CVS Names New CEO as it Posts Stronger Revenue--2nd Update
November 06 2020 - 10:35AM
Dow Jones News
By Matt Grossman
CVS Health Corp. on Friday named Karen Lynch, chief of the
company's Aetna insurance arm, as its next CEO, as the pharmacy
giant navigates the coronavirus pandemic and a shifting health-care
landscape.
Ms. Lynch's appointment, effective Feb. 1, makes CVS the largest
company by revenue to be run by a female CEO. The company reported
$256 billion in revenue last year.
An insurance industry veteran, Ms. Lynch presided over Aetna
following its acquisition by CVS in 2018. She replaces Larry Merlo,
a pharmacist by trade who spent a decade atop the company and
engineered the $69 billion Aetna deal.
She takes over as CVS reaps benefits of its Aetna acquisition,
which has fueled revenue gains and set the company apart from its
struggling rival Walgreens Boots Alliance Inc.
"We're on a mission to reshape health care as we know it today,"
Ms. Lynch said Friday on a call with analysts. "Never before has
our purpose been more critical."
The announcement came as CVS said sales rose 3.5% to $67.06
billion in the quarter ended Sept. 30 as more diagnostic testing
during the Covid-19 pandemic helped boost the company's retail
business.
CVS said it has doubled the number of locations where it offers
Covid-19 testing to more than 4,000, and has administered more than
six million tests for coronavirus to date.
CVS is a dramatically changed, much larger company from when Mr.
Merlo became CEO in 2011. The company's revenue and market
capitalization more than doubled, largely due to the Aetna deal,
while the company's store count grew by more than a third to nearly
10,000 U.S. locations.
Beyond that, CVS has worked to transform itself from primarily a
retail business into a health provider, both with the addition of
Aetna and strategic moves. Those moves include banning tobacco
sales and adding "Health" to the company's name and trying to turn
its drugstores into health hubs to offer a broader range of
services, many aimed at those with chronic illnesses.
The transition has been rocky at times. CVS has struggled with
slowing revenue from prescription drugs, which drives the bulk of
sales. Six months following the Aetna deal, CVS shares were down
more than 30% and Mr. Merlo was scrambling to convince investors
that the acquisition would ultimately bolster the company.
CVS became the biggest retail provider of Covid-19 tests and
worked to build a business selling tests to employers for their
workers. For a time this summer, the testing ramp-up led to major
delays in results that left many customers with result wait times
far longer than the company advertised.
Company executives say they are readying the company to become a
major provider of a coronavirus vaccine as drugmakers work to
develop and win approval for a drug.
For the latest quarter, CVS's profit was $1.22 billion, or 93
cents a share, down from $1.53 billion, or $1.17 a share, in the
same three-month period a year earlier.
Revenue in the segment that includes the retail drugstores
climbed 5.9% to $22.73 billion as higher prescription volumes,
general-merchandise sales and more diagnostic testing boosted the
business. Revenue for the segment that includes Aetna climbed by
8.8% amid membership growth in government products. Revenue
declined in the pharmacy-services segment.
The company offered a more optimistic outlook for the rest of
the year, reporting that it now expects a full-year adjusted profit
of $7.35 a share to $7.45 a share in 2020.
Ms. Lynch, the incoming CEO, has worked at Aetna since 2012.
Before joining Aetna, she was president of managed-care provider
Magellan Health Inc. Mr. Merlo, on the investor call, described her
as a "big thinker" unafraid of change.
Mr. Merlo, will serve as a strategic adviser until his
retirement in May.
Write to Matt Grossman at matt.grossman@wsj.com
(END) Dow Jones Newswires
November 06, 2020 10:20 ET (15:20 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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