Cencora Q3 2021 Earnings Call Transcript

Quartr
Provided by Quartr
August 4, 2021

There are 8 speakers on the call.

Operator

Good morning and welcome to the AmerisourceBergen Third Quarter Fiscal Year 2021 Earnings Conference Call. All participants will be in a listen Please note this event is being recorded. I would now like to turn the conference over to Bennett Murphy, Head of Investor Relations. Listen only. Please go ahead.

Speaker 1

Thank you. Good morning and thank you all for joining us for this conference call to discuss AmerisourceBergen's fiscal 2021 Q3 results. I'm Ben Burpee, Senior Vice President, Investor Relations. Joining me today are Steve Tallis, Chairman, President and CEO chat provided in today's press release, which is available on our website at investor. Americisothurgan.com.

Speaker 1

We mode. On an adjusted non GAAP basis, including but not limited to, EPS, operating income and income taxes. Forward looking statements are based on management's current expectations and are subject to uncertainty and change. For a discussion of key risks and assumptions, we refer to today's press release and our SEC filings, call, including our most recent 10 ks. AmerisourceBergen assumes no obligation to update any forward looking statements and this call cannot be listen

Speaker 2

only listen only mode. Good morning to everyone joining us today. Before we discuss our results for the quarter, I want to comment on the distribution industry's recent milestone regarding the proposed settlement agreement to address opioid related claims only Throughout the litigation process, We have been consistent in stating our desire to address the enormity of the opioid challenge by bringing solutions to the table. Across the United States with substantial financial support. Clearly, the process is in an advanced stage, and we will not comment At this time, we take our role in the supply chain seriously and continue to work closely with stakeholders Concerning these complex matters, AmerisourceBergen will continue to work diligently and alongside partners to combat version while supporting real solutions to help address the crisis in the communities where we live, Turning now to our results for the Q3 of fiscal 2021.

Speaker 2

AmerisourceBergen delivered yet another quarter of exceptional results, driven by a high level of execution, purpose minded team members and continued focus on delivering differentiated value. As we announced earlier this morning, We had revenues of over $53,000,000,000 representing growth of 18% from the same period last year, And we grew our adjusted EPS by 17% year over year. These results reflect Continued strong performance across AmerisourceBergen's businesses as we capitalize on our differentiated pharmaceutical centric value proposition and as our team successfully execute on our key strategic initiatives. This strength and execution continue to create value for our shareholders. And today, we are again raising our fiscal 2021 full year guidance, which Jim will discuss later in greater detail.

Speaker 2

I will focus my remarks today on the key strategic pillars that are driving our strong performance as well as how with the addition of Alliance Healthcare, AmerisourceBergen continues to be well positioned only mode. In the United States, our Pharmaceutical Distribution business And strong end market trends, including an earlier than expected return to pre COVID prescription utilization trends in the June quarter. Our leading customer base includes our Good Neighbor Pharmacy and Elevate Provider Network members. They are proving daily that community pharmacies are at the forefront of providing quality and equitable care and maintaining deep levels of trust and more at Chain Drug Store Pharmacies by J. D.

Speaker 2

Power. This is the 10th time we have received that honor in the past 12 years, and it is a testament to community awareness of the value of the quality of care and experience patients receive at GMP member pharmacies. We held our annual ThoughtSpot Conference last week, and I was touched and inspired by the stories that our members shared. Only.

Speaker 3

Through the

Speaker 2

entrepreneurship, expertise and deep community roots, community pharmacies prove that they do more than just for prescriptions. They are critical promoters of health equity across the U. S, often going above and beyond only. To provide holistic care and health education at the local level, particularly in under resourced communities. Since the beginning of the pandemic, community pharmacies have stepped up fearlessly to meet the unprecedented challenges of the global health crisis and show the world why community pharmacies are integral to our communities.

Speaker 2

Only. The value proposition of community based care has never been clearer. Another relevant example is on the animal side. The growth in pet ownership has increased demand for our veterinarian customers as pets are a cherished part of the family and the care a veterinarian provides is valued. This positive trend over the last year only.

