Larry Merlo, Cvs Health, Becky discussed on Squawk Pod
Squawk Pod to CEO Stories. CVS Health's leader. Larry Merlo we have an opportunity. Putting the consumer at the center of our strategy to transform the way healthcare is delivered in our country trick and United Airlines announcing a change at the top. This was a clown. Car of ineptitude when Oscar Munoz took over hedge fund manager Kyle Bass says China doesn't need loans from the World Bank the largest strategic military competitor in the world that the US has we keep giving them billions of dollars. It's crazy and artificial intelligence change. The workforce workforce we have to use machines and use algorithms not only to learn but to conduct this. I'm CNBC producer. Katie Kramer it's Thursday first day December. Fifth Two Thousand Nineteen Squawk Pod figgins right now three one good morning everybody welcomed Squawk box here on CNBC. We are live from the Nasdaq market site in Times Square. I'm becky quick. Along with Joe Kernan. Andrew is off today but filling in Tom Farley. He's the CEO of far point acquisition group former president of the NYSE and CNBC contributor. Good Morning Tom. Good morning first up today on the PODCAST. CVS Health the drugstore. Giant is one year into its merger with Aetna creating a one hundred ninety five billion dollar healthcare company. That's the eighth largest in the fortune. Five hundred although it runs more than nine thousand stores the new CVS CVS health is no longer just retail. It's also a pharmacy benefits manager. One of the nation's largest insurers and runs a burgeoning chain of healthcare clinics and as is so often the case with the big companies. CBS has held talks with an activist. Investor starboard value has taken a stake in the company. We'll talk about all that. Here's Larry Merlo and yes he started as is a pharmacist. CEO OF CVS health. Larry it's great to see you right to be here becky. So where are you just over a year end you know what has been a terrific year. The Integration Gratien of the two companies has gone very. Well I in many respects. Were ahead of schedule. On many of the integration activities and as a result the synergy dollars associated associated with integration is ahead of plan and at the same time we begun. The transformation journey were bringing innovative products and services to market The most visible side of that the health clubs They've gotten off to a great start in Houston and we've laid a solid foundation for growth in in the years to come in The credit for this goes to our three three hundred thousand colleagues. They're absolutely committed to our vision or strategy and they're working hard to bring it to life. Where are you ahead of expectations? In terms of in terms of the combination factors factors into what the there were many many synergy activities in terms of combining the companies as it relates to the back office pharmacy programs and priorities. And those are the things that have garnered A lot of momentum and ahead of ahead of plan there and again. We're excited with With what's happening with the health clubs and in some of the other products that That we have in pilot and In the response we're getting from our customers. The stock over the course of the year has is not performed strongly but you have picked up pretty sharply over the last nine months and if we compared to what's been happening with walgreens shares. It's a much different story. They've been under quite a bit of pressure as there's been concerns concerns about what's happening in the pharmacy so it does look from that relative perspective like you guys made the right move by pivoting. What have you heard from starboard when they came in what? What are the conversations that they've started? Well Becky I'm not gonNA comment on market speculation. What I will say is we have a regular dialogue with our investors? We certainly appreciate Their their input and You know in their feedback and look I think. Investors see the momentum in the business. We've had three consecutive quarters where we've where we beat expectations and they're seeing tangible signs of our vision coming to life with things like the health ups and you know we had an investor. Yesterday in early June we laid out our strategy and more important the path forward over the next three years and the stock spin up about forty percent since that meeting. Larry when I I look at your stock your trading more with the AETNA purchase your trading more like a united healthcare trading as as opposed to a drugstore company. How should investors at home think about your company and how to value well Tom? We are a healthcare company. Today that journey began many years ago and we celebrated five years. Here's this past September of eliminating the sale of tobacco. was there with you. I was on the Stock Exchange for third. We rang the bell. It was it was a great day and at a day day that made us all proud was fun and we look back. You know five years ago. It was absolutely the right decision. It's open doors for partnership for acquisitions. Obviously Asleep the pinnacle of that is the acquisition and We are healthcare company today and and we have an opportunity putting the consumer at the center of our strategy you to transform the way healthcare is delivered in our country of of CVS moved very quickly in terms of saying they weren't going to sell tobacco. I remember at the time that was a little bit of a controversial move although so it has seemed to pay dividends for. Cvs what do you think about. What's happening with vaping right now becky? It's a great question and I can remember the question we got back then was well. Will you carry the e cigarettes and yeah I remember going into A A retail establishment that was selling the products and and I saw the device vice with the Hello Kitty logo in the bubble gum flavored liquid. And you know it it absolutely raise the question in terms of we'll wait a minute. What are we doing here and five years later we see what has happened? post the tobacco announcement. We started a campaign. We are working with community partners. Be the first create the first tobacco free generation. We've made a lot of progress. We have more than two hundred college and university campuses that are tobacco free today as a result of that program. But you vaping is taking us backwards you see some of the statistics vaping up more than seventy percent with school aged children and I saw some stats recently. That more within seventy percent of high school students that are vaping will turn to tobacco upon graduation. So we've got a reverse try to really the tough one you know. Why because as an anti nanny stater I'm just drawn to wanting to regulate vaping and I feel like my like I'm going against this is different for yeah? This is totally your kids. That's what I mean marketing to kids and become a nanny state. That's like a one exception into the role in Ken. langone man Bloomberg. I know. But you're right it's like we would just get off the nicotine from the delivery system of the cigarette and now when you were found a new delivery system for nicotine flavors like Cotton Candy. It's just Joe. The challenge in in the problem is. We're we're seeing it play out you know with some of the tragedies that have been you know unfortunately well publicized as you know we don't know the longitude no effect of these products and and and if something has to be done Larry as an investor I'd think about that move to eliminate tobacco products. I think it was courageous. I like the deal. The last six or nine months have been fabulous abuse But yet the stock is down over five year periods. So talk to us about the Amazon risk. Talk to us about the risks of the business and as an investor as we think about your say that like every sentence that's amazing what's as an investor. That's weird anyway. Okay go ahead. Sorry where how should I think about the business for a year from now or two years. Well Tom you'd think about with the customer. The consumer at the center of our strategy we spent a lot of time with our customers What are their needs? What are they frustrated with? How do we bring solutions? That in maybe set another way. How do we make sure we're not leaving? Any white space to be disrupted by other forms of competition. And you've seen a number of things in terms of You you know the the elements of how do we make You Know How do we redefine convenience and you can think of some of the things that we're doing Omni channel has you know is is a term that is probably over used to some degree bed you know in some respects.