Month: January 2024

Shares of Walgreens closed 5% lower on Thursday after the company reported fiscal first-quarter adjusted earnings and revenue that topped expectations, but cut its quarterly dividend nearly in half. 

The retail pharmacy giant slashed its dividend to 25 cents per share from 48 cents per share to “strengthen [its] long-term balance sheet and cash position,” CEO Tim Wentworth, who officially took the helm during the quarter, said in a statement. 

Walgreens’ dividend yield is now 3.9%, based on Wednesday’s closing price. That’s down significantly from its prior yield of more than 7%, which made the company the highest-paying dividend stock in the Dow Jones Industrial Average. 

It also marks the company’s first dividend cut in nearly five decades. The dividend will be payable on March 12.

In an interview with CNBC, Wentworth called the dividend cut an “incredibly important and responsible” decision. 

He added that the majority of investors expected the move and “actually are excited about the fact that we’re going to have additional capital to invest in the core business in a way that stimulates growth again, because that ultimately is going to be the most shareholder-friendly thing we can do.”

The dividend reduction comes as Wentworth, a health-care industry veteran, tries to steer the company out of a rough spot. 

Shares of Walgreens plummeted 30% last year as the company grappled with weakening demand for Covid products, low pharmacy reimbursement rates, increased pressure from online retailers, labor unrest among pharmacy staff in the fall, an uneven push into health care and a challenging macroeconomic environment.

But Thursday’s earnings beat marks a turnaround from October, when Walgreens missed earnings estimates for two straight quarters for the first time in nearly a decade.

Here’s what Walgreens reported for the three-month period ended Nov. 30 compared with what Wall Street was expecting, based on a survey of analysts by LSEG, formerly known as Refinitiv:

• Earnings per share: 66 cents per share adjusted vs. 61 cents expected
• Revenue: $36.71 billion vs. $34.86 billion expected

The company reported a net loss of $67 million, or 8 cents per share, for the fiscal first quarter.

That compares with a net loss of $3.7 billion, or $4.31 per share, during the same period a year ago, when Walgreens was ordered to pay a multibillion-dollar settlement for litigation alleging the company helped fuel the nation’s opioid crisis. 

The net loss in the most recent quarter included a $278 million after-tax charge related to Walgreens’ forward sale of shares of drug distributor Cencora, formerly known as AmerisourceBergen. 

Excluding certain items, adjusted earnings per share were 66 cents for the fiscal first quarter. 

Walgreens booked sales of $36.71 billion in the quarter, a roughly 10% jump from the same period a year ago. 

The company said revenue growth in its U.S. retail pharmacy and international business segments, and sales contributions from its U.S. health-care division, drove the increase. Walgreens is making significant investments to transform from a major drugstore chain to a large health-care company. 

Despite the quarterly beats, Walgreens reiterated its fiscal 2024 adjusted earnings guidance of $3.20 to $3.50 per share. 

Executives during an earnings call Thursday highlighted incremental fiscal year 2024 “tailwinds and headwinds in a challenging environment” compared to when it issued its previous outlook.

Walgreens now expects better performance from its pharmacy services unit due to more favorable tax rates. It forecast a full-year adjusted effective tax rate of 15% to 17%, compared to the prior outlook of 19% to 20%.

But executives also expect several hurdles, including lower market growth in prescriptions and lower sale and leaseback contributions. They also expect a pullback in consumer spending to cut into U.S. retail sales in the short term, then improve in the second half of the fiscal year.

The company did not indicate in the earnings release whether it would also maintain its previous revenue guidance of $141 billion to $145 billion. 

During an earnings call on Thursday, executives said the company is on track to achieve $1 billion in cost savings during fiscal 2024 due to its ongoing cost-cutting initiative, which involves closing unprofitable stores, layoffs and using artificial intelligence to drive supply chain efficiencies, among other efforts.

Sales growth across pharmacy and health care

Walgreens’ U.S. retail pharmacy segment generated $28.94 billion in sales in the fiscal first quarter, an increase of more than 6% from the same period last year. Comparable sales at pharmacy locations rose 8.1%. 

That segment operates more than 8,000 drugstores across the U.S., which sell prescription and nonprescription drugs as well as health and wellness, beauty, personal care, and food products. 

A customer prepares to enter a Walgreens store on October 31, 2023 in Los Angeles, California. Pharmacy staff at some CVS and Walgreens locations have organized a three day walkout in multiple states which will last until November 1. 

Mario Tama | Getty Images

Pharmacy sales for the quarter rose 10.7% compared with the fiscal first quarter of 2023, as comparable sales climbed more than 13% due to price inflation in brand medications and “strong execution” in pharmacy services, Walgreens said. 

Total prescriptions filled in the quarter including immunizations totaled 311.6 million, which is flat compared with the same period a year ago. 

Walgreens cited a weaker respiratory virus season this fall, which is blunting demand for medications and vaccines. The company also pointed to Medicaid redeterminations, which are routine reviews each state’s Medicaid agency conducts to determine whether beneficiaries still qualify for coverage. 

Retail sales for the quarter fell 6.1% from the same period a year ago, and comparable retail sales declined 5%. Walgreens pointed to the weaker respiratory season as well as “macroeconomic-driven consumer trends” and Thanksgiving holiday store closures – a first for the company last year — to explain the decrease. 

More CNBC health coverage

Meanwhile, the company’s international segment, which operates more than 3,000 retail stores abroad,  racked up $5.83 billion in sales in the fiscal first quarter. That’s a rise of more than 12% from the same period a year ago. 

The company said sales from Walgreens’ U.K. subsidiary, Boots, grew more than 6%.

Revenue from Walgreens’ U.S. health-care segment came in at $1.93 billion, up from $989 million in the same period last year. 

