CVS Health Corp. named David Joyner as its new chief executive officer, ending a tumultuous tenure for Karen Lynch at the pharmacy giant.
Longtime executive Joyner, 60, took over Thursday, according to a Friday release. The move comes after the company repeatedly missed earnings targets, spurring activist interest and setting off unrest among shareholders that spilled into public view in recent weeks.
CVS said its third-quarter results are expected to miss Wall Street's expectations and that the company will pull its 2024 earnings guidance because of elevated medical costs. Joyner reached out to employees on Friday in a memo, pleading for help.
"It is no secret that our industry faces significant and dynamic challenges, and that CVS Health must make financial and operational improvements to drive elite execution and maintain our position as a leading health care company," he said, without laying out specific changes.
Shares in the company fell as much as 7.9% at the New York market open after losing 19% this year as of Thursday. Rival Walgreens Boots Alliance Inc.'s stock dropped 3.1%.
Latest Results
The company reported preliminary adjusted earnings of $1.05 to $1.10 a share in the third quarter. The health benefits business expected a medical-loss ratio of 95.2% in the third quarter, far worse than analysts anticipated.
The results also reflect a $1.1 billion charge for a premium deficiency reserve to cover excess medical costs. Executives plan to update investors during CVS's third-quarter earnings call in November.
The company had been reviewing its strategic options for months, including a potential breakup, Bloomberg News has reported, as rising medical costs in its Aetna insurance arm weighed on the health-care conglomerate. On Friday, the company said it was no longer considering a breakup.
The entrance of hedge fund Glenview Capital Management, which approached the company about bolstering the business, increased the pressure on Lynch, 62. The decision to replace the CEO is "one we respect and support," Glenview said in a statement.
The investor doesn't appear to be moving on from its push to improve outcomes at CVS. "We look forward to engaging with David Joyner in the near future to discuss opportunities to enhance the performance, culture and governance of this iconic institution to drive value for all stakeholders," Glenview said, adding that shareholders should continue to push for "immediate board refreshment."
Upheaval at CVS
CVS shares are down 10% since Lynch became CEO in February 2021. She struggled to create a one-stop shop for medical services amid a government crackdown on spending, increasing health expenses, and post-pandemic pressure on retail stores.
It still operates the largest US retail pharmacy chain, but competition from Amazon.com Inc. and Walmart Inc. has eroded drugstores' profits. Pharmacies have been shuttering locations and dealing with labor shortages, driving up patient wait times and frustrating customers.
Lynch responded by deepening CVS's reach into health-care services, purchasing Medicare clinic chain Oak Street Health and home-visits company Signify Health. Those deals aimed to augment Aetna's large Medicare Advantage insurance business with care delivery, mirroring the strategy of rival UnitedHealth Group Inc.
