November 15, 2007 / 5:41 AM / 10 years ago

CVS focused on integrating mergers

CHICAGO (Reuters) - CVS Caremark Corp (CVS.N) is focused on integrating recent acquisitions instead of looking for new purchases, but will expand its in-store health clinics, Chairman and Chief Executive Thomas Ryan said on Wednesday.

“It’s most important that we stay focused on the integration, the execution and getting our balance sheet in order, and then we will have the opportunity to look at opportunistic acquisitions,” Ryan said at the Reuters Health Summit in New York.

CVS acquired pharmacy benefits manager Caremark in March and is still integrating the Osco and Sav-On drugstores it bought last year from Albertsons Inc.

Ryan said he did not think CVS needed to be in every state, but said the company could move into the Pacific Northwest region at some point.

Meanwhile, CVS, one of the country’s largest drugstore chains, is expanding health services offered in its stores.

CVS plans to open about 300 in-store health clinics a year as it targets a total of about 2,500, he said. The company will have about 400 of the MinuteClinics in its stores by the end of the year, he said.

The MinuteClinics -- clinics run by nurse practitioners -- are part of a growing push by drugstores and retailers like Wal-Mart Stores Inc (WMT.N) to offer more services and attract more customers.

The clinics, which offer tests for strep throat and treatment for minor illnesses, have grown as consumers look for a venue more convenient than a doctor’s office and as uninsured patients seek less expensive alternatives to emergency rooms for basic health care.

With the growth of the clinics and the use of nurse practitioners in other health-care venues, Ryan said there could eventually be a small shortage of nurse practitioners, but he hasn’t seen any yet.

“Right now, we’re the employer of choice because the nurse practitioner, he or she, likes running their own office,” he said.

CVS is also planning to expand the percentage of private-label and proprietary brands -- like Playskool diapers -- it sells. Currently, the brands make up about 15 percent of front-end, or nonprescription, sales for the company.

“We have a goal of growing that to 20 percent by 2010,” he said.

    While drugstores like CVS are generally considered somewhat recession-resistant because consumers buy medications even in tough economic times, Ryan said CVS has felt some effects of the shaky U.S. economy.

    During Halloween, “we actually saw people buying less of the six packs of the big candy bars and more of the small packs,” he said. “Our candy business was off a little bit on just the size, so maybe people are cutting back a little bit.”

    Before the Federal Reserve Board meets, Ryan said he usually gets a call the Boston Fed asking about CVS’ business to get a sense of the economy.

    The warm October that hurt sales at retailers also affected CVS. The company saw a weak start to the cold and flu season, Ryan said, though it has begun to pick up in the last week.

    CVS shares closed on Wednesday down 45 cents at $41.80 on the New York Stock Exchange. The stock is up 35 percent this year, compared with a 13 percent drop for top rival Walgreen Co

    WAG.N.

    (For summit blog: summitnotebook.reuters.com/)

    Reporting by Brad Dorfman; Editing by Jeffrey Benkoe

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