024 with an operating loss of over $14 billion, more than doubling FY 2023’s loss of $6.9 billion versus FY 2022’s profit of $1.4 billion during the pandemic. $12.7 billion of a total $13.4 billion impairment was due to VillageMD’s loss in value due to clinic closures, slow patient panel growth, and downward trends in Medicare reimbursement. The remainder of about $332 million was attributed to loss of value in the CareCentrix home care unit (Form 10-K 10 October 2024, document page 123; impairments page 97; also TTA 28 Mar)

The Big Idea of combining primary care with retail locations in the Roz Brewer/WBA’s Stefano Pessina vision (hallucination?) was a major misstep into a Big Hole.

  • Bad timing was one factor. VillageMD added to a mound of miseries in retail and pharmacy sales caving, competition from direct vendors such as Amazon and Mark Cuban Cost Plus, plus  traditional brick-and-mortar CVS and Walmart. There were also expensive settlements around opioid prescribing. VillageMD also tapped Walgreens for $3.5 billion to acquire Summit Medical and CityMD–and defaulted on a $2.25 billion loan in August.
  • Joining primary care clinics with retail footprints wasn’t based on testing consumer behavior and acceptance–or practice reality. The plan was to have 1,000 joint locations modeled on the picture above left by 2027. As a model, it depended on obtaining both sufficient providers and building loyal patient panels, a slow pull if there ever was one. Physically adding clinic locations to Walgreens’ stores proved to be both expensive and difficult. 
  • These factors and others sank Roz Brewer’s CEO-dom, the share price, and the vision of Mr. Barry’s and VillageMD’s founders and physicians. The last dated back to 2013 and built into a network of hundreds of freestanding primary care clinics in value-based care. Many of the 140+ closures starting early this year were not only of expansions, but also of long-standing VillageMD offices, including in its core market of Chicago metro. Earlier this year, Cigna wrote off most of its $2.5 billion investment, throwing its Q1 into the red [TTA 2 May].

Many of the practices participated successfully in CMS’ advanced ACO shared savings models starting in 2016 such as Next Generation, Direct Contracting, and the current ACO REACH. The practices integrated telehealth as part of their value-based care models to achieve quality metrics. In CY 2023, VillageMD-operated ACO entities in the REACH model achieved $140 million in gross savings for Medicare, with $36 million shared back with the government and the remainder reinvested in the care model. (CMS reports are released 10-12 months after the prior year’s end.) 12 November release

Walgreens went big–and was sent home with the metaphorical tail between the hind legs. Perhaps engraved on VillageMD’s headstone will be what Walgreens CEO Tim Wentworth said of VillageMD during the Q4 earnings call in October, “… We’ve declared it’s not a crucial part of our future.” Mr. Wentworth and the board declared months ago that they wished to sell all or part of the business, at least below their majority holding at 63% [TTA 8 Aug, 2 JulyWho even wants to or is able to buy, with Walmart Health defunct and Oak Street Health and One Medical retrenching for their respective owners? Will VillageMD be part of anyone’s future? Healthcare Finance News, Healthcare Dive

Walgreens’ Mound of Misery piles higher with shareholder class action lawsuit, skeptical industry opinion

Walgreens Boots Alliance (WBA) faces shareholder, analyst discontent. The securities class action lawsuit filed by investor Rizwan Bhailain on 12 July in the US District Court for the Northern District of Illinois alleges that WBA misled investors with “overwhelmingly positive statements” about its pharmacy division while “concealing material (sic) adverse facts” such as the pharmacy division being “not truly equipped to handle ongoing challenges in its industry” and that “Walgreens would require significant restructuring to create a sustainable model.” The proposed class is for those who purchased shares between 12 October 2023, right before CEO Tim Wentworth started, to 26 June 2024. Wentworth, CFO Manmohan Mahajan, and chief pharmacy officer Rick Gates are also named in the lawsuit. The law firms involved are Lubin Austermuehle P.C., the Law Office of Terrence Buehler, both in Illinois, and Levy & Korsinsky, LLP in NYC. Crain’s Chicago Business, Scribd (lawsuit full text)

Industry stock analysts aren’t crazy about what is happening either. As the stock remains in the doldrums below $12, Walgreens’ billion-dollar ‘cut and sell’ strategy under Tim Wentworth has not led to optimism. Full year guidance was lowered only weeks ago after Q3 results were in. [TTA 2 July] The assumption based from the Q3 call that one-quarter of Walgreens’ 8,700 US store locations are candidates for closure by 2027 hasn’t bolstered confidence from one influential firm, Raymond James, where an analyst remarked in a recent report: “We are unaware of any retailer successfully adopting a ‘shrink to survive’ strategy.”

MedCityNews’s dismal headline, “Walgreens’ Finances Are in Dire Straits — But All Hope Is Not Lost”, interestingly had no counter from Walgreens per author Katie Adams’s requests. She tried to find some optimistic voices but the best she could manage was a sanguine view from Stephanie Davis, senior equity research analyst at Barclays. She approved of shrinking VillageMD as the largest drag on Walgreens’ financials, but acknowledged that the ‘headwinds’ in retail pharmacy justified an underweight or sell rating.

UpScript Health’s CEO Peter Ax was quoted at length pointing out other factors affecting both the ‘front’ of the store and pharmacy. In the front, there’s theft, lack of staff, supply chain shortages, and consumer wallet shortages. Over in the pharmacy section, shrinking margins, lack of pharmacists, and the squeeze between the current cost of capital and Walgreens’ financials will likely hamper reconfiguring stores and adopting efficient technologies. Another factor is that the patient blending between the pharmacies and primary care has proved to be extremely difficult. Walgreens, in trying to create a pharmacy/VillageMD closed system, now sees it as low margin/high cost, and wants to offload the cost onto additional investors. (Not much different than CVS with Oak Street Health, except that CVS got to the JV point faster. TTA 29 May

Even when locations are closed, some leases may be difficult to terminate or ‘repurpose’–and in these closures, Walgreens will be dealing with the anger of communities believing they will be shortchanged in access to pharmacy and healthcare, which knock on to the political and bad publicity that’s not needed.

