CVS Health (CVS) Nears Completion of $8B SGFY Acquisition

·4 min read

CVS Health CVS recently announced that it is going to close the $8-billion acquisition of Signify Health SGFY on or around Mar 29, 2023. However, this is subject to fulfillment or waiver of the remaining customary closing conditions as stated in the merger agreement.

The acquisition was initiated back in September 2022. Per the definitive deal, CVS Health will acquire Signify Health for $30.50 per share in cash, which will add up to the total transaction value.

Significance of the Acquisition

According to CVS Health, Signify Health, as a leading healthcare platform, will play a critical role in advancing the company’s healthcare services strategy. It will also provide a platform to accelerate CVS Health’s progress in value-based care. Both companies expect the transaction to close in the first half of 2023.

In this regard we note that, Signify Health combines technology, analytics and networks to power and create value-based payment programs, driving better outcomes and experiences. Signify Health works particularly in Health Risk Assessments, value-based care and provider enablement.

It has a network of more than 10,000 clinicians across 50 states as well as a nationwide value-based provider network combined with its proprietary analytics and technology platforms. Based on these, Signify Health is improving patient engagement, patient outcomes and care coordination for stakeholders across the health care system.

Strategic Synergy

Upon closing of the deal, Signify Health will continue to operate as a payor-agnostic business as part of CVS Health.

According to CVS Health management, both companies hold a common goal of building an integrated experience that supports a more advanced patient care.

CVS Health Corporation Price

CVS Health Corporation Price
CVS Health Corporation Price

CVS Health Corporation price | CVS Health Corporation Quote

Signify Health's network of clinicians utilize home-based visits to identify a patient's clinical and social needs. After that, they connect them to appropriate follow-up care and community-based resources to provide a more connected, effective care experience. In 2022, Signify Health's clinicians expect to connect with nearly 2.5 million unique members in the home, virtually and physically. On average, they expect to spend 2.5 times longer with a patient in the home than providers spend in the average primary care office visit.

This apart, following the acquisition of Caravan Health in March 2022, Signify Health has further expanded its focus on value-based care and population health. Caravan currently serves as a partner to over 170 providers participating in accountable care organizations (ACOs) serving Medicare beneficiaries.

Signify Health’s ACOs generated more than $138 million in gross savings in 2021. In 2023, the Caravan business is expected to serve ACOs representing over 700,000 people – rivaling many standalone platforms.

Post the acquisition, as part of the CVS Health business, Signify Health will be able to make further progress with extensive primary care enablement capabilities, including turnkey analytics, network and practice improvement solutions, to help providers transition to value-based reimbursement and improve the quality of care. CVS Health believes that this acquisition will enhance CVS Health’s connection with consumers in home care and enable providers to address patients better. In addition, this combination will also strengthen CVS Health’s ability to expand and develop new product offerings in a multi-payor approach.

Financial Significance

In September, CVS Health expects the acquisition to be meaningfully accretive to its earnings and expects to achieve its long-term adjusted EPS goals as outlined on its Investor Day in December 2021.

Zacks Rank and Key Picks

CVS Health currently carries a Zacks Rank #3 (Hold).

Two better-ranked stocks in the overall healthcare sector are Catalyst Pharmaceuticals CPRX and Avanos Medical AVNS. Haemonetics and Catalyst Pharmaceuticals each sport a Zacks Rank #1 (Strong Buy), while Avanos Medical has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Estimates for Catalyst Pharmaceuticals’ 2023 earnings have increased from $1.17 to $1.42 in the past 30 days. Shares of the company have increased 102% in the past year.

CPRX’s earnings beat estimates in three quarters while beating the same in one, the average surprise being 3.35%. In the last reported quarter, Catalyst Pharmaceuticals delivered an earnings surprise of 4.76%

Estimates for Avanos Medical’s 2023 earnings have remained constant at $1.68 in the past 30 days. Shares of the company have declined 15.2% in the past year compared with the industry’s fall of 16.3%.

AVNS’ earnings beat estimates in all the trailing four quarters, the average surprise being 11.01%. In the last reported quarter, Avanos Medical delivered an earnings surprise of 25%.

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