CVS Health (NYSE:CVS)
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3 Months : From Jan 2020 to Apr 2020
By Anna Wilde Mathews
Former Aetna Inc. Chief Executive Mark Bertolini said he is being pushed off the board of CVS Health Corp.
Mr. Bertolini, who joined the CVS board after the November 2018 closing of CVS's nearly $70 billion deal to buy Aetna, told The Wall Street Journal he was willing to stay on the board, and he said the integration between the two companies isn't complete.
CVS said Monday that Mr. Bertolini and two other directors won't stand for reelection to the board. The company said Mr. Bertolini would depart "following the successful integration of the Aetna business."
The company said it was reducing the number of board members following corporate governance best practices.
CVS Chairman David Dorman said in a statement announcing the changes that the board wished to thank Mr. Bertolini "for his contribution to the successful integration of Aetna." He said the remaining board members had strong confidence in CVS's leadership and direction.
Mr. Bertolini said, "I was willing to continue to serve on the board of directors in support of the most transformative effort in health care for our nation. However, the board thought otherwise." He said the "integration is far from over."
Asked about his relationship with current CVS Chief Executive Officer Larry Merlo, he said, "There's always going to be a natural tension between the current CEO and the former CEO in any discussions regarding how you move the strategy forward. He's the guy in the seat, I'm not."
A spokesman for CVS said, "As Dave Dorman said, the integration has been a success and the board has the utmost confidence in the current management team and the progress the combined company has shown to date. We will of course have more to share on that front when we report earnings next week."
After the departures, CVS said its board membership will shrink to 13 from 16. In addition to Mr. Bertolini, the company said that Richard Swift and Richard Bracken won't stand for reelection to the board and will leave after the company's annual meeting. The date of this year's annual meeting hasn't yet been announced, but the meeting was in May last year.
The company's 2018 merger created an industry giant that brings together retail pharmacy, a pharmacy-benefit manager and the Aetna insurance business. CVS has said it expects the combination to improve health care and bring down costs
CVS shares fell sharply last year after a downbeat earnings projection in February. Investors pressed for more detail about the company's growth plans, and CVS promised that it would return to profit growth this year. Shares rose as the company delivered stronger-than-expected results in subsequent quarters.
Matthew Borsch, an analyst with BMO Capital Markets, said investors' mood around CVS is brighter.
Yet, he said, Mr. Bertolini's unusual public statement, combined with the recent departure of the company's president of pharmacy, might "raise questions about whether everything is going as well as management insists."
CVS is in the process of opening around 1,500 health hub stores, which are designed to offer a broader range of services than its traditional drugstores, many aimed at people with chronic illnesses such as diabetes.
Yet CVS, like competitor Walgreens Boots Alliance Inc., faces pressure on margins in its retail pharmacy business. Also, investors have pushed down shares of insurers over political concerns, as Democratic presidential candidates advocate for a major revamp of the U.S. health-care system.
Write to Anna Wilde Mathews at email@example.com
(END) Dow Jones Newswires
February 03, 2020 14:17 ET (19:17 GMT)
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