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Walgreens’ healthcare division shines in Q2 earnings

The news: Walgreens Boots Alliance posted higher sales but lower profits in Q2 2023 as COVID-19 vaccinations plummeted, and the company digested its $3.5 billion debt and equity investment in VillageMD’s acquisition of Summit Health in January.

  • Sales increased 3.3% year over year (YoY) to $34.9 billion, while net earnings slid 19.8% to $703 million.
  • Just 2.4 million vaccinations were administered in Q2 compared with 11.8 million the prior year’s Q2.
  • The US healthcare division had sales of $1.6 billion, up $1.1 billion from Q2 2022, but posted an operating loss of $472 million.

The pivot to healthcare from retail continues: Walgreens calls consumer-centric health solutions its next growth engine. Other Q2 highlights for its healthcare division include:

  • Its $1.37 billion acquisition of specialty pharmacy Shields Health Solutions.
  • The retailer now manages 806,000 valued-based lives under VillageMD/Summit.
  • It operates 210 VillageMD clinics that are next door to Walgreens pharmacies.
  • VillageMD ended the quarter with 729 locations, including Summit Health and CityMD.
  • Nearly 50% of patients in those co-located clinics opted to fill their prescriptions next door at the Walgreens pharmacy, CFO James Kehoe said on the earnings call.
  • Walgreens Health Corners, which provide in-store and virtual health services, grew 47% YoY, to 117 locations.
  • It now has five clinical trials contracts since it entered the field in June 2022.

Looking ahead: Walgreens won’t slow down building out its primary care and home health offerings.

  • Its $392 million deal for the remaining 45% of CareCentrix is expected to close in fiscal Q3.
  • Walgreens and VillageMD launched a pilot program to help patients manage their medications after discharge from the hospital.

Our take: Walgreens is giving its rivals CVS Health and Walmart a run for their money. The Summit Health deal greatly expanded its market presence and its offerings, adding multispecialty and urgent care clinics to VillageMD’s primary care clinics.

  • Walgreens will see 20.8 million patients in its retail clinics in 2023, we estimate.
  • That’s about one-quarter (24.8%) of all US retail clinic patients.
  • In 2024, it will see 21.9 million patients, up 5.7% from 2023.

This article originally appeared in Insider Intelligence's Digital Health Briefing—a daily recap of top stories reshaping the healthcare industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.