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

11-06-20 1020ET