CAH - Earnings call transcript Q2 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, and welcome to the Cardinal Health, Inc.

Second Quarter Fiscal Year 2020 Earnings Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Kevin Moran. Please go ahead.

Kevin Moran

you quarter us fiscal thank Cardinal we and second Health’s XXXX morning for as joining discuss Good results. Executive Mike I of am Officer. our are Chief Investor President Dave Chief Kaufmann, Relations and our Kevin joining me Financial Moran, interim Officer, and Vice Evans, today

of find can Section release at ir.cardinalhealth.com. on the and You website presentation press IR today’s our

could to to During of description of in a the addressed materially the The these the and projected Please statements. risks matters or call, results the the for we SEC refer forward-looking will statement cause uncertainties those and from to beginning risks that are slide presentation at differ filings be subject actual forward-looking making implied. our statements and our uncertainties.

comments XXXX attached the our our all reconciliations non-GAAP update the relevant out specifically a on non-GAAP can discussion outlook in press be unless GAAP. be including FY schedules they basis, are for to periods as our called today, to release. an to will GAAP During found

During kindly yourself ask ask we an question. the to try one with and that call, so can follow-up opportunity we today’s one question limit get to a you everyone portion of Q&A that

turn now over I’ll that, call With Mike. to the

Mike Kaufmann

for joining morning, Good thanks and us.

level affected our containing surgical discuss things packs to any year, reiterate voluntary gowns we we regarding source outlook a and free those shared QX Before three performance I our for and recalls few the certain for would like gowns. last Thursday

issue be full and The regarding on found press release website. our information can additional this

we as doing from situation and to this to We again. our everything and prevent patients. this we the apologize are issue possible. understand can gravity resolving to we of dedicated foremost, Simultaneously, customers and as quickly happening this First are their

business to are actions. conduct review and corrective our third-party are engaging experts quality and and we committed assurance preventative executing processes a practices to of We comprehensive

represents certain and our related recalls, cost write-offs, our week, for costs GAAP best recalls, costs charge the last well disruption we such in estimate charge including to QX remediation a as results. supply $XX products. shared as million recalled This of these we inventory As replace recorded to as

$XX and SG&A. To adjustments of $XX future our cost provide it made and charge from within This million be to million is financial some within any is products non-GAAP excluded of this clarity, results. sold will

leadership behalf Cardinal On tireless dedication of and for would to the employees entire thank I Health our like team, effort. their

of included, their possible on are All us, myself and as this focused our issue patients. quickly customers resolving as for

then updated thoughts path call today walk outlook. XXXX the And share turn fiscal results now over I’ll on to some and I’ll our our through QX forward.

Dave Evans

Thanks, exceeded a we QX, for This prior Mike. $X.XX elaborate an the fiscal fiscal and of update by second share, driven delivered of performance XX% XXXX result our activities was earnings comments guidance. overview provide increase I’ll operating quarter with year. from and start of follow. combination an then an the per I our to and on to will non-operating our the of expectations which In

last year Total to last $X.X increased consolidated from to and margin year revenue billion company gross versus X% billion. X% $XX.X increased

wide X% billion. partially were sales These costs by driven increase increased and benefits SG&A growth offset higher was the fluctuations liabilities. items deferred to This of by $X.X compensation savings in to by enterprise measures. support cost

the of prior million, year. for $XXX The with a increase operating the net X% earnings result consolidated quarter from

expense lower million. and driven to plan and to decreased expense was below deferred value in $XX continue de-leveraging This and the by we interest XX% earnings, operating execute investments of other income Moving as our interest compensation primarily change plans.

and nearly million have half. through Of of now paid long-term quarter, paid down note, more the down $XXX the we million in $XXX debt than first

favorable the year. in about impact prior quarter than tax Average than diluted last to the million percentage points the X for primarily lower of was nearly XXX jurisdictional shares were Our outstanding changes fewer million four rate XX% mix. due effective year

we two of now quarters per share shares program. remaining an authorized initiated accelerated million completed have and average During repurchased first the We $XXX $XX repurchase share quarter, million $XXX share. our repurchase program in value the We million under over Board QX. X.X

balance flow to U.S. included quarter on billion, the flow. outside for the million with Moving cash was $XXX a which ended Operating quarter million. $XXX cash approximately the held We $X.X cash of

which As the in the timing, the cash time flows. point reminder, quarter a affects particularly of day ends in in week

