Walgreens to Invest Over $5.5 Billion in Health Services Push

Walgreens to Invest $5.5 Billion in Health Services Expansion

By Leroy Leo and Dania Nadeem

(Reuters) -Walgreens Boots Alliance Inc said on Thursday it would take majority stakes in two smaller health care providers for about $5.5 billion, as the second largest U.S. pharmacy chain shifts focus beyond its drugstores.

Shares in Walgreens rose nearly 7% to $50.44 in afternoon trading after it reported fourth-quarter results that beat estimates, helped by easing pandemic-related restrictions and COVID-19 vaccine administrations at its stores.

The company said it would make a $5.2 billion investment in VillageMD, raising its stake https://reut.rs/3AGlbg2 in the primary care provider to 63%. It will also invest $330 million in post-acute and home care provider CareCentrix to take a 55% stake.

Walgreens, which has more than 9,000 drugstores across the country, said these investments will support its new business unit that will provide pharmacy and primary care services in-store, at home, in the doctor’s office and via mobile app.

Rosalind Brewer, who took over as CEO earlier this year, said the deals will help Walgreens manage rising costs in high-risk patients. “These are the same patients who frequently visit our stores and meet with our pharmacists,” Brewer added.

Walgreens said it expects adjusted earnings growth, at constant currency rates, to be flat for fiscal year 2022.

The company aims to open at least 600 physician-led primary care clinics in more than 30 U.S. markets by 2025 and 1,000 clinics by 2027.

Walgreens and VillageMD have 52 primary care practice locations with pharmacy and doctor offices together, and will have more than 80 such locations by the end of this calendar year, the company said.

Same-store sales at its U.S. pharmacies rose 8.8% in the fourth quarter, which included a 485 basis point boost from COVID-19 vaccinations, the company said.

Excluding items, Walgreens earned $1.17 per share, compared with Refinitiv IBES estimates of $1.02 per share.

(Reporting by Dania Nadeem and Leroy Leo in Bengaluru; Editing by Vinay Dwivedi)