cigna David Cordani Tech Value Investing Videos

Cigna CEO David Cordani Speaks With CNBC’s David Faber Today

Timeless Reading eBook

CNBC Unique: CNBC Transcript: Cigna CEO David Cordani Speaks with CNBC’s David Faber Today

WHEN: Today, Wednesday, August eight, 2018

WHERE: CNBC’s “Squawk on the Street”

Get The Timeless Studying eBook in PDF

Get all the 10-part collection on Timeless Studying in PDF. Reserve it to your desktop, learn it in your pill, or e-mail to your colleagues.

Q2 hedge fund letters, convention, scoops and so on

Cigna CEO David CordaniPicture supply: CNBC Video Screenshot

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Cigna CEO David Cordani and CNBC’s David Faber on CNBC’s “Squawk on the Street” (M-F 9AM – 11AM) at present, Wednesday, August eighth. Following are hyperlinks to video of the interview on CNBC.com:

Cigna beats earnings estimates on prime and backside line

Cigna CEO David Cordani defends Categorical Scripts deal

David Faber: let’s usher in David Cordani, he in fact is the CEO of Cigna. The person who authored the deal itself. And we sort of we’re going to play defend your deal right here this morning, David.

David Cordani: good morning.

Faber: all the time good to have you ever this morning and completely satisfied to have you ever as nicely this morning. You set out an extended letter yesterday on this very topic. Mr. Icahn says he has no concept how one can be doing this deal, in his opinion no less than, “it’s inexplicably ridiculous.” what say you?

Cordani: nicely, we’ve been very constant. The mixture with categorical presents an impressive alternative to enhance affordability. Per your feedback a couple of moments in the past, everyone from the president via firms by way of people need improved affordability. Cigna and categorical each individually are functioning very properly delivering very low medical value development or progress. And the mixed firm will truly additional enhance affordability. Cigna stepped forth with a aim to ship medical prices progress or development at a CPI degree by 2021 and we’re already delivering the bottom medical prices within the business. So it’s about creating worth for patrons and shoppers. And in consequence, delivering worth again for our shareholders. And we’re dedicated to this actually engaging strategic and monetary mixture.

Faber: yeah. Mr. Icahn speaking about various issues which are pretty complicated when it comes to rebates and coverage however, David, the timing is sweet right here as a result of I would like you to go attempt to clarify, no less than, to our viewers and your shareholders – you understand final night time I assume CMS made some modifications to medicare half b to emulate the instruments and practices utilized in medicare half d. Are you able to type of give us the sense right here as to what the distinction between b and d is, and whether or not it’s good or dangerous for categorical scripts?

Cordani: positive, so the headline is it’s good. And from a macro perspective, the business market has been utilizing quite a lot of mechanisms round formularies, so combination swimming pools of prescription drugs which have medical effectiveness, working with manufactures, coordinating medical packages, step therapies, et cetera. And primarily, what the secretary stepped ahead and stated is ‘it would be a good thing for the medicare programs for some of those the proven capabilities, for example, that Express Scritps does quite well to be afforded to the medicare program with the objective back, to the our first point, of improving affordability with tremendous clinical quality.’ so the secretary’s statements yesterday afternoon we agree with. We view them as an evolution to the marketplace and the mixed firm is in actually good place to have the ability to carry out and ship extra worth in that case for medicare beneficiaries via permitted affordability. And once more in a nutshell it’s utilizing confirmed business options for presidency packages to enhance affordability and high quality.

Faber: Icahn recommended you guys might do as an alternative of shopping for categorical you are able to do a multiyear partnership. And that might be higher than shopping for them and taking the danger therein. Why is that not one thing, maybe, you’d have explored or thought-about? I do know you had a multiyear partnership with catamaran quite a few years in the past. That was then acquired. However give me some sense there as to why that wouldn’t be an applicable avenue.

Cordani: Positive, David. So, first, we’re an organization that does consider in partnering, so in a broader sense, we companion fairly successfully, for instance, 500 doctor teams and hospitals round the us to assist to coordinate and ship higher worth and care. So we get the idea of partnering. Extra broadly, relative to this mix, it’s extra broad than a PBM acquisition. There’s a set of capabilities. There’s an incredible distribution enlargement functionality for us. For instance, Cigna solely overlaps with 10 to 15% with categorical scripts business shoppers. Cigna doesn’t compete within the well being plan area. Categorical scripts does and it presents a chance for us to supply behavioral and well-being options, et cetra. And importantly, what’s being confirmed proper now’s, the mixing of knowledge to work extra successfully with the training doctor the good thing about our sufferers or clients presents simply an impressive alternative to enhance affordability, high quality, and repair. So we see it as a strategic reformatting and repositioning alternative. Past that, mr. Icahn means that what Cigna ought to do is sit on the sidelines, permit the marketplace to shake itself out, and purchase again our inventory. We don’t consider that that may be a technique. We consider that’s extra monetary engineering and we’re attuned to with the ability to delivering excellent shareholder worth. I might simply spotlight the truth that we delivered in extra of 380% TSR during the last eight plus yr. So we’re used to delivering excellent shareholder worth however we achieve this by working within the market to create worth for our clients and shoppers.

