The paragraph is an introduction to Cencora's Q4 Full Year 2024 Earnings Call. Drew, the operator, introduces the event, mentioning a Q&A session to follow. Bennett Murphy, Senior VP, Head of Investor Relations, opens the call, joined by Bob Mauch, President and CEO, and Laz Krikorian, Senior VP, and Chief Accounting Officer. They will discuss financial results, non-GAAP measures, and forward-looking statements, with reference to their website and SEC filings for details. They emphasize the management's current expectations, associated risks, and state that the call cannot be rebroadcast without permission. They request participants to limit questions to one each to accommodate everyone within the allotted time.

In the earnings call for Cencora's fiscal 2024 fourth quarter, it was announced that CFO Jim Cleary is unable to attend due to illness after completing the New York City Marathon. His remarks will be delivered by Chief Accounting Officer Laz Krikorian. The newly appointed President and CEO expressed excitement about leading a growth-oriented company that achieved a 15% increase in adjusted earnings. Cencora continues to strengthen its global customer relationships and enhance its capabilities, particularly in specialty pharmaceuticals, a key differentiator. The company is focused on strategic investments, partnerships, and leveraging data to support its robust performance and strategy execution.

The paragraph discusses the expansion of Cencora's capabilities in the pharmaceutical industry, highlighting the acquisition of Retina Consultants of America (RCA), a leader in the Retina MSO space. This move enhances Cencora's relationships with community providers and supports innovative therapies, aligning with their strategic priorities of market leadership, innovation, and improved patient outcomes. The acquisition also complements their investment in OneOncology and strengthens their position in specialty care. Cencora values RCA's clinical research expertise and its alignment with their focus on pharmaceutical innovation amidst a complex operating environment for community providers.

The paragraph highlights Cencora's strategic focus on aligning with partners to navigate industry changes and enhance patient care. By investing in global distribution infrastructure and technology, Cencora aims to generate actionable data for improved efficiency and regulatory compliance. Their forward-thinking approach allows them to leverage healthcare dynamics for the benefit of their customers, focusing on strategic partnerships and key markets for growth. They actively listen to and anticipate customer needs, enhancing services such as pharmacy solutions to optimize operations and improve financial performance. For example, they have increased support in the procurement process.

The paragraph discusses Cencora's strategic efforts to enhance customer experience through advanced analytics, increase automation in its European distribution centers, and efficiently operate its global specialty logistics business. While facing challenges in the outsourced pharma services market, resulting in a goodwill impairment for the PharmaLex business, Cencora remains committed to its long-term growth strategy. The company aims to be a partner of choice for new product development and commercialization by offering a range of services. The paragraph also emphasizes the strength and dedication of Cencora's global team in driving business success.

The paragraph emphasizes Cencora's commitment to investing in its people and fostering diverse teams to achieve the best results. As the company looks towards fiscal 2025, it plans to build on its strong team and maintain its track record of impressive performance by equipping employees with necessary resources. The new leadership, including a Chief Data and Information Officer and a Head of Strategy, aims to enhance their customer-centric approach and innovative mindset. With a robust strategy and portfolio, Cencora remains well-positioned in the healthcare sector, focusing on integration and differentiated capabilities across global markets. The company values its employees' dedication and prides itself on strategic customer partnerships.

The paragraph provides an overview of Cencora's financial performance for the fourth quarter and the entire fiscal year 2024. Laz Krikorian, speaking on behalf of an absent Jim, highlights the company's ability to seize opportunities through its pharmaceutical-centric strategy and strong customer relationships. Cencora achieved an adjusted diluted EPS of $3.34 in the fourth quarter, a 17% increase from the previous year, and $13.76 for the full fiscal year, a 15% increase year-over-year. The consolidated revenue for the fourth quarter rose by 15% to $79.1 billion, fueled by growth in both the US and International Healthcare Solutions segments. Meanwhile, the consolidated gross profit increased by 7% to $2.5 billion, primarily driven by the US segment's performance.

The paragraph discusses the financial performance of the company in the recent quarter. The consolidated gross profit margin decreased to 3.1% due to the growth of the US Healthcare Solutions segment, which has a lower margin, and pressure from low-margin GLP-1 product sales and reduced sales of high-margin COVID-19 therapies. Operating expenses rose by 7% to $1.6 billion to support revenue growth, while operating income increased by 6% to $851 million, driven by robust growth in the US segment. Net interest expense dropped by 66% to $21 million due to strong free cash flow, higher investment rates, and reduced interest from foreign borrowings and the divestiture of a subsidiary in Egypt. The effective tax rate for the quarter was 20.3%, leading to a full-year rate of 20.8%.

In the fourth quarter, the company's diluted share count decreased by 3% due to $500 million in share repurchases, including $250 million from Walgreens Boots Alliance. The US Healthcare Solutions segment saw a 16% revenue increase to $71.7 billion, driven by strong prescription trends, especially GLP-1 products, and increased specialty product sales. GLP-1 product sales rose by $3.1 billion, marking a 55% year-over-year increase. Excluding GLP-1 sales, revenue growth was 10%. Operating income in this segment grew 10% to $697 million due to higher distribution volumes. The International Healthcare Solutions segment reported $7.4 billion in revenue, a 6% increase (8% on a constant currency basis).

