Walgreens Invests $970M in Shields Health Solutions

Walgreens Boots Alliance (WBA) has made a majority investment in Shields Health Solutions, a leader in integrated, health system-owned specialty pharmacy care. The $970 million investment should help strengthen Shield’s health system-based specialty pharmacy strategy, the company said.

Walgreens is a U.S. retail company that dispenses pharmaceutical and beauty products. It has operations in more than 25 countries.

Additionally, the planned investment accords Walgreens a 71% ownership stake in Shields Health with an option to acquire the remaining equity stake. Notably, per the terms of the agreement, other Shields Health equity holders will also have the option to allow Walgreens to purchase the remaining stake.

The investment affirms Walgreen’s commitment to accelerate innovative healthcare models. In addition, the company should be able to develop health system partnerships and coordinate care for complex chronic conditions. (See Walgreens stock charts on TipRanks)

Over the past two years, Shields Health has expanded its platform to represent more than 1 million patients across more than 30 disease states. The company has also grown its portfolio to more than 70 health system partners.

According to Walgreens CEO Roz Brewer, “The Shields model has shown to improve patient care, and will be complementary to our existing specialty pharmacy offering, further expanding our capabilities to best meet the needs of health system partners and patients.”

Recently, Morgan Stanley analyst Ricky Goldwasser reiterated a Hold rating on Walgreens and raised the price target to $52 from $51, implying 8.29% upside potential to current levels. The price target increase follows the company’s announcement of its plan to hike the minimum wage to $15 from $10.

Goldwasser stated, “While the news is not surprising, on the heels of CVS’ decision on 8/4, and is already included in our below consensus estimates for FY22, today’s PR removes the uncertainty related to the bottom-line impact.”

Consensus among analysts is a Hold based on 1 Buy and 9 Holds. The average Walgreens price target of $54.11 implies 12.68% upside potential to current levels.