By Sriparna Roy
(Reuters) -Cigna projected 2025 profit growth of at least 10% on Thursday, after posting quarterly results that beat Wall Street expectations, driven by strong demand for its specialty drugs and new clients for its pharmacy benefit management unit.
Shares of the U.S. health insurer were up nearly 3%.
The company said it benefited from increased adoption of biosimilars, or less expensive close versions, of AbbVie (NYSE:ABBV)'s blockbuster arthritis drug Humira in the third quarter.
The company in June started distributing Humira biosimilars at no out-of-pocket cost to patients using its specialty pharmacy, Accredo.
In the quarter, Cigna (NYSE:CI) said it saw about one-third of eligible Humira prescriptions transition to biosimilars.
It also expects to begin offering an interchangeable biosimilar to Johnson & Johnson (NYSE:JNJ)'s big-selling psoriasis drug Stelara in 2025.
Revenue for the Evernorth healthcare services unit, which includes Cigna's pharmacy benefit management business, rose 36% to $52.64 billion. PBMs negotiate drug prices with manufacturers on behalf or employers and health plan clients.
"All in, we see this as a fairly solid quarter that should leave the company with a reasonable set-up into the fourth quarter and 2025," J.P.Morgan analyst Lisa Gill said.
'HIGHLY DISRUPTED' MEDICARE ADVANTAGE MARKET
Cigna has a smaller presence than rivals in the Medicare Advantage market, where insurers have been experiencing pressures due to increased medical costs, and relies more on employer-sponsored healthcare management.
The company is in the process of selling its Medicare Advantage business, which manages plans to cover older Americans, to Health Care Service Corp.
Recent media reports speculated that Cigna had resumed talks to buy Humana (NYSE:HUM), after abandoning the pursuit late last year.
CEO David Cordani in a call with analysts described the Medicare Advantage market as highly disrupted and said the company was focused on share buybacks.
"We view the likelihood of Cigna pursuing a large-scale acquisition of Humana as unlikely," said Stephens analyst Scott Fidel.
Humana shares were down nearly 2% in early trading.
Cigna said it expects cost trends to remain elevated above historical levels in 2025.
For 2024, the company maintained its forecast for medical cost ratio - the percentage of premiums spent on medical care - of between 81.7% and 82.5%, but sees it trending toward the higher end of the range due to increased use of expensive specialty drugs. Companies aim for a ratio of closer to 80%.
Cigna also still expects adjusted earnings for the year of at least $28.40 per share.
Quarterly net income fell 47.5% to $739 million, or $2.63 per share, including a non-cash after-tax investment loss of $1 billion related to its minority ownership of primary care provider VillageMD.
Total revenue for the third quarter was $63.7 billion, topping analysts' estimate of $59.4 billion, according to LSEG data.
The company posted adjusted quarterly profit of $7.51 per share, beating Wall Street expectations by 31 cents.