That increase reflects primary-care provider VillageMD’s acquisition of multi-specialty care provider Summit Health and growth across all businesses in the segment on a pro forma basis.

VillageMD sales grew 14% compared to the same period a year ago due to same-clinic growth and strength in Summit Health, among other factors.

Sales from the segment’s specialty pharmacy company, Shields Health Solutions, grew 27%, driven by recent contract wins with health systems and expansion of existing partnerships.

Specialty pharmacies are designed to deliver medications with unique handling, storage and distribution requirements, often for patients with complex conditions such as cancer and rheumatoid arthritis.

— CNBC’s Bertha Coombs and Robert Hum contributed to this report.

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Clarification: This story was updated to reflect that Summit Health is a multi-specialty care provider.

Harun Ozalp | Anadolu | Getty Images

The free version of ChatGPT may provide inaccurate or incomplete responses — or no answer at all — to questions related to medications, which could potentially endanger patients who use OpenAI’s viral chatbot, a new study released Tuesday suggests.

Pharmacists at Long Island University who posed 39 questions to the free ChatGPT in May deemed that only 10 of the chatbot’s responses were “satisfactory” based on criteria they established. ChatGPT’s responses to the 29 other drug-related questions did not directly address the question asked, or were inaccurate, incomplete or both, the study said. 

The study indicates that patients and health-care professionals should be cautious about relying on ChatGPT for drug information and verify any of the responses from the chatbot with trusted sources, according to lead author Sara Grossman, an associate professor of pharmacy practice at LIU. 

For patients, that can be their doctor or a government-based medication information website such as the National Institutes of Health’s MedlinePlus, she said.

An OpenAI spokesperson said the company guides ChatGPT to inform users that they “should not rely on its responses as a substitute for professional medical advice or traditional care.”

The spokesperson also shared a section of OpenAI’s usage policy, which states that the company’s “models are not fine-tuned to provide medical information.” People should never use ChatGPT to provide diagnostic or treatment services for serious medical conditions, the usage policy said.

ChatGPT was widely seen as the fastest-growing consumer internet app of all time following its launch roughly a year ago, which ushered in a breakout year for artificial intelligence. But along the way, the chatbot has also raised concerns about issues including fraud, intellectual property, discrimination and misinformation. 

Several studies have highlighted similar instances of erroneous responses from ChatGPT, and the Federal Trade Commission in July opened an investigation into the chatbot’s accuracy and consumer protections. 

In October, ChatGPT drew around 1.7 billion visits worldwide, according to one analysis. There is no data on how many users ask medical questions of the chatbot.

Notably, the free version of ChatGPT is limited to using data sets through September 2021 — meaning it could lack significant information in the rapidly changing medical landscape. It’s unclear how accurately the paid versions of ChatGPT, which began to use real-time internet browsing earlier this year, can now answer medication-related questions.  

Grossman acknowledged there’s a chance that a paid version of ChatGPT would have produced better study results. But she said that the research focused on the free version of the chatbot to replicate what more of the general population uses and can access. 

She added that the study provided only “one snapshot” of the chatbot’s performance from earlier this year. It’s possible that the free version of ChatGPT has improved and may produce better results if the researchers conducted a similar study now, she added.

Grossman noted that the research, which was presented at the American Society of Health-System Pharmacists’ annual meeting on Tuesday, did not require any funding. ASHP represents pharmacists across the U.S. in a variety of health-care settings.

ChatGPT study results

The study used real questions posed to Long Island University’s College of Pharmacy drug information service from January 2022 to April of this year. 

In May, pharmacists researched and answered 45 questions, which were then reviewed by a second researcher and used as the standard for accuracy against ChatGPT. Researchers excluded six questions because there was no literature available to provide a data-driven response. 

ChatGPT did not directly address 11 questions, according to the study. The chatbot also gave inaccurate responses to 10 questions, and wrong or incomplete answers to another 12. 

For each question, researchers asked ChatGPT to provide references in its response so that the information provided could be verified. However, the chatbot provided references in only eight responses, and each included sources that don’t exist.

One question asked ChatGPT about whether a drug interaction — or when one medication interferes with the effect of another when taken together — exists between Pfizer‘s Covid antiviral pill Paxlovid and the blood-pressure-lowering medication verapamil.

ChatGPT indicated that no interactions had been reported for that combination of drugs. In reality, those medications have the potential to excessively lower blood pressure when taken together.  

“Without knowledge of this interaction, a patient may suffer from an unwanted and preventable side effect,” Grossman said. 

Grossman noted that U.S. regulators first authorized Paxlovid in December 2021. That’s a few months before the September 2021 data cutoff for the free version of ChatGPT, which means the chatbot has access to limited information on the drug. 

Still, Grossman called that a concern. Many Paxlovid users may not know the data is out of date, which leaves them vulnerable to receiving inaccurate information from ChatGPT. 

Another question asked ChatGPT how to convert doses between two different forms of the drug baclofen, which can treat muscle spasms. The first form was intrathecal, or when medication is injected directly into the spine, and the second form was oral. 

Grossman said her team found that there is no established conversion between the two forms of the drug and it differed in the various published cases they examined. She said it is “not a simple question.” 

But ChatGPT provided only one method for the dose conversion in response, which was not supported by evidence, along with an example of how to that conversion. Grossman said the example had a serious error: ChatGPT incorrectly displayed the intrathecal dose in milligrams instead of micrograms

Any health-care professional who follows that example to determine an appropriate dose conversion “would end up with a dose that’s 1,000 times less than it should be,” Grossman said. 

She added that patients who receive a far smaller dose of the medicine than they should be getting could experience a withdrawal effect, which can involve hallucinations and seizures