Less than 12 hours after activist investor Carl Icahn publicly criticized the Cigna's proposed merger with Express Scripts, the insurer struck back with a letter of its own re-emphasizing its support for the deal.
Tuesday's letter from Cigna's board of directors marked the first time the insurer has specifically addressed Icahn's push to block the merger. In between emphasizing the "tremendous value for shareholders," the board took pointed jabs at Icahn, calling his opposition self-serving and adding that his letter "demonstrates an uninformed view of the current healthcare marketplace and Cigna's strategy."
"Mr. Icahn’s opposition is misguided and shortsighted," Cigna wrote. "Moreover, the assertions in Mr. Icahn’s letter are value destructive and demonstrate a clear lack of understanding of the dynamics of the healthcare industry."
On Tuesday morning, Icahn classified the $67 billion deal as a "huge bailout" for Express Scripts and predicted the acquisition would be "one of the worst blunders in corporate history."
But Cigna pushed back on some of Ichan's chief criticisms of the deal, including new regulatory pressure from the Trump administration that could reform the PBM rebate system, and mounting pressure from Amazon. Cigna noted that it has successfully navigated previous regulator pressures, including the Affordable Care Act.
Furthermore, the board said changes to the rebate structure would impact government plans, not the commercial side. Express Scripts has already said the company would be fine without rebates.
The board also emphasized the new company would allow the company to "compete or partner with others in the market from a position of strength," adding to CEO David Cordani's comments on last week's earnings call that the insurer would not be opposed to working with Amazon.
The insurer mocked Icahn's suggestion that it could partner with Express Scripts while it develops its own PBM.
"The notion that we can negotiate a complex multiyear agreement with a third party that will allow us to deliver attractive PBM affordability to our clients and customers while the rest of the industry reformats itself is naïve at best," the board wrote. "We have firsthand knowledge as a PBM operator that these arrangements are complex and that it would be exceedingly difficult to draft a static contract that benefits Cigna in all scenarios in a changing environment."
The board reaffirmed its position that Cigna shareholders should vote for the deal on Aug. 24, a move that could keep Cigna from paying a $1.6 billion breakup fee. Under the terms of the agreement, Cigna would have to pay the termination fee if shareholders voted against the deal and the board changed its recommendation.
While the back-and-forth has made for good fodder over the last few days, analysts believe shareholders will approve the vote. In a research note, Leerink's Ana Gupte said Icahn's proposals were "unrealistic" and pointed to Cordani's confidence in meetings with investors.