Jim Cramer: All proper, Mr. Cordani. Jim Cramer. You already know I’m an enormous supporter of Cigna. It’s been a exceptional inventory. And an incredible supporter or Philadelphia, which nonetheless issues to me. However I do need to ask you one thing: should you stayed unbiased, once I take a look at the CVS’ numbers at this time and the way nice their pharmacy profit supervisor does, you’ve obtained a unbelievable pharmacy profit supervisor. I’m not saying that the mixture might be fascinating long-term – I feel it’s. However your inventory, I feel, I might argue, can be at 200 to 210 as we speak, simply based mostly on what cvs is saying and what united well being is saying. How do you cope with the truth that can be fabulous efficiency and everybody would need that?

Cordani: So, Jim, once more, good morning and thanks on your feedback. We’ve delivered nice outcomes. Our 2017 outcomes have been off the charts, prime line, backside line, we delivered the perfect medical value development once more within the business in 2018 would be the sixth consecutive yr. So we now have a robust basis and we’re delivering for our shoppers and our clients as we develop our enterprise. We’re pleased with that. Secondly, we view our inventory as briefly dislocated. It’s an outstanding worth at this time and we’re assured we’re going to develop the worth over time. The distinction is this mix presents a chance for instant worth creation, mid teen accretion within the first yr — we don’t have to attend three or 4 years — mid teen accretion within the first yr excluding the recognized transitioning shoppers. Distinctive free money move. Six plus billion dollars in 2021, however money movement within the first 18 to 24 months to delevarge the franchise and nonetheless have vital capital to deploy even in these 18 to 24 months for extra shareholder worth creation. So we agree with you. Our firm is excessive worth. Our firm has been performing fairly properly. And we’re assured in our potential to create large shareholder worth. However having these capabilities to additional enhance affordability, to take our nation to a sustainable degree of a cpi or higher degree medical value development, with these partnerships with the physicians and broadening our attain to deal with the marketplace and drive progress, that’s engaging to us. All whereas delivering that excellent shareholder worth. We don’t have to attend three to 5 years for it. We’ll ship that accretion in yr one.

Faber: David, have you ever talked to Icahn? Did he get in contact with you a way? Did you’ve got a dialogue?

Cordani: we’re dissatisfied that he selected that his technique of communication was an open letter. There’s been no inbound to our company.

Faber: ISS arising with a choice, and it will probably sometimes in conditions like this be definitely of significance, given its affect to some giant shareholders. Are you able to characterize how your conversations with ISS have gone and the arguments you made there and what your expectations are once they come out with their suggestion I feel on Friday more than likely?

Cordani: sure. Robust governance is a vital a part of what ISS would take a look at. We’ve had excellent engagement with iss to stroll via the strategic rationale, the governance framework that was utilized excessive, the analysis framework and the worth creation framework together with the mitigants to cope with the altering market, together with altering laws across the general market. We’re assured when it comes to the shareholder worth creation. We’re assured that’s understands the shareholder worth we’ve created during the last eight plus years and we’ve an excellent open line of communication with them to make sure they’ve all the knowledge they want to attract the conclusions.

Faber: and, lastly, David – until Jim has one other one, I’m unsure – simply say the phrase “Amazon” and everyone runs for the hills. Carl makes use of it in his letter — Mr. Icahn. Body the competitors that you simply anticipate right here from amazon for me when it comes to what it’s going to imply for this mix.

Cordani: David, there’s little question the marketplace continues to undergo evolutionary change at a minimal. Some individuals might level towards revolutionary change. Which is why as an organization we’ve continued to take a position closely in innovation. We’ve poured about three/four of a billion dollars again into our franchise during the last couple of years when it comes to know-how, options, capabilities, et cetera to broaden our direct to shopper attain, our partnership capabilities with a doctor group and the well being care skilled group. Because it pertains to amazon, it’s one other instance of change and evolution. They’re getting into the mail order pharmaceutical achievement. We see that motion. Clearly we anticipated that motion. The medical integration we expect is the purpose of differentiation. How an organization like Cigna is ready to create higher exercise for a person or affected person with their doctor to allow them to both keep their well being, decrease their well being danger — 25% of People have excessive well being dangers. Optomize their care in the event that they’re in a persistent situation to be extra coordinated. For instance, individuals with continual care or have a better chance of needing behavioral useful resource help – we’re one of many largest behavioral suppliers. After which getting one of the best acute care. We see it as a altering market. We’re nicely positioned and we’re much more successfully strategically positioned with the categorical scripts mixture to have the ability to ship worth for our shoppers and clients.

Faber: David, we’ll depart it there for now. However definitely respect your lending your voice to this debate this morning. And we’ll, in fact, await the result of the shareholder vote slightly greater than two weeks from now. Thanks.

Cordani: thanks on your time right now.

Faber: positive factor. David Cordani, CEO of Cigna.