CVS Health Corp. named Karen Lynch as its next chief executive officer, putting a seasoned insurance executive in place to succeed longtime leader Larry Merlo. The shares jumped.
The change reflects how CVS has evolved under Merlo’s direction from a pharmacy chain into a health conglomerate that sells insurance coverage, administers drug-benefit plans and offers care, including Covid-19 testing.
Lynch, 57, joined CVS in 2018 when it bought Aetna, where she was seen as a likely successor to its CEO, Mark Bertolini.
Lynch will be one of the highest-profile female executives in business, leading a company with a market value of more than $80 billion. On Friday, CVS boosted its full-year forecast as it prepared to play a role in vaccinating people for Covid-19.
“My focus is on building on the strong foundation and positive momentum we have across the company to continue to address the human aspects of health,” Lynch said in a call with analysts Friday. Her appointment will be effective Feb. 1, and she will join the board upon assuming her new role, CVS said in a statement.
CVS gained 5.3% to $64.64 at 10:02 a.m. in New York trading Friday. Through the close on Thursday, the stock had declined 17% since the year began.
Lynch’s background matches the company’s ambitions, said Jefferies analyst Brian Tanquilut. “That’s where they want to go as a company, and that’s where her value will be,” he said.
Merlo, 64, became CEO in 2011 and molded CVS into a health-industry bellwether. In his nine years at the helm, CVS has expanded its number of stores to 9,900, along the way acquiring Aetna in 2018 for $68 billion.
He will remain on the board until CVS’s next annual meeting in May, and ill serve as a strategic adviser to assist with the transition until he retires on May 31, the company said.
“If we told you a year ago that to-date, 6 million people would have gone to their local CVS pharmacy for a diagnostic test related to some virus, it would probably get an eyeball roll,” Merlo said during the conference call. “The reality is, that’s happened.”
Like many health-care companies, CVS has been challenged by the coronavirus pandemic. The initial wave of infections that spread across the U.S. in the spring disrupted both its retail and its pharmacy business, as Americans avoided shopping and visits to the doctor.