Cigna CEO quells humana acquisition speculation

Diving overview:

Cigna CEO David Cordani poured cold water on speculation that Cigna is interested in acquiring rival Humana during a conference call with investors Thursday. Despite reports earlier this fall that the two payers had resumed deal talks, Cordani said Cigna plans to use the excess cash to buy back its own stock, Cigna said on Cigna's third-quarter results. I said this when we talked. Cigna easily beat Wall Street expectations with revenue of $63.7 billion in the quarter, up 30% from a year earlier, as strong demand for specialty drugs fueled growth in the company's medical services division. However, Cigna's profit fell to $739 million from $1.4 billion a year earlier due to a $1 billion investment loss associated with the decline in the value of primary care chain VillageMD.

Dive Insight:

Cigna continues to avoid significant pressure that has hit its health insurance peers this year. Most of the Connecticut-based payer's business is with employer customers, which has shielded Cigna from the worst of the Medicare Advantage disruption.

Cigna, which is on the verge of being completely removed from Medicare coverage, has little interest in acquiring Humana and getting back into the fray, despite Bloomberg reporting in October that the two companies had resumed talks about a potential deal. Apparently not.

“We do not comment on rumors, but we will be clear about the actions we will pursue,” Cordani said. “We continue to use excess free cash flow to buy back our own shares, and we plan to continue actively buying back our own shares.”

Humana stock falls 4% Before commercial release Trading began following the comments, but the company's stock recovered slightly after the market opened.

Meanwhile, Cigna's medical services division evernorth That includes Express Scripts, a leading pharmacy benefit manager that continues to steadily grow its revenue. evernorth Cordani said he “highlighted” Cigna's performance in the quarter.

Evernorth's results for the quarter were boosted by Express Scripts, despite growing criticism of drug intermediaries by antitrust regulators. On Thursday's call, Mr. Cordani criticized recent efforts by the Federal Trade Commission to crack down on PBMs, sticking to a pledge he made earlier this year to more vigorously protect lucrative businesses.

Cordani said he “disagrees with the baseless claims” presented by the FTC and argued that PBMs improve affordability and competition in the drug supply chain.

Express Scripts grows adjusted revenue 50% year-over-year thanks to healthcare payer transition Mr. Centene Favorable prescription drug contracts boosted PBM performance in 2024.

However, PBM margins were sluggish, with Express Scripts reporting a 9% increase in adjusted operating income. The shallow margin trajectory is surprising when you consider the cost of implementing a large-scale system. Centene Contracting should slow, according to Jefferies analyst David Windley.

Cigna “may have just barely lived up to low expectations,” Windley wrote in a note Thursday.

Evernorth also includes specialty pharmacies AkredoMedical Benefits Manager Evicor and Cigna's other health services product lines.

Evernorth's Professional and Nursing Services business increased adjusted revenue and adjusted operating income by 23% year-over-year, significantly exceeding historical performance and Cigna's long-term guidance for the business.

“We were expecting a strong contribution in the quarter, and this performance exceeded our expectations,” Chief Financial Officer Brian Evancho said on a conference call.

Management attributes this growth to increased adoption of biosimilars as well as strong demand for specialty medicines, particularly for inflammatory, oncological and neurological diseases.

Evernorth continued to see the adoption of interchangeable products. biosimilar The immune disease treatment drug “Humira” is now eligible. Akredo In June, patient copays will be $0. Cordani said one-third of eligible Acredo patients are currently taking counterfeit drugs.

Evernorth also biosimilar Immunosuppressant Stelara will also be available at no out-of-pocket cost in 2025.

“I can imagine doing much more using this handbook and approach. biosimilar Looking ahead to the next few years.” Eric Palmer, President and CEO Evernorth said by phone Thursday.

Evernorth also looks forward to the continued adoption of GLP-1, a drug traditionally used for diabetes that has shown efficacy in a variety of use cases, including weight loss.

In March, Cigna announced a GLP-1 cost-sharing agreement that protects health plan and employer customers from rising drug costs and covers health status management programs. evernorth You can benefit from continued demand.

Palmer said the program, called EncircleRx, has already gained nearly 8 million lives. This is a significant increase from EncircleRx's 2 million registered users as of August.

But the demand for specialty drugs that boosted Evernorth's results put pressure on Cigna's insurance division, which provides health insurance to 19 million people.

Cigna Healthcare's adjusted revenue increased 3% year over year, but adjusted operating profit decreased 4% due to higher medical expenses.

“Overall, this was a pretty solid quarter, and the company should be reasonably positioned for the fourth quarter and into 2025,'' JPMorgan analyst Lisa Gill said. mentioned in the memo.

Cigna also continues to contend with the fallout from its $2.5 billion investment in VillageMD two years ago.

The insurer is investing in VillageMD, a network of health care chains majority owned by Walgreens Co., with the aim of creating value-based care arrangements that connect Evernorth with its physicians.

But Cigna found itself an unwitting victim of VillageMD's declining value, leading Walgreens to consider offloading the provider entirely.

Cigna's $1 billion write-off this quarter builds on an earlier $1.8 billion write-off in May due to Village MD's lackluster growth and decisions to close a number of underperforming clinics. .

“In hindsight, the timing (of the investment) was a little disappointing considering the turmoil in the world. market … The timing turned out to be bad,” Cordani said.

In response to these results, Cigna has restated its guidance for 2024.