Major Glenview Capital CVS Health The company’s shareholders are expected to meet with management on Monday to propose fixes for the struggling business, a person familiar with the matter said, adding that there is a possibility of pressure from activists.
Hedge funds have a significant presence within the company, some people said. Glenview invests in a variety of areas, but according to its latest regulatory filings, the company holds positions in the following areas: CenteneCVS, and Teva Pharmaceuticals Among other names.
Details of Glenview’s proposal were not available. The Wall Street Journal first reported that Glenview would meet with CVS executives, including CEO Karen Lynch.
A CVS spokesperson said the company “maintains regular dialogue with the investment community as part of our robust shareholder and analyst engagement program.”
“Beyond that, we cannot comment on our involvement with specific companies or individuals,” the spokesperson said.
CVS stock ended Monday up about 2%. Before the start of trading on Monday, the stock had fallen about 22% since the beginning of the year.
The meeting with Glenview is not CVS’ first contact with an activist. Earlier this year, Sachem Head Capital Management, a prominent activist fund run by Scott Ferguson, disclosed through regulatory filings that it had established a position within the company.
Jeff Smith’s Starboard Value also invested in the company in 2019 and held discussions with company executives.
Investor confidence in CVS deteriorated after the company cut its full-year outlook for three consecutive quarters.
The company’s earnings have been hit by rising medical costs in its insurance division. The issue is plaguing the entire healthcare industry as more seniors undergo procedures delayed by the coronavirus pandemic.
CVS owns Aetna, the nation’s third-largest health insurance company by market share, according to the American Medical Association. The company’s insurance division includes dental and vision, as well as Aetna plans for the Affordable Care Act, Medicare Advantage, and Medicaid.
In its second-quarter results in August, CVS announced new plans to cut costs by $2 billion over several years, including streamlining operations and expanding its use of artificial intelligence. The company has also finalized a three-year plan to close 900 stores, with 851 stores closed as of August.
CVS will cut less than 1% of its workforce, or about 2,900 people, as part of a new cost-cutting plan, a company spokesperson said in a statement Monday. A spokesperson said the job cuts primarily affect corporate roles and do not affect employees at the company’s retail stores, pharmacies or distribution centers.
Most affected employees will be notified this week and will receive severance and other benefits, a spokesperson said. In addition to the layoffs, CVS has also closed some job openings.
“As our industry faces continued disruption, regulatory pressures, and evolving consumer needs and expectations, it is critical that we remain competitive and operate at peak performance,” the spokesperson said. told CNBC.
The Wall Street Journal first reported the cuts on Monday.
Also in August, CVS announced a leadership shakeup based on its insurance division’s performance and outlook. The company announced that CEO Lynch will replace Brian Cain, the division’s president, effective immediately.
Meanwhile, CVS faces increasing pressure in its retail pharmacy business. Reimbursement rates for prescription drugs have plummeted in recent years, while inflation and weak consumer spending have made it difficult for CVS stores to make a profit on the shelf.