Speaker 2

As long term benefits for our business as MWI is well positioned with key anchor customers and services. On the human health side, access to local trusted expertise care remains vital, particularly for those dealing with complex health challenges that bring them into the care of specialty physician providers. As I have said from the onset of the pandemic, we are conscious of the negative impact that restrictive measures have on patients only. When they have less access to screenings and tests that help doctors identify serious health issues. This has particularly impacted patients who are new to a doctor or health care facility, but now our Customers have begun to see a normalization in new patient trends.

Speaker 2

And as a result, patients are more Thank you for being diagnosed and gaining access to treatment. This is a clear positive for patient care. As the leading provider of specialty distribution and commercialization services, we will continue to play our role In supporting pharmaceutical innovation and access as patients visit volumes continues to normalize. Our specialty physician services business had strong performance this quarter and continues to differentiate AmerisourceBergen only. Additionally, biosimilars continue to be a positive for our customers, our business and the health care system overall as they provide room for new innovative products only.

Speaker 2

The innovations in CAR T and cell and gene therapies and the potential applications of the only. AmerisourceBergen is well positioned to support all these innovations through our specialty distribution and manufacturer services offerings. Our unique ability to provide value added expertise in conjunction with innovative solutions and quality service only. With strong partnership, relationships and a leading portfolio of solutions

Speaker 1

listen only. To support a wide pipeline of practices

Speaker 2

and products, AmerisourceBergen is uniquely positioned only. To capitalize on the market opportunities provided by global pharmaceutical innovation as we drive growth in our business only and help our partners tackle some of the most critical challenges facing healthcare. We have a strong foundation in place across Our businesses and in June, we took another significant step forward by closing the Alliance Healthcare transaction And welcoming their talented team to the AmerisourceBergen family. The acquisition of Alliance Healthcare only. Our ability to provide innovative and global healthcare solutions specified pharmaceutical distribution and manufacturer services company with leading market positions In addition to the traditional wholesale business, Alliance Healthcare operates a range of leading The acquisition of Alliance Healthcare extends our distribution reach, builds on our market leading services capabilities and expands on our key differentiators.

Speaker 2

Specifically, AmerisourceBerlin's leading portfolio Our key anchor customers now includes a long term relationship with Foods in the U. K. And a network of independent pharmacies across Europe through the Aufeia Pharmacy Network. Since the completion of the transaction, We have gotten the chance to know both the business and the people at Alliance Health Care better, and we remain very positive only about the opportunity that this landmark achievement provides AmerisourceBergen as we are positioned and customer relationships to lead with market leaders in every segment and to supporting patient access wherever a prescription is needed. 2nd, AmerisourceBergen's leadership in specialty is further enhanced with key commercialization services in new markets.

Speaker 2

By leveraging the expertise and capabilities of our World Courier business, Along with alliances, Aloga and Alpura, we innovate our ability to be a differentiated solution provider This is complementary to the solutions that we provide at World Courier, which continues to play a key role in providing only. Global Specialty Logistics through growth traditional commercial offerings and direct to patient clinical trial capabilities. We remain dedicated to expanding on our leadership in specialty and to enhancing our capabilities to support global pharmaceutical innovation. 3rd, AmerisourceBergen focuses on delivering best in class services This fiscal quarter, we were selected as the Industry Leader Award winner at the 2021 SAP Innovation Awards Sustainable global pharmaceutical supply chain is vital and the ability to support pharmaceutical innovation Your global footprint with broad leadership and local expertise provides differentiated value for our partners. Only.

Speaker 2

AmerisourceBergen stakeholders recognize the value we create, the importance of our purpose and the critical nature of the service only and the infrastructure that we provide. 4th, AmerisourceBergen continues to evolve upon our history of corporate stewardship, which focuses on advancing our people and culture, protecting the company's financial health and ensuring long term sustainable value creation. With Alliance Healthcare, we are now an even more global and diverse company, and we are committed more than ever Advancing the value of our talent and culture. Over the past year, we have invested in enhancing our We recently launched our executive leadership initiative to accelerate the advancement and ongoing success only. Addressing the most pronounced leadership and representation gaps identified over the last several months following best in class research based approaches.

