Mad Hedge Biotech and Healthcare Letter
September 8, 2022
Fiat Lux
Featured Trade:
(WON’T GO DOWN WITHOUT A FIGHT)
(CVS), (SGFY), (AMZN), (HUM), (UNH)
Mad Hedge Biotech and Healthcare Letter
September 8, 2022
Fiat Lux
Featured Trade:
(WON’T GO DOWN WITHOUT A FIGHT)
(CVS), (SGFY), (AMZN), (HUM), (UNH)
Bigger is better. At least, that’s what CVS Health (CVS) seems to believe.
Recently, the big news in healthcare is CVS’ move to acquire Signify Health (SGFY) for $8 billion, pushing it even nearer to its goal of becoming an integrated healthcare provider.
The deal, anticipated to close by the first quarter of 2023, is an all-cash deal with CVS paying $30.50 per share.
While this deal isn’t exactly something new, Signify has been known to be a great innovator in the fast-moving space.
The critical factor in how Signify is different from other companies lies in its strategy, which leans more on a technology- and data-focused model that caters to the gig economy. Under its scheme, clinicians are likened to Uber drivers in terms of independence.
Meanwhile, CVS’ move to swoop in and buy Signify actually threw a wrench in the plans of another company hoping to dominate in the healthcare space: Amazon (AMZN).
Just a few weeks before this announcement, Amazon’s entry into the healthcare industry felt unstoppable. The e-commerce giant started its journey with the $3.9 billion purchase of One Medical (ONEM), a doctor’s office chain, with the goal of continuing its expansion through a deal with Signify.
The encroachment of the retail giant seemed like a massive issue for existing players in the healthcare industry, particularly CVS, which was said to have lost out in the bidding war for ONEM.
Needless to say, this makes CVS’ success in buying Signify an even sweeter victory.
More importantly, this decisive move from CVS makes it apparent that it won’t go down without a fight. That is, Amazon’s march into the healthcare industry will not be completely unopposed.
Basically, Signify sends clinicians to patients’ homes to help them assess their conditions. However, the company does not offer home health services at all.
CVS’ decision to pursue this deal makes it clear that the company is veering toward primary care delivery. Signify’s services can integrate almost seamlessly with the CVS Health ecosystem, with clinicians being afforded the opportunity to simply direct patients to other CVS products and services.
However, not all plans are perfect.
One red flag in this deal involves the major clients of Signify: Humana (HUM) and UnitedHealth (UNH).
Given that CVS is a competitor, they may be put off by the new arrangement and decide to pull out of their existing contracts. This is an understandable concern since one of the main attractions in availing of Signify’s services is its status as an independent entity. This ensures that it operates without any bias and allows equal participation among all payers.
While Signify execs claim that all stakeholders are “very supportive” of this deal, the effects of the plan remain to be seen.
Either way, home-based healthcare is emerging as a new and lucrative trend in the industry. Hence, more and more companies are expected to make similar decisions.
Earlier this month, Walgreens Boots Alliance (WBA) executed a similar move when it acquired a majority share of CareCentrix. Even UNH shelled out a premium when it bought LHC Group, a home-health provider, for $5.4 billion this spring.
Whether it’s caused by an aging population battling mobility issues or healthier patients who realized the price of convenience during the pandemic, it’s undeniable that the demand for home-based healthcare is growing.
Obviously, companies like CVS are capitalizing on that trend.
So far, CVS’ strategy to develop a one-stop-shop for healthcare looks to be on track. The fact that it’s managing to build out a full-scale integrated model while practically doubling its stock price in the last three years makes it an excellent stock to own for the long haul.
If the company continues this trajectory and expansion into primary care, then CVS could quickly become one of the biggest healthcare stocks globally.
Legal Disclaimer
There is a very high degree of risk involved in trading. Past results are not indicative of future returns. MadHedgeFundTrader.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein. Affiliates of MadHedgeFundTrader.com may have a position or effect transactions in the securities described herein (or options thereon) and/or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies.
This site uses cookies. By continuing to browse the site, you are agreeing to our use of cookies.
OKLearn moreWe may request cookies to be set on your device. We use cookies to let us know when you visit our websites, how you interact with us, to enrich your user experience, and to customize your relationship with our website.
Click on the different category headings to find out more. You can also change some of your preferences. Note that blocking some types of cookies may impact your experience on our websites and the services we are able to offer.
These cookies are strictly necessary to provide you with services available through our website and to use some of its features.
Because these cookies are strictly necessary to deliver the website, refuseing them will have impact how our site functions. You always can block or delete cookies by changing your browser settings and force blocking all cookies on this website. But this will always prompt you to accept/refuse cookies when revisiting our site.
We fully respect if you want to refuse cookies but to avoid asking you again and again kindly allow us to store a cookie for that. You are free to opt out any time or opt in for other cookies to get a better experience. If you refuse cookies we will remove all set cookies in our domain.
We provide you with a list of stored cookies on your computer in our domain so you can check what we stored. Due to security reasons we are not able to show or modify cookies from other domains. You can check these in your browser security settings.
These cookies collect information that is used either in aggregate form to help us understand how our website is being used or how effective our marketing campaigns are, or to help us customize our website and application for you in order to enhance your experience.
If you do not want that we track your visist to our site you can disable tracking in your browser here:
We also use different external services like Google Webfonts, Google Maps, and external Video providers. Since these providers may collect personal data like your IP address we allow you to block them here. Please be aware that this might heavily reduce the functionality and appearance of our site. Changes will take effect once you reload the page.
Google Webfont Settings:
Google Map Settings:
Vimeo and Youtube video embeds: