The paragraph is an introduction to Cencora's Fiscal 2025 Second Quarter Results Conference Call. Lucy, the operator, opens the call and hands it over to Bennett Murphy, the Senior Vice President and Head of Investor Relations and Treasury. Bennett introduces himself and mentions the key executives present, including Bob Mauch, the President and CEO, and Jim Cleary, the Executive Vice President and CFO. He states that they will be discussing non-GAAP financial measures and forward-looking statements, with relevant documents available on their website. He also notes that there will be an opportunity for participants to ask questions, encouraging one question per participant to accommodate as many people as possible. Finally, Bennett hands the call over to Bob Mauch to continue.

In Cencora's fiscal 2025 second quarter earnings call, the company reported strong performance, with a 10% revenue growth and a 16% growth in adjusted diluted EPS. Leveraging their pharmaceutical-centric strategy, Cencora has raised its fiscal year guidance, anticipating continued strong execution. The company is expanding its healthcare solutions, focusing on three main areas: enhancing patient care through expertise and insights, deepening customer partnerships by understanding customer needs, and strengthening global leadership in specialty medications. Cencora's extensive data capabilities allow it to transform insights into actionable solutions, supporting pharmaceutical commercialization and access within the healthcare ecosystem.

The paragraph highlights two key examples of progress in engaging with industry stakeholders and strengthening partnerships. Firstly, Cencora supports the resilience of independent pharmacies through advanced analytics, helping them identify business opportunities and address care gaps. This effort is crucial as approximately 30 million Americans live in pharmacy deserts. Secondly, Cencora uses dispensing insights to inform biopharma partners about product trends, as exemplified by their work in bladder cancer treatment. The company is expanding its data insights services and strengthening relationships across the pharmaceutical supply chain to enhance healthcare outcomes.

Cencora is focused on understanding customer strategies and enhancing its capabilities by actively participating in a variety of industry events. The company engaged with community pharmacies, oncology practices, chain drug stores, and biopharma companies to gather insights and strengthen partnerships. Cencora showcased its capabilities and partnerships at a specialty pharma conference and participated in panels on policy and healthcare access. The company's leaders also met with legislators in Washington, D.C., to highlight pharmacists' crucial role in communities. Furthermore, they collaborated with oncology partners to advocate for better patient outcomes. These efforts aim to deepen Cencora's global leadership in specialty medications and improve service to partners and patients.

The article discusses Cencora's strategic expansion in the specialty pharmaceutical sector, focusing on its integrated U.S. and European 3PL services. By combining local expertise with global reach, Cencora aims to position itself as a preferred partner for pharmaceutical manufacturers. The company is enhancing its capabilities in key European markets and strengthening its specialty offerings in the U.S. through partnerships with health systems. These efforts support its role in distribution and comprehensive patient care as specialty medication use rises. Financial growth is driven by the U.S. segment's size and organic expansion, while the company navigates challenges in the international market but remains optimistic about future opportunities.

The paragraph discusses Cencora's performance and future strategy, emphasizing a focus on growth and innovation without complacency. The company is committed to building capabilities and partnerships for long-term success, investing in talent and digital productivity, and creating value for stakeholders. Jim Cleary then provides an update on Cencora's financial performance in the second fiscal quarter, noting strong results driven by a pharmaceutical-centric strategy and growth in specialty areas. Due to strong performance, Cencora is raising its full-year guidance for adjusted operating income and EPS. Consolidated revenue for the quarter was $75.5 billion, a 10% increase mainly from U.S. revenue growth.

The paragraph outlines the financial performance and key figures for a company's recent quarter. The Healthcare Solutions segment drove revenue growth, particularly with GLP-1 products, with total gross profit reaching $2.9 billion, an increase of 15%. Gross profit margin increased by 16 basis points, partly due to the acquisition of Retina Consultants of America (RCA), which also elevated operating expenses by 15% to $1.7 billion. Operating income reached $1.2 billion, up 15%, driven by strong performance in the Healthcare Solutions segment. Net interest expense rose to $104 million due to new senior notes and a term loan for the RCA acquisition. The effective tax rate was 20.8%, with expectations of a full-year rate below 21%.

The paragraph discusses financial and operational results, highlighting a 3% decrease in the diluted share count due to $1 billion in share repurchases, with no further repurchases anticipated as focus shifts to debt reduction after acquiring RCA. The company ended March with a $2 billion cash balance and slightly below $200 million year-to-date adjusted free cash flow, expecting full-year adjusted free cash flow between $2 billion and $3 billion. The U.S. Healthcare Solutions segment saw an 11% revenue increase to $68.3 billion, driven by strong utilization trends and growth in GLP-1 and specialty product sales. GLP-1 sales rose 36% year-over-year but declined 10% sequentially. Excluding GLP-1 sales, revenue growth was 9%. The RCA acquisition did not significantly increase U.S. revenue due to sales from the specialty physician services business to RCA being eliminated in consolidation.