The ride continues to be rough for Wentworth and Company. What Mr. Market is saying is that some very good news needs to be forthcoming, quickly. If Walgreens is ‘too big to fail’, as the Trilliant analyst quoted in the article put it, well, that hasn’t proved true for other companies in similar situations.

Walgreens gives up on VillageMD, will sell to reduce stake below majority, closing underperforming stores, revising profit outlook– and in abandoning Boots sale, managing director James quits

Q3 results are in for Walgreens Boots Alliance (WBA) and it was largely a bummer, especially if you work for VillageMD. Their financials have taken a hit from crashing US consumer retail spending and the softening pharmacy business. Adjusted earnings per share (EPS) were $0.63, down 36.6% on a constant currency basis compared to Q3 last year. The full year guidance was lowered from Q2’s outlook of $3.20 to $3.35 EPS to $2.80 to $2.95, again citing US trends. Q3 sales were up 2.6% to $36.4 billion, up 2.5% versus last year. Release

Industry estimates are that fully one-quarter of Walgreens’ 8,700 US stores are being reviewed for performance and closure, based on industry estimates and Tim Wentworth’s remarks on the investor call last week. Healthcare Dive, FierceHealthcare

Mr. Market didn’t like the WBA news at all, dropping the share price from the call last week to today, closing at $11.58, its lowest level in years. Nine years ago, it traded just over $95 per share. Its consistently steady price and healthy dividend save the last couple of years gave it a broker nickname of a ‘widows and orphans’ stock.

The bad news for VillageMD is that it’s for sale. Walgreens plans to lower its ownership below a majority holding and not to grow that line of business, instead focusing on retail pharmacy. Lowering its ownership stake means it has to find a buyer or buyers for at least 14 points of its 63% share. And it’s been a money pit. It not only upped its share from about 30% to 63% in 2021 for $5.3 billion but subsidized the acquisition of Summit Health/CityMD by VillageMD in November 2022 for $8.9 billion ($3.5 billion from WBA). The rough calculation of $10 billion [TTA 28 Mar] spent under CEO Roz Brewer’s watch does make it a bit easier for CEO Tim Wentworth to slash away. 140 locations were closed by March with a total now estimated at 160.  

But where to find a buyer/investor? It won’t be Cigna. Last May, Cigna wrote off $1.8 billion of its 2022 $2.2 billion investment which gave it a ‘in the teens’ share [TTA 2 May]. WBA wrote it down as well; last quarter, a $12.4 billion non-cash impairment charge related to VillageMD goodwill netted a $5.8 billion writedown. It’s no moneymaker though its revenue this quarter grew 7%. An industry analyst estimated VillageMD’s 2023 losses at $800 million last April. Primary care is no longer a hot investment. Even mighty CVS is looking for a private equity investor in Oak Street Health, which implies that CVS doesn’t want to put more than the bare minimum into expanding OSH’s clinics [TTA 29 May].

This Editor’s own interesting take on an option. VillageMD’s new COO/president is a Centene ‘retiree’, Jim Miller. Previously, he had the same positions for two years at Magellan Health. He was there when it was acquired by Centene in 2022 and stayed on till retiring in April. Magellan’s holdings have largely been sold off since activist investor Politan stepped in [TTA 10 Apr]. Could it be that Miller may find investors to buy or spin it off and go private?

Shields Health not for sale and neither is Boots, which didn’t make the latter’s managing director happy. On the investor call, Wentworth also confirmed that specialty pharma operation Shields Health Solutions, bandied about as a sale candidate, will be retained. It grew 24% in Q3 versus year prior. Boots pharmacies in the UK will remain off the WBA selling block in another about-face. Right after last week’s investor call, Boots’ managing director Sebastian James announced his departure, effective in November (!) reportedly for a European eye surgery business. James had been with Boots as MD since 2018 and oversaw 13 consecutive quarters of market share growth including this one, with a 6% rise in UK comparable retail sales. It’s hard not to speculate that either James had lined up a buyer or he tired of the push me-pull you from management. Another factor that doesn’t inspire confidence. Morningstar UK

Wentworth continues to have a rough ride with some speculation as to why WBA continues to dig itself into a hole and when it will turn around.

Short takes: Cue Health shuts (updated for Ch. 7), Walmart Health lays off, Walgreens sells $400M share in Cencora, $26M Series B for Expressable

Cue Health gets the clue to shut down operations. It will be a Memorial Day to remember for the 480 remaining US employees of the San Diego-based company. Come Tuesday, none of them will be returning to work. The 230 scheduled earlier this month to wind up in July, plus the remaining 250, have their last day and paycheck on Friday 24 May, according to the WARN Act paperwork filed with the state of California. Notices were doled out to employees by the chief human resources office. The notice includes company leadership, presumably also including the new (since March) CEO Clint Sever. Cue has overseas operations in Hyderabad, India; it is unknown whether that will be affected. 

Update 28 May: Cue Health filed for Chapter 7 today in the District of Delaware to formally wind down its business. The press release stated that the board attempted to pursue additional financing or a strategic transaction. The next steps will be a bankruptcy trustee appointment to sell the Company’s assets. This will be used to pay creditors in accordance with the provisions of the Bankruptcy Code. Release  

Cue Health’s collapse follows the news on 15 May that the US Food and Drug Administration (FDA) invalidated Cue Health’s main business in Covid-19 Tests for Home and OTC Use and for the authorized lab test version, advising that the tests be tossed in the trash. Their remaining test is one for Mpox on an EUA. Two other tests developed for flu and RSV are still under FDA review. At its peak, it had over 1,500 employees and was valued at $3 billion. Undoubtedly, none of this is a surprise to Cue’s employees who’ve been hanging on. Presumably the released employees will be lucky to receive their final paychecks and can forget about severance or health insurance via COBRA since that requires an existing business. Our best wishes to all of them.  San Diego Union-Tribune, Becker’s, MedTechDive

Another unsurprising layoff is that of 74 workers at Walmart Health Virtual Care located in Phoenix. Last month, Walmart announced the closing of Virtual Care along with its 51 Health Centers for primary and urgent care, having never scaled its model. The WARN Act notice was filed with Arizona on 17 May. Employees were offered severance of 90 days if they were unable to close another Walmart position. This is on top of Walmart relocating most positions, including remote, to Bentonville, with some in the San Francisco and NYC areas. Becker’s, FierceHealthcare The Health Centers are closing on 28 June per an update from Walmart. Walmart is also ending its Walmart Flex Medicare Advantage plan through UnitedHealthcare which was available solely in Georgia. There is no word about other Georgia and Florida programs in conjunction with Centene’s Ambetter and Orlando Health. TTA 30 April

