Healthcare firms reported solid quarterly earnings during the week of October 31 with several executives mentioning the outlook for acquisitions.
CVS Health Corporation on November 2 reported third-quarter results that featured double-digit percentage increases for total revenue in the quarter and the year. Revenue increased to $81.2 billion in the quarter, up 10% compared to the prior year. Revenue in the year-to-date period jumped to $238.6 billion, up 10.7% compared to the previous year.
The Woonsocket, Rhode Island-based company raised its 2022 full-year cash flow from operations guidance range to $13.5 billion to $14.5 billion from $12.5 billion to $13.5 billion.
On September 2, the company agreed to acquire Signify Health, Inc. for $30.50 per share in cash, representing a transaction value of approximately $8 billion. The deal is expected to close in the first half of 2023.
It was revealed during the CVS earnings call that the company may remain an active acquirer.
“We need to do M&A and continue to evaluate those options in the marketplace,” said Karen S. Lynch, CVS Health president and CEO.
Also announced was that CVS Health plans to sell its long-term care pharmacy business, Cincinnati-based Omnicare, reporting a $2.5 billion loss related to it in the third quarter.
Omnicare serves skilled nursing facilities and senior living communities.
In addition, the company entered into settlement agreements during the third quarter with two states and a tribe to settle all opioid claims against it. In October, the company agreed in principle to a global settlement framework which, if all conditions are satisfied and the non-monetary terms are finalized, would result in the settlement of substantially all opioid lawsuits and claims filed by other states, political subdivisions and tribes against the company to be paid over 10 years, beginning in 2023. In the third quarter, CVS recorded a pre-tax charge of $5.2 billion related to the estimated liability for opioid-related claims.
“The opioid settlement provides us with clarity,” Lynch said.
Also announcing results for the third quarter on November 2 was Louisville, Kentucky-based Humana Inc.
Humana affirmed its fiscal year 2022 adjusted earnings per share guidance that was previously revised upward. The current fiscal year 2022 adjusted earnings per share guidance of approximately $25 reflects 21% growth compared to fiscal year 2021 adjusted earnings per share results.
“We are pleased with our third-quarter results and the strong performance across all of our businesses,” said Bruce D. Broussard, Humana’s president and CEO. “Humana is well positioned for the 2023 Medicare Advantage annual election period. In fact, 72% of Humana plans have $0 primary care copays and 94% include dental benefits. Taken together, our plan designs and operating performance reinforce our confidence in achieving our new 2025 adjusted EPS target of $37.”
The company anticipates 2023 individual Medicare Advantage membership growth of 325,000 to 400,000, or 7.1% to 8.7% growth, over projected fiscal year 2022 ending membership.
More than 99% of retirees in Humana’s group Medicare Advantage rated plans remain in four-star or above contracts for 2023.
During Humana’s earnings call, Broussard mentioned his firm’s acquisition strategy.
“We continue to find the best value is in-market acquisitions,” Broussard said. “There’s the administrative productivity we get. We’ll do medium to smaller acquisitions.”
Broussard also mentioned a goal of growing the company’s mail order and specialty operations.
David M. Cordani, chairman and chief executive officer of Bloomfield, Connecticut-based Cigna Corporation, said during his company’s November 3 earnings call that “organic investments are No. 1.” He placed acquisitions last on his list of priorities. “We are open to M&A … over time,” Cordani said.
Highlights from Cigna’s third-quarter results include:
• Total revenue in the third quarter was $45.3 billion.
• Shareholders’ net income for the third quarter was $2.8 billion, or $8.97 per share.
• Adjusted income from operations for the third quarter was $1.9 billion, or $6.04 per share.
• Adjusted income from operations for 2022 is projected to be at least $23.10 per share. Adjusted income from operations for the third quarter increased 3% from the same period of 2021, excluding the divested international life, accident and supplement benefits and Medicaid businesses, with contributions from Evernorth and Cigna Healthcare.
Year to date through November 3, the company will have repurchased 22 million shares of common stock for approximately $5.8 billion, including the final settlement of the accelerated share repurchase agreements announced in June.
Cordani commented on the macroeconomic headwinds U.S. corporations are facing.
“We’ve seen little direct impact,” Cordani said. “A net hiring environment is in front of us.”
Also reporting results on November 3 was Orange, California-based Alignment Healthcare, Inc.
Third-quarter financial highlights included:
- Health plan membership at the end of the quarter was approximately 98,000, up 14% year over year.
- Total revenue was $360.3 million, up 22.8% year over year.
- Health plan premium revenue of $345.4 million represented 23.9% growth year over year.
A consumer brand name of Alignment Healthcare, Alignment Health is a Medicare Advantage company that offers more than 40 plans that serve 38 counties across four states.
