CVS Gives New Mexico It’s First Retail Medical Clinic

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Last week, CVS Health (NYSE:CVS) expanded its MinuteClinic footprint in New Mexico and gave the region its first retail medical clinic by opening MinuteClinics in three CVS pharmacy stores. MinuteClinics are small walk-in retail health clinics within the CVS Caremark pharmacy stores which utilize nationally recognized protocols to diagnose and treat minor health conditions, perform health screenings, monitor chronic conditions and dispense vaccinations at much lower prices than a hospital. It is usually staffed with advanced degree nurses known as nurse practitioners who treat routine maladies. CVS has provided medical care to over 20 million patients since the inception of MinuteClinic. It has approximately 2,200 nurse practitioners, providing high-quality, affordable, walk-in healthcare services, seven days a week, without any prior appointment. MinuteClinic also has affiliations with 47 major health systems around the country, with joint clinical programs and integration of electronic medical record.

CVS is the largest and the fastest growing retail clinic operator in the U.S. Currently, the company has opened MinuteClinics in 939 location in 31 states and the District of Columbia. It plans to open a total of 150 new MinuteClinics by the end of the year and operate 1,500 clinics by 2017. New Mexico is CVS’ fourth expansion state in 2014. The company anticipates an increasing demand for medical services in New Mexico and believes that MinuteClinic can play an important role in providing easy access to medical care for local residents.

As per a recent report by Merchant Medicine, CVS has a considerable lead with more than double the number of retail clinics compared to its closest competitor Walgreen. While CVS has over 900 MinuteClinics in 31 states, Walgreen operates just 388 clinics in 19 states. Additionally, the report claims that CVS continues to open clinics at a much faster pace than its competitors. Wal-Mart, Target and Kroger are some other companies that run similar retail clinics. Operating 119 retail clinics, Kroger is ranked number three followed by Wal-Mart (92) and Target (70). ((CVS Doubles Up Walgreen In Retail Clinics As Obamacare Patients Seek Care, Forbes, June 5, 2014))

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The U.S. is currently facing an acute shortage of primary care physicians. With 30 million additional Americans expected to be included under healthcare coverage (as a result of the Affordable Care Act), the demand is expected to outweigh the supply by about 45,000 doctors by the end of this decade. ((CVS Caremark’s CEO Presents at UBS Global Healthcare Conference (Transcript), Seeking Alpha, May 20, 2014)) Expanding the MinuteClinic footprint can help CVS take advantage of this huge demand-supply gap.

Our price estimate of $77 for CVS Caremark is approximately 10% lower than the current market price. We are in the process of updating our model for the company.

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