Walgreens Boots Alliance (WBA) cashed in another $400 million sale of Cencora stock. The funds will be used for debt paydown and general corporate purposes. Their share of Cencora, a drug distributor formerly known as Amerisource Bergen, is now at 12% from 13% as recently as February. In that month, they sold 2% for $992 million in shares [TTA 14 Feb]. There is no change to their board representation (Ornella Barra, COO International) nor the partnership. WBA release

And to wind up with a little bit of good news, Expressable raised a $26 million Series B, for a total of $45.5 million since 2019. The virtual speech therapy provider will be using the funds for further development of their care delivery platform, expansion of their clinical network of W2-employed speech-language pathologists, and acceleration of their growth in health plans and provider partnerships. The round was led by HarbourVest Partners, with participation from Digitalis Ventures and existing investors F-Prime Capital and Lerer Hippeau. Release   Hat tip to past colleague Amy VanStee, VP of content and marketing.

Facing Future 2: Walgreens writes down $5.8B for VillageMD in Q2, lowers 2024 earnings on ‘challenging’ retail outlook

Walgreens unsparing in FY 2024 Q2 results, affected by VillageMD closures, weak retail, and inflation. In a financial report released Thursday, remarkably devoid of happy talk, Walgreens Boots Alliance (WBA) presented a ‘picture adjustment’ that wrote down VillageMD’s losses even while locations are being closed. WBA also factored in for full year 2024 the ‘challenging retail environment in the US’ as well as the blurry picture of the US Healthcare division that includes VillageMD, Summit Health/CityMD, Shields Health Solutions (pharmacy), and CareCentrix (home care). 

For WBA in total, the first six months of their fiscal year, through 29 February 2024, reflected a tidy increase in sales: 8.1% from the year-ago period (7.2% in constant currency) to $73.8 billion. Operating loss was $13.2 billion, versus prior year/same period loss of $6 billion.

  • Most of the operating loss was attributable to VillageMD’s exits from Florida, Indiana, Chicago, Boston, Rhode Island, and Las Vegas. The total number of locations will be 140, not the earlier reports of 50 that grew to 85. Both were confirmed by a company spokesperson to Forbes.
  • Financially, the impact is a $12.4 billion non-cash impairment charge related to VillageMD goodwill, resulting in a $5.8 billion charge attributable to WBA, net of tax and non-controlling interest.
  • The six-month net loss: $6.0 billion versus $3.0 billion in prior year/same period, again taking into account non-cash impairment charges.
  • This totals to a loss per share of $6.93 compared to loss per share of $3.50 in prior year/same period.

As noted earlier, this Editor’s math is that Walgreens in the US sank close to $10 billion in VillageMD including their minority then majority interest, plus subsidizing their purchase of Summit Health. This write-off is well over half. The fact that the write-off of closing markets, locations, and goodwill is not being delayed past the fiscal mid-year is aggressive. Contrast this to Teladoc, which waited a full year to write down Livongo.

US Healthcare as a whole for Q2 rose 33.2% in sales, narrowed operating loss to $34 million versus last year’s $159 million, and came up positive in EBITDA with $17 million, a $127 million increase versus the same quarter prior year. For the full year, WBA is projecting a breakeven of plus/minus $50 million.

Retail sales continued to weaken, with a 4.5% decrease for the quarter ending 29 February. Comparable retail sales decreased 4.3% versus same quarter in prior year. Pharmacy sales were higher, driven partially by higher drug costs, with a 8.7% rise.

Rounding out the picture, for the full year, WBA’s earnings per share guidance lowered to $3.20 to $3.35.  WBA earnings release, FierceHealthcare,CNBC    CEO Tim Wentworth will have an interesting next six months to turn this ship around.

Signs of the next phase in 2024? Veradigm CEO, CFO booted (updated); SmileDirectClub fails, TeleDentists steps up; FruitStreet sues Sharecare for $25M; Walgreens’ former CEO Roz Brewer’s platinum parachute

As your Editor reflects on 2023’s BloodOutOfARock versus 2020-2021’s Alcoholic Bender or the ‘new normal’ touted by the Usual Suspects (with 2022 only a burp on the way), she actually sees some Signs of Hope. 

Having lived through the Digital Health Slough of Despond of 2008-2009 as the marketer for an early telemonitoring company, there are many actions that to the observant are markers that the board is being cleared of the also-rans and never-should-have-beens. They are like dead plants and brush that need to be cleaned out so that new growth can happen. We are cycling through some of them already as we move to a New Reality and winding this up, with some examples. 

  • Early stage companies still in the red, with promising financials, but needing to get to the next stage, suddenly unable to get even modest funding (an early indicator of funding drought)
  • Large companies that can get funding snapping up smaller companies at knock-down rates to fit a ‘vision’. Watch for fill-ins, add-ins, bolt-ons that later are revealed to have taken place ‘just in time’. (And may be sold or spun off later in the cycle.)
  • Large companies veering off into lines of business that look like meadows but are minefields–and hiring expensive senior executives who don’t know one or the other but then have to run both at very high levels. They then depart (or are departed) with expensive packages.
  • VCs and PEs really snapping the purses shut–and shutting. (The latest is OpenView in Boston, not even much of a healthcare player except for a couple in HIT over a decade ago but a recently participant in a Series B for RPM Optimize Health)
  • Public companies moving from party-hearty unicorns to hoarding pens and Post-It notes to locking the doors bankrupt in two to three years. (Cracked SPACs, IPOs, and more)
  • Too many players competing with each other with near-identical services in what turns out to be a limited market–and gaining advantage by cutting patient health, privacy, and regulatory corners. (DTC telemental care and drug prescribing)
  • Layoffs at companies that over-hired in the boom spreading to larger companies that largely did not, cutting their next generation of leaders in response to Mr. Market and creating internal chaos. (Instigating panic at blue-chips like CVS and Walgreens)
  • Stupid (yes) acquisitions being acknowledged and cleaned off the books–none too quietly, but done for survival’s sake. (Somewhere there should be a memorial to Teladoc-Livongo. Sorry, Teladoc.)
  • Increased Federal and state regulation of normal business processes. (FTC’s sudden prominence adding to the usual DOJ antitrust pile-on and senatorial posturing)
  • A general cleansing of the cant and hype infecting a sector. (Look to the conferences and press releases for changes in language.)

