Anthem surprised Wall Street on Wednesday by moving up the launch of its in-house pharmacy benefits management business, sending shares 10 percent higher as investors welcomed the decision after rival health insurers signed multibillion-dollar deals joining forces with PBMs.
The company also forecast higher-than-expected 2019 profit and handily beat fourth-quarter earnings estimates.
Rival health insurers Aetna and Cigna closed deals with the biggest U.S. pharmacy benefits managers last year to bolster profits, cut costs and better manage patient prescriptions. Anthem, however, had initially planned to launch its own pharmacy benefits business, IngenioRx, in 2020.
On Wednesday, the company said it would instead launch the business in the second quarter, after the sector witnessed its biggest shakeup in years.
Anthem Chief Executive Gail Boudreaux said the company has been in "intense preparation" with CVS Health for over 15 months to speed up the launch.
CVS, which has a large PBM business and acquired Aetna, will handle prescription fulfillment and claims processing for about five years for IngenioRx, as per an earlier contract.
"It is kind of an interesting dynamic where they are like partners in the business world but also competing," Evercore ISI analyst Michael Newshel said, adding that the share jump was due to the early launch news and because Anthem's core business was growing faster than expected.
Anthem said it continues to expect annual cost savings of over $4 billion from IngenioRx.
"The accelerated launch positions us to transition all of our membership by the first quarter of 2020, a full year ahead of our prior schedule," Chief Financial Officer John Gallina said.
Newshel said the accelerated transition could add 75 cents to 90 cents to 2019 earnings.
Anthem has given notice for an early termination of its contract with PBM Express Scripts that was set to expire on Dec. 31, due to its recent acquisition by Cigna. The agreement will now terminate on March 1, Anthem said.
Separately, Cigna said in a regulatory filing it will exclude revenue and earnings from Anthem's contract with Express Scripts when providing its 2019 forecast on Feb. 1.
Excluding items, Anthem posted a quarterly profit of $2.44 per share, beating analysts' estimates by 24 cents, according to IBES data from Refinitiv.
Anthem forecast 2019 adjusted earnings per share of over $19, well ahead of Wall Street forecasts of $17.61.