Market analysis 12/9/21

Healthcare sector gainers/losers (mid/large cap)

SPY down a bit, -0.30% at 12:30ET. XLV +0.40%. XBI -2.10%

Biggest gainer in the SPY ETF is CVS (ticker: CVS +3.78%). Today is CVS’ Investor Day. The buried lede is a plan for $10 billion in share buybacks and an increased dividend coinciding with forecasted revenue growth. A lot of people doing complementary shopping while waiting before and after their COVID shots. With infiniboosters likely, no reason to see a tapering of these increased revs.

Other news: they care closing some 9% of stores in a large-scale reorg. Remaining CVS locations would expand their operations into primary care, behavioral health care and other therapeutic areas. Company execs see the future of CVS as a community health center, with longer hours for its clinics and reservation systems for patients that presumably would coordinate care and integrate EHR data.

CVS has also reported some success in its predictive analytics for patients with potential to develop kidney disease. CVS monetizes their existing patient data by selling analytics tools to health plans that help identify patients at risk for future kidney disease. According to CVS, patients enrolled in this program are twice as likely to receive dialysis in-home, a less-expensive alternative to dialysis-center treatments such as those offered by DaVita.

Loser on the day is Labcorp (LH -3.30%). Labcorp provides laboratory diagnostic tests for healthcare providers and drug developers. The company announced a new dividend with an estimated payout ratio of 15-20% of adjusted earnings. They also announced a $2.5 billion share buyback program.

I think that today’s drop was due to the announced dividend giving a haircut to a good chunk of potential future earnings since there was no other news catalyst on Google or Yahoo today beside the 8K announcement. This news is perhaps disappointing to those following LH since back in March 2021 they announced they had hired Goldman Sachs to advise them on how to increase their stock price.

Labcorp was an early developer of PCR testing and has grown through M&A over the years. Their portfolio of brands included Covance, recently rebranded as Labcorp Drug Development. Covance came up in recent conversations with a friend about animal testing and remains one of PETA’s most-reviled corporate culprits.

Normally LH would be right in my wheelhouse of facilitators of biotech and pharma development but given the animal cruelty, corporate whitewashed Wikipedia, vague language in the 10K and general lack of transparency I’m going to pass on further examination for now.

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