In this Editor’s observation, another latter-stage sign is when C-levels don’t survive management failures and are sent packing. Another is seeing a small company sue a larger one over failed partnerships, usually involving IP or program design theft. This past week had examples of these two, plus examples tracking with the above markers.

Veradigm still minus 2022-23 financial statements, boots and replaces its CEO and CFO. The former Allscripts has failed to file financial statements for full year 2022 and to date in 2023 due to a massive flaw in its financial reporting software adopted in 2021 that affected its revenue reporting going back to then. While it is still trading on Nasdaq despite 14 November and earlier 16 August, 18 May, and 20 March notices from the exchange under Nasdaq Listing Rule 5250(c)(1) (Veradigm release), there still is no resolution about when their statements will be filed with the SEC. The company’s latest move was to force the resignations of CEO Richard J. Poulton and CFO Leah S. Jones, replacing them with two interims. From the board, Dr. Shih-Yin (“Yin”) Ho becomes CEO for six months and Lee Westerfield, CFO of Clearsense, becomes CFO. Mr. Poulton, a 10-year veteran, will receive a $1.6 million severance. Ms. Jones will receive a six-month continuation of salary plus additional payments to “provide business-development related services” which is corporate-speak for paying you to transition to her replacement. The board will search for permanent replacements for the CEO and CFO positions.

According to their announcement, the management changes resulted from “the Audit Committee’s previously disclosed, ongoing independent investigation, which is being conducted by legal counsel and relates to the Company’s financial reporting and internal controls over financial reporting and disclosure controls”. Reading it, Job #1 for the new team appears to be reviewing the fiscal 2023 guidance that was released on 18 September and regaining compliance with the Nasdaq Listing Rule. Veradigm also reiterated that they will have a 2020-22 revenue reduction “relating to certain revenue recognition practices.”  

Additional board changes include the chairman, Greg Garrison, as executive chairman and the appointment of Carol Zierhoffer (bio), retired CIO of Bechtel Corporation, as lead independent director. Perhaps Ms. Zierhoffer can help with the conundrum of a software company engaged in vital health and financial information transmitted via practice EHRs and practice management having its own massive accounting software problem derailing them for two years. CFO Dive has more details on the audit and a shareholder suit filed in November.

Update: A Nasdaq panel spared Veradigm’s exchange listing, for now. Mark 27 February 2024 as the date Veradigm is required to provide their 2022-2023 financial reporting to Nasdaq as required under Listing Rule 5250(c)(1). This was reported in Veradigm’s 8-K filing to the SEC on 13 December. Note that Nasdaq’s release states “The Company plans to file its Form 10-K and the Form 10-Qs as soon as possible; however, no assurance can be given as to the definitive date on which such periodic reports will be filed.” (Editor’s emphasis) Stay tuned. Healthcare Dive

No rescue for direct-to-consumer clear dental aligner provider SmileDirectClub. SmileDirect, which along with Byte (acquired 2021 by dental industry giant Dentsply Sirona), NewSmile, SnapCorrect, and several others market DTC aligners and teledentistry, failed to find a buyer or new financing after its Chapter 11 filing in September. The plan centered around the once-billionaire founders buying the company back, but they could not get their main lender HPS Investment Partners and other creditors owed $900 million, nor new investors, on board.

Heavily advertised SmileDirect IPO’d in 2019 with a valuation of $8.9 billion, but never turned a profit from its combination of DIY and teledentistry. Other drains were a patent fight with CandidCare and multiple patient complaints including jaw damage, migraines from misalignment, and tooth loss. Candid, like Invisalign, now works only through dentists who do the impressions, filings for tooth separation if needed, progressive aligner delivery, and tracking progress over what is typically one year for children, teens, and adults (over 60% of business)

In the FAQs on the lone page on its website, SmileDirect no longer will honor customer contracts for aligners and dental checkups or lifetime guarantees, but continues to demand payment from patients on SmilePay contracts. (Good. Luck. With. That!) The Hill, Fortune, HIStalk 11 Dec. For the teledentistry service The TeleDentists, it is a marketing opportunity to join with Byte in prescribing and providing dentist services for their clear aligners (email promotion). The TeleDentists is also partnering with WebMD Care for consumers seeking care after researching a dental condition. (Release

(Editor’s note: Having gone through Invisalign as an adult to correct a growing problem with alignment, your Editor cannot conceive of a DIY approach to a complex process that also required a significant amount of daily self-discipline.)

Fruit Street Health sues former partner Sharecare for $25 million. The interestingly named Fruit Street provided its diabetes management program to digital health conglomerate Sharecare as part of Sharecare’s unified virtual health management platform for individuals and enterprises. Starting in 2018, Fruit Street had a business agreement with Sharecare to offer its CDC-recognized diabetes prevention program (DPP) on Sharecare’s platform. Sharecare now has its own diabetes prevention program, “Eat Right Now”, which Fruit Street claims violates the terms of its agreement. The lawsuit was filed in Fulton County, Georgia. Sharecare claims not only that the lawsuit is without merit, but also that Fruit Street owes them $3 million in payments.