Speaker 2

In the future, we plan to provide dedicated development opportunities only. For high potential employees, our additional underrepresented groups, investing in our leadership development And talent and culture is important to our long term sustainable growth, which is supported by diverse and inclusive teams. This focus is important to ensuring we capture the value of our collective differences and reflect our social commitment strategy is foundational to AmerisourceBergen, our leadership, our Board and our people. Recently, AmerisourceBergen joined the Science Based forward initiative as we continue to align our business with best practice organizations around the world. At the local level, we continue to be deeply committed to our communities.

Speaker 2

This past year, we launched My Community Impact, only matching gifts and dollar for doers program, and we recently made it available to all global employees. Our philanthropic efforts have been recognized by Divercity and to rank us 8th in their annual 50th Best in Philanthropy rankings. As I close my prepared remarks today, I remain truly inspired by the commitment and performance of our team members only. You are now numbering 41,000. With their unwavering passion and support, AmerisourceBergen is well positioned only.

Speaker 2

To capitalize on our global footprint, to provide leading pharmaceutical distribution services and to leverage our expertise as an innovative commercialization services provider internationally. We remain confident in our pharmaceutical centric strategy, only. Our capabilities as partner of choice with market leading manufacturer services and our role in continuing the acceleration of pharmaceutical innovation. By providing differentiated value to our stakeholders, focusing on our customers, expanding on our leadership in specialty And executing, innovating and supporting pharmaceutical innovation globally, we are well positioned to create long term stakeholder value only mode for a more in-depth review of our results and updated financial guidance. Jim?

Speaker 3

Thanks, Steve, and good morning, everyone. Before I discuss our 3rd quarter results, I want to comment on the pharmaceutical distribution industry's continued progress The proposed settlement agreement represents an important step towards achieving a broad resolution of governmental opioid claims and aligns with the legal accrual the company recorded in the Q4 of its fiscal year ended September 30, 2020. AmerisourceBergen appreciates the enormity of the opioid epidemic and this broad Resolution is an important step toward delivering meaningful relief to communities across the United States. Turning now to our business. AmerisourceBergen remains focused on our differentiated and innovative value proposition to deliver long term growth and value creation to our stakeholders.

Speaker 3

Powered by our purpose driven team members, we will continue to execute on our pharmaceutical centric strategy on an enhanced global platform to serve both upstream partners and downstream customers. As we recently completed the acquisition of Alliance Healthcare in the quarter, I would like to welcome the Alliance Healthcare team to AmerisourceBergen. Having joined AmerisourceBergen myself through an acquisition and experienced several acquisitions during my tenure, I've seen firsthand the thoughtful and strategic approach AmerisourceBergen takes to successfully integrate acquired companies. We enjoy working with our incredibly talented new team members and learning more not only about their businesses, but also about how much we culturally have in common. As we have said since announcing the acquisition, Alliance Healthcare is a strong and efficient business and we look forward to working together to continue to provide innovative solutions to our customers and stakeholders.

Speaker 3

My remarks today will focus on our adjusted non GAAP financial results unless otherwise stated. Growth rates and comparisons are made against the prior year June quarter. For a detailed discussion of our GAAP results, please refer to our earnings release. I will provide commentary in 2 main areas this morning. First, I will review our adjusted quarterly consolidated results and our segment performance.

Speaker 3

2nd, I will cover the upward revision to our fiscal 2021 guidance. Turning now to discuss our 3rd quarter results. We finished the quarter with adjusted diluted EPS of $2.16 an increase of 17%, $53,400,000,000 up 18%, driven by revenue growth in both the Pharmaceutical Distribution Services segment and other, which includes Alliance Healthcare and our Global Commercialization Services and Animal Health Businesses. Consolidated gross profit increased 32% to $1,600,000,000 Driven by increases in gross profit in each operating segment. In the quarter, gross profit margin increased 33 basis points from the prior year quarter to 3.05%.

