CVS Health Corporation

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Case Summary

Company Name
CVS Health Corporation
Stock Symbol
Class Period
May 21, 2015 to February 20, 2019
Motion Deadline
April 26, 2019
Southern District of New York

The complaint charges CVS Health and certain of its officers with violations of the Securities Exchange Act of 1934.  CVS Health was formerly known as CVS Caremark Corporation and changed its name to CVS Health Corporation in September 2014.  CVS Health, together with its subsidiaries, provides integrated pharmacy health care services, operating through its Pharmacy Services and Retail/LTC segments.

On May 20, 2015, CVS Pharmacy, Inc. (“CVS Pharmacy”), a wholly owned subsidiary of CVS Health, entered into an Agreement and Plan of Merger (the “Merger Agreement”) to acquire Omnicare, Inc. (“Omnicare”), a provider of pharmaceuticals and related pharmacy services to long-term care facilities and specialty pharmacy and commercialization services for the bio-pharmaceutical industry (the “Omnicare Acquisition”).  Pursuant to the Merger Agreement, upon the effective date, each share of Omnicare common stock would be converted into the right to receive $98.00 in cash.  In addition, CVS Pharmacy would assume approximately $2.3 billion in Omnicare debt.

On August 18, 2015, CVS Health acquired 100% of the outstanding common shares and voting interests of Omnicare shareholders for $98.00 per share, for a total value of $9.6 billion, and assumed long-term debt with a fair value of approximately $3.1 billion.  According to CVS Health’s SEC filings, the Company acquired Omnicare to expand its operations in dispensing prescription drugs to assisted-living and long-term care facilities and to broaden its presence in the specialty pharmacy business, as it sought to serve a greater percentage of the growing senior patient population in the United States.

The complaint alleges that throughout the Class Period, defendants made materially false and misleading statements and/or failed to disclose adverse information regarding the Company’s business and financial condition, including that CVS Health’s financial condition and expected earnings were deteriorating as a result of rising costs and poor results associated with the Omnicare Acquisition.  As a result of this information being withheld from the market, CVS Health securities traded at artificially inflated prices during the Class Period, with its stock price reaching a high of more than $114 per share.

Then on February 20, 2019, CVS Health announced the Company’s fourth quarter and full year 2018 financial and operating results and provided 2019 full year guidance. CVS Health advised investors that adjusted earnings in 2019 would be $6.68 to $6.88 per share, compared with the $7.36 per share average market estimate, citing rising costs and poor results related to the Omnicare Acquisition.  Following this news, CVS Health’s stock price fell $5.66 per share, or more than 8%, to close at $64.22 per share on February 20, 2019.

Class Period: May 21, 2015 - February 20, 2019
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