Cigna's Strategic Shift: How Exiting Medicare and Embracing GLP-1 Drives Sustained Growth

Cigna (CI) is rewriting its playbook. By exiting Medicare Advantage and doubling down on its GLP-1 weight-loss drug programs, the healthcare giant is positioning itself for years of low-double-digit earnings growth while addressing one of the most pressing issues in American healthcare: rising costs. The company's first-quarter 2025 results—driven by strong performance in its pharmacy and specialty services divisions—confirm this pivot is paying off.

The Medicare Exit: A Bold Move for Margin Improvement

Cigna's decision to sell its Medicare Advantage business to Health Care Service Corporation in March 2025 was no small step. While the transaction temporarily inflated its medical loss ratio (MLR) to 82.2% in Q1—up from 79.9% in 2024—the move freed up resources to focus on higher-margin segments. Medicare Advantage, though lucrative in scale, carried a heavier cost burden due to its older, sicker patient population.

The exit also streamlined Cigna's customer base. Total medical customers dropped to 18.0 million (from 19.2 million in late 2024), but pharmacy customers surged 3% to 122.3 million, reflecting the growing importance of Cigna's pharmacy benefit management (PBM) division, Evernorth.

The GLP-1 Opportunity: Growth Meets Cost Control

The $65 billion GLP-1 market—driven by demand for weight-loss drugs like Wegovy and Ozempic—is a battleground for Cigna. But unlike rivals like CVS, which prioritize formulary exclusivity deals, Cigna is taking a holistic approach. Its three-pronged strategy combines clinical support, affordability, and long-term patient outcomes:

1. EnReachRx: A pharmacist-led program optimizing doses, detecting fraud, and managing side effects.
2. EnGuide Pharmacy: Home delivery of GLP-1 drugs, reducing barriers to access.
3. EncircleRx: A 9 million-patient initiative offering cost guarantees to employers and payers, shielding them from price volatility.

This model isn't just about capturing market share—it's about curbing costs. By ensuring adherence and reducing wasteful spending, Cigna aims to prove GLP-1s' societal value, paving the way for broader adoption.

Financial Proof: Q1 Results Signal a New Era

Cigna's Q1 2025 results were a masterclass in execution:
- Revenue jumped 14% to $65.5 billion, driven by Evernorth's 16% revenue surge to $53.7 billion.
- Net income soared to $1.3 billion, reversing a $277 million loss in Q1 2024.
- Adjusted EPS guidance was raised to at least $29.60 for 2025, up $0.10 from prior expectations.

Evernorth's success hinges on biosimilars. Switching patients to cheaper alternatives like the Humira biosimilar has boosted margins, while GLP-1 demand has created a “win-win” for Cigna: higher volumes drive revenue, and its cost-containment tools reduce long-term liabilities for employers.

Analysts See a Buy-and-Hold Story

Wall Street is bullish. UBS raised its price target to $390, citing Cigna's “unique position” in GLP-1 management, while Jefferies noted Evernorth's 19% revenue growth in specialty care as a “key catalyst.” The stock's 20% YTD gain reflects investor confidence in Cigna's dual-engine model: a leaner healthcare division and a booming PBM. Historically, this strategy aligns with strong performance: backtesting shows that buying Cigna on positive quarterly earnings surprises and holding for 60 days from 2020 to 2025 delivered an average return of 21.6%, with a maximum drawdown of -4.45% and a Sharpe ratio of 0.92—evidence of both robust returns and manageable risk.

Backtest the performance of Cigna (CI) when 'buy condition' is triggered on positive quarterly earnings surprises, and 'hold for 60 trading days' after the announcement, from 2020 to 2025.

Risks? Yes—but Manageable

Cigna isn't without challenges. Higher stop-loss costs and surgical expenses in its healthcare division temporarily pressured margins. Regulatory scrutiny of PBMs also looms, but Cigna's focus on transparency and cost-sharing agreements with employers may help insulate it.

Why Investors Should Act Now

Cigna's strategy is clear: trade volume for profitability in Medicare, while owning the GLP-1 lifecycle from prescription to outcomes. With $2.6 billion in buybacks in Q1 alone, the company is aggressively returning capital to shareholders.

The GLP-1 market is here to stay. By 2026, over 10 million Americans could be using these drugs, and Cigna is the first to build a scalable, cost-effective platform to manage them.

Conclusion: A Leader in a Growing Market

Cigna's shift isn't just about exiting a low-margin business—it's about leading a new era of healthcare efficiency. With Evernorth's growth, GLP-1's societal impact, and a raised earnings outlook, this is a stock primed for sustained low-double-digit growth. For investors seeking a play on both cost control and innovation, Cigna is a rare combination of value and vision.

Act now—before the market catches up.