Overview
CVS had a good quarter, beating analyst estimates and raising its 2025 earnings guidance.
While Aetna’s medical costs are still running hot, the tone was confident and optimistic about the path to recovery after a terrible 2024. Healthcare delivery made a headline with a $5.7 billion goodwill impairment during the quarter due to a decision to halt future growth in Oak Street clinics, but the business is generally performing in line with expectations.
Meanwhile, most of the earnings call discussion was about what is happening in the PBM and retail pharmacy spaces, indicating where analysts are most interested at the moment. The PBM transition is experiencing some near-term bumps, driven by the shift in pricing models. CVS sees a significant longer-term opportunity in specialty pharma in moving branded drugs to biosimilars and generics. CVS’s retail business saw an 8% swing in growth, as it is now expecting 3% growth on the year, from previous expectations of a 5% decline.
The strategic conversation around CVS, and others like Cigna, is increasingly less about healthcare services and more about pharma, which I think is indicative of where the sector is heading broadly over the next several years. Specialty pharma is going to be a key part of every conversation, it would seem. CVS is honing in – smartly IMO – on retail pharmacy as a core strategic asset, mentioning that its “9,000 pharmacies are the front door to our enterprise”, and they’re investing in improving the performance here. Despite retail reimbursement pressures, it seems to me that investing in and building on that wedge is a smart move.
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Key Metrics
Earnings Call Discussion:
Here are a few key takeaways from the earnings discussion:
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