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CVS Health (CVS +2%) looks to break free from its frail state today following a WSJ report that Glenview Capital, a major shareholder, will meet with management to propose a new route to turn around its operations. As of Friday's close, shares of the pharmacy benefits manager (PBM), health insurer, and retail pharmaceutical chain have tumbled by 24%. While still far better than Walgreens Boots Alliance (WBA), whose stock has plunged by over 65%, not to mention Rite Aid, which filed for Chapter 11 bankruptcy late last year, it does not offer much comfort for investors who have endured several periods of stagnant growth and slashed guidance.

What Glenview Capital is proposing has yet to be disclosed. However, CVS must address several items, all of which could be part of Glenview's discussions.

• CVS's Health Care Benefits segment has been on shaky ground, resulting in the departure of the Aetna President in August, less than a year after he stepped into the position. Problems here arose primarily from Medicare Advantage. Costs have risen rapidly; CVS's medical benefit ratio (MBR) jumped by 340 bps yr/yr in Q2. Meanwhile, CVS aggressively targeted membership expansion, culminating in operating margins being cut in half.
  • Bringing margins back up could be a focal point for Glenview. While little control can be had over medical cost trends, CVS can control its offerings, including supplemental benefits and Part D, both of which are placing pressure on margins this year.
• PBMs are in the hot seat. The FTC announced it was suing CVS's Caremark Rx, among other PBMs, earlier this month. While this is out of CVS's hands, it produces uncertainty. Whatever comes of the government scrutiny, changes may be coming within CVS's Health Services segment following persistent headwinds, including losing a large client to Cigna's (CI) Express Scripts earlier this year.
  • Health Services is still a relatively high-margin business, a factor behind CVS's activity in the M&A market, such as acquiring Oak Street for $10.6 bln last year. It also has been driving gains across other businesses, including Aetna. Therefore, Glenview may want to explore further opportunities within this segment but at a cost-effective pace, given the debt CVS has accrued due to M&A.
• The retail side of CVS has endured sliding front store volumes, reflecting stubborn inflationary headwinds. However, competitors such as Amazon (AMZN) also deal with inflation but are still possibly scooping up CVS shoppers, underpinning potential staleness at CVS and lagging technological advantages, including delivery. CVS has announced past store closures, similar to WBA, which is shuttering around 25% of its physical locations. Glenview could be wanting to accelerate these plans.

Activist investor pressure is not new to CVS. Starboard Value took a stake in the company in 2019 and held talks with executives. Then, last month, hedge fund Sachem Head Capital disclosed a new stake in CVS. There may be many challenges facing CVS. However, it commands an imposing presence, from retail to health care services, and sweeping changes may be the spark to finally light a fire under the stock.