CVS Health: A Strategic Play in the Obesity Drug Market and Beyond
16min read CVS Health (CVS) has emerged as a key player in the evolving healthcare landscape, driven by its recent financial performance, strategic partnerships, and bold moves to reshape its business portfolio. The company’s first-quarter 2025 results, coupled with its landmark deal with Novo Nordisk to prioritize Wegovy® (semaglutide 2.4 mg) on its formularies, has sparked investor optimism. Let’s dissect the catalysts behind the stock’s 8.8% premarket surge and assess whether this momentum is sustainable.
The Novo Nordisk GLP-1 Deal: A Game-Changer for Obesity Care
CVS’s partnership with Novo Nordisk to make Wegovy the preferred GLP-1 drug on its largest commercial formularies starting July 2025 is a strategic masterstroke. The move positions CVS Caremark to reduce costs for its clients while expanding access to Wegovy, a proven weight-loss medication with cardiovascular benefits. Key terms include:
- Formulary Preference: Wegovy becomes the top choice for millions of CVS Caremark members, sidelining rivals like Eli Lilly’s Zepbound.
- Cost Reduction: Eligible patients can access Wegovy at $499/month via NovoCare® Pharmacy or CVS locations, undercutting competitors.
- Integrated Care: Pairing Wegovy with CVS’s Weight Management Program combines medication with lifestyle support, enhancing long-term adherence and outcomes.
This deal isn’t just about cost savings—it’s about capturing a growing market. With obesity rates rising globally and GLP-1 therapies dominating the weight-loss space, CVS is leveraging its 9,000 pharmacies and PBM scale to build a defensible moat. The partnership also signals a shift toward value-based care, aligning with broader industry trends toward outcomes-driven medicine.
Financials: Strong Q1 Performance and Raised Guidance
CVS delivered a robust Q1 2025 report, driving its stock higher:
- Revenue: $94.6 billion (+7% YoY), boosted by a 14.2% surge in same-store sales and a 17.7% jump in pharmacy sales.
- Adjusted EPS: $2.25, crushing estimates of $1.64.
- Cash Flow: Guidance raised to $7.0 billion from $6.5 billion, reflecting improved liquidity.
The company also hiked full-year 2025 Adjusted EPS guidance to $6.00–$6.20 (up from $5.75–$6.00), underscoring confidence in its turnaround. Key drivers include:
- Pharmacy & Wellness: Revenue rose 11.1% to $31.9 billion, fueled by flu season and vaccine demand.
- Health Benefits: Adjusted operating earnings hit $2.0 billion (+200% YoY), benefiting from cost discipline and exiting unprofitable ACA exchanges.
The stock’s 8.8% premarket jump on May 1, 2025, pushed it near its 52-week high, reflecting investor enthusiasm for these metrics.
Market Reaction: Bulls vs. Bulls in a Bearish World
The market’s positive response to CVS’s Q1 results and partnership is notable amid broader economic uncertainty. Key catalysts include:
1. Strategic Exits: By exiting ACA individual exchanges by 2026, CVS is shedding underperforming segments to focus on Medicare and commercial markets, which analysts view as higher-margin opportunities.
2. PBM Strength: CVS Caremark’s formulary changes and integrated programs position it to attract clients seeking cost-effective solutions, a critical advantage in a $430 billion PBM market.
3. Wegovy’s Clinical Edge: With FDA approval for cardiovascular risk reduction, Wegovy’s safety profile and efficacy make it a high-demand drug, bolstering CVS’s pharmacy traffic and loyalty.
Analysts like Michael Cherny of Leerink Partners praised the “clear positive signs across all segments,” while InvestingPro’s “Fair Value” model underscored the stock’s undervalued status, with a 52.05% YTD return.
Risks on the Horizon
While the outlook is bright, risks remain:
- Regulatory Headwinds: Arkansas’s new law requiring PBMs to separate retail pharmacy ownership could disrupt operations, though executives downplay impacts.
- Eli Lilly Competition: Zepbound’s lower monthly cost ($450 vs. Wegovy’s $499) and broader label for both diabetes and obesity may erode market share.
- Economic Sensitivity: Rising drug costs and potential tariff impacts on imports could pressure margins.
Conclusion: A Buy with Strong Upside
CVS Health’s combination of financial strength, strategic partnerships, and operational discipline positions it to capitalize on the obesity drug boom and broader healthcare trends. With its $4.6 billion adjusted operating income (up 54.9% YoY) and raised guidance, the company is delivering on its value-based care vision.
The stock’s 8.8% premarket surge and YTD outperformance highlight investor confidence, while the Novo Nordisk deal alone could generate $1.2 billion in annual savings for clients—a win-win for CVS and its partners.
While risks like regulatory changes and competitive dynamics linger, the data points to a compelling investment thesis. For income-focused and growth investors alike, CVS’s dividend yield of 1.3% and potential to outperform in a fragmented healthcare sector make it a strong buy at current levels.
With a 52.05% YTD return and a path to $6.20 EPS in 2025, CVS is proving that strategic bets on innovation—and exiting non-core businesses—can fuel sustained growth in a challenging market.
