CVS names new CEO after layoffs and poor stock performance

CNN
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America’s largest drugstore chain named a new CEO on Friday. Longtime CVS Health CEO David Joyner replaces Karen Lynch.

CVS also withdrew its 2024 profit forecast and discouraged investors from relying on full-year guidance it provided in August, citing higher health care cost pressures. Share prices have fallen nearly 20% this year and fell sharply after the announcement.

The restructuring comes after a particularly challenging year for the company, marked by falling stocks, sluggish growth and pressure from investors, among many other issues.

In August, rising costs at CVS’s Aetna insurance unit hurt profits and led to the downfall of then-president Brian Kane. In September, the Federal Trade Commission targeted major pharmaceutical companies, including CVS subsidiary Caremark, accusing them of driving up insulin prices.

“Given the execution deficiencies at CVS, particularly at health insurer Aetna, which Lynch previously led, the management change does not surprise us,” Julie Utterback, senior equity analyst at Morningstar, said in a note. “However, investors may have been hoping for talent from outside the organization.”

There are lower reimbursement rates for prescription drugs hit retail pharmacies including Walgreens and Rite-Aid, causing falling profits and forcing drugstores to close locations and cut jobs.

Earlier this month, CVS announced it would lay off 2,900 workers as part of a cost-cutting measure. The company closed 244 stores in four years and announced plans to close another 900 stores in 2021. Meanwhile, rival chain Walgreens is closing 1,200 stores as it faces competition from online pharmacies and larger retailers, another challenge for drugstores.

CVS has also been surrounded by talk of a possible separation of its retail pharmacy division from its insurance division after the company responded to pressure from activist investors in early October. However, since the company appeared to double the value of its integrated model in its announcement, analysts believe this is unlikely.

“We believe our integrated model is working. Our results need to show this more consistently,” a CVS Health spokesperson said in a statement to CNN.

Joyner, previously president of CVS Caremark, succeeds Lynch after he resigned in consultation with the company’s board of directors.

Lynch had been CEO since 2021 and led the company through the Covid-19 pandemic, overseeing the rollout of vaccinations in stores. Under her tenure, the company also acquired Signify Health, which provides home health services.

“The board believes this is the right time for change and we are confident that David is the right person to lead our company,” Executive Chairman Roger Farah said in a statement.

CVS is scheduled to report third-quarter results on November 6th.