CVS Health Replaces CEO Karen Lynch with David Joyner

By Sriparna Roy and Leroy Leo
(Reuters) – CVS Health announced on Friday that it has replaced CEO Karen Lynch with David Joyner, a veteran of the company who retired and returned last year. This decision follows pressure from investors, including activist Glenview Capital, to improve the company's stagnant share price.

CVS also withdrew its 2024 forecast and provided a third-quarter earnings outlook that fell significantly below analyst expectations, causing its shares to drop 7% on Friday. The stock has decreased by nearly 50% since its 2022 highs, largely due to a series of profit forecast cuts stemming from rising costs in its healthcare insurance sector and stiff competition in retail pharmacies.

While its pharmacy benefit management business has been profitable, it is under scrutiny from the U.S. government due to ongoing efforts to reduce drug prices. Just last month, the Federal Trade Commission sued CVS and its competitors.

CVS Chairman Roger Farah stated that the board believes it is the right time for a leadership change and expressed confidence in Joyner's ability to lead the company. The company expects an adjusted profit of $1.05 to $1.10 per share for the quarter ending September 30, which is significantly lower than analyst estimates of $1.70.

CVS began expanding beyond just retail pharmacies with the acquisition of Aetna in 2017, underlining its goal to control healthcare costs while contending with new competition, including from Amazon. Following the acquisition, Lynch took office as CEO in 2021, and the company's shares surged as it played a pivotal role in COVID-19 recovery. However, analysts note that CVS has struggled to harness the benefits of integrating its acquired businesses, leading to recent leadership challenges.

Observers noted that the transition had been anticipated, given CVS's difficulties following Lynch's tenure, particularly after the Aetna merger. Glenview Capital recently expressed concerns and suggested a strategic review that could lead to splitting CVS's core businesses. Joyner stated that the company would aim to function as "one CVS Health."

Glenview emphasized that CVS should enhance its culture and leadership with individuals who possess both industry experience and fresh perspectives. They believe CVS’s Medicare insurance division, which constitutes about a third of its business, can be improved, especially as costs have surged over the past year due to increased demand for healthcare services from older people.

CVS's third-quarter medical care ratio is currently at 95.2%, surpassing estimates of 90.95%, while the industry typically targets around 80%. Lynch stepped down from her role with the board's agreement, handing over the reins to Joyner, who had previously served as president of CVS Caremark.