Walgreens Boots Alliance may sell its entire stake in physician-staffed clinic operator VillageMD, … [+]
Walgreens Boots Alliance may sell its entire stake in physician-staffed clinic operator VillageMD, which has already cost the pharma giant billions of dollars.
“The Company is currently evaluating a variety of options related to VillageMD in light of the Company’s continued investment in VillageMD’s businesses and VillageMD’s ongoing and expected substantial future cash requirements,” Walgreens said in a filing Wednesday with the Commission. of US Securities and Exchange. “These options may include a sale of all or a portion of VillageMD’s businesses, potential restructuring options and other strategic opportunities.”
Walgreens Chief Executive Tim Wentworth, who took over as the company’s top executive last October, told analysts in June that the company would remain an investor and partner but was working with VillageMD management “toward an end point “. Walgreens had a 53% ownership stake in VillageMD at the end of June.
It’s unclear given the financial losses at VillageMD how much Walgreens’ stock would be worth if a buyer were found.
Walgreens invested more than $6 billion in VillageMD under former CEO Roz Brewer to take a controlling stake, but the company has already scaled back dramatically in expanding physician practices and clinics that the company opened attached to Walgreens. In 2020, Walgreens said it planned to open 500 to 700 physician-run Village Medical at Walgreens primary care clinics in more than 30 U.S. markets over five years, with “the goal of building hundreds more after that.” “.
Wentworth said earlier this year that Walgreens and partner VillageMD have slowed the number of clinic openings in part because operators haven’t been able to fill so-called “patient panels,” which are a set number of individual patients under a provider’s care. specific.
But the decision to downsize to fewer than 90 Village Medical Walgreens locations today has put the business “on a clearer path to profitability as it continues to add life and optimize its cost structure,” Wentworth said in June.
The investment did not go well. Walgreens’ total operating loss for the first nine months of fiscal 2024 widened to $13.1 billion, reflecting “a $12.4 billion non-cash impairment charge related to the VillageMD goodwill, which resulted in a of $5.8 billion attributable to WBA, net of tax and non-controlling interest.”
In Wednesday’s SEC filing, Walgreens said it offered VillageMD in January 2023 “senior secured credit facilities in the aggregate amount of $2.25 billion, consisting of a senior secured term loan in an aggregate principal amount of $1.75 billion and a senior secured credit facility in an aggregate original committed amount of $500 million.”
And last Friday Walgreens and VillageMD “acknowledged the existence of defaults under the VillageMD Secured Loan.” On Tuesday of this week, Walgreens and VillageMD “entered into a forbearance agreement, under which the Company has agreed not to pursue legal remedies, subject to VillageMD’s compliance with the terms set forth therein, and the Company is actively engaged in discussions with VillageMD stakeholders and other third parties regarding the future of its investment in VillageMD.”