WOONSOCKET – Investors reacted positively on Wednesday to CVS Caremark Corp.’s announcement that its head of retail operations, Larry J. Merlo, would succeed Thomas M. Ryan next year as the company’s CEO.
CVS shares rose 57 cents to close at $36.32 in New York Stock Exchange trading on Wednesday, and added another 9 cents in early trading on Thursday. The company’s stock has increased 13 percent since the start of this year.
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Merlo’s biggest challenge will be working to successfully integrate the CVS/pharmacy retail division with the pharmacy-benefit management (PBM) side of the company, which grew significantly after its 2007 merger with Caremark Rx Inc., Helene Wolk, an analyst at Sanford C. Bernstein & Co., told Bloomberg News.
“The challenge will be fully carrying on the vision, which is not to develop just the value of retail, or to restore the PBM to some functionality, but rather to create value through the combination of the two,” she said.
Jeff Jonas, an analyst with Gabelli & Co., told Bloomberg the company’s 7,063 drugstores remains at the company’s heart, although the company’s revenue is about evenly split between retail and PBM. “The retail side where Larry Merlo comes from has always been best in class,” he said.
Separately, Dow Jones Newswires and other outlets reported that CVS plans to borrow $1 billion with the sale of five-year and 10-year bonds on Thursday. The company had $8.5 billion in long-term debt as of March 31, according to a Securities & Exchange Commission filing.
Also, Crain’s Chicago Business reported Wednesday that CVS had won a three-year contract worth roughly $800 million to manage prescriptions benefits for employees of the city of Chicago and other local government agencies.
Additional information is available at cvscaremark.com.