Speaker 3

This was primarily due to the acquisition of Alliance Healthcare, which has a higher gross profit margin, an increase in sales of specialty products Regarding consolidated operating expenses. Operating expenses were $996,000,000 up 38% year over year due to the addition of the Alliance Healthcare business and also includes the internal investments we are making across our business They ensure we continue to create differentiated value and support our long term growth. Turning now to consolidated operating income. Our operating income was $631,000,000 up 24% compared to the prior year quarter. This increase was driven by increases in both the Pharmaceutical Distribution Services segment and Other, Which I will discuss in more detail when I review segment level performance.

Speaker 3

Operating income margin grew 6 basis Net interest expense was $51,000,000 up 36% due to debt related to the Alliance Healthcare acquisition. Our effective income tax rate was 21%, up from 18.8% in the Q3 of fiscal 2020, 1.6% increase due to the dilution related to employees.com and the weighted average daily impact of the June issuance flow and cash. Our adjusted free cash flow was strong in our fiscal Q3, bringing our year to date free cash flow number to $1,200,000,000 while our cash balance was $2,600,000,000 This completes the review of our consolidated results. Now I'll turn to our segment results. Pharmaceutical Distribution Services segment revenue was $49,300,000,000 13% for the quarter, driven by increased sales of specialty products and solid performance broadly across our Pharmaceutical Distribution businesses.

Speaker 3

Across our distribution businesses, we are seeing better and earlier than expected utilization trends as there have been more normalized physician interaction patterns leading to new patient starts. Pharmaceutical Distribution Services segment operating income Increased about 13% to $484,000,000 AmerisourceBergen continued to benefit in the quarter from our leadership in specialty where there has been a notable return to pre COVID strength and continued positive biosimilar trends. I will now turn to other, which includes Alliance Healthcare, MWI, World Courier and Amerisource Bergen Consulting. Alliance Healthcare is in our results for the month of June and had strong performance out of the gate. In the quarter, other segment revenue was $4,100,000,000 up 128%, Excluding the impact of Alliance Healthcare, Global Commercialization Services and Animal Health revenue was up 22%.

Speaker 3

Other segment operating income was $147,000,000 up 77%, Excluding the impact of Alliance Healthcare, Global Commercialization Services and Animal Health operating income was up 21%, reflecting the solid fundamentals of the businesses. World Courier has continued its session on performance providing high touch specialty logistics around the globe. Despite challenges in global logistics Looking ahead, the business is highly complementary to Alliance Healthcare's Aloga and Algeria businesses, and we are excited to offer an integrated suite of solutions on our enhanced global platform to serve our manufacturer customers. Turning now to MWI. The pandemic has truly encouraged all of us to focus on the health and well-being of our communities and mode.

Speaker 3

And this includes our animal companions. Over 12,000,000 families in the U. S. Have gained a pet since the pandemic began. And since pet owners view their pets as family members, the focus on health and well-being is a positive market trend for our MWI companion business.

Speaker 3

In the Production Animal market, our investments in technology solutions Following the closing of the Alliance Healthcare acquisition back in June, we updated our 2021 guidance for And the weighted average share count impacted the 2,000,000 shares of stock that we delivered to Walgreens. Given the continued strong performance of AmerisourceBergen's businesses, we are again raising our EPS guidance call, reflecting growth of 16% to 18% from the previous fiscal year. We are also updating other financial guidance metrics for fiscal 2021, including a meaningful increase to our Operating expenses are now expected to be approximately $3,900,000,000 due to the Alliance Healthcare acquisition. As a reminder, when you consider your models, Align Healthcare has higher margins or gross profit, Operating expenses and operating income as evidenced by the update to our fiscal 2021 guidance for consolidated operating expenses to reflect the 4 months of Alliance Healthcare. Next, turning to operating income.