Moving million, driven Distribution X% with and Pharma. encouraged increased X% increased the We being in program were $XXX our divisions. of Specialty across segment. to driver. $XX.X see areas on the Segment with growth starting billion, Segment generics Solutions by segment the to largest many revenue results to positive Pharmaceutical momentum our profit

what our pricing, a reminder, to our we sell-side and – item launches. program generics As new sourcing, refer as volume, includes

sales in same time, time first to in net supply growth tailwinds renewals. strong to through dynamics several quarters, Distribution These Brand reverted Solutions At we customer tailwind. were mix contribute the business. as the our our chain. continued the create also offset we For partially and changing we value contract program from capture headwind manage earnings Specialty positively our Pharma see generics to a by

Growth a flat year Transitioning to the and revenue decline to was by in at-Home offset Medical, distribution. Cardinal products Health at billion. for in prior was segment $X

products. includes distribution brand our and national and both the brand lagged products through half. Cardinal reminder, first Health Cardinal Health Overall, have brand expectations a As volumes

initiatives we progress validates discuss his will the to our we importance make. commercial in This remarks. still of While have which Mike recognize

were improve in products profits are freight structure of IT ongoing by Medical segment to relationships. to and segment These XX% $XXX decline XXXX on up to year-to-date a million. partially X% basis. distribution. and compared profit to optimize the benefits offset increased cost Medical including work a now fiscal reflects This our benefits initiatives

the $X.XX. to out this to Moving few range full half we’re year call of behind prior from guidance items now to $X.XX range With our contributing outlook. $X.XX full to EPS increase. our fiscal year the a us, raising the year of XXXX to $X.XX I’ll

tax clarity have now tariffs. and we we including affect mentioned First, medical inflation, last external that factors quarter additional device the the enterprise, brand regarding

trends in Also we the year. expect our the segment original segment to full to the few note the on the as Pharma sustained exceed based Pharma we our additional program, half in the now A year. items expectations generics for look improved to second of

means First, improvement recall comparison of last dynamics started be that of to generic perspective, when market from in QX more see was this a year-over-year challenging we in QX performance that it in comping an year we’ll the year.

majority increase back occurring year range be we the half Second, year. legal in the the in of million with to million of of expect year-over-year the the now to $XXX cost $XXX for opioid-related the

recorded a our As reminder, segment. these in expenses Pharma are

brand inflation. on Third,

range While contingent smaller of expectations, the to January be fell a within our vendors our contribution price the they continue each year. dollar increases from

This And segment. fourth in to the the quarter XXXX Medical, quarters. took I’ll in fiscal remind you the affect year-over-year charge of for in growth related of rates our will we the half second

I corporate the rest to thus now the in deferred interest earlier. $XXX XXXX and of due compensation Regarding FY This and benefits seen with income $XXX is favorability expense and we anticipate our largely investments that the our mentioned improvement million. the other assumptions, we’ve debt of million deleveraging far of to plan range

we long-term reminder, least reduce XXXX. to a plan fiscal outstanding at $X debt in by As billion

year. million to the range of fiscal to average XXX weighted diluted in expect we the million for full be XXX shares Finally,

halfway Given decided year, that this we’ve we are range. through narrow the to

Regarding we segment our one making update. assumptions, are

of original now With significant expectation favorability expect to improvement the profit discussed, our a we This is low from digit segment double decline a I Pharmaceutical decline. single digits. low

With that, it turn to Mike. me let back over

Mike Kaufmann

Thanks, Dave.

this remainder Specialty to businesses and areas the the few, committed continue core growth to at-Home. the settlement Pharma, focus enhancing to the will to we As in for we and actively we next start involved year In our of including look negotiations in of sustained and let to fueling we on ongoing the epidemic. me established by evolving on being and part global saying terms a opioid be solution of remain continue

segment. work the drive increased confidence growth in to have we our across Overall, Pharma

from in capabilities market Our investments pricing program now Red for headwind analytics dynamics tailwind in the continued and a changing generics be us our enabling Specialty rather than improving ever expected. our our year the previously investments Care capture to in and enable landscape. a value are as Oak to businesses strong healthcare and Also, as our Connected we as performance well generic both

last mentioned I streamline our Medical. multiple initiatives to enhance that to we flight in approach commercial quarter Moving had supply and our chain.

