Cigna Q3 Earnings Report

By Sriparna Roy

(Reuters) – On Thursday, Cigna projected 2025 profit growth of at least 10% following strong quarterly results that exceeded Wall Street expectations. This growth was fueled by high demand for specialty drugs and an increase in clients for its pharmacy benefit management unit.

Shares of the U.S. health insurer rose nearly 3% after this report.

The company noted it benefitted from a greater adoption of biosimilars, specifically less expensive versions of AbbVie’s (NYSE:ABBV) popular arthritis drug, Humira, during the third quarter. Cigna began distributing Humira biosimilars at no out-of-pocket cost to patients through its specialty pharmacy, Accredo, this June. In this quarter, about one-third of eligible Humira prescriptions shifted to biosimilars. Cigna also plans to offer an interchangeable biosimilar to Johnson & Johnson’s (NYSE:JNJ) popular psoriasis drug, Stelara, in 2025.

Cigna's Evernorth healthcare services unit, which encompasses its pharmacy benefit management business, saw a 36% increase in revenue, reaching $52.64 billion. Pharmacy Benefit Managers (PBMs) facilitate negotiations between drug manufacturers and employers or health plan clients.

Analyst Lisa Gill from J.P. Morgan remarked that this was a solid quarter for Cigna, setting the company up well for the fourth quarter and 2025.

Challenges in Medicare Advantage

Cigna has a smaller presence compared to competitors in the Medicare Advantage market, which has been facing pressures from rising medical costs. The company is divesting its Medicare Advantage business, which serves older Americans, to Health Care Service Corp.

There have been recent media speculations about Cigna reviving talks to acquire Humana (NYSE:HUM) after abandoning its pursuit late last year. Cigna's CEO, David Cordani, characterized the Medicare Advantage market as 'highly disrupted' and emphasized the company's focus on share buybacks.

Analyst Scott Fidel from Stephens believes that the chance of Cigna pursuing a significant acquisition of Humana is low. Humana shares fell nearly 2% in early trading.

Cigna anticipates continued elevated cost trends above historical levels for 2025. For 2024, it maintained its forecast for the medical cost ratio—what percentage of premiums is spent on medical care—between 81.7% and 82.5%, leaning towards the higher end due to the rising use of costly specialty drugs.

Cigna also keeps its adjusted earnings forecast at a minimum of $28.40 per share for the year.

Financial Results

The company's quarterly net income dropped by 47.5% to $739 million, or $2.63 per share, which includes a $1 billion after-tax investment loss associated with its minority stake in primary care provider VillageMD. Total revenue for the third quarter was $63.7 billion, surpassing analysts' estimates of $59.4 billion according to LSEG data. The adjusted quarterly profit stood at $7.51 per share, exceeding Wall Street expectations by 31 cents.