Cencora, Inc. Q1 FY2025 earnings call

• Advancing leadership in specialty: Completed the acquisition of RCA - Retina Consultants of America on January 2. RCA is a leading retina MSO with strong leadership, clinical excellence, and clinical research capabilities, fitting into the strategy to expand specialty leadership in a high-growth pharmaceutical-centric segment. • Driving efficiency and productivity: Focused on enhancing capabilities through advanced technology and global team collaboration. Upgraded systems to safeguard infrastructure resilience and streamline operations for better customer satisfaction, aligning with digital transformation strategy. • Executing with customer-centric mindset: Demonstrated advanced solutions at the product showcase, engaged with global customers, including visiting international operations in the UK and engaging with top biopharma customers. Built on strengths in pharma services like market access, regulatory, pharmaco-vigilance, and 3PL and specialty logistics networks.

U.S. healthcare solutions segment revenue was $74 billion, up 14%. International healthcare solutions segment revenue was $7.5 billion, up approximately 6% on an as-reported basis and nearly 9% on a constant currency basis. Consolidated revenue was $81.5 billion, up 13% mainly due to strong growth in the U.S. healthcare solutions segment. Consolidated gross profit was $2.5 billion, up 6%, with a gross profit margin of 3.11%, a 20 basis point decrease due to factors like low-margin GLP-1 sales, lower commercial COVID-19 vaccine sales, and no exclusive COVID-19 therapy sales.

• Adjusted diluted EPS guidance raised to a range of $15.25 to $15.55. • Consolidated revenue growth expected in the range of 8% to 10%, up from previous 7% to 9%. • U.S. healthcare solutions segment revenue growth expected in the range of 9% to 11%, up from previous 7% to 9%. • Consolidated operating income growth expected in the range of 11.5% to 13.5%, up from previous 5% to 6.5%. • Interest expense expected in the range of $290 million to $310 million, up from previous range due to financing of RCA acquisition.

• Impact of market trends such as sales of low-margin GLP-1 products and lack of exclusive COVID-19 therapies negatively affecting gross profit margin. • Exchange rate fluctuations affecting international healthcare solutions segment performance. • Uncertainty in clinical trial activity impacting the global specialty logistics business, though expected to improve later in fiscal 2025.

Q: Michael Cherny from Leerink Partners asked about where the company is best positioned to outgrow the market on specialty.

A: Robert Mauch said it's through a pharmaceutical centered strategy, building services, and having the best customer portfolio.

Q: Lisa Gill from JP Morgan asked about elements in U.S. revenue growth guidance.

A: James Cleary explained factors like GLP-1 growth assumption, Humira conversion, and RCA acquisition impact.

Q: Elizabeth Anderson from Evercore ISI asked about World Courier business.

A: James Cleary said World Courier had a more challenging quarter due to subdued clinical trial activity but expected improvement later, and Robert Mauch emphasized the importance of global footprint.

Q: Steven Valiquette from Mizuho Securities asked about Walgreens.

A: Robert Mauch said teams are engaged with Walgreens to create value, and James Cleary said guidance includes assumptions on Walgreens.

Q: Eric Percher from Nephron Research asked about MSO business.

A: Robert Mauch talked about importance of physician leadership and value creation through services, and James Cleary discussed RCA accretion.

Q: Daniel Grosslight from Citi asked about MSO competitive environment.

A: Robert Mauch said confident in RCA and OneOncology as leading platforms.

Q: Stephen Baxter from Wells Fargo asked about U.S. business organic guidance and RCA accretion.

A: James Cleary discussed guidance and RCA accretion ramping.

Q: Charles Rhyee from TD Cowen asked about biosimilar Eylea.

A: Robert Mauch said healthy market with innovation and biosimilars.

Q: Allen Lutz from Bank of America asked about U.S. utilization.

A: James Cleary said guidance assumes utilization trends and views company performance as resilient.

Q: George Hill from Deutsche Bank asked about MSO value drivers.

A: Robert Mauch said value drivers vary by practice and are dynamic.

Q: Erin Wright from Morgan Stanley asked about specialty categories and animal health.

A: James Cleary said oncology and ophthalmology are key, and animal health had good growth.

Q: Kevin Caliendo from UBS asked about COVID headwind.

A: James Cleary said guidance assumes customer changes and explained COVID-related headwind.

Q: Eric Coldwell from Baird asked about World Courier.

A: James Cleary and Robert Mauch discussed World Courier's challenges, improvement expectations, and competition.