The paragraph discusses the financial performance of Cencora's International Healthcare Solutions segment, which saw a 9% decrease in operating income due to higher technology expenses in its European distribution and lower income in its Canadian business, partially offset by positive results in global specialty logistics. It also addresses a $418 million goodwill impairment for PharmaLex, attributed to lower demand from pharma and biotech for outsourced services. Despite this, PharmaLex remains a strategic asset. The impairment affects only GAAP results, not non-GAAP adjusted results. For fiscal year 2024, consolidated revenue rose 12% to $294 billion, driven by 13% growth in the US segment and 4% in the International segment. Operating income increased by 11% to $3.6 billion, with the US segment contributing to 13% growth through specialty product sales, sales to major customers, and COVID-19 vaccines.

The paragraph discusses the financial performance and projections of a company for its fiscal 2024 and 2025. In fiscal 2024, commercial COVID-19 vaccines contributed to significant operating income growth, particularly for International Healthcare Solutions, which saw a 3% increase on a reported basis and 9% on a constant currency basis. The company generated $3.1 billion in adjusted free cash flow and returned $1.9 billion to shareholders through dividends and share repurchases. They also announced an 8% increase in their quarterly dividend. For fiscal 2025, guidance is provided on an adjusted non-GAAP basis, with specific details outlined in their earnings presentation. Key focus will be on adjusted diluted EPS and components of earnings growth.

In fiscal 2025, the company anticipates adjusted diluted EPS growth of 8% to 10%, driven by share repurchases and business momentum, while not accounting for the RCA acquisition. Despite challenges from declining COVID product demand and the potential loss of an oncology customer, the company expects consolidated and segment revenue growth of 7% to 9% and operating income growth of 5% to 6.5%. The US Healthcare Solutions segment will benefit from pharmaceutical utilization trends and efficiencies, offsetting headwinds, while the International Solutions segment will see gains from key businesses and reduced IT expense growth. Interest expense details follow this discussion.

The paragraph outlines financial expectations for fiscal 2025, excluding the impact of the RCA acquisition. The company anticipates interest expenses between $150 million and $170 million, an effective tax rate of about 21%, and an average share count of approximately 196 million due to significant share repurchases. Capital expenditures are expected to be around $600 million, while adjusted free cash flow is projected to be between $2 billion and $3 billion. The company emphasizes continued strong cash flow to support dividends and capital allocation priorities, highlighting the RCA acquisition as aligning with strategic imperatives. The acquisition is planned to be funded through a mix of debt and cash on hand.

The paragraph discusses Cencora's financial and strategic outlook. The company plans to fund 20% of an acquisition from cash on hand and expects the acquisition to positively affect earnings by $0.35 per share in the first 12 months, even after financing costs. Cencora is focused on maintaining a strong credit rating and will prioritize reducing leverage after the transaction. The company is positioned for growth in fiscal 2025, driven by a strong, purpose-driven team and strategic execution. During a call, Lisa Gill from JPMorgan asks the CEO, Bob, about his strategy in light of a new President and a likely Republican Congress in 2025, seeking insight into potential changes during his first year as CEO.

In the paragraph, Bob Mauch expresses gratitude to the Cencora Board of Directors for his new role and emphasizes that the company remains strong and focused on executing its strategy through 2024. He acknowledges the dynamic nature of the market but believes the company's focus areas are appropriate. Despite not needing a strategy change, there is ongoing improvement in operational and strategic areas, with an emphasis on leveraging existing strengths, enhancing talent, and ensuring customer insights are integrated into decision-making. Mauch also mentions the company's experience in navigating different healthcare and pharmaceutical policies across various administrations.

The paragraph is part of a conference call where Michael Cherny from Leerink Partners asks about the company's growth expectations and headwinds, specifically concerning COVID-19 comparisons and customer losses. Bennett Murphy responds by emphasizing that the U.S. Healthcare Solutions segment anticipates continued operating income growth in 2025, driven by pharmaceutical utilization trends and growth in key markets like specialty. This provides a solid foundation moving into the upcoming years. Furthermore, Murphy indicates confidence in managing potential headwinds and maintaining strong baseline growth.

The paragraph discusses a company's strategy amidst COVID-related challenges, including a potential loss of an oncology customer, which impacts 2025 expectations. Without the negative impact from commercial COVID vaccines, the U.S. Healthcare Solutions segment's top-end operating income would be 8%, rather than 6.5%. Elizabeth Anderson from Evercore ISI asks about the company's focus on MSO (Management Services Organization) capabilities. Bob Mauch responds, highlighting the importance of the MSO space as part of their strategy, aligning with their commitment to being involved in the specialty pharma market.