Fruit Street was founded in 2014 as a public benefit corporation [explained here TTA 24 Feb] headquartered in NYC by Laurence Girard. It is modestly funded at $35 million. Atlanta-based Sharecare was founded 2018 by serial entrepreneur and WebMD founder/CEO Jeff Arnold with Mehmet Oz, MD, surgeon, TV celebrity, and former Senate candidate. Sharecare went public on Nasdaq in the palmy days of early 2021 via a SPAC with Falcon Capital Acquisition Corp. It broke out of the gate with a $3.9 billion valuation, but like most SPACs it cracked downward within months and shares now trade at an anemic $0.99. In January, current CEO Arnold will be transitioning to executive chairman. Long-time Centene exec and retired president Brent Layton will move from a board director position to the CEO chair (release). MedCityNews, Axios

Former Walgreens CEO Roz Brewer eyewatering compensation revealed. A final example of our third bullet above is the excellent financial arrangement Ms. Brewer had with Walgreens Boots Alliance. Her package of compensation and stock options awarded by the board was $71 million for about 30 months, which included a $4.5 million signing bonus to lure her from Starbucks, over half a million in moving expenses, and $60 million in three years of compensation. According to the information in The Messenger, a good portion was in stock which fell in value 57% during her time at Walgreens, continuing a trend before her arrival. It was also consistent with an executive termination without cause, which also tied her to non-disparagement and non-disclosure agreements. Was her departure by mutual agreement with the board? That is fairly typical language, but reports in the article attributed the real cause in this statement from a source indicating loss of confidence by the most important man at WBA, Stefano Pessina: “Stefano thought she was a lightweight and unable to do the hard, transformational things he needed her to do.” (Was buying the majority of VillageMD, starting the joint store/practice location plan, buying CareCentrix and specialty pharmacy Shields Health Solutions during her tenure, not quite enough? Perhaps too much spent in a hot market and not enough return, especially by VillageMD on Summit Health and CityMD?) 

Her departure and replacement by a healthcare veteran with directly related management and organizational expertise, Tim Wentworth, is yet another example of this particular cycle coming to completion. And now that we’re in the midst of clearing the field, what happens next?

Turmoil smacks retail healthcare (updated): Walgreens to shut 60 VillageMDs, as Village names 3 new presidents; CVS shakeup continues; Rite Aid bankrupt; Amazon’s One Medical rebrands Iora

Walgreens shuttering 60 VillageMD locations adjacent to stores in five markets. This follows a second disappointing quarter for Walgreens Boots Alliance [Q3 TTA 28 June] and a fiscal Q4 net loss of $180 million, or 21 cents per share. Their CFO attributed the loss to charges for certain legal and regulatory approvals and settlements (in September, $44 million for their Theranos fling), and one-time charges related to Walgreens’ cost-cutting program. Cuts announced by acting CEO Ginger Graham are $1 billion in 2024. Shares perked up slightly; since the start of 2023, share value has been down 39% for the year before the earnings call on 12 October. 

Cutting 27% of co-located VillageMD clinics in ‘non-strategic locations’ is a start. Currently, about 220 are co-located with Walgreens which followed an original plan of about 200 in 2023. However, since WBA bought a 63% share in VillageMD for $5.3 billion in 2021, VillageMD has aggressively expanded. They bought Summit Health last November for $8.9 billion ($3.5 billion from WBA) which included CityMD, acquired Starling Physicians in Connecticut, Family and Internal Medicine Associates in central Kentucky, and Dallas (Texas) Internal Medicine and Geriatric Specialists for a whopping 700 locations [TTA 9 Mar]. Last quarter’s revenue grew by 17%. But expansion can be problematic. Together with the underperformance of CityMD, which came with the acquisition of Summit, and weak retail sales, for WBA this led to an adjusted operating loss of $172 million for the US Healthcare segment. But…there may be more. HISTalk cites an analysis by AI company founder Sergei Polevikov that attributes half of WBA’s projected 2023 $3 billion net loss, its first ever, to…VillageMD. Yet it appears, at least in the press, that Walgreens is staking a great deal on VillageMD, even though it may be a ‘gamble’. FierceHealthcare

As noted last week, WBA has experienced problems from the streets to the suites. Pharmacy workers have walked out, the CEO was given the heave-ho before Labor Day and replaced in record time, the CFO exited in July, and the CIO mysteriously departed at the top of this month. Bad earnings and a depressed retail/pharmacy outlook, without Covid’s ‘black swan’ stimulus, will do that. Even the US Healthcare head on the earnings call resorted to the anodyne “We will continue to grow in 2024 but with a renewed focus on more profitable growth.”  TTA 11 Oct, Chain Store Age, CNBC

Updated & Breaking  VillageMD’s three new divisional presidents. Village Medical’s new president is Rishi Sikka, MD, who is joining from president of system enterprises at Sutter Health. CityMD is promoting Dan Frogel, MD to the dual role of president and chief clinical officer. He joined in 2013 as a founder of Premier Care which was merged into CityMD and has had other positions within CityMD and Summit Health. At Summit Health, Becky Levy, JD moves to the new position of president of Summit Health and Starling Physicians. She has been with Summit Health since 2011, previously as chief legal officer, chief administrative officer, and chief strategy officer. Business Wire 18 October

CVS Health continues to Shake & Bake. Chief financial officer and recently announced president of Health Services Shawn Guertin is taking a leave of absence due to “unforeseen family health reasons”. The CFO role will be covered by Tom Cowhey, SVP of corporate finance with Mike Pykosz, CEO of Oak Street Health, stepping in as the interim president of health services. Interestingly, the CVS release included Kyle Armbrester, the CEO of Signify Health, as being “highly involved in the Health Services strategy”. Both Oak Street and Signify were part of a CVS buying binge this year and last that topped $18.6 billion. Neither is reportedly profitable. As usually happens when the numbers don’t look good, CVS will be laying off 5,000 in the next few months, with the first tranche of 1,200 this month [TTA 23 Aug].  FierceHealthcare, Healthcare Dive

Retail pharmacy chain Rite Aid declared Chapter 11 last Sunday. One of the US’ largest chains with 2,000 locations in 17 states, it will close 150 locations and sell its pharmacy benefit manager Elixir. Rite Aid has been beleaguered with over 1,600 lawsuits over opioid prescriptions from Federal to state and local governments, hospitals, and individuals, as well as high debt and heavy competition from other retailers like Walgreens, CVS, and Walmart, as well as Amazon. The greatest numbers are in Michigan, California, New York, New Jersey, and Pennsylvania.  Reuters, The Hill

And for Amazon, Iora Health is now One Medical Senior. Iora was acquired by One Medical in 2021 but never rebranded. It was quite different than One Medical’s membership concierge-style practices in serving primarily Medicare patients in full-risk value-based care models such as Medicare Advantage (MA) and Medicare shared savings programs at 46 locations in seven states. One Medical intends to be able to serve patients of any age at all sites, according to One Medical VP Natasha Bhuyan’s comments to Healthcare Dive at HLTH last week.

