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Cigna Upgraded, Anthem Downgraded by Morgan Stanley on Biosimilar Humira Opportunity

Published 22/06/2022, 19:18
Updated 22/06/2022, 19:18
© Reuters

© Reuters

By Sam Boughedda

Morgan Stanley analyst Ricky Goldwasser said in a client note Wednesday that the firm is upgrading Cigna Corporation (NYSE:CI) shares to Overweight from Equal Weight and downgrading Anthem Inc (NYSE:ANTM) to Equal Weight from Overweight.

"We see a major new opportunity for specialty pharmacies but a lesser role for distributors," the note from Goldwasser read.

Commenting on Cigna, the analyst, who also raised the price target on Cigna to $296 from $283, said it "stands to be the largest beneficiary from Humira biosimilars in our Healthcare Services coverage."

"We see a path to higher segment growth over time. Management raised guidance on Evernorth's earnings growth by +100bps (+5-7% from +4-6%) at its recent 6/3 investor day, but our analysis suggests room for +200bp improvement after internal investments wind down and the full year benefit of Humira kicks in. In addition, if Cigna leverages its specialty distribution business (CuraScript) to insource distribution of Humira, it could add upside," added Goldwasser.

On Anthem Inc, Goldwasser reduced the firm's price target to $533 per share from $607 and stated: "Anthem's multiple has expanded >5x turns since 1Q20 and at 15.2x is trading at the highest multiple since 3Q18 (16.4x), +2.4x turns higher than its 5-year average. Anthem has navigated the uncertainty of the last 2 years extremely well and has delivered consistently better MLR and EPS. But as we look into the next couple of years, we don't see the same upside earnings optionality given a smaller specialty pharmacy footprint than CI's – we estimate only ~10% of Anthem's earnings come from IngenioRx."

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