The paragraph discusses Cencora's strategy of supporting community and specialty providers, particularly through Management Services Organizations (MSOs), which align with the company's long-standing commitment to assist these providers. This support is crucial as the healthcare landscape becomes more challenging for community and specialty practitioners. George Hill from Deutsche Bank asks about the implications of the Inflation Reduction Act (IRA) changes on Part B drug costs and the profitability of oncology practices, questioning how Cencora plans to support these practices amidst potential legislative changes. While acknowledging the matter is still a few years away, he seeks initial insights on the company's strategy to address potential challenges.

In the paragraph, Bob Mauch discusses the impact of the IRA on Part B and Part D reimbursements, emphasizing that it is uncertain but likely manageable for providers and Cencora. He mentions ongoing efforts to model various scenarios and highlights that the impact is more on reimbursement rather than list price. Bob also refers to their partnerships, like with RCA and OneOncology, and suggests that innovation can mitigate potential negatives. Following this, Eric Percher from Nephron Research asks about the uptick in the specialty trend in Q3, noting the higher margin specialty distribution with providers and health systems, and inquires whether there's an acceleration in Q3 or if it's a continuation of previous trends.

In the paragraph, Bennett Murphy discusses how the fourth fiscal quarter displayed similar growth trends as seen throughout fiscal year '24 and in previous years, particularly emphasizing the specialty market for physicians and health systems as a key growth driver. He indicates this is a continuation of positive trends rather than a deviation. The operator then introduces Stephanie Davis from Barclays, who congratulates Bob Mauch on his new position and inquires about the RCA transaction, specifically its expansion beyond oncology into other specialties. Bob Mauch explains that Cencora is focusing on specialty expansion into areas with growth potential and innovation, alongside Part B components they can support, noting their historical leadership in oncology and Retina.

The paragraph discusses the strategic decision to expand investments in the retina specialty, highlighting the inclusion of urology in OneOncology. It emphasizes the growth and innovation in the retina market, noting RCA's position as a leader with world-class clinicians and researchers. In response to Kevin Caliendo's question about potential expansion into ophthalmology, Bob Mauch reaffirms their investment in RCA as a market leader in retina and indicates growth will occur by adding more physicians. The mention of market opportunities and biosimilars suggests a favorable outlook for growth in this space.

The paragraph discusses the pharmaceutical pipeline in the area of Retina, highlighting the role of biosimilars and new innovations in improving patient outcomes. It emphasizes the importance of the clinical excellence and research capabilities of RCA, which not only treats a large number of patients but also plays a crucial role in conducting clinical trials and facilitating patient access to these trials, thereby accelerating the introduction of new products to the market. It then transitions to a Q&A session where Eric Coldwell from Baird inquires about market share in the ophthalmology specialty products sector. Bennett Murphy responds, affirming their leadership in the market, particularly within the segment they have long operated in, mentioning Cencora's focus on growth in retina and ophthalmology alongside oncology. Finally, Erin Wright from Morgan Stanley asks about the World Courier's demand trends and customer base.

The paragraph addresses investment strategies, customer relationships, and contract renewals within the healthcare and pharmaceutical sectors. Bennett Murphy confirms the continuation of a strong relationship with Express Scripts Cigna, noting no changes there. He acknowledges some softness in the World Courier market due to reduced clinical trial development but highlights it as a growing business. Bob Mauch emphasizes the strength of World Courier in clinical trial logistics and the strategic importance of their partnership with Walgreens. Despite a downturn from peak 2021 trial volumes, they remain optimistic about future growth and are well-positioned in both World Courier and PharmaLex.

The paragraph discusses a productive and ongoing relationship between Cencora and Walgreens, focusing on collaborative efforts to drive business growth, improve efficiency, and develop new programs that benefit both companies. Bennett Murphy emphasizes Cencora's strategy of aligning resources with customer strategies, including those of Walgreens. Murphy also highlights Cencora's focus on strengthening its specialty services and expanding offerings for manufacturers, citing the OneOncology investment and the PharmaLex acquisition as key assets. Lastly, the discussion pivots to a revenue acceleration inquiry from Allen Lutz of Bank of America, with Lutz noting that the growth does not appear to stem from the specialty segment accelerating.

The paragraph contains two main discussions featuring Laz Krikorian and Bob Mauch. Laz Krikorian addresses the strong growth in the US Healthcare business mainly driven by GLP-1 sales, with specialty products and distribution also contributing significantly. Meanwhile, Bob Mauch responds to concerns raised by Senator Warren regarding the ownership of group practices or MSOs by distributors. He emphasizes respect for governmental processes and clarifies that the MSO model aims to support community providers, which tend to be more cost-effective sites of care, aligning with their long-term focus.

The paragraph discusses the benefits of Cencora's involvement in the MSO (Management Services Organization) space, highlighting improved patient access and cost effectiveness in healthcare. Bob Mauch expresses gratitude for his position and confidence in the company's strong culture and diverse portfolio. He commits to continuing effective operational and strategic execution. The call concludes with thanks to participants.

This summary was generated with AI and may contain some inaccuracies.