Headline: CVS Appoints New CEO Amid Aetna's Cost Challenges
David Joyner became the new CEO of CVS Health Corp (NYSE:CVS) last Friday following Karen Lynch's departure. Wall Street analysts and some investors have expressed concerns over Joyner's ability to address the rising healthcare costs impacting the Aetna health insurance business. Joyner, who has been responsible for CVS's Caremark pharmacy benefit management since 2023, was appointed by the board last Wednesday.
The leadership change coincided with CVS withdrawing its 2024 earnings forecast and announcing that third-quarter profits would be well below analysts' expectations, resulting in a 5% drop in shares on Friday. CVS is facing pressure from investors, including Glenview Capital, to boost its stock price, which has fallen 24% over the past year, contrasting with record highs in the broader market.
Analysts, including Andrew Mok from Barclays, anticipated the leadership change due to the company’s recent missteps. However, they have expressed concerns about Joyner's lack of experience in health insurance and as a public company CEO, calling attention to an urgent leadership vacancy at Aetna. Other analysts and investors share these views, focusing particularly on Aetna’s struggle to control costs in its Medicare Advantage plans for seniors.
Board Chairman Roger Farah highlighted the board's unanimous decision and thorough succession planning process during an interview with Joyner. Joyner expressed confidence in tackling Aetna’s issues and mentioned his intention to form a new management team, including leadership for Aetna, which has been temporarily overseen by Lynch after Brian Kane's departure two months ago.
Joyner's initiatives include a new drug coverage model for health plan customers and a strategy for alternatives to biological drugs. Despite these plans, investors like James Harlow from Novare Capital Management, who hold CVS shares, remain unconvinced of the impact of Joyner’s leadership on Aetna’s cost issues.
Some analysts remain optimistic about Joyner’s potential impact, recalling his successful transformation of Caremark’s business in the early 2000s. Lisa Gill from J.P. Morgan highlighted Joyner’s direct management style and straightforwardness as assets.
In response to its strategic challenges, CVS announced on Friday the completion of a strategic review, the sale of non-core assets, and the closure of 271 retail pharmacies. Despite discussions around separating its pharmacy and insurance operations, Farah confirmed the decision to preserve the company's current structure and focus on better execution.