CVS Health CEO Lynch is stepping down as the national chain struggles to find the right path

CVS Health CEO Karen Lynch has resigned as shares of the company and the healthcare giant have fallen 19% this year fights on several fronts.

The company's shares plunged again on Friday after CVS Health also warned of disappointing third-quarter earnings and said investors should not rely on forecasts for this quarter it provided in August.

Lynch will be replaced by veteran CVS Health executive David Joyner, who will try to steer the company through rising costs for its health insurance business, declining drugstore sales and growing investor pressure. All major pharmacy chains trying to navigate a drastically changed landscape and facing competition online and elsewhere.

Michael Cherny, an analyst at Leerink Partners, said the leadership change was unexpected, although he understood the reasons behind it “after another quarter of poor performance.”

“Given the operational and equity underperformance, it is difficult to say that a change at the top is undeserved,” he said in a research note.

With Lynch's departure, there are now 45 female CEOs in the S&P 500, or about 9% of all CEOs, according to executive data firm Equilar.

CVS Health operates one of the country's largest drugstore chains and a massive pharmacy benefit management company that provides prescription drug coverage for employers, insurers and other large customers. Additionally, the company covers nearly 27 million people through its Aetna insurance arm.

The company lowered its financial expectations for the third time this year in August, hurt by growing claims from its Medicare Advantage insurance, and Lynch said at the time that she would take over leadership of the insurance segment.

Her insurance predecessor, former Humana executive Brian Kane, left the company about a year after he arrived.

Barclays analyst Andrew Mok said on Friday that the struggling insurance division now has a leadership gap that the company will need to fill in the near future.

CVS Health said Friday that it is still struggling with higher medical costs in this segment.

The company has been “performing significantly below its potential and has fallen behind in its investment and actuarial approach in recent years,” Glenview Capital Management said in a statement released earlier this month.

The hedge fund, which owns a stake in CVS Health, said it was offering “proposals to improve CVS Health's governance, culture, efficiency, sustainability and growth.”

Rising claims from the company's Medicare Advantage plan have hurt CVS Health for much of this year and contributed to its repeated forecast cuts. Medicare Advantage plans are privately run versions of the federal government's insurance program, primarily for people age 65 and older.

CVS Health also said in August that the company was hurt by a decline in quality ratings for those plans and pressure from Medicaid insurance, which the company administers in several states.

The Woonsocket, Rhode Island, company said Friday that it expects third-quarter adjusted earnings to fall between $1.05 and $1.10 per share. Analysts polled by FactSet forecast earnings of $1.69 per share.

CVS Health will report third-quarter results on November 6, the day after Election Day.

Joyner, who will also join the company's board of directors, most recently served as executive vice president of CVS Health and president of its Pharmacy Benefit Management (PBM) division. The company said he has 37 years of experience in health care and pharmacy benefits administration.

CVS Health also announced Friday that Chairman Roger Farah will now serve as executive chairman. Farah said in a statement that the board believes it is “the right time for a change” and is confident in Joyner's leadership.

Lynch became CEO in early 2021, replacing the company's longtime leader Larry Merlo. She joined CVS Health when the company acquired its Aetna division several years ago.

Her tenure began as the company's drugstores benefited from a surge in COVID-19 vaccine sales. She then led an aggressive push into nursing care.

Lynch told analysts in 2021 that “we are closer to the consumer than anyone else” and that providing more care can help the company influence the overall cost of care.

CVS Health spent $8 billion to buy home health provider Signify Health and, early last year, another $10.6 billion for Oak Street Health, which operates clinics that specialize in treating Medicare Advantage patients.

CVS Health shares fell nearly 8%, or $5.01, to $58.65 in midday trading Friday, while broader indexes were mixed.