CVS beats Amazon for Signify Health

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CVS Health agreed to acquire Signify Health, a Dallas-based value-based care facilitator, for approximately $8 billion.

Why it’s BFD: After losing One Medical to Amazon and seeing Walgreens betting on VillageMD and CareCentrix, CVS finally got a foothold in healthcare delivery.

Enlarge: CVS has been candid about its intention to get closer to the patient, far from its historical roots. Signify moves CVS away from the pharmacy – and into the home.

  • Through this agreement, CVS has access to more than 10,000 clinicians nationwide who provide health and wellness visits to nearly 2.5 million patients at home.

Yes and: Buying Signify isn’t a “one and done” strategic decision – but a jumping-off point for its larger healthcare delivery ambitions, which will likely involve more mergers and acquisitions, executives at Signify have hinted. CVS in an earnings call Tuesday morning.

  • Signify ticks two boxes — home health and provider empowerment — and is complementary to the third box that CVS reiterated it plans to enter: primary care. (Plus, unlike One Medical, it’s a cost-effective starting point.)
  • “The value-based care capabilities that this brings to us is where a lot of the long-term power is,” CEO Karen Lynch told investors.

What they say : Analysts were quick to give their thoughts on the deal ranging from positive (BTIG) to perplexed (Cowen).

  • “The deal with CVS makes sense,” BTIG analysts David Larsen and Aron Corin wrote in a Tuesday note, saying it can help CVS “build a critical care and care coordination solution home and supporting Signify in retail, specialty and pharmaceutical services.”
  • Cowen analysts Charles Rhyee and Steven Braun weren’t so convinced: “While we’re encouraged to see CVS make an acquisition…we believe investors will seek clarity on key topics such as employee retention. customers, potential synergies, and how Signify will fit into CVS’s move to care delivery.”

How it works: Signify helps health systems and health plans move to value-based care arrangements by creating risk contracts where it shares both upside and downside risk.

Details: CVS agreed Monday to acquire Signify for $30.50 per share.

  • New Mountain Capital, which owns a 60% stake in Signify Health, has agreed to vote in favor of the transaction.
  • CEO Kyle Armbrester will continue to lead Signify as part of CVS.
  • BAML advised CVS, while Goldman Sachs and Deutsche Bank, as first reported by Axios, are advising Signify.

The context: It is the pharmaceutical retailer’s largest healthcare merger and acquisition since buying Aetna in a $69 billion deal in 2018.

  • It picked up Caremark RX for around $27 billion in 2007.
  • CVS was the finalist for One Medicalwhich went to Amazon for $4 billion in July.

To note : CVS is also looking for a buyer for BSwift, the benefits technology company it acquired eight years ago, Axios reported last week..

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