News

CVS enjoys robust profit, revenue growth thanks to acquisition strategy

Buying Target's pharmacy business and a pharmacy distributor is paying off for retail pharma powerhouse.

February 12, 2016

Successful acquisitions are playing a key role in CVC Health's latest financials, driving profit upward 13 percent in Q4 and the pharma powerhouse expects the trend to continue into this year.

In mid December 2015 the retailer finalized its acquisition of Target's pharmacy and clinic businesses for approximately $1.9 billion, according to a company release. CVS Health now owns Target's 1,672 pharmacies across 47 states and plans to operate them through a store-within-a-store format, branded as CVS/pharmacy. CVS Health will open up to 20 new clinics in Target stores within three years of the close of the transaction, states the release. Earlier in 2015 CVS spent $10 billion to buy pharma distributor Omnicare. That deal provides CVS with nationwide prescription sales to assisted living and skilled nursing homes, as well as other long-term facilities, providers and hospitals.

In regard to its Q4 earnings, CVS met expectations for profit and is on track for guidance for the first quarter of 2016 and the year. In the last three months of 2015 CVS opened 53 new retail stores while closing 14 locations and relocating 19 retail stores. At year's end it operated 9,655 stores including the Target pharmacies.

Net revenues increased 11 percent, hitting a record $41.1 billion, in Q4 compared to a year ago same quarter, and operating profit jumped 17.6 percent, to hit $2.7 billion.

Full-year financials reveal a 10 percent net revenue jump, to hit a record $153.3 billion compared to the year prior and operating profit increased 7.4 percent, hitting $9.5 billion, compared to 2014.

"We enjoyed a successful year in 2015, highlighted by excellent performance across our enterprise and two key acquisitions that support our strategy for growth. We grew our core business with the acquisition of Target's pharmacies and clinics and expanded our reach with the acquisition of Omnicare, the leader in long-term care pharmacy," stated CVS Health President and CEO Larry Merlo in a release regarding the earnings news.

Merlo noted his company's growth in the specialty market is outpacing industry activity.

"Overall, our leadership in multiple competencies enables us to provide superior value for patients, payers, and providers. We firmly believe that we have the right strategy for success in the evolving health care marketplace," he stated.