Walgreens Boots Alliance Spending Big on Clinic, Post-Acute Ventures
Walgreens Boots Alliance is investing more than $5.5 billion to become the majority owner of the VillageMD primary care clinic chain and take a 55% stake in CareCentrix, a Connecticut-based provider of home and post-acute care with 19 million lives under management.
Along with those investments, executives of the pharmacy giant on Thursday said they are creating a new division called Walgreens Health to group a number of its consumer-focused businesses, including digital efforts. CEO Roz Brewer said the creation of Walgreens Health helps to clarify WBA’s strategy around community healthcare as it looks to grow beyond its core pharmacy business to include more primary and chronic care services.
“Our strategy leverages an ecosystem including our trusted brands, exceptional assets, healthcare expertise and scale, integrated with a range of new talent, capabilities, resources and an intensified focus on operational excellence to drive long-term sustainable profit growth,” Brewer said.
Illinois-based WBA is pumping $5.2 billion in VillageMD to grow its stake in that company to 63% from 30%. The move, it said, will speed up plans to open more than 600 Village clinics inside Walgreens stores by 2025 – the two companies have to date partnered on 52 such locations – and add another roughly 400 in the two following years. VillageMD today runs about 230 clinics in 15 markets and is on pace to book $1.3 billion in revenues this year. As part of Thursday’s announcement, WBA said Village will launch an initial public offering of its shares in 2022 but that WBA will retain its majority stake.
WBA’s investment in CareCentrix – it will acquire its majority stake at a price of $330 million – will grow its post-acute and home care business and extends the reach of Walgreens pharmacies with health plans and systems. CareCentrix is on track to post revenues of more than $1.2 billion and manages about $1.4 billion in spending. WBA’s leaders have the option to buy out CareCentrix’s remaining investors in the near future.
WBA’s portfolio also includes infusion and home care ventures as well as Shields Health Solutions, a specialty pharmacy in which WBA last month said it investing $970 million for a 71% stake. The company’s leaders see the addition and integration of Village and CareCentrix as helping to create a business model that will set WBA apart and accelerate its long-term profit growth: Starting in two years, Brewer and her team think the company’s earnings per share can grow in the low teens on a consistent basis.
Brewer and CFO James Kehoe said Thursday they will entertain other possible acquisitions to help them build out Walgreens Health in coming years. (The company this spring sold its wholesale Alliance Healthcare business to AmerisouceBergen for $6.5 billion; some of those proceeds went to pay off some debt.) A cost savings plan launched in late 2018 and since expanded to more than $2 billion will contribute to those EPS growth projections.
Shares of WBA (Ticker: WBA) rose more than 7 percent Thursday on its flurry of news, which included its fourth-quarter earnings. Year to date, they have risen about 20 percent.
