Jim Carchidi
Good morning, readers.
President Biden’s State of the Union address was peppered with important moments for the U.S. business landscape — and a number of the themes he highlighted are trends we’ve been following for months. That includes industrial investments spurred by federal programs like the Chips act, the waves made by a proposed rule change banning noncompete clauses and the rising tide of unionization sweeping across sectors.
CVS buys further into primary-care sector
Oak Street Health CEO Mike Pykosz
Oak Street Health photo
In another health care sector-consolidation move, Providence, Rhode Island-based CVS Health Corp. (NYSE: CVS) is furthering its advancement into the primary care business with a $10.6 billion deal to acquire Chicago-based Oak Street Health Inc., report Ben Miller and Mary Serreze of Chicago Business Journal and Providence Business First, respectively.
Oak Street focuses on providing primary care to adults on Medicare. The companies said the deal would reduce care costs and improve outcomes. Oak Street will continue to grow aggressively under its new owner, CVS financial officer Shawn Guertin told investors Wednesday.
At the current rate of growth we would expect to have 300 clinics by the end of 2026,” Guertin said on a fourth-quarter earnings call. He said the clinics are profitable, scalable, and collectively promise to deliver $2 billion to shareholders in adjusted earnings by that time.
The deal comes as a number of corporate giants look to buy footholds in the primary and urgent care businesses, including a previous deal by CVS to acquire Signify Health for $8 billion. A unit of Walgreens Boots Alliance Inc. (Nasdaq: WBA) has reached a deal to acquire Summit Health–CityMD for $8.9 billion, and even Amazon.com Inc. (Nasdaq: AMZN) has reached its own $3.9 billion deal to acquire primary care company One Medical.
Why 2023 is a critical year for drugmakers
Neil Kumar, CEO of BridgeBio
Todd Johnson | San Francisco Business Times
This is shaping up to be a critical year in the biotech startup space as investors look to deploy tens of billions of dollars in cash raised in 2022, reports Ron Leuty of the San Francisco Business Times.
The money comes as some companies in the space are close to running out of gas. But long to-market times for new drugs means companies have to appeal to investors throughout the lifecycle of a new product.
“A substantial number of companies need to tap financial markets this year,” said Neil Kumar, founder and CEO of Palo Alto, California-based BridgeBio Pharma Inc. “That puts the focus on this year and ‘how do I get people to keep their eyes on this.'”
The quest for cash will likely lead to a further winnowing of life-sciences companies, said Daphne Koller, the founder and CEO of Insitro Inc., a San Francisco drug development company with more than $500 million in the bank at the end of last year that is coupling artificial intelligence with biology. There may be some good science lost in the process of companies not be able to raise more money, she said.
“Hopefully, it will shake out soon,” Koller said. “There’s a lot of pain that’s happening right now.”
Senior living co. plots $4B national expansion
We’ve covered the effects of the aging population on the talent market, as the smaller Generation Z heads toward graduation and the working world. But there’s another side to the coin: the larger Baby Boomer generation is getting older, building demand for products and services meant for a senior population.
That’s growing demand that Erickson Senior Living is looking to confront with a $4 billion expansion plan over the next five years, reports Melody Simmons of the Baltimore Business Journal. The growth program will establish new units across the country to serve the 10,000 Baby Boomers hitting 65 years old each day.
“This is a market poised for explosive growth,” said Tom Neubauer, executive vice president of sales and marketing at Erickson.
Banks balk at commercial real estate loans
It’s not just a lack of demand weighing on the commercial real estate sector — banks are also hesitant to finance deals in the space.
That’s the case in South Florida, where commercial real estate sales in the fourth quarter plunged 55% to $5.2 billion compared to the same period a year prior, reports Brian Bandell of the South Florida Business Journal.
“We started feeling it in late August and by Sept. 15 it was pencils down,” said Paul Tanner, founding partner of Fort Lauderdale, Florida-based Las Olas Capital, which invests in commercial real estate. “The lending institutions wanted to see how interest rates would play out, how the recession would play out and no one was willing to be bold.”