Speaker 3

We now expect Pharmaceutical Distribution operating income guidance to the low double digit growth range referral activity this quarter. This range also reflects our expectation for operating income in other Operating income growth for Global Commercialization Services and Animal Health Group is expected to be in the low double digit range for fiscal 2021, driven by the strong performance of the World Courier and MWI. Finally, turning to free cash flow. We have raised our free cash flow guidance to Approximately $1,700,000,000 up from approximately $1,500,000,000 As it pertains to fiscal financial guidance at the end of our current fiscal year. This approach allows for guidance to be fully informed by the output of our year end business planning process.

Speaker 3

That being said, we wanted to remind you of 3 important items from fiscal 2021 as you consider your models. 1st, through the end of June, the financial contribution from sales of COVID-nineteen therapies And the benefit from that exclusivity is not expected to repeat in fiscal 2022. 2nd, we will have Higher interest expense in fiscal 2022, driven by the debt related to the Alliance Health Care acquisition. 3rd, for the Q4 of fiscal 2021, we expect our weighted average shares to be almost 2 11,000,000 shares due primarily to the forward looking impact of the 2,000,000 shares of our stock delivered to Walgreens session at the close of the Alliance Healthcare acquisition. Our share count will continue to tick higher in 2022 due to normal employees.com related solution and the fact that we have committed to prioritize paying down $2,000,000,000 in total debt The strength of AmerisourceBergen is undeniable and is exemplified by our continued exceptional results quarter after quarter.

Speaker 3

This is the 6th quarter since the pandemic began and our results demonstrate the resilience and strength of our company. I am thoroughly impressed by the execution and performance across our businesses that has positioned us for continued success. And continue to deliver strong results. Before I conclude my prepared remarks this morning, I would like to touch And we continue to work diligently to build our corporate stewardship initiatives to ensure the work we are doing benefits all stakeholders. We are focused on continuing to build robust talent development programs so that all our team members feel they have opportunities to grow in Martin.

Speaker 3

In our communities, we're supporting non profit partners through our foundation to expand access to quality health care, promote health equity environmental stewards in the communities where we live and work through initiatives like our commitment to using sustainable packaging to reduce the use only on single use plastics and working closely with our partners to optimize delivery routes to minimize our greenhouse gas commission footprint. We look forward to providing further updates on our ESG progress as we continue to find ways to make a positive impact on the people, planet and communities where we live and work. As we focus in on the end of our fiscal year conference we have already had this year. First, our teams continue to execute and leverage our capabilities to create differentiated value

Speaker 2

for our

Speaker 3

stakeholders. 2nd, our future growth has been further solidified by our acquisition of Alliance Healthcare. 3rd, our purpose driven culture continues to empower our We'll continue to deliver long term sustainable value for all our stakeholders. As we look to the future, I am proud call. Thank you for your interest in AmerisourceBergen.

Speaker 3

Now I will turn the call over to the operator to start our Q and A. Operator?

Operator

Thank you. We will now begin the question and answer session. And the first question will be from Charles Rhyee with Cowen. Please go ahead.

Speaker 4

Yes. Thanks, guys. Congrats on the quarter and thanks for taking the question. I want to ask, last quarter, there was a lot of concerns around Generic deflation and the impact it might be having on you and the other distributors. Given the performance in the quarter, how should we think about The issue of generic deflation really in the context here of strong results in distribution both from a top line and an operating profit perspective.

Speaker 3

Yes, Charles, this is Jim and thanks a lot for that question. Generic inflation is It's trending relatively in line with our expectations and overall generic deflation rates are relatively in line with the last couple of years. But I think the key point I'd like to make in answering the question that you asked is that looking at Our business model is not as reliant on generic pricing as it once was in the past. And several years ago leadership of the company recognized the need to have more balanced profitability across the portfolio of pharmaceuticals And that rebalancing ensures that AmerisourceBergen receives fair compensation for the value we provide across brand, Generics and Specialty, especially as the market continues to shift to include more specialty. And so our alignment with strategic key anchor customers and our leadership in specialty continue to serve as Positive differentiators for our positioning and results.

