Yahoo Finance Walgreens (WBA) to Make Additional Investment in VillageMD
Walgreens Boots Alliance, Inc. WBA recently announced an additional investment in VillageMD to strengthen its strategic position in delivering value-based primary care. The investment, valued at $5.2 billion, will accelerate the opening of at least 600 Village Medical at Walgreens primary care practices in more than 30 U.S. markets by 2025 and 1,000 by 2027. Notably, more than half of those practices are based in medically underserved communities.
The companies initially entered into a partnership in 2019 with the trial launch of five co-located practices in the Houston area. Following the successful pilot, the companies expanded the partnership in July 2020. This was followed by an accelerated investment announced by Walgreens in January of this year.
Through its relationship with VillageMD, Walgreens became the first national pharmacy chain to offer full-service primary care practices with primary care physicians and pharmacists co-located at its stores all under one roof at a large scale. Since more than 75% of Americans reside within five miles of a Walgreens, this partnership will result in a major boost in access to primary care in underserved urban and rural communities.
Strategic Investment
The $5.2-billion investment expands WBA’s ownership stake in VillageMD from 30% to 63%. However, VillageMD will remain a standalone company with its board and management, as it plans to conduct an IPO in 2022.
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This financing will enable VillageMD to accelerate its strategy of delivering comprehensive, coordinated care through a primary care model, including expansion into broader service lines.
Few Words on VillageMD
VillageMD provides patients with high-quality primary care and an outstanding experience while allowing physicians to shift from traditional fee-for-service to risk-based care models. The company, at present, operates more than 230 practices across 15 markets, with plans to grow nationally in the future. The company has registered significant growth, with revenues predicted to reach $1.3 billion in 2021, up from $217 million in 2017.
More on the News
Walgreens and VillageMD presently have 52 co-located primary care practice locations open, with more than 80 planned to open toward the end of this calendar year.
The transaction is expected to close by the end of 2021, subject to the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and fulfillment of other customary closing conditions. Under the terms of the deal, VillageMD’s financials will be consolidated by Walgreens.
Industry Prospects
Per a report published in Future Market Insights, the global value-based healthcare services market is projected to witness a CAGR of 20.9% during 2021-2031. Factors such as the increasing incidence of chronic diseases and greater requirement for high-quality care services are bolstering the adoption of value-based healthcare services. Further, the growing usage of social tools, mobile applications and real-time analytics are expected to drive the market during the forecast period.
Per company-provided data, value-based primary care is a $1 trillion, fast-growing segment of the healthcare system.
Given the substantial market prospects, the expanded investment in VillageMD seems strategic for Walgreens.
Notable Developments
In October 2021, Walgreens and Vitamin Angels reported a new milestone in their eight-year collaboration, with more than 300 million women and children receiving life-changing vitamins and minerals. Walgreens has backed Vitamin Angels’ efforts to offer vitamins and minerals to malnourished women and children around the world since 2013. By the end of Walgreens’ fiscal year in August 2025, the companies also established a new goal to reach 500 million women and children.
In September 2021, the company announced a majority investment in Shields Health Solutions via its wholly-owned subsidiary, Walgreen Co. The investment worth approximately $970 million expands on a minority equity investment announced by Walgreens in July 2019. This investment will benefit Shields’ health system-based specialty pharmacy strategy.
Share Price Performance
The stock has underperformed its industry over the past year. It has grown 30.9% compared with the industry’s 39.5% growth.
Zacks Rank and Key Picks
Currently, Walgreens carries a Zacks Rank #3 (Hold).
A few better-ranked stocks from the broader medical space include Encompass Health Corporation EHC, AMN Healthcare Services Inc AMN and National Vision Holdings, Inc. EYE, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Encompass Health has a long-term earnings growth rate of 18%.
AMN Healthcare has a long-term earnings growth rate of 10.5%.
National Vision has a long-term earnings growth rate of 23%.
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