In the Healthcare Solutions segment, operating income rose by 23% to $1.0 billion, driven by growth in Human and Animal Health distribution and RCA's contributions, despite a smaller-than-expected COVID vaccine headwind. Strong performance was noted in specialty sectors, aided by high utilization in health systems and the uptake of biosimilars. Higher-than-expected COVID-19 vaccine sales reduced the headwind. In the International Healthcare Solutions segment, revenue increased to $7.2 billion, a 1% rise on a reported basis and 6% on a constant-currency basis, due to growth in European distribution. However, operating income fell by 17% due to a global specialty logistics slowdown and difficult comparisons due to prior price adjustments in a developing market. Despite these issues, the European distribution business performed well, especially in 3PL. The paragraph concludes by indicating that the fiscal 2025 guidance expectations will be on a non-GAAP adjusted basis, except for specific metrics.

The paragraph outlines the revised fiscal 2025 EPS guidance, increased to a range of $15.70 to $15.95, reflecting a growth of 14% to 16% due to a strong operating performance in the U.S. Healthcare Solutions segment and reclassification of RCA's equity as a contingent liability. This change contributes to a higher-than-expected EPS, with no impact on operating income. The guidance assumes full consolidation of RCA, without a non-controlling interest reduction. Revenue guidance remains unchanged with expected growth of 8% to 10%, although the International Healthcare Solutions segment's revenue growth outlook is adjusted to 3% to 4%, down from 4% to 5%. The company is pleased with the integration of RCA and its potential for positive patient outcomes.

The company has adjusted its expectations for revenue and operating income growth. The International Healthcare Solutions segment's revenue growth is now expected to be 6% to 8%, down from 7% to 9%, due to factors like tougher market comparisons and biosimilar competition. Consolidated and U.S. Healthcare Solutions revenue growth is also anticipated to be at the lower end of their ranges. However, despite lower revenue growth, profit margins are positive. Operating income growth projections have improved, with consolidated growth now expected to be 13.5% to 15.5%, and U.S. Healthcare Solutions at 17.5% to 19.5%, reflecting strong performance and pharmaceutical utilization. Conversely, the International Healthcare Solutions segment is expected to see an operating income decline of 4% to 1% due to demand softness in clinical trials and pharma services, partially mitigated by currency impacts. On a constant-currency basis, this segment's operating income is expected to be down 3% to flat.

The paragraph is a segment of a financial call discussion. After providing updates on share count expectations for Cencora, the speaker concludes the company's strong quarterly financial performance and the foundational role of team members and partnerships in driving success. The focus on team development, capability enhancements, and productivity is emphasized. Elizabeth Anderson from Evercore ISI asks about the strong performance of the U.S. Healthcare business's AOI (Adjusted Operating Income) and its future prospects. Bob Mauch responds, highlighting Cencora's strong long-term market positioning, especially in the specialty pharmaceutical sector, and expresses confidence in continued performance.

The paragraph discusses Cencora's strong positioning and innovation in the pharmaceutical industry, particularly with biopharma manufacturers and providers. The company is well-placed across various care sites, from large to small pharmacies, and emphasizes the importance of their purpose-driven team and their commitment to long-term innovation and partnerships. Cencora leaders actively engage with industry stakeholders to ensure they meet and exceed customer needs, fostering a growth mindset. This strategic positioning and commitment to learning and innovation are expected to sustain their performance in the long term.

In the paragraph, Michael Cherny congratulates the company on its strong performance and inquires about the drivers of growth in specialty services at Cencora. Jim Cleary responds, acknowledging the impressive U.S. business results, particularly attributing the Q2 success to organic growth from the U.S. distribution business. He highlights that this growth is fueled by utilization trends and strong sales of specialty products to physician practices and health systems. Additionally, Cleary notes the importance of recent strategic moves, including the acquisition of RCA and investment in OneOncology, as a natural progression in their specialty business, enhancing their capabilities in distribution and value-added services like GPO.

The paragraph discusses the company's strategy and future plans, particularly in the MSO (Management Services Organization) space, where they aim to enhance services for their existing customer base. Bob Mauch emphasizes the company's commitment to investing in its strengths, highlighting the MSO expansion as an example. The discussion then shifts to a question from Lisa Gill of JPMorgan about potential tariff implications from the Trump administration. She inquires about the impact on the company's branded and generic business segments, particularly regarding price changes and their business economics. Jim Cleary responds by acknowledging the company's ongoing monitoring of tariff developments in the pharmaceutical market.

The paragraph features a corporate discussion addressing the impact of tariffs on a pharmaceutical-centric business. The speaker notes that their analysis has not shown any material impacts on the business due to tariffs, emphasizing their focus on ensuring patient access to medications and supporting the supply chain. They also advocate for customers' proper reimbursement for healthcare services. Following this, George Hill from Deutsche Bank asks a two-part question, requesting details on how RCA impacts gross margin expansion and clarity on growth in specialty drugs, specifically comparing the U.S. drug business under Part B versus Part D.

