Break-off to the three Walgreens Boots Alliance companies will leave their rivals …(+)
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The split of Walgreens into three companies leaves the industry trend of integrating healthcare services.
Last week, the report that Walgreens parent Parent Walgreens Boots Alliance will split into three businesses includes a sale or spin-off of Boots UK. It has over 1,800 stores overseas.
In the US, Walgreens retail pharmacies are also divided into separate companies. The third company also includes the fast-growing specialty pharmacy business. This is highlighted by Walgreens as a $24 billion company.
“The company was initially private as a whole, but Sycamore (Partner) plans to divide the three major Walgreens businesses into their own units with a clear capital structure,” Financial Times reported in a 4-by-line story.
The news of the potential split for Walgreens is as rival CVS Health is committed to maintaining all businesses, including the growth of retail pharmacies and the Oak Street Senior Health Center. CVS also owns the country's third largest health insurance company in Aetna and one of the nation's largest pharmacy benefit management (PBM) companies in Caremark. By owning health insurance companies and PBMs, these CVS companies can purchase services from provider businesses with discounts for health plan enrollees and employers and government clients.
“We have a leading PBM, the country's best pharmacy, a well-known franchise through Aetna, and industry-leading healthcare provider assets,” CVS CEO David Joyner told analysts in November about Analysts Ally's third quarter revenue calls. “Our collection of business and omnichannel capabilities allows us to move our industry forward with innovative, market-powered solutions.”
For more than a decade, Walgreens has resisted working in a business that pays for health operations without owning PBMs or health plans. It was a strategic mistake, according to some analysts.
But Walgreens' efforts to package more healthcare services into retail pharmacies are rocky, to say the least. Under former CEO Roz Brewer, Walgreens spent billions of dollars investing and running a clinic operator Villagemd, which has a doctor's staff.
Walgreens was able to take over $6 billion in Villagemd under Brewer to take the committee's stake in Villagemd, but the company has already dramatically reduced the practices of doctors who are obsessed with Walgreens and the clinic expansion. In 2020, Walgreens said it plans to open 500-700 doctor-led primary care clinics in more than 30 US markets over five years, with the intention of “in building hundreds of people afterwards.”
However, Tim Wentworth, CEO of Walgreens, who replaced Brewer in October 2023, said a year ago that Walgreens and partner Villagemd delayed openings in some clinics as they were unable to fill in a “patient panel,” a certain number of individual patients, in which operators were in the care of a particular provider.
Meanwhile, Walgreens, which has been cutting through stores by closures, reported a net loss of 31 cents per share for the first quarter, which ended November 30th last year. This is comparable to a one-year loss of $67 million or 8 cents per share.
Walgreens has not commented on speculations about whether the company is private by Sycamore or whether the dissolution is ongoing. Additionally, Walgreens' sales could require the support of Italian billionaire and former company CEO Stefanopesina.
However, Walgreens is already looking to sell some medical assets, including an interest in Villagemd. And Wentworth's focus on turning the company around includes debt reduction. Cencora's Walgreens shares fell from 10% to 6%, increasing the drug dealer's shares with revenues of around $300 million.
“Our first quarter results reflect a disciplined implementation of our priorities in 2025. We will stabilize our retail pharmacies by optimizing our footprint, controlling operational costs, improving cash flow and continuing to address reimbursement models.