Walgreens’ transformation continues: new CEO enters, CIO exits, launches Virtual Healthcare in 9 states

This week of HLTH has not been short of Big News from WBA, perhaps cleverly to ace out CVS, Amazon (facing retail monopoly charges from the FTC and 17 states), and Walmart. Regaining the lost momentum at Walgreens Boots Alliance will be a heavy lift.

Enter Tim Wentworth as CEO from retirement. Mr. Wentworth formerly helmed Express Scripts, coming on after that company’s acquisition of pharmacy benefits manager Medco. When Express Scripts was acquired by Cigna in 2018, he headed their health services area, now Evernorth, retiring from there at the end of 2021. He is exactly what executive chair Stefano Pessina (and the board) ordered–a younger executive (63) with CEO experience, energy, through-the-ranks background, and deep, deep experience in pharmacy management, payers, and healthcare. To CNBC on Tuesday, Mr. Wentworth said, “What made me decide to come back was a chance to lead this iconic brand and company at a time when it’s not in a steady state. It’s a massive platform…they touch almost 10 million people a day.” Plus undoubtedly an offer hard to refuse! He starts on 23 October. Walgreens replaced Roz Brewer, who departed 31 August [TTA 19 Sep], in record time. Her interim replacement, former pharma exec Ginger Graham, returns to her lead independent director spot on the WBA board. WBA release

Walgreens recently missed earnings estimates for its Q3 ending in May [TTA 28 June] with underperformance problems in retail consumer sales and urgent care CityMD. They have been selling peripheral businesses and investments, with plans to lay off 10% (500) of its workforce. It doesn’t help the bottom line that Walgreens last month settled a class action lawsuit about its long-ago Theranos clinics in Arizona for a tidy $44 million.

There’s trouble from the streets to the suites right now. Pharmacy workers walked out on 300 Walgreens locations this past Monday through Wednesday. Their big issues are short-staffing and overwork. Demands are, according to an organizer talking to the AP: to improve transparency about shifting hours and schedules; to set aside training hours for new team members; and to adjust tasks and expectations at each location based on staffing levels. They are also organizing for union representation. Walgreens isn’t alone in this–CVS has also faced pharmacy worker walkouts. Fortune  At the executive level, chief information officer Hsiao Wang left suddenly on 2 October after one year after a recent leave of absence. His departure was confirmed by Walgreens to industry publication PYMNTS. Neal Sample, a consultant and former CIO at Northwestern Mutual with experience at Express Scripts, will be stepping in on an interim basis. Retail Dive. This follows on Walgreens’ chief financial officer James Kehoe July departure after five years to join financial services firm FIS in August. Mr. Wentworth’s HR experience will come in handy on these issues.

On a positive note, WBA announced Monday at HLTH that its Walgreens Virtual Healthcare will start up in nine states later this month. Via their website, Virtual Healthcare will provide on-demand consults with providers on common medical conditions and for prescriptions. It will be available in California, Florida, Georgia, Illinois, Michigan, Nevada, North Carolina, Ohio, and Texas, which represent almost half of the US population as well as Walgreens’ pharmacy customer base. It will be primarily clinician chat-based, with synchronous video visits for select conditions. Conditions treated include seasonal allergies, COVID-19 or flu, erectile dysfunction, hair loss, birth control, and other common health needs. Cash only–$33 for chat with video visits $36 to $75, which puts it in line with Amazon Clinic’s cash charge of $35 and $75 respectively. Insurance may come in the future. WBA has had telehealth through VillageMD locations and has actually had tele-dermatology service since 2016. Walgreens’ move, though, is a little tardy given Amazon Clinic’s national rollout after privacy issues delayed it on 1 August [TTA 1 Aug] and CVS’ Virtual Primary Care nationally with Amwell a year ago [TTA 12 Aug 22]. Healthcare Dive

Walgreens trying to reboot “healthcare transformation” momentum, looking for new CEO, settling with Theranos litigants

A $4.7 billion makeup for chairman Stefano Pessina. In the race among CVS Health, Walmart, and Amazon, something is not clicking with Walgreens Boots Alliance (WBA). WBA was a late entrant in the diversification race but they certainly went big when they did, acquiring VillageMD, Summit Health, and CityMD plus at-home care provider CareCentrix and specialty pharmacy Shields Health Solutions. But the results have been disappointing. Their Q3 reported in June was negative [TTA 28 June]. Roz Brewer, appointed as CEO 2 1/2 years ago for her expertise in retail operations at Starbucks and Sam’s Club, was also tasked with making Mr. Pessina’s healthcare diversification strategy, started in 2020 with VillageMD, a reality. Billions were spent, including a full $5 billion purchase of VillageMD along with their purchase of Summit Health and CityMD, plus CareCentrix. With no healthcare experience, she had to learn and execute from scratch–an adventure that ended on 31 August with her resignation. CNBC

How now, Stefano? Ms. Brewer’s temporary replacement is Ginger Graham, the lead independent director and a pharmaceutical veteran as former president and CEO of Amylin Pharmaceuticals plus group chairman in the office of the president for cardiology medical technology company Guidant. She will serve only until another CEO, now with healthcare background, is chosen. Mr. Pessina has an outsize vote in the choice as a 17% shareholder, engineer of the company, and himself CEO for five years after merging Alliance Boots with Walgreens in 2014.

Two other options for WBA are to go private, which Mr. Pessina has done before in 2007, but one that involves taking on heavy debt loads in addition to a high level of existing debt. Unlike 16 years ago, at 82 he has limited time to recoup the value of his personal 17% share. The other is to find an acquirer willing to pay a premium for the company higher than the current share price. That acquirer due to antitrust could not be a competitor like Walmart, but possibly a healthcare provider or a health insurer. But given the current attitudes at FTC and DOJ, even that approach may fall into the very wide Antitrust Net [TTA 11 Aug and previous].

WBA’s troubles are coming at a bad time, with CVS Health and Amazon also struggling with perhaps too-aggressive approaches in a down market, especially for healthcare.

The analysis in Crain’s Chicago Business (PDF) is worth your time–see pages 1 and 39.

