CEO removed, initial Q3 results fell short of expectations, and CVS.US (CVS.US) plummeted by more than 11% before the market

The Zhitong Finance App learned that the largest pharmaceutical retail company in the US (CVS.US) announced management changes on Friday and announced preliminary results for the third quarter that fell short of expectations.

According to the statement, the company appointed David Joyner as its new CEO, ending the tumultuous tenure of current CEO Karen Lynch at the pharmaceutical retail giant.

Joyner, 60, a long-time executive at Sylvis Health officially took over on Thursday. Previously, the company failed to meet profit targets several times, triggering shareholders' dissatisfaction, and entered the public eye in recent weeks.

Furthermore, according to preliminary performance data released by Seavis Health, the initial adjusted earnings per share for the third quarter were 1.05 to 1.10 US dollars, which fell short of market expectations of 1.7 US dollars. The 2024 profit guidance was cancelled, and it warned that “given the continued rise in medical cost pressure in its healthcare and welfare department,” investors should not rely on the company's previous guidance.

The company notes that the medical benefits business expects a medical loss rate of 95.2% in the third quarter, far higher than Wall Street's expectations. The data also reflects $1.1 billion in underpremium reserve expenses to cover excess medical expenses.

The company will announce third-quarter results on November 6, local time.

After the news was announced, before the US stock market on Friday, the stock price of Seavis Health fell by more than 11%. As of Thursday, the stock had a cumulative decline of 20% this year so far, compared to a 22% increase in the S&P 500 index.

According to reports, Seavis Health has been reviewing its strategic options for several months, including a possible spin-off, as rising healthcare costs from its insurance company Aetna put pressure on the healthcare group.

Hedge fund Glenview Capital Management has also approached the company to support its business.

Since Lynch became CEO in February 2021, Seavis Health's stock price has dropped by about 10%, as it has been difficult for her to create a one-stop health service store amid government crackdowns on spending, increased medical expenses for insurance departments, and increased pressure on retail stores after the pandemic.

On Friday, the company said the decision to remove Lynch was made by the board of directors. “The Board believes now is the right time to make a change,” said Roger Farah, who was appointed as Executive Chairman of the Board as part of this move. “David and his deep understanding of our integrated business can help us more directly address the challenges facing our industry.”

Joyner began his career at Aetna as an employee benefits representative, and most recently served as Executive Vice President of Seavis Health and president of CVS Caremark. He led the pharmacy services business in partnership with employers, health plans, and government entities.