CVS Health CEO Karen Lynch steps down, the company’s stock has fallen 19% this year, and the healthcare giant struggling in some aspects.
Shares fell again on Friday after CVS Health also warned that its third-quarter results were disappointing and said investors should not rely on guidance for the quarter provided in August. .
Lynch will be replaced by veteran CVS Health executive David Joyner, who will try to navigate the company through rising costs in its health insurance business, weak drugstore sales and mounting pressure from investors. All major pharmacy chains is navigating a dramatically changed landscape in the face of competition online and elsewhere.
Michael Cherney, an analyst at Leerink Partners, said the leadership change was unexpected but he understood the rationale behind it “following yet another weak quarter.”
“Given the weak performance and stock price, it is difficult to say that the change at the top is unwarranted,” he said in a research note.
Lynch’s departure leaves the S&P 500 index with 45 female CEOs, or about 9% of all CEOs, according to executive data firm Equilar.
CVS Health is one of the nation’s largest drugstore chains and also operates a large pharmacy benefit management business that provides prescription drug coverage for employers, insurance companies, and other large customers. It also covers approximately 27 million people through its Aetna insurance division.
The company has revised its earnings forecast downward. 3rd time this year Lynch announced in August that he would take over leadership of the insurance division, which was hit by a rise in claims from Medicare Advantage coverage.
Her predecessor, former Humana insurance executive Brian Kane, left the company after about a year on the job.
Barclays analyst Andrew Mok said on Friday there was a leadership gap in the struggling insurance sector that needed to be addressed in the short term.
CVS Health said Friday that the sector continues to struggle with rising medical costs.
Glenview Capital Management said in a statement earlier this month that the company “has been operating well below its potential and has had a poor investment and actuarial approach in recent years.”
The hedge fund that owns CVS Health stock said it is offering “recommendations to strengthen CVS Health’s governance, culture, efficiency, sustainability, and growth.”
Rising claims from the company’s Medicare Advantage coverage have hurt CVS Health for much of this year, contributing to repeated outlook cuts. Medicare Advantage plans are the private version of the federal government’s coverage program primarily for people age 65 and older.
CVS Health also said in August that it was being hurt by declining quality ratings for those plans and pressure from Medicaid coverage in several states it manages.
Rhode Island’s Woonsocket announced Friday that it expects third-quarter adjusted earnings to fall between $1.05 and $1.10 per share. Analysts surveyed by FactSet expected earnings of $1.69 per share.
CVS Health is scheduled to report third-quarter results on Nov. 6, the day after Election Day.
Mr. Joyner, who will also join the company’s board of directors, most recently served as executive vice president and president of pharmacy benefit management (PBM) at CVS Health. The company said he has 37 years of experience in medical and pharmacy benefits management.
CVS Health also announced Friday that Chairman Roger Farrar will become executive chairman. Farrar said in a statement that the board believes “the time is right to make change” and has confidence in Joyner’s leadership.
Lynch took over as CEO in early 2021, replacing the company’s longtime leader Larry Merlo. She joined CVS Health when it acquired the Aetna division several years ago.
Her tenure began with the company’s drugstores riding a wave of revenue from coronavirus vaccines. She then led an aggressive push into care delivery.
“We’re closer to the consumer than anyone else,” Lynch told analysts in 2021, adding that by providing more care, the company could impact the overall cost of care. He said he could.
CVS Health acquired home health care provider Signify Health for $8 billion and earlier last year spent another $10.6 billion on Oak Street Health, which operates clinics specializing in treating Medicare Advantage patients. .
CVS Health stock fell nearly 8%, or $5.01, to $58.65 in midday trading Friday, amid mixed broader indexes.
