Street Calls of the Week
WOONSOCKET, R.I. - Omnicare, LLC, a subsidiary of CVS Health (NYSE:CVS), filed for voluntary Chapter 11 bankruptcy protection on Monday in the U.S. Bankruptcy Court for the Northern District of Texas. Despite this subsidiary’s challenges, parent company CVS Health maintains strong financial health according to InvestingPro analysis, with a market capitalization of $95.19 billion and trading near its 52-week high.
The long-term care pharmacy provider is pursuing the court-supervised process to resolve issues stemming from recent litigation in the U.S. District Court for the Southern District of New York and to address broader financial challenges facing the long-term care pharmacy industry. CVS Health, recognized as a prominent player in the Healthcare Providers & Services industry, has demonstrated resilience with annual revenue of $384.33 billion in the last twelve months.
During the bankruptcy proceedings, Omnicare plans to continue providing pharmacy services to its long-term care facility customers without interruption. The company has secured an agreement for $110 million in debtor-in-possession financing to maintain operations throughout the process.
"Omnicare has been engaged in a civil lawsuit alleging technical violations of pharmacy law based on practices the government knew about and approved," said David Azzolina, President of Omnicare, in a press release statement. "The District Court nevertheless imposed an extreme and, we believe, unconstitutional penalty."
The company intends to use the Chapter 11 process to evaluate restructuring options, including a potential standalone restructuring or sale strategy. Omnicare expects to pay vendors and suppliers in full under normal terms for goods and services provided after the filing date, and plans to continue employee wages and benefits without interruption, subject to court approval.
Omnicare serves as a provider of pharmacy services to the long-term care market, including skilled nursing facilities and independent and assisted living communities.
Jenner & Block LLP and Haynes Boone are serving as legal counsel to Omnicare, with Houlihan Lokey acting as investment banker and Alvarez & Marsal as restructuring advisor.
In other recent news, CVS Health has announced the expansion of its Aetna Clinical Collaboration program to ten hospitals by the end of 2025. This initiative aims to embed Aetna nurses within hospital settings to assist Medicare Advantage members during transitions from hospital to home or skilled nursing facilities. In financial updates, Wolfe Research raised its price target for CVS Health to $85 from $80, maintaining an Outperform rating due to the company’s potential for significant earnings growth by 2028. Additionally, CVS Health’s board of directors declared a quarterly dividend of $0.665 per share, set to be paid on November 3, 2025. In legal matters, CVS Pharmacy agreed to a $12.25 million settlement with Massachusetts over allegations of overcharging the state’s Medicaid program, MassHealth. Cantor Fitzgerald reiterated its Overweight rating on CVS Health, citing a positive outlook amid changes in the health insurance marketplace. These developments highlight CVS Health’s strategic initiatives and ongoing financial commitments.
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