On May 7, 2024, the CVS Pharmacy logo is visible in stores in the Florida Keys, United States.
Jakub Bolzycki | Noor Photos | Getty Images
Glenview Capital CVS Health Shareholders are expected to meet with company leadership on Monday to come up with solutions for the troubled business, people familiar with the matter said, in what could be a harbinger of an aggressive push.
The hedge fund has built up a sizable position in the company, some people familiar with the matter said. Glenview invests in a variety of industries, but its most recent regulatory filings show it holds positions in: hundredsCVS and Teva Pharmaceuticals Among other names.
The specifics of the Glenview proposal are unclear at this time. The Wall Street Journal first reported that Glenview would meet with CVS management, including Chief Executive Karen Lynch.
A CVS spokesman said the company “maintains regular dialogue with the investment community as part of our robust shareholder and analyst engagement program.”
“Other than that, we cannot comment on our work with specific companies or individuals,” the spokesperson said.
CVS shares have fallen 22% so far this year. The meeting with Glenview was not CVS's first contact with activists. Earlier this year, Sachem Head Capital Management, a prominent activist fund run by Scott Ferguson, disclosed through regulatory filings that it had accumulated a stake in the company.
Jeff Smith's Starboard Value also took a stake in the company in 2019 and has held discussions with company leadership.
Investor confidence in CVS has declined after three consecutive quarters of lowered full-year guidance.
The company's earnings are being hit by rising medical costs in the insurance sector – an issue plaguing the broader healthcare industry as more seniors undergo surgeries postponed during the Covid-19 pandemic.
CVS owns Aetna Third largest health insurance company Based on market share, according to the American Medical Association. The company's insurance segment includes Aetna's Affordable Care Act, Medicare Advantage and Medicaid plans, as well as dental and vision insurance.
During its second-quarter results in August, CVS announced a leadership shakeup based on the performance and prospects of its insurance unit. The company said Chief Executive Lynch will replace Brian Cain, the unit's president, effective immediately.
Meanwhile, CVS's retail pharmacy business is also facing increasing pressure. Reimbursement rates for prescription drugs have fallen sharply over the past few years, while inflation and weak consumer spending have made it difficult for CVS stores to turn a profit.
CVS announced a new plan in August to cut $2 billion in spending over several years, including streamlining operations and increasing the use of artificial intelligence. The company also completed a three-year plan to close 900 stores, with 851 stores closed as of August.