Can the emergency change of command of the CVS.US (CVS.US) solve the “safety problem”? Wall Street sees it this way

Following Karen Lynch's rapid departure last Friday, David Joyner, the new CEO of CVS.US, took over as CEO. Wall Street analysts and some investors are questioning whether Joyner has the right experience to reverse Aetna's health insurance business at a time when the company is struggling with high medical costs.

Joyner, who has led the company's Caremark pharmacy benefits administration business since 2023, was appointed to the position by the board last Wednesday and took over last Friday. In addition to Aetna and PBM businesses, Sylvis Health also has a large retail pharmacy chain of the same name; each division accounts for about one-third of the company.

Zhitong Finance previously reported that while announcing senior personnel changes, Seavis Health also announced that earnings per share after initial adjustments for the third quarter were 1.05 to 1.10 US dollars, which fell short of market expectations of 1.7 US dollars, and cancelled the 2024 profit guidelines, and 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 guidelines. The news drove the company's stock price to close 5% last Friday.

The company is facing pressure from shareholders, including activist investor Glenview Capital, to raise its share price. When the overall market hit a record high last year, Sylvis Health shares fell 24%, almost half of their 2022 high.

Wall Street Perspectives

Andrew Mok, senior analyst at Barclays, said, “The change in leadership was largely unexpected given recent mistakes.” But he pointed out that Joyner's background had no experience with health insurance or as a CEO of a listed company, and that “Aetna's leadership gap may need to be addressed in the short term.”

Four other analysts and investors also questioned Joyner's ability to reverse Aetna's situation. Aetna has been trying to control the cost of medical services, which affects its health insurance for people aged 65 and over. Its problems are similar to those of competitors in the same industry, but more obvious.

Roger Farah, executive chairman of Seavis Health, said in a joint interview with Joyner that the board was in agreement on selecting the new CEO and called the succession plan “very thorough.” He added, “We've been thinking a lot about it and having a lot of discussions.”

Joyner said in an interview that he has the experience needed to take on this role and that he has begun to address the challenges faced by Aetna during his previous tenure as an executive at Aetna. He plans to hire his own management team — to include managing Aetna, which has been overseen by Lynch since former leader Brian Kane left office two months ago.

Joyner notes that his business plan includes creating a novel drug coverage for health plan customers and a new strategy to provide nearly expensive biopharmaceutical replicas.

Health insurers usually aim to pay around 80% of the customer's medical service premiums they charge. Seavis Health said on Friday that the premium rate for medical services has risen to 95%.

This is a concern for investors such as James Harlow, senior vice president of Novare Capital Management, which holds shares in Sylvis Health. “I just didn't connect Joyner as CEO with how to solve these problems,” he said.

Baird analyst Michael Ha also said that the appointment of Joyner was mainly in response to investors' desire to change the CEO.

Not all analysts are skeptical about the move, though.

J.P. Morgan analyst Lisa Gill said Joyner is famous for reversing Caremark's business in the early 21st century. “Joyner's direct management style and candor will be very valuable,” Gill said.

Seavis Health said on Friday that it has completed a strategic assessment, will sell non-core assets, and close 271 retail pharmacies. The media previously reported that the company is considering spin-off the pharmaceutical and insurance businesses. In an interview, Farah talked about the possibility of a spin-off. He said, “There are some questions about whether these departments or parts can stick together. I think our current conclusion is that they are coming together and we just need to do better.”