Walgreen promotes insider Wasson as new CEO

NEW YORK - Drugstore operator Walgreen Co. opted for continuity over change in picking its new chief executive, as it promoted veteran Gregory Wasson to the post.

Wasson is a 29-year Walgreen veteran who served as chief operating officer since 2007, and before that led the Walgreen Health Services unit for five years. His appointment was unveiled late Sunday.

Wasson replaces Jeffrey Rein, who led the company for two years before resigning in October. Rein's departure followed Walgreen's unsuccessful attempt to buy California-based Longs Drugs Stores. Longs sold itself to CVS.

Alan G. McNally, 63, who has served as chairman and acting CEO since October 2008, will remain chairman of Walgreen's board.

"Greg is a strong, natural leader and strategist with a clear view of where he wants to take this company to deliver improved shareholder returns," said McNally in a statement. "Since he became president nearly two years ago, his personal leadership has been instrumental in assembling a wonderfully talented leadership team."

Wasson joined Walgreens as a pharmacy intern in 1980 and advanced steadily through increasingly responsible executive positions over the course of his 29-year career with the company.

While conceding Wasson's experience with the company, analysts said Deerfield, Ill.-based Walgreen might have been better off choosing a CEO who could offer a new perspective on the changing drugstore industry.

A CEO from outside the industry would have brought "fresh and unique ideas," said Pali Capital analyst Robert Summers. Deborah Weinswig of Citi Investment Research said the choice might be a disappointment to investors.

Summers said Wasson, as COO, presided over "the worst operating performance in Walgreen's history."

SunTrust Robinson Humphrey analyst David Magee said Walgreen has hired outsiders for other key positions, such as Chief Financial Officer Wade Miquelon, who previously worked for Tyson Foods.

"We understand that this decision will be cheered internally at both corporate and in the field," Magee wrote.

The Deerfield, Ill., company is in the midst of a transition of its own, as it is slowing down store openings and trying to cut billions in annual costs. Weinswig noted that those tasks alone will be a difficult starting point for Wasson. Summers adds that Walgreen needs a new strategy to deal with tightening consumer spending and smaller profit margins on generic drugs.

Drugstores depend heavily on generic drugs — low-cost, more profitable versions of branded drugs — for their profits, he said. But within a few years, generics of many of the current best-selling drugs will already be on the market, and Walgreen will have to look elsewhere for profit growth.

Summers said he is concerned the company will try to do that by ramping up store growth again.

As head of the health services business, Wasson oversaw buyouts of several specialty pharmaceutical companies, Walgreen said. Specialty pharmaceuticals, which are used to treat complex and chronic ailments, is considered one of the fastest-growing and most promising areas of the drug industry.

Shortly after Wasson became president of the entire company, the health services unit also bought a home care business.

According to the company, the Walgreens Health Initiatives pharmacy benefits management business covered 2.2 million lives in 2002, when Wasson took over Walgreen Health Services. It now covers about 9.2 million lives.

Walgreen, like rival CVS, has branched out into pharmacy benefits management and is operating hundreds of in-store clinics and job site health centers. Analysts generally believe CVS' combination with Caremark has been more successful than Walgreen Health Initiatives.

Less than two weeks ago, interim CEO Alan McNally has said the search to fill the CEO job might last until February or March.

Walgreen shares slipped 13 cents to end at $26.80.

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