Walgreens-Alphabet Join Forces To Control Healthcare Costs

Walgreens Boots Alliance, Inc. (NASDAQ:WBA) recently formed an alliance with Alphabet’s (NASDAQ:GOOG) life sciences and healthcare segment, Verily, to collaborate on multiple projects. This agreement is aimed at providing advanced healthcare outcomes to chronic conditions like diabetes at low cost of care. Financial terms of the deal have been kept under wraps.

Per the agreement, Walgreens is going to be the foremost choice as a retail pharmacy development and commercialization partner of Verily. With this, Verily’s products are going to get better accessibility after being deployed at Walgreens’ retail locations. According to Walgreens, this strategic tie-up is designed to combine Verily’s healthcare technology innovation with Walgreens’ trusted pharmacy services.

The partnership will work to find new ways for better availability of advanced healthcare technologies and solutions. This may include sensors and software to help prevent, manage, screen and diagnose disease.

At the beginning, both companies are going to initiate a medication adherence pilot project that will install devices and other approaches designed to improve adherence. Moreover, Walgreens with Onduo — Verily’s joint venture with Sanofi (PA:SASY) — will launch a virtual diabetes solution. This in turn, will cater to Walgreens’ employees and family members with Type 2 diabetes through the Walgreens employee health plan. Additionally, Onduo’s tools, coaching and remote access to specialty doctors could help patients effectively tackle their diabetes.

Huge Potential in Diabetes Management Space

Ageing population, unhealthy lifestyle, rising awareness of healthcare and its higher expenditure are likely to drive the acutely competitive diabetes market. Meanwhile, chronic diseases today are increasing at an alarming rate and so the expenses. Advanced chronic care is gradually getting exorbitant, making it quite unaffordable for the masses.

Per a report by Mordor Intelligence, the global market for diabetes care devices is projected to reach a value of $30.25 billion by 2021 at a CAGR of 5.93%. Considering this bullish market trend, we find Walgreens’ decision to team up with Verily to be perfectly strategic.

Share Price Performance

Over the past three months, Walgreens Boots has outperformed its industry. The stock has inched up 0.4% versus the industry's 5.8% decline.

Zacks Rank & Key Picks

Walgreens currently carries a Zacks Rank #3 (Hold). Two better-ranked stocks in the broader medical space are Surmodics, Inc. (NASDAQ:SRDX) and Veeva Systems (NYSE:VEEV) .

Surmodics’ long-term earnings growth rate is projected at 10%. The stock carries a Zacks Rank #2 (Buy) at present.

Veeva Systems’ long-term earnings growth rate is estimated at 19.5%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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