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.
It also withdrew its 2024 forecast and gave an outlook for third-quarter earnings far below analyst estimates.
CVS shares were down 7% at $58.64 on Friday.
They are down by nearly half from their 2022 highs, in part due to quarter after quarter of repeated profit forecast cuts related to rising costs in its large health care insurance business and competition for its vast network of retail pharmacies.
Its third business — pharmacy benefit management — has been profitable but a focal point for US government efforts to bring down drug prices.
The Federal Trade Commission sued it and its rivals last month.
“The board believes this is the right time to make a change, and we are confident that David is the right person to lead our company,” CVS chairman Roger Farah said in a statement.
CVS on Friday said it expected adjusted profit of $1.05 to $1.10 per share for the quarter ended Sept. 30 compared to analysts’ estimates of $1.70, according to data compiled by LSEG.
CVS was already growing rapidly beyond its retail pharmacy footprint when it bought health insurer Aetna in 2017, a move it said was needed to try to rein in health care costs and as it faced new health care competition from Amazon and others.
In 2021, former Aetna executive Lynch took over as CEO and the company’s shares soared as it benefited from its role in the COVID-19 pandemic recovery.
Wall Street analysts have said the company failed to find the benefits that could come from integration of different acquired businesses.
“This move was 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 earlier this month with its concerns, and sources said a strategic review that could include a split of the company’s core businesses was on the table.
In a statement to employees, Joyner, who is on the board of directors, said that in order to succeed, the company would need to operate as “one CVS Health.”
Two sources familiar with the situation said CVS planned to remain one company under Joyner.
Glenview said Friday that CVS needed to make changes to both leadership and the board.
“We believe the Company’s culture, governance and leadership should be strengthened by those with both appropriate industry experience as well as fresh perspectives and that the Company would be best served through prompt Board evolution,” it said in a statement.
It said the company’s Medicare insurance division, which accounts for one-third of its business, was “quite fixable.”
Costs for insurers providing Medicare plans — available for people age 65 and above and those with disabilities — have soared in the last year due to sustained high demand from older adults for health care services.
CVS’s third-quarter medical care ratio, the percentage of premiums spent on medical care, is significantly higher at 95.2% than estimates of 90.95%.
The industry generally targets a medical benefit ratio closer to 80%.
Lynch stepped down from her position in agreement with CVS Health’s board, the company said. Joyner, who is president of the company’s pharmacy benefit manager, CVS Caremark, takes over as president and CEO on Friday.