Update  The class action lawsuit by customers who purchased Theranos blood tests at Arizona-located Walgreens, originally filed in 2016, was settled two weeks ago. Walgreens will pay $44 million into a fund for affected customers. There are two levels of individual payments. One group of customers will receive double the cost of their Theranos tests, plus an additional $10 base payment. Then there are members of a Walgreens Edison subclass, presumably more damaged, who will receive an additional $700 to $1,000 for medical battery claims. The plaintiffs’ memorandum has additional detail to be approved by the US District Court in the District of Arizona. There was also a settlement with Sunny Balwani that involves the successor company, Theranos ABC, but none with Elizabeth Holmes. MedTech Dive   Hopefully the new CEO will avoid the Fear of Missing Out (FOMO) that powered Walgreens’ involvement with Theranos.

Mid-week roundup: Optum buying Amedisys home care for $3.3B; Clover Health settles 7 shareholder lawsuits around SPAC non-disclosures; Walgreens cuts 2023 outlook, stock plummets 11%

UnitedHealth Group expands home health again, aces out Option Care Health in all-cash deal. Amedisys had previously accepted Option Care’s all-stock deal in May valued at $97.38 per share. Optum’s offer is at $101 per share in cash, a dollar higher than its previous offer, creating a valuation for the company at $3.7 billion. Amedisys will add to UHG’s $5.4 billion acquisition of the LHC Group in February, including the hospital-at-home market from its acquisition of Contessa Health for $250 million in 2021. 

Option Care is a public (Nasdaq: OPCH) post-acute and home infusion care company for which Amedisys in-home care delivery would have been an exceptional fit. It was last heard from in August making a run at Signify Health for home health and ACO providers. At that time, the not-well-known company was discovered to have some impressive backing from Goldman Sachs. Walgreens Boots Alliance also backed the company but cut its stake in March and sold the rest for $330 million earlier this month. Option Care will receive a termination fee of $106 million. Healthcare Dive, FierceHealthcare

Insurtech Clover Health settles seven lawsuits around its 2021 SPAC. Clover, with Medicare Advantage plans in eight states, went public in January 2021 at the very peak of ‘blank check’-dom. Almost immediately, after an explosive report by Hindenburg Research that revealed that the Department of Justice (DOJ) had been investigating the company on investor relationships and business practices starting in fall 2020 [TTA 9 Feb 2021], there were multiple lawsuits filed by shareholders (derivative litigation) over not revealing this material fact. Shares took the expected dive from their intro of $15.90 to today’s $0.85. The seven derivative lawsuits were in Delaware, New York, and Tennessee courts and are being settled without payment. According to Clover’s release, “the defendants in the derivative lawsuits will receive customary releases and the Company will implement a suite of corporate governance enhancements. The settlement does not involve any monetary payment, other than payment of an award of fees and expenses to plaintiffs’ counsel, which has not yet been set. The defendants have denied all wrongdoing and have entered into this settlement to avoid the burden, expense, and distraction of ongoing litigation.” In April, Clover settled a securities class action in which the class will receive $22 million, $19.5 million paid by the company’s insurance. Mobihealthnews

Walgreens Boots Alliance missed Wall Street expectations and lowered its outlook for the year. In their Q3, net earnings fell 59% to $118 million, mostly due to lower operating income. Their topline was healthy–$35.4 billion, up 9% year over year–driven by the US health provider segment (VillageMD, Summit Health, and CityMD plus at-home care provider CareCentrix and specialty pharmacy Shields Health Solutions) which was up 22%. However, both retail consumer sales and CityMD underperformed due to the absence of COVID and a mild respiratory illness winter. Together with VillageMD’s clinic expansions, this led to an adjusted operating loss of $172 million for US Healthcare. WBA cut its earnings guidance for the year to $4.00 to $4.05 per share from its previous outlook of $4.45 to $4.65. Walgreens has been selling off businesses or investments that are peripheral to providing healthcare services, such as its investment in Option Care (above). FierceHealthcare, Healthcare Dive

VillageMD opens the Walgreens purse, set to buy Summit Health for $8.9B

Moving from rumor to deal in a New York Minute. Primary care provider VillageMD has moved to a definitive agreement to acquire specialty/urgent care provider Summit Medical in an $8.9 billion deal including debt. This was heavily rumored last week [TTA 1 Nov]

This will create a provider behemoth of 680 provider locations, 750 primary care providers, and 1,200 specialty care providers in 26 markets. The fun facts:

  • VillageMD has 342 total primary care clinics in 22 southern and northeastern markets covering 15 states, with 152 co-located with Walgreens; these will eventually increase to 200.
  • Summit Health has 370 locations in New York, New Jersey, Connecticut, Pennsylvania, and central Oregon. VillageMD and Summit do not overlap (except in NJ) on markets.  
  • VillageMD consists of primarily owned and affiliated primary care practices; Summit Health specialty practices (neurology, chiropractic, cardiology, orthopedics, dermatology) plus 150 CityMD urgent care locations.
  • VillageMD has successfully mastered value-based care models in Medicare and entered advanced Medicare ACO models early and vigorously (Editor’s information). Summit Health presently is primarily is fee-for-service with some participation in value-based programs.

The participation in this one is interesting: 

  • Walgreens Boots Alliance (WBA) will invest $3.5 billion through an even mix of debt and equity 
  • Cigna’s health services organization Evernorth will become a minority owner; the exact percentage is not disclosed at this point
  • It’s not disclosed at this time whether Summit Health’s current majority owner, Walburg Pincus, will retain an interest in the combined companies. 

WBA remains the largest and consolidating shareholder of VillageMD, but with this acquisition, reduces its ownership share from approximately 62-63% to 53%. WBA’s other US non-retail healthcare interests include specialty pharmacy company Shields Health Solutions and at-home care provider CareCentrix.

Based on their release, the acquisition is expected to close in January 2023, subject to the usual Hart-Scott-Rodino Act (HSR) premerger notification and report with the DOJ and the Federal Trade Commission (FTC) that initiates a 30-day waiting period.

