Retail pharmacy giant CVS Health is closing in on a deal to scoop up Medicare-focused primary care company Oak Street Health for about $10.5 billion including debt, The Wall Street Journal reported Monday.
The companies are discussing a price of about $39 a share, WSJ reported, citing people with knowledge of the matter. If the deal goes through, the acquisition could be announced as soon as this week, the sources said, per the WSJ report. CVS is due to report earnings Wednesday.
Oak Street Health shares jumped more than 35% in late trading Monday following the WSJ article, MarketWatch reported. The company's shares closed Monday at $25.96 after a 2.5% decline then spiked to more than $35.50 in the extended session.
Last month, during the J.P. Morgan Healthcare Conference, rumors swirled that CVS was exploring a $10 million deal to buy the primary care company, based on reporting from Bloomberg.
That same week, the retail drugstore operator announced a partnership with Carbon Health along with a $100 million investment. The startup also is partnering with CVS Health to pilot its primary and urgent care clinic model in the drugstore giant's retail stores.
CVS began expanding beyond retail pharmacies when it acquired health insurance company Aetna in 2018 in a $69 billion deal.
The drugstore operator has made strategic moves to expand its footprint in healthcare via acquisitions. It plans to buy home health company Signify Health for nearly $8 billion. There were rumors last year that CVS was in talks to buy another primary care player, Cano Health.
And, according to regulatory filings, there was at one point a bidding war between Amazon and CVS to buy One Medical.
CVS, which operates 9,900 locations across the country, has been laser-focused on expanding its footprint in primary care. The company wants to enhance its health services in primary care, provider enablement and home health, CVS CEO Karen Lynch said during the company's second-quarter earnings call in August.
Oak Street Health, which went public in 2020, operates 169 primary care clinics in 21 states with 159,000 at-risk patients receiving care, according to information the company presented at JPM.
The company estimates 2022 revenue will reach $2.16 billion.
Oak Street is a tech-enabled primary care chain that specifically targets Medicare-eligible patients, particularly those in underserved communities. The company leverages value-based care payment structures to improve outcomes and curb cost.
Oak Street has data to show that its economic model helps provide better patient outcomes. The company achieved the highest net savings out of 53 direct contracting entities in the Global and Professional Direct Contracting Model for the 2021 performance year, while earning the highest possible quality score of 100%.
However, the company has sizable losses and is forecasting an adjusted EBITDA loss of $287.5 million in 2022.