Dive Brief:
- Walgreens raised the long-term outlook for its U.S. healthcare segment along with its first quarter financials on Thursday to reflect its recent acquisition of medical group Summit Health, which closed Jan. 3.
- Walgreens expects the segment to bring in between $14.5 billion and $16 billion in sales in 2025, up from the previous guidance of between $11 billion and $12 billion for that year.
- In November, value-based provider VillageMD, which is majority-owned by the retail pharmacy chain, agreed to acquire New York-based Summit for roughly $9 billion. Cigna’s health services arm Evernorth also invested in the deal.
Dive Insight:
Walgreens is working to expand the scope of its business beyond pharmacies to more consumer-centric healthcare, and has acquired a number of companies to help it reach that goal. Its U.S healthcare division is now comprised of VillageMD, Summit, specialty pharmacy company Shields Health Solutions and at-home care provider CareCentrix, along with other health ventures.
The Summit acquisition accelerated the U.S. healthcare division’s path to profitability, now expected by the end of 2023. But bringing Summit onboard is already boosting Walgreens’ financials.
Walgreens on Thursday raised its full-year revenue guidance to $133.5 billion to $137.5 billion to account for the Summit acquisition and better-than-expected sales in the first quarter.
The Illinois-based drugstore company beat analyst expectations with $33.4 billion in sales, down almost 2% year over year. Roughly $989 million of those sales came from its U.S. healthcare segment, indicating year-over-year growth of more than 38%.
VillageMD grew almost 49% due to clinic growth. The unit added 119 clinics compared to the year-ago quarter, for a total of 393 total clinics open to date, according to the release.
Meanwhile, Shields grew 44% due to contract wins and the expansion of existing partnerships, and CareCentrix grew 22% due to additional service offerings with existing partners.
“We're making significant progress in driving our U.S. Healthcare segment to scale and profit,” Walgreens CEO Roz Brewer said in a statement on the results.
Walgreens reported a net loss of $3.7 billion in the quarter, compared to a profit of $3.6 billion at the same time last year. The significant decrease was driven by a $5.2 billion charge that Walgreens agreed to pay in November to settle opioid-related claims and litigation alleging the pharmacy giant mishandled prescriptions of the painkillers, driving the opioid epidemic. CVS and Walmart reached similar deals.
