MinuteClinics Helps Immunize CVS Caremark’s $45 Stock Value

November 8th, 2011 by Trefis Team
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CVS Caremark (NYSE:CVS), the second largest drug retailer after Walgreens with 7,300+ stores, expects to break even on its 2006-acquired subsidiary MinuteClinics on an all-in basis by the end of this year. MinuteClinics are the nation’s largest retail-based walk-in medical clinics and CVS Caremark currently operates 645 Minuteclinics across the U.S. CVS Caremark is an integrated pharmacy services provider and drugstore chain that competes with Walgreen (NYSE:WAG), Wal-Mart (NYSE:WMT) and Rite-Aid (NYSE:RAD).

View our detailed analysis for CVS Caremark

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MinuteClinics: Drive Pharmacy Sales

Staffed primarily by Nurse Practitioners and Physician’s Assistants, MinuteClinics treat common ailments and offer routine vaccinations, cost cheaper than a typical visit to the doctor’s office or emergency room and do not require an appointment. Such clinics also offer a convenient way for people to get common vaccinations.

MinuteClinics, that are featured at CVS pharmacy locations, help in driving up prescription filling rates at the corresponding pharmacies and increase the ability to cross-sell other front-end products to customers who come in for prescriptions, as they wait for their appointments.

On Track to Break Even This Year

CVS Caremark acquired MinuteClinics in 2006 and has since increased locations by more than 8x in the last five years, from 80 in 2006 to 645 today. CVS has announced further plans to open 500 clinics over the next 5 years. It thus expects its plans to double its clinic count over the next several years to position it to play an important role in providing care to the 32 million newly insured beginning in 2014.

With a 16% revenue growth this quarter versus the same period last year, MinuteClinics are right on track to break even on an all-in basis by the end of this year. CVS has also been exploring ways of making MinuteClinic part of Caremark’s Pharmacy Benefit Management’s coverage that could lead to an important advantage in the marketplace.

We shall watch out for more at the upcoming CVS Caremark Analyst Day next month, where it is likely to talk about its MinuteClinics in greater detail.

We have a $45 price estimate for CVS Caremark, which is about 20% ahead of the current market price.