Lenders started asking for more equity in deals, often making them unfeasible, Tanner said.
On the building side, rising interest rates compound with high construction costs, and many developers are now slow-playing their projects rather than moving aggressively to steps that require a loan, Tanner said.
Expediency still key in hiring market
The hiring market may be loosening up in some sectors like technology, but most companies still need to play offense if they want to bring skilled professionals onboard, reports Andy Medici of The Business Journals.
Most companies are still planning to hire in 2023 — about 58%, which is up from 46% six months ago — according to a survey by talent solutions and business consulting firm Robert Half. But about 90% of hiring managers said it was still tough to find professionals for skilled roles, and employers pegged the time it takes to hire for an open position at 11 weeks, up from seven in 2021.
Employers said they conduct about four interviews with a candidate before extending a job offer — but in that time they could lose promising candidates.
There are also signs that workers who had previously left the job market entirely are back in it — the percentage of working-age adults who are actively employed rose to 62.4% in January, tied for the highest point since the pandemic began. Meanwhile the U.S. clocked the lowest unemployment rate since 1969 at about 3.4%, and there are nearly two open jobs for every unemployed worker.
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NFL team owners look to sell riverside estate
River House, the name of Dan and Tanya Snyder’s River Road estate, is on the market for $49 million.
Sean Shanahan
Washington Commanders co-owners and CEOs Dan and Tanya Snyder have been quietly looking for a buyer for their Potomac, Maryland, estate for years, but the 15-acre property has now hit listing sites for $49 million.
The listing comes as the Snyders weigh offers to sell their NFL franchise, though the team has yet to publicly confirm whether a full sale, or simply bringing on additional investors, is the goal of a process to “consider potential transactions” that started in November.
The property includes a two-story reception hall and massive limestone fireplace, a gym, a spa lounge and a library.
Other top-of-the-market listings:
- A castle-like lake house in Walworth County, Wisconsin, is on the market for $1.99 million. The house was built in 1996 and features a round tower, stained glass windows and vaulted ceilings. Set on almost an acre, the property has sandy beach frontage on Pleasant Lake.
- Mauricio Umansky, the star of Netflix’s “Buying Beverly Hills” and CEO of The Agency, is headed to Scottsdale, Arizona, to kick off the listing of a $12.99 million mansion. His company’s Scottsdale arm is listing the property, which features a gym, 10-person movie theater, a negative-edge pool and spa.
- A $4 million home has hit the market in Sewickley Heights, Pennsylvania. The property, designed by architect Benno Jenssen, includes large windows, French doors and marble fireplaces throughout.
Also in the news
Disney CEO Bob Iger
Jim Carchidi
- The Walt Disney Co. (NYSE: DIS) plans to lay off 7,000 workers amid an effort to reduce $5.5 billion in costs and a restructuring of its business into three main divisions: Disney Entertainment, ESPN, and Disney Parks, Experiences and Products.
- Atlanta-based Graphic Packaging International Inc. is planning to invest $1 billion in Waco, Texas, to build a 640,000-square-foot paper mill. The investment will bring approximately 230 jobs to the site.
- Papa John’s International Inc. (Nasdaq: PZZA) is planning to sell its corporate campus in Louisville. The site used to be its headquarters, before it moved its primary base to Atlanta shortly after it named Rob Lynch its CEO.
Ohio could get extreme environment training center
John Vickers is founder and CEO of Blue Abyss Diving Ltd. in Cornwall, England.
Blue Abyss
Cornwall, England-based Blue Abyss Diving Ltd. wants to prepare its trainees for the most extreme environments in — or not in — the world, and it’s considering doing so near Cleveland, Ohio, reports Mary Vanac of Cleveland Inno.
The $200 million extreme-environment research, testing and training center would include a 164-foot-deep pool, microgravity suite, astronaut training center, and hotel, saidJohn Vickers, founder and CEO of the Cornwall, England-based startup.
The Blue Abyss facility could be used by astronauts or researchers to prepare them for space or ocean exploration, according to the company’s website. The center is also expected to include a mock section of the International Space Station for commercial astronaut training.