Bet on VillageMD and Summit closing deeper into Q1–but closing. This Editor’s over/under is that this is overly optimistic given the current DOJ and FTC’s scrutiny and apparent dislike of healthcare acquisitions, even though the provider groups don’t overlap except in a minor way in NJ. But perhaps Amazon, with a healthcare footprint primarily in pharmacy and shuttering Amazon Care, thought OneMedical would move smartly. CVS thought the same with Signify Health, yet both are on information Second Requests that extend the waiting period. DOJ is after all smarting hard with a Federal District Court nixing their challenge of UHG’s Optum with Change Healthcare, but it’s hard to throw typical antitrust at this one.

Go big or go home, indeed.     Healthcare Dive, Becker’s

VillageMD considering $5-$10B merger with Summit Health provider group: reports

Two large provider groups, VillageMD and Summit Health, reportedly are considering a merger. VillageMD, which now is majority owned (62%) by Walgreens Boots Alliance, has 342 total primary care clinics in 22 southern and northeastern markets covering 15 states, with 152 co-located with Walgreens eventually increasing to 200. Summit Health has 370 locations in five states, including specialty practices and CityMD urgent care locations. Summit Health is majority owned by Walburg Pincus.

This reinforces a trend of cross-healthcare sector buys, consolidations, and control. VillageMD’s move from a co-location deal with Walgreens to majority ownership (but controlled by an independent board) was one step starting during the pandemic in July 2020 [TTA article series here].

  • Amazon agreed to acquire OneMedical (1Life) for $3.9 billion at the end of July, and abandon Amazon Care, though now running into FTC/DOJ review headwinds with a second request for information [TTA 15 Sep].
  • CVS Health has made no secret of its desire to acquire primary care, provider enablement, and home health companies (Signify Health, also under DOJ scrutiny), but apparently has abandoned or put on hold a deal with Cano Health [TTA 21 Oct].
  • Walmart continues to go direct by opening full-service clinics, announcing the expansion of 16 based in the Tampa, Jacksonville, and Orlando areas in 2023 (Healthcare Dive, Healthcare Finance News).

Valued at $12.9 billion and with Walgreens’ backing, VillageMD has the ‘go big or go home’ resources to execute Walgreens’ version of this strategy.

Why this very well may happen. The two do not overlap (except in NJ) on markets. VillageMD is primarily owned and affiliated primary care practices; Summit Health specialty practices (neurology, chiropractic, cardiology, orthopedics, dermatology) and CityMD urgent care. VillageMD has successfully mastered value-based care models in Medicare and entered advanced Medicare ACO models early and vigorously (Editor’s information); Summit Health primarily is fee-for-service with some participation in value-based programs. More to come. Bloomberg, Becker’s, and a very big hat tip to research from Jailendra Singh of Truist Securities  (paper here)

News briefs, catchup edition: UnitedHealth/Change decision October?, CVS wins $8B Signify Health auction, Walgreens majority buy of CareCentrix, FTC requests more info on Amazon-One Medical

Your Editor is semi-returned from Almost Two Weeks in Another Town, with a few more days to close out September (and summer into autumn) coming up. A lot of big news broke despite the usually slow Labor Day holiday week.

UnitedHealthcare Group/Change Healthcare Federal lawsuit to be decided in October–reports. The bench trial in the US District Court in Washington DC pitted the Department of Justice and state plaintiffs against UHG’s massive $13 billion acquisition of claims and EDI/data processing giant Change. It concluded 16 August with closing arguments presented 8 September. Dealreporter via Seeking Alpha reported that UHG and Change effectively countered DOJ’s antitrust objections to the acquisition. Change Healthcare had previously sold their claims editing business to TPG Capital to ease antitrust concerns.  Whether that will be enough in the current environment with greater sensitivities around healthcare consolidation remains to be seen. If approved, Change will be folded into OptumInsight. For a deeper dive into the issues, see TTA’s earlier reporting 3 August and 23 March.

CVS Health beat out other contenders with an $8 billion cash bid for Signify Health. It was a busy Labor Day for CVS as Signify’s board met and decided that day on CVS’ cash offer of $30.50 per share in their unusual auction. Amazon, UnitedHealth Group, and little-known Option Care Health were the other bidders. Signify is a strategic boost for CVS in becoming a major player in primary care, provider enablement, and home health as we’ve summarized here from CVS’ Q2 earnings call. Signify’s capabilities in in-home health delivery and provider services were cheaper to buy than to develop. Based on the weight given to it in the CVS release, Signify’s Caravan Health and their Medicare ACOs furnishing value-based care management services to 170 providers was a significant factor in the top price paid.

New Mountain Capital and their investors own 60% of Signify and will be exiting. Signify had in July announced their own exit from the costly and problematic Episodes of Care/BPCI business acquired with Remedy Partners back in 2019. This led to most of the over 480 staff layoffs announced last month. The sale is, as usual, pending regulatory approvals and isn’t expected to close until first half 2023. Kyle Armbrester, Signify’s CEO Kyle Armbrester will continue to lead the company as part of CVS Health. Healthcare Finance, FierceHealthcare

Rival Walgreens Boots Alliance completed their acquisition of a majority share of home care coordination platform CareCentrix. Walgreens’ final payment was $330 million for 55% of the company at an $800 million valuation. As noted previously, Walgreens ‘go big or go home’ strategy in primary care kicked off in 2020 with growing investments in VillageMD, culminating in last year’s $5.2 billion for 63% of the company. The plan is to co-locate Village Medical offices with 600 Walgreens locations by 2025 [TTA 14 Oct 2021]. CVS’ recent actions can be seen as a reaction to Walgreens’ aggressive moves. Healthcare Finance

Amazon now under FTC scrutiny for One Medical acquisition. If shutting down the much-publicized Amazon Care wasn’t quite enough last month, the Federal Trade Commission (FTC) will be reviewing Amazon’s $3.9 billion buy of One Medical. This was announced in a 1Life Healthcare (parent of One Medical) 8-K filing with the Securities and Exchange Commission (SEC). Both 1Life and Amazon received requests for additional information on 2 September, above and beyond the usual required Hart-Scott-Rodino Act (HSR) reports that will be reviewed by the FTC and DOJ. Effectively it extends the HSR waiting period by 30 days after One Medical and Amazon have substantially complied with the additional information ‘second request’.

The FTC isn’t winning popularity contests with Amazon’s legal department, as the agency is reviewing their acquisition of iRobot, maker of robot vacuum cleaners. Mobihealthnews