CVS Caremark finalizes Longs acquisition; announces Q3 earnings, generic Rx discount program
WOONSOCKET, R.I. CVS Caremark—which is expecting to close today the acquisition of Longs Drug Stores—announced record third quarter revenues, operating profit and earnings. In addition, the pharmacy retailer is entering into the discount generic drug program arena with its new Health Savings Pass program.
“Despite the difficult macro economic environment we posted solid third quarter results right in line with our plan. In the third quarter, we received record sales, record operating profit, record earnings per share and record cash flow,” Tom Ryan, chairman, president and chief executive officer told analysts during a conference call to discuss results.
Net revenues for the third quarter ended Sept. 27 increased $368.2 million to $20.9 billion, up from $20.5 billion in the year-ago period.
Revenues in the retail segment increased 5.3 percent to $11.5 billion in the third quarter, while same-store sales rose 3.7 percent. Pharmacy same-store sales increased 3.8 percent and were negatively impacted by about 280 basis points due to recent generic introductions. Front-end same-store sales increased 3.3 percent.
Revenues in the pharmacy services segment decreased 0.9 percent to $10.6 billion. Retail network claims processed during the quarter increased 2.7 percent to 134.4 million compared with 130.9 million in the year-ago period.
The increase in retail network claims was driven primarily by increased enrollment in the Medicare Part D business. Mail service claims processed during the quarter decreased 19.6 percent to 14.7 million compared with 18.3 million in the year-ago period primarily due to the termination of the Federal Employees Health Benefit Plan mail contract, effective Dec. 31, 2007.
Net earnings available to common shareholders rose to $732.5 million, or 50 cents a share, from $686.1 million, or 45 cents a share, in the year-ago period.
In addition to discussing third quarter results, Ryan unveiled details of the company’s new Health Care Savings Program that offers a 90-day supply of more than 400 generic drugs beginning Nov. 9.
Aimed at helping the uninsured in today’s challenging economy, the new Health Savings Pass has a $10 annual enrollment fee for a 90-day prescription for one of more than 400 common generic maintenance medications that treat such conditions as diabetes, high blood pressure and high cholesterol for $9.99 at a CVS pharmacy.
In addition, the Health Savings Pass will provide access to services and screenings at MinuteClinic, the retail-based health clinics, at a 10 percent discount for cash-paying patients.
Consumers can obtain a Health Savings Pass at any of the more than 6,300 CVS locations nationwide but calling 888-616-2273 or online www.cvs.com/healthsavingspass where they can find a list of the medications covered.
Meanwhile, CVS is set to close today its acquisition of Longs, a move that will add 521 retail locations in California, Hawaii, Nevada and Arizona, as well as Longs’ PBM services.
CVS has completed the subsequent offering period of its tender offer for all of the outstanding common stock of Longs, as reported Wednesday by Drug Store News.
McKesson reports earnings increase for Q2 2008
SAN FRANCISCO McKesson Co. reported Wednesday that its earnings for second quarter 2008 which ended Sept. 30 totaled $26.6 billion, up 9 percent from $24.5 billion at the same time last year.
“We had a solid quarter, with a particularly strong performance from Distribution Solutions despite industry concerns about lower prescription trends,” John H. Hammergren, chairman and chief executive officer said in a statement. “In Technology Solutions, our second quarter operating profit was up 8 percent year-over-year, although we did begin to see some customers delay their purchasing decisions.”
Second-quarter diluted earnings were $1.17 per share, up 41 percent from 83 cents per diluted share last year. That total included 27 cents per share from a $76 million tax reserve release and five cents per share after sale of the 42 percent holdings of Verispan, the company reported. McKesson benefited from the sale of its specialty pharmacy business Distribution Solutions, a business within McKesson Specialty Care Solutions.
McKesson also said that its second-quarter earnings totals included $25 million in pre-tax share-based compensation expense, versus its pre-tax expense of $28 million one year ago.
The company said that projections for 2009 earnings were reported at $4.00 to $4.15 per diluted share.
CVS completes tender for Longs Drugs acquisition
WOONSOCKET, R.I. CVS Caremark has successfully completed the subsequent offering period of its tender offer for all of the outstanding common stock of Longs Drug Stores, and expects to effect the merger on or about Oct. 30.
The subsequent offering period for the tender offer expired at 6 p.m., New York City time, on Oct. 28. A total of approximately 28,317,338 shares of Longs were tendered in the initial and subsequent offering periods of the offer, representing approximately 78.07 percent of the outstanding shares.
CVS expects to effect, without a vote or meeting of Longs’ stockholders, a short-form merger on or about Oct. 30 to complete the Longs acquisition.
In the merger, each of the remaining outstanding shares (other than any shares owned by CVS or its subsidiaries) will be converted into the right to receive the same $71.50 in cash per share, without interest, that was paid in the tender offer.
Following the merger, Longs’ common stock will cease to be traded on the New York Stock Exchange.