The paragraph discusses the impact of RCA on Cencora's financial results. RCA, being a higher-margin business than Cencora's core distribution operations, significantly enhances both gross profit and operating margins due to the internal elimination of certain sales to prevent double-counting. Initially, Cencora's guidance included a reduction in EPS expectations due to a non-controlling interest. However, after consolidation and an accounting assessment, RCA's financial involvement was classified as a contingent liability, not a non-controlling interest, leading to a higher-than-expected EPS contribution without affecting operating income. The EPS guidance increased by approximately $0.14 due to this accounting determination, with most of the guidance increase attributed to the core U.S. distribution business, offsetting international decreases.

In the article's paragraph, the speaker, Charles Rhyee, addresses a decline in international guidance, specifically in the specialty logistics business where trial activity is subdued. Rhyee asks for more details on this softness, pointing out the broader context of potential tariffs and regulatory actions affecting the pharma market. He inquires about insights from pharma clients regarding business development and clinical trial starts and seeks clarification on whether the subdued activity is due to delays. Jim Cleary acknowledges the question and appears ready to provide additional context.

The paragraph discusses the challenges faced by the International Healthcare Solutions segment due to subdued clinical trial activity, resulting in lower demand for global specialty logistics and early-stage pharma consulting projects. This slower-than-expected rebound has led to reduced operating income guidance for the segment. However, the company remains optimistic about its end-to-end service offering, which is gaining traction with manufacturers, and believes it is well-positioned to capitalize on future demand recovery. Additionally, Eric Percher from Nephron Research asks about the profitability and opportunities within the MSO operations, implying an interest in understanding the income streams and market risks. Bob Mauch responds confidently about the potential within the MSO space.

The paragraph discusses the integration of services between an oncology practice and a retina specialist, emphasizing the complementary nature of these services as they expand. The speaker highlights their strength in distribution and GPO capabilities, enhanced by adding MSO services to support physicians. They express excitement about future growth opportunities, particularly expanding clinical trial services from RCA to OneOncology, benefiting both biopharma partners and providers. The conversation shifts to Steven Valiquette from Mizuho Securities, who inquires about the impact of subdued clinical trial activity on their International Solutions. He asks whether the slowdown affects specific customers or is widespread and seeks an estimate of the percentage decline, whether single or double-digit. Bob Mauch responds that the activity is market-based.

The paragraph discusses the current market trends in the biopharmaceutical industry, specifically focusing on the decline in clinical trial starts over the past few years, which is expected to rebound. The company is engaging with biopharma companies on a range of services, including consulting and logistics. While the industry saw peak trial activity during the COVID-19 pandemic, activity has since decreased. The company believes it is well-positioned to be a preferred partner as the market recovers. Following this discussion, Allen Lutz from Bank of America asks about growth in different verticals, such as oncology and retina, and utilization rates from 2024 to early 2025. Bob Mauch responds, noting that while specific commercial components aren't broken out, the performance is broad-based.

The paragraph discusses the company's focus and strong performance in the specialty healthcare space, particularly in oncology. The speaker emphasizes their well-positioned growth across various sites of care, including health systems, and highlights their efforts to add value for biopharma partners and providers. Jim Cleary notes the company's strong performance in the first half of the year, leading to an increase in operating income guidance. Daniel Grosslight from Citi inquires about the increased attention on health systems this quarter. The speaker queries whether there is specific strength in health systems on the provider side and asks about any near-term investments needed to support this channel.

In the paragraph, Bob Mauch explains that the focus on health systems is to demonstrate their strong position for specialty growth across various sites of care. He mentions their investments in community practices and collaboration with health systems and other customers to capture specialty growth. By highlighting this broad-based positioning, Mauch expresses confidence in their ongoing growth. Following this, Kevin Caliendo from UBS asks about the increase in EPS guidance, specifically the contributions from RCA and how the impact of COVID was lower than expected. He seeks clarification on whether the improvement is due to better economics, cost management, or a change in mix, aiming to understand the source of the guidance upside.

In the paragraph, Jim Cleary responds to a question about the factors influencing an increase in EPS guidance for their company. He explains that the anticipated impact of COVID was less severe than expected, with a headwind of $15 million instead of the forecasted $30 million. He attributes the improved guidance to a favorable business mix, highlighting the growth of their specialty and biosimilar segments, which contribute to higher margins. This results in operating income growth outpacing revenue growth. Cleary acknowledges the positive guidance update and expresses gratitude for the inquiry. The conversation then transitions to a question from Erin Wright of Morgan Stanley.

The speaker, Jim Cleary, addresses questions about the company's strategic focus and economic prospects. He highlights that while there are no plans for future share buybacks due to a near-term focus on deleveraging, the investments in and acquisitions of MSOs like OneOncology and RCA are significant. The company owns 35% of OneOncology but plans to potentially own all of it over time, suggesting substantial capital deployment in the future. Regarding the GLP-1 segment, although it contributes to revenue, it remains minimally profitable with no anticipated changes to its economic impact.

Cencora has announced a strong performance and an increase in guidance, emphasizing its commitment to building on its strengths, enhancing productivity, investing in talent and data capabilities, and differentiating itself to biopharma partners and providers. The call concludes with a thanks to the participants.

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