CVS names Joyner CEO and withdraws profit forecast amid pressure from investors

By Sriparna Roy and Leroy Leo

(Reuters) – CVS Health on Friday replaced CEO Karen Lynch with David Joyner, a CVS veteran who retired before returning to the company last year after investors including activist Glenview Capital pressured the company , to improve its stagnant share price.

The company also withdrew its 2024 forecast and gave guidance for third-quarter earnings that were well below analysts’ estimates.

CVS shares fell 7% on Friday. They have fallen by nearly half from their 2022 highs, in part because the company made repeated cuts to its profit forecasts quarter after quarter, as costs in its large health insurance business and competition for its vast network of retail pharmacies increased related.

Its third division – Pharmacy Benefit Management – was profitable, but was at the center of the U.S. government’s efforts to reduce drug prices in the United States. The Federal Trade Commission sued the company and its competitors last month.

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

CVS said Friday it expects adjusted earnings of $1.05 to $1.10 per share for the quarter ended Sept. 30, compared with analysts’ estimates of $1.70, according to a statement data compiled by LSEG.

When CVS purchased health insurer Aetna in 2017, CVS was already rapidly outgrowing its retail pharmacy presence. The move was necessary to contain healthcare costs and as the company faces new healthcare competition from Amazon.com and others. In 2021, former Aetna executive Karen Lynch took over as CEO and the company’s shares soared as it benefited from its role in the recovery from the COVID-19 pandemic.

Wall Street analysts said the company failed to realize the benefits that could come from integrating various acquired companies.

“This move has been brewing for some time as CVS has struggled under Lynch’s leadership following the failed Aetna merger,” said Oppenheimer analyst Michael Wiederhorn.

Glenview went public with its concerns earlier this month and sources said a strategic review that could include splitting up the company’s core businesses was on the table.

In a statement to employees, Joyner, who sits on the board, said that to be successful the company must operate as “a CVS Health.”

Two sources familiar with the situation said CVS planned to remain as one company under Joyner.

Glenview said Friday that CVS needs to make changes to both leadership and the board.

“We believe that the company’s culture, governance and leadership should be strengthened by individuals who have both relevant industry experience and fresh perspectives, and that the company would be best served by a rapid replacement of the board,” it said an explanation.

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It said the company’s Medicare insurance division, which accounts for a third of its business, was “fairly repairable.”

Costs for insurers offering Medicare plans — available to people age 65 and older and people with disabilities — have skyrocketed in the last year due to continued high demand for health care services among older adults.

CVS’s medical coverage ratio, the percentage of premiums spent on medical care, was 95.2% in the third quarter, well above estimates of 90.95%. The industry generally aims for a medical benefit rate of around 80%.

Lynch resigned from her position in consultation with CVS Health’s board of directors, the company said. Joyner, who is president of the company’s pharmacy benefit manager CVS Caremark, will take over as president and CEO effective Friday.

(Reporting by Leroy Leo and Sriparna Roy in Bengaluru; Writing by Caroline Humer; Editing by Maju Samuel, Devika Syamnath and Nick Zieminski)