Speaker 3

And just like you were saying and asking in your question, it's really kind of evidenced And this quarter's results as we talked about in our prepared remarks this quarter adjusted operating income was up Pharmaceutical Distribution operating income was up 13% year over year and we increased Our guidance for the full year for Pharmaceutical Distribution operating income from high single digits to low double digits and this is just one of the many drivers that enabled us to have the increase in EPS guidance of $0.20 to $0.25

Operator

Thank you. And the next question will be from Lisa Gill with JPMorgan. Please go ahead.

Speaker 5

Thanks very much. Good morning, everyone, and congratulations on a great quarter. Just want to understand a couple of things. One would be the comments around utilization. Did you have any pent up demand or do you feel like this is back to more utilization when we think about utilization.

Speaker 5

And then secondly, Jin, when we think about the Alliance, the original guidance that you gave around accretion and what we saw in the quarter, I know it was only a partial quarter impact for Alliance, but How did that come in versus your expectation?

Speaker 3

Yes, great. And so I'll answer Both of those. And so as we said in our remarks, we're seeing better and earlier than expected utilization trends. When we look at year over year Retail Rx trends, we see that Year over year growth rates are higher in our Q3 compared to the year over year growth rates in the first half. And so We think it's a combination of pent up demand and return to normal.

Speaker 3

And with regard to the Alliance question that you asked. Alliance had a strong start out of the gate. When we initially announced The completion of the acquisition in early June, we updated our EPS guidance to include a 0.45 $0.50 contribution from the business during the last 4 months of our fiscal year and we now expect That Alliance will contribute approximately $0.50 in those 4 months of fiscal 2021. Thanks.

Operator

And the next question will be from Ricky Goldwasser with Morgan Stanley. Please go ahead.

Speaker 6

Yes, hi, good morning. Thanks for all the details. So from everything we are hearing today, fundamentals are stable to positive And you have increased visibility, you have the sort of the building blocks across All your portfolios and Jim, you referred to a very balanced portfolio. So my first question is with All this kind of like now in place in the increased visibility. 1, how should we think about sort of steady state EBIT or EPS growth beyond sort of 2022 kind of like headwinds and tailwinds.

Speaker 6

And then my second question that relates to that sort of long term outlook, we just recently only We saw a biosimilar approval with an interchangeable status. I think that's something that we've been waiting for the industry, we've been waiting for a very long time. So how do you see this as kind of like long term implication of this approval? And then what areas do you think interchangeability

Speaker 3

Yes, great. I'll As we kind of think about the longer term, I think it's Kind of key to look at what we've been seeing in our businesses over the last quarter and several quarters. We're really saying just broad based performance across our businesses. And we've been talking about some time about specialty physician services And health systems for continuing to see really good performance there and also in community and specialty pharmacy, World Courier, only Wai, some of the things that have benefited us and will continue to benefit us are our industry leading customers. Only.

Speaker 3

It's really a differentiator for AmerisourceBergen and it's really across most of our business We have these industry leading customers that help with our long term growth. It's the leadership in specialty that is really benefiting us, has been benefiting us and will continue to benefit us. When we look at market trends, The biosimilar trends, the improvements in utilization, but really just kind of the strong end market trends, Whether it be in oncology, biosimilars, companion animal, those are the sorts of things which will really continue to benefit us only

Speaker 2

Ricky, hi. So Bison, AmerisourceBergen is You know, proud of the role that you play in being a really, really promoter of biosimilars for patient choice and affordability. It's a clear opportunity for us. Part B is the most impactful for us, Especially in oncology with now 40% share for Avastin and Ataxin among other key products. What's interesting, of course, in oncology is the well developed portfolio, services we have through our eye on GPO and the strong We have to community oncology practices and leaders.

Speaker 2

Also, biosimilar, as we pointed out, is positive driver For our services, our businesses including the Ash and Ink Center, where we focus on patient access, pharmaeconomics and adherence solution. Only Biostim is also becoming more positive in the health systems area. I just noted and talked about the first interchangeable product that is an A Part D product. It's in an important therapeutic area, which is diabetes. And of course, interchangeability will be more important for us when there's more than one product.