Our continues. work these in areas

the recalls, currently with our most immediate we teams However, the patients. and our meet to of their needs customers recent Medical segment deploying are

this their we chain and commercial our the remain are of these slow we While recognize to strategies we confident momentum initiatives, in success. in work streams, and will underlying dedicated supply

an update our on will provide call. next We

a continue to explore our sheet allocation committed our prioritizes a to balance in modestly prudently and business, the enterprise At structure. the that to we repurchases remain the cost Across level, maintaining Opportunistically, dividends. capital approach continue manage growing will company, M&A. we we and disciplined strong share reinvesting

that We’re doing and velocity and resources, better improving technologies through create this our the new focusing embracing visibility processes, throughout our company.

easier to is Our do to goal be business with.

creation mindset sustainable years we come. takes new continue root, this and a ongoing to shift As for behavioral value will see to

open to it pause questions. now I’ll that, for With up

Operator

first Thank Guggenheim. you. Glen we’ll [Operator question Instructions] our from take And with Santangelo

Glen Santangelo

good and thanks Yes, morning.

the Because in have to Just is months, sort the the Dave, fourth Medical profit the any half last from that operating alluded the curious, segment. first recall the already in up comp charge question as the the through year? digits quick regarding kind if you you for and you have look year. of in I’m guidance a of does of that second your coming six outlook implications double easy quarter

implies kind the if performance kind pretty correctly curious second of else at weak And operating be maintaining half. there, that I’m looking the or guidance if in by anything there’s just there? the it So I’m would of that,

Dave Evans

Yes, Dave. Glen. Good This is question.

at terms half in see, we costs as is, direct charge the could on, uncertainty include this What have of collected margin customers. So million. we revenue we our frankly disruptions second any of early stage – in you implications and $XX in with those to very and our

we’ve read well in that and would say the half the guidance that I Med. you’ve So for second we’re for of that that fairly uncertainty some reflected providing this

Glen Santangelo

of confident. opioid expenses Why with I expenses out stack. expecting update maybe The we here? of million. Okay. litigation from a you your think of to the follow-up respect sort few give months. of to the And been litigation you’re a Hopefully, $XXX Could winding we’ll there now timeline now? an be of like sort expense up to increased were should on million you’ve $XX It framework’s for us then a opioids, I million maybe kind just about the sounds forecasting maybe if taken what you $XXX to ask quick Mike and could

Mike Kaufmann

for Yes, question. the thanks

We are still continue. framework and to dedicated the does progress

incredibly are these arrangements. imagine, can you as But complicated positive. a that’s So

with have through with. We we’re working states to work that XX different

And get months several get a so get there the over work to various implementation it. be line, this when agreed got weeks And that’s work the to of to it’s of that through done then and done. goal to even going to got is lot next And we’ve over it’s components papered. the to, of

And with that costs – you’re to believe, a a the those all to even original at go portion million we was million so the up. to $XXX QX. up look you ramping more $XXX will right, little of in the to and and million the going way believe spend, probably when ramp are QX from begin significant $XX our costs in We

Next question, please.

Operator

Sachs. question from next We Jones Robert our Goldman will with to go

Robert Jones

for Thanks important to I because with guess Cardinal group. it’s so obviously that to to questions. Mike, the Yes. and topic, stick just the

peers potential One settlement. about narrowing opioid a around your talked of conversations

that you bit local progressing. incrementally, more municipalities engaging how and sound point. is Could not positive many this are little maybe just obviously at a specifically, states and You but other this give states, on more maybe governments more

four seen just side I original are AGs curious I’m just of state specifically, and had the that coming the you seeing think to all framework the we people obviously other more table? highlighted

Mike Kaufmann

Yes, important for topic. the again this question on thanks

this. and we They appreciative have that the said, with we’re been of initial the working lead this four states. XX framework remain on all committed took I As to very AGs

only me the and states to the I the for right those with the is this equally not But and that overall details with to AGs improve other from the you opioids. now of continue the are the programs to you monitoring to make how which to tell tell goods the which we handicap for components it some right about, agreement. on the of feedback to components we get country need it, do appropriate to to But that various in wouldn’t the I states of thing are working free relief but and get try continue the the We look talking people think all for or that believe and out. progress or that important, are we’re companies four distributing dollars the to talked the many to them help will be

Robert Jones

And generic from this appreciate guess I just in a to to first went the highlighted dynamic, a it’s program back No, you no, that, tailwind. headwind Mike. it I to quarters, go several time

from four specifically to your generic talked what exactly you guys I tailwind a to maybe headwind quarter? flip You about that a the a just little guess comprise the into program. dive components generics Could changed in deeper

Mike Kaufmann

Yes.

I think a couple of things.

for item the the of this is first that our expectations all quarter. by far the in think I drove difference

the be. Maybe performance was little big And mentioned, across all pretty else Dave the better, good components. really much this where was of driver. to As right it’s expected but a bit there we everything

Oak. to an maintaining but cost to job very important level, perform it