Shares of CVS dropped by 10% on Friday morning, pacing what would be the company’s worst loss in three years, after the company replaced its chief executive while cutting its earnings projections well below analyst expectations.
The retail pharmacy chain has suffered from higher medical costs and a drop in consumer spending.
CVS Health shares fell below $58 during premarket trading on Friday, on track for the pharmacy chain’s worst loss since a 12% dip on March 15, 2020.
The company said in a statement Friday that David Joyner, who previously served as executive vice president, replaced CEO Karen Lynch on Thursday after an unspecified “agreement” with the company’s board.
CVS also released its projections for the company’s upcoming third quarter, saying it expects adjusted earnings of between $1.05 and $1.10 per share—an estimate that fell below analyst estimates of at least $1.69 per share, according to FactSet.
The guidance also includes a $1.1 billion charge stemming from the company’s Medicare business, according to CVS, which noted it has experienced “medical cost trends” that were “in excess” of what was expected.
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CVS Health is one of three pharmacy benefit managers targeted in a lawsuit from the Federal Trade Commission, which has accused the companies of driving up the price of insulin. The three firms—which the FTC says manages about 80% of prescriptions in the U.S.—have created a “perverse” drug rebate system that has “artificially inflated” insulin’s price, the FTC claims. The FTC alleges the firms excluded lower-priced insulin in favor of higher-priced options when negotiating terms and conditions for access to prescription drugs. All three firms have denied the agency’s claims.
Lynch served as CVS Health’s chief executive since 2021, after previously overseeing the company’s pharmacy services business. The leadership change follows a call from Glenview Capital, one of CVS’ major shareholders, which reportedly proposed unspecified changes for the company’s business. Retail pharmacies have struggled in recent years as they lose revenue from prescription drugs and staffing shortages. Walgreens and Elevance Health have also warned of challenges in the retail pharmacy market, as pharmacies lose money on drugs like Ozempic and Mounjaro, two increasingly popular medications for treating diabetes and weight loss.