Speaker 2

Only It's a positive development and we are impressed on taking note of the FDA's flexibility and willingness to consider it considering the changeability, we think that it bodes well for the efficacy and The role that biosimilars will play in Pharmaceuticals in the future. So again, that Part B biosimilars are our sweet spot. So thanks.

Operator

And the next question will be from Steven Valiquette with Barclays. Please go ahead.

Speaker 7

Great. Thanks. Good morning. So with the updated free cash flow guidance from $1,500,000,000 to $1,700,000,000 do you have any color on how So that is stemming from the Alliance Healthcare assets versus the core operations. I might have missed that.

Speaker 7

Also when thinking about the annual run rates. Can you remind us of the approximate annualized operating cash flow contribution and also just any CapEx you expect tie to the just the acquired Alliance Health Care assets on a go forward basis once all the best settles. Thanks.

Speaker 3

Yes. So with regard to free cash flow, we are very pleased that we're raising guidance on so many fronts It's a trading value driver for us and we increased $1,500,000,000 to $1,700,000,000 And we're seeing good performance at both AmerisourceBergen and only. Alliance, but most of that increase is due to AmerisourceBergen because if you look at Alliance during the 4 months, we have nice contribution of free cash flow, But that's really largely offset by deal fees and expenses that to a large extent offsets the Alliance free cash flow during the 4 months. And so most of that increase is attributable to Amerisource And as we look at Alliance long term on the free cash flow front, the statement that we Maybe at the closing of the deal is that we expect our combined free cash flow to be 1 point 2, 5 times what it would have been standalone for AmerisourceBergen. And then on, you asked about that CapEx and our CapEx guidance for the year remains at approximately 400,000,000

Speaker 2

Okay.

Operator

Thanks. And the next question will be from Jalendra Singh with Credit Suisse. Please go ahead.

Speaker 2

Yes, thanks and congrats on a good quarter. Last quarter, you guys called out seeing up to 40% utilization for biosimilars on the oncology side. Curious how that trended in the current quarter and what some of your near to medium term expectations are for utilization the line. Yes. We expect that the trends will continue.

Speaker 2

I just the answer to Ricky's question, We talked about that same 40% market share for 2 of the most prominent oncology products. And we believe that this will continue to be a positive trend and the innovative products continue to play a role and through contracting and That's where organizations like our Ion GPO are very important. But there's no doubt that the trend for biosimilar adoption is intact

Operator

Thank you. And the next question will be from Eric Percher with Nephron Research. Please go ahead.

Speaker 3

Thank you. Appreciate the initial commentary on fiscal year 2022 and the fiscal year 2021 considerations. I'm curious when you look at 'twenty one and think about core growth and core growth as you come out of the pandemic

Speaker 1

And some

Speaker 3

of the puts and takes around generics and biosimilars. Do you believe that core growth is actually higher As we look into 2022 than it was pre pandemic. And my follow-up there would be when we look at The other business in MWI, certainly World Courier benefited during the pandemic. Does Is there a headwind going forward or does that begin to or does that sustain? Yes.

Speaker 3

So with regard to growth rates and with regard to fiscal year 2022, Eric, we'll provide comprehensive guidance at the end of our fiscal year after we completed our year end business planning process And we won't be getting into that in any sort of detail today. I went through some puts and takes in my prepared remarks. I won't go through those. Again, I will just comment that we're seeing good strength and momentum across Our businesses and really kind of the special thing is just how broad based it is across our businesses Both in Pharmaceutical Distribution and in other being driven by the industry leading customers, leadership in specialty, biosimilars, improvements we're seeing in utilization and that will all inform the guidance that we put out at the end of our fiscal year. I'll talk a little bit about other and then I'm sure Steve will want to get into more detail.

Speaker 3

In one of the businesses and others are MWI business. And I think some of the benefits that we've seen there during the pandemic that increased pet ownership, I mean that's going to have legs and continue to enable growth in that business over the longer term. Steve? Yes. Eric, thanks for the question

Speaker 2

on World Courier. We cannot underscore enough what a fabulous job they're doing. The environment for them is really challenging if you think about the global context that they operate in and all the different pandemic restrictions. And a lot of the business that we do there is based on international freight and which is not as easy to obtain as it used to be. So only We recently visited with the team and that there was we had a short visit to the U.

Speaker 2

K. When the restrictions were lifted. It was wonderful to not only meet the Lions team, but also to see our World Courier leadership team and really give them a pat on the back because they have done a fabulous job Growing the business and meeting the needs of the global clients throughout this very difficult period and in many cases shifting the business model At home, we've owned the business for 8, 9 years now and I have to tell you this is a wonderful All part of AV that keeps on growing and keeps on finding new ways to maximize the expertise in clinical trial logistics And help the global pharma partners meet their innovation needs. And the last thing I'll say is it's a wonderful opportunity to share knowledge between Alliance Health Care and World Careta. So we're very positive on that business.

Operator

Thank you. And the next question will be from Kevin Caliendo with UBS. Please go ahead.

Speaker 3

Sure. First, I was we've gotten a lot of questions about freight and shipping costs and those increasing. Wondering if you're seeing any impact from that in any way shape or form or how that might impact guidance going forward. And just as sort of a follow on to the biosimilar question. Are you seeing any change in the spreads or the profitability on biosimilars going forward?

Speaker 3

Are you expecting that to happen? Thank you.

Speaker 2

I can take part of it. On the biosimilars part, honestly, only. We have we've said that it's somewhere between brand and generic processing. And of course, every single product is different depending on the number of competitors, So it's a large category. It's becoming a larger and more interesting category for us.

Speaker 2

And Jim can give more comments about that. But as expected, we expect that the positive trends will continue and This is becoming an important driver for patients

Speaker 3

and for physicians and for AmerisourceBergen. Yes. And you had asked about Some of the input costs. And yes, there is inflation in things like labor and transportation. And And that's I think evident throughout the economy and something that all businesses are experiencing only And we certainly see it.

Speaker 3

But I think it's really important to say that that's something that we've been Experiencing this past quarter and of course this past quarter, we saw the 24% increase in operating income, 13% in Pharmaceutical Distribution. If we exclude Alliance Commercialization in Animal Health, which is a labor intensive group, the 21% increase in operating income and those sorts of input costs are all

Operator

And the next question is from George Hill with Deutsche Bank. Please go ahead.

Speaker 3

Steve, I was just hoping that you could talk a little bit more about the opportunities you see in the manufacturer services business and kind of where you think about the white spaces there I'll post the close of the Alliance acquisition.

Speaker 2

Thank you, George. We're tremendously excited because Just meeting with the team, I'll spend so much time pre close and negotiations. When we get together, The intense discussions we have about opportunities and how do we take all the combinations of businesses that we have and really make 1 equal 3, I mean that's old fashioned, but that's essentially what we're trying to do. And there's tremendous knowledge. If you look at Our corporate team is focused in Weybridge in the U.

Speaker 2

K. And that is the headquarters. The U. K. Is also the headquarters for World Courier.

Speaker 2

But If you look at how AmerisourceBergen is positioning ourselves with Alliance, we have a good mixture of developed European markets and higher growth emerging markets. It's very important priority for us to develop the services and innovative lines in those markets. World Korea has A small expertise and a small presence in almost all the markets that Alliance is already in. But We set up a lot of our commercialization businesses to help smaller companies launch products globally. And I sincerely feel This acquisition is going to give us the opportunity to really have the presence, have the boots on the ground, the local market knowledge To look at both the innovative side, the distribution side and the commercialization side, to benefit the patients we serve and the manufacturers that

Operator

Thank you. Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to Steve Collis for any closing remarks.

Speaker 2

So thank you for your time today. AmerisourceBergen is a purpose driven leading global healthcare company With a foundation in distribution, and we continue to advance our role as a key pillar of pharmaceutical innovation and access. To provide innovative and global health care solutions for our partners. Our results and guidance clearly exemplify our performance, execution

Operator

session. You may now disconnect.

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Earnings Conference Call
Cencora Q3 2021
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