Walgreens to cut stake in primary care provider VillageMD: WSJ

Walgreens will no longer be primary care provider VillageMD's majority owner, according to a Thursday report from the Wall Street Journal.

CEO Tim Wentworth told the Journal the retail pharmacy chain plans to reduce its 53% stake in the clinics, but did not provide further details. A Walgreens spokesperson declined to answer questions from Modern Healthcare about plans to reduce the ownership stake and by how much.

Related: Walgreens-backed VillageMD closing almost 50% of clinics

Wentworth hinted at more changes to come on Thursday's third-quarter earnings call.

"We believe in the future of [VillageMD and Summit-CityMD] and intend to remain an investor and partner. But as part of our persistent focus on value creation for WBA, we are collaborating with leadership toward an endpoint to rapidly unlock liquidity, enhance optionality and position them for additional growth," Wentworth said on the call.

Wentworth's decision comes less than three years after Walgreens pledged a $5.2 billion investment to take a 63% controlling stake in VillageMD. The investment was then-CEO Roz Brewer's first big strategic move after taking the helm at Walgreens in March 2021. Walgreens' stake was reduced to 53% when VillageMD acquired Summit Health-CityMD in an $8.9 billion deal in January 2023.

Walgreens had big plans for VillageMD and started to roll out hundreds of Village clinics connected to Walgreens stores.

Those plans soon soured. Walgreens has struggled with limited payer reimbursements, less consumer demand and a drop-off in COVID-19 services. The company implemented a $1 billion cost-cutting initiative in late 2023, which included shuttering dozens of VillageMD clinics, and began a months-long strategic review.

Walgreens took a $6 billion hit in the second quarter related to VillageMD, which plans to close 160 clinics this year.

Mary Langowski, Walgreens' U.S. healthcare president, voiced support for VillageMD on Thursday's earnings call. She said Walgreens will pursue capital-light services and partnerships with a range of providers, payers and pharmaceutical manufacturers.

Langowski, who replaced John Driscoll in March, will take on an expanded role overseeing specialty pharmacy operations, manufacturer relations, contracting, supply chain and services deployment.

Wentworth said Thursday the company is taking no action on selling specialty pharmacy company Shields Health Solutions, despite earlier reports of exploring such an option.

Walgreens reported a $5.6 billion net loss, or $6.53 per share, in the first nine months of fiscal 2024, compared with a $2.9 billion loss, or $3.36 per share, in the year-ago period. The company slashed its 2024 guidance amid a worsening retail environment and announced it would look at closing about 25% of its stores.