Shares of WebMD (WBMD) plummeted 30% Tuesday morning after the health IT service provider terminated takeover talks, warned of a gloomy 2012 and disclosed the resignation of CEO Wayne Gattinella.
The New York-based company said Anthony Vuolo, who already serves as its chief financial officer and chief operating officer, will take over for Gattinella on an interim basis.
Wall Street punished WebMD for saying it has ended talks with potential acquirers and its sale exploration process without reaching a deal. The company said it had been in talks with “several” potential suitors, but declined to name them.
Joining a slew of other negative preannouncements on Tuesday, WebMD said it expects its 2011 revenue and earnings to come in between the low end and midpoint of its forecast. The company cited weaker-than-expected sales activity for advertising and sponsorship products due to a “challenging business environment” for pharmaceutical companies.
WebMD also said it anticipates 2012 revenue slumping as much as 2% to 8% from 2011, due to certain drug makers losing their patent exclusivity and a more competitive landscape. Net income is expected to be “significantly lower” than 2011.
Despite this lowered outlook, WebMD said it expects its expenses to rise 5% to 8% in 2012 as it continues to make new long-term investments.
“While we face near-term challenges, I am confident that there is significant growth opportunity ahead for WebMD," Martin Wygod, chairman of WebMD, said in a statement. "I believe that the pressures facing the pharmaceutical industry will ultimately prove to be the strong catalyst for a meaningful shift by them to digital marketing solutions.”
WebMD’s stock plunged 27.25% to $26.75 Tuesday morning and hit a new 52-week low of $25.01. Even before this selloff, the stock was off 30% over the past year.
WebMD said Vuolo will continue to serve as CFO as the company searches for a permanent CEO.
“With my support and that of the Management Committee, I am confident that Tony will lead a smooth transition as the Board conducts a search for a new CEO,” said Wygod.