The Cigna Group

Ladies and gentlemen, thank you for standing by for the Cigna Group's second quarter 2024 results review. At this time, all callers are in a listen-only mode. We will conduct a question and answer session later during the conference and review procedures on how to enter queue to ask questions at that time. If you should require assistance during the call, please press star zero on your touch-tone phone. As a reminder, ladies and gentlemen, this conference, including the Q&A session, is being recorded. We'll begin by turning the call over to Ralph Jacoby. Please go ahead.

Thank you. Good morning, everyone. Thanks for joining today's call. I'm Ralph Jacoby, Senior Vice President of Investor Relations. With me on the line this morning are David Cordani, the Cigna Group's Chairman and Chief Executive Officer, Brian Evenko, Chief Financial Officer of the Cigna Group and President and Chief Executive Officer of Cigna Healthcare, and Eric Palmer, President and Chief Executive Officer of Evernorth Health Services. In our remarks today, David and Brian will cover a number of topics including our second quarter financial results and our financial outlook for 2024. Following their prepared remarks, David, Brian, and Eric will be available for Q&A. As noted in our earnings release, when describing our financial results, we use certain financial measures, including adjusted income from operations and adjusted revenues, which are not determined in accordance with accounting principles generally accepted in the United States, otherwise known as GAAP. A reconciliation of these measures to the most directly comparable GAAP measures, shareholders net income and total revenues respectively, is contained in today's earnings release, which is posted in the investor relations section of thecignagroup.com. We use the term labeled adjusted income from operations and adjusted earnings per share on the same basis as our principle measures of financial performance. In our remarks today, we will be making some forward-looking statements including statements regarding our outlook for 2024 and future performance. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our current expectations. A description of these risks and uncertainties is contained in the cautionary note to today's earnings release and in our most recent reports filed with the SEC. Regarding our results in the second quarter, we recorded an after-tax net special item charge of $64 million, or 23 cents per share. Details of the special items are included in our quarterly financial supplement. Additionally, please note that when we make perspective comments regarding financial performance, including our full year 2024 outlook, we will do so on a basis that includes the potential impact of future share or purchases and anticipated 2024 dividends. With that, I'll turn the call over to David.

Thanks, Ralph. Good morning, everyone, and thank you for joining our call today. For the second quarter, we again delivered strong performance as we continue to build on our momentum. Today, I'll discuss our performance for the quarter and key strategic drivers of our growth, demonstrate how the strength and durable nature of our model is fueling our success, then Brian will review additional details on the results and our outlook for the rest of the year, and we'll move to your questions. So let's get started. For the second quarter, I'm pleased to report that Cigna Group delivered total revenue of $60.5 billion, and adjusted earnings per share of $6.72. We achieved these positive overall results in a dynamic environment, and I'm proud of our team for continuing to focus on those we serve, ensuring that they get the care they need, they get their medications at an affordable cost, and they get the support they need in order to make the best decisions about their health and vitality. All of this requires a relentless focus on innovation, disciplined execution, and a passionate commitment to our mission. During the quarter, our Evernorth Health Service businesses demonstrated continued strength with our market-leading specialty and pharmacy benefit services capabilities. Within Evernorth, I'll start with our accelerated growth specialty and care businesses, which provide specialty drugs for the treatment of complex and rare diseases, distribution of specialty pharmaceuticals, as well as clinical programs to help clients improve health and vitality. we saw strong growth in the quarter with adjusted income growing 12% year over year, reflecting continued demand for our services, while we also continue to invest in broadening our offerings and expanding our reach. In Accredo, our specialty business, our growth continues to be fueled by secular tailwinds as well as Accredo's differentiated strength, which makes us the market leader in the space. Biosimilars, for example, represent a force of change and a substantial opportunity for continued growth and impact. At the end of June, we began dispensing our interchangeable biosimilar for Humira. Our program has $0 out-of-pocket cost for patients, saving them, on average, $3,500 per year. To deliver these savings, we have agreements in place with multiple manufacturers that will produce biosimilars for Evernor's pharmaceutical distributor, Qualant Pharmaceuticals. Now, the biosimilar opportunity goes well beyond Humira. By 2030, we expect an additional $100 billion of annual specialty drug spend in the U.S. will be subject to biosimilar and generic competition, and Accredo is well-positioned to deliver differentiated value for clients, customers, and patients. In our care services businesses, we are continuing to grow and expand in key areas of increased demand, including behavioral health, virtual, and home care. For example, this summer, we further expanded Evernorth Behavioral Care Group to an additional seven states. we are seeing positive patient outcomes from our unique clinician matching capabilities based on individual needs and preferences, with fully 84% of patients experiencing clinically significant reductions in the depression and anxiety symptoms. Now shifting to Express Scripts, our foundational pharmacy benefit services businesses, we are seeing continued strong client demand given our breadth of clinical and supply chain expertise as well as our proven partnership orientation. This quarter, ExpressFit's built on a long track record of innovating for those we serve with continued enhancements and new solutions. For example, given the high cost of GLP-1 drugs, we're continuing to see meaningful interest from our clients in EncircleRx, now with more than 2 million lives already enrolled. Our program starts with our longitudinal data to target patients who will most benefit from these medications. and we provide patients with resources to make lasting changes, help maximize the effectiveness of these medications, both in the short and long term. Another example of our innovation orientation is a recent announcement of Express GRIPS oncology benefit services, which will be available in 2025. Our new solution helps patients navigate the challenges of cancer care by providing a single oncology benefit, integrating pharmacy, medical, and behavioral health treatments. Our patient-centered approach will help to ensure the earliest possible detection, guide individuals to high-quality providers, and coordinate care across clinical teams. Now moving to Cigna Healthcare, our health benefits platform, we continue to deliver solutions that create value and better outcomes for clients and customers, coupled with highly competitive total cost of care. Similar to others in the industry, and as we've anticipated, we are seeing increased utilization in our book of business. I would note that our results are largely in line with the elevated levels in our planning and pricing assumptions. Our U.S. employer foundational growth business continues to perform in line with our expectations. Over this year, I've met with hundreds of clients across the U.S. and globally. And while the needs of every client are unique, there are a few consistent themes that cross every discussion. First, continued focus on affordability. particularly in light of medications like GLP-1s and gene therapies coming to market. Next, an increased need of improved access and, importantly, coordination of behavioral health services. Third is mounting point solution fatigue. And fourth, the opportunity and need for leverage of our longitudinal data and clinical programs to help keep people healthy and vital. Our solutions continue to resonate well, given our highly consultative approach to help clients choose the right set of solutions our proven capabilities to support the workforce, and our innovative programs that help to keep costs down. As a result, we are further gaining share and continue to see outside opportunities, for example, in our select segment. Another key ability of our U.S. employer business to deliver integrated and tailored benefits for our clients and customers are modular solutions that incorporate innovative services from Evernorth, including behavioral health, virtual care, and pharmacy. Our Pathwell Swedish solution, which continues to drive exceptional value, is a prime example. Pathwell specialty is another way we are reducing costs associated with specialty drug therapies, while also providing improved care and clinical outcomes for patients. With our credo nurses, nearly 50% of our Pathwell specialty patients who've transitioned their side of care now receive treatment in the comfort and convenience of their home. We are pleased with how the market continues to recognize the value we are delivering through solutions like PathFall. Turning to our Medicare Advantage business, we continue to make great progress regarding the sale of this business, and I'm pleased that we remain on track to close in the first quarter of 2025 as planned. Next, I want to take a few minutes to talk about the current environment surrounding pharmacy benefit managers and the relative landscape. At the heart of this debate, is the cost of pharmaceuticals. As we previously discussed, a key force of change in healthcare is the surge of pharmacological innovation. For context, prescription drug coverage is the most frequently used care benefit, and on average, it's used 15 times per year per person, resulting in billions of dollar, billions of prescriptions per year annually in the United States. Today, and for the foreseeable future, the most meaningful advances extending and improving quality of life will come through gene therapies, breakthrough in treatments for cancers and other conditions, as well as personalized medicines. In the U.S., for example, there are already more than 20 gene therapy and cell therapies available. However, there are nearly 1,000 more in the pipeline. Additionally, as we know, GLP-1s are growing rapidly, helping to treat diseases and complications that stem from obesity and diabetes. this class of drug is on tap to be the number one pharmacy benefit trend driver for plans of all sizes this year. And the impact will grow, with some forecasting nearly 10% of the US population using GLP-1s in the next 10 years or sooner. The implications rippling from these fast-growing pharmaceutical trends across the entire healthcare system are undeniable. And one of the biggest unanswered questions is, How could society afford this continued trajectory? Our role is to negotiate with pharmaceutical manufacturers as well as pharmacies to ensure that individuals are able to access pharmacological innovations at a fair and affordable price. In fact, pharmacy benefit companies are the only part of the drug supply chain who work to drive costs down. To underscore this, new drugs coming to market with unsustainable prices in 2023 were up $300,000 on a medium basis, up over 35% over 2022. And last year, median brand drug price increases were greater than 5% more than the rate of inflation. Let me repeat this. Last year, the median annual price for new drugs coming to market was $300,000, up 35% over 2022. Meanwhile, In 2023, Express Script's change in patient cost sharing was relatively flat on average. Express Script's patients with employer-sponsored drug coverage pay on average $15 out-of-pocket for a 30-day supply. And for a client, Express Script's delivered more than $38 billion in savings annually. Stepping back, our industry negotiations to drive these results can at times generate friction in the system. Friction that is spilled into and now has reached heightened levels in the political arena and media, with industry winners and losers being declared at every report and every headline. We believe that the facts and results and outcomes delivered to our clients, customers, and patients should rule the day. However, the environment calls on us to be more proactive. This means ensuring that what we do and the value we bring is more widely and better understood. And we continue to evolve our model to address legitimate pain points and opportunities. For example, in 2023, 1% of the patients in the United States experience out-of-pocket costs above $2,000 a year. From our point of view, that's too many. We accept the responsibility to accelerate innovation to make medications more affordable while continuing to improve health outcomes and finding solutions for every person we serve. Make no doubt, our team will continue to lean into these challenges for the benefit of our patients, clients, and the healthcare ecosystem. And we are proud of the work that our team does every day and the role we play and the results we're able to achieve. Now let me pause and summarize before transitioning to Brian. When you combine our compelling growth potential and strong execution focus, we have confidence in our ability to meet our 2024 and long-term growth targets. We have a proven track record of delivering differentiated value for those we serve by innovating new solutions, like in CircleRx and our Pathwell suite, as well as expanding meaningful partnerships. As a result, in the second quarter, we delivered on our financial commitment with adjusted EPS of $6.72, and we remain on track to deliver our guidance for full-year adjusted earnings per share of at least $28.40 for 2024. Further, our company has attractive sustainable growth opportunities over the long term, and we remain on track to deliver average annual adjusted EPS growth of 10 to 14%, building on our track record of achieving 13% adjusted EPS growth over the last decade. All will regenerate cumulative operating cash flow of $60 billion over the next five years, while continuing to meaningfully invest capital for the benefit of shareholders. We also continue to make strategic investments in strengthening our capabilities in our foundational and accelerated growth business and remain focusing on harnessing the breadth of our capabilities of our organization to meet the evolving needs of those we serve. Overall, our strong performance through the first half of the year reflects the balance in our company portfolio and the significant value creation that positions us for sustained and differentiated growth. With that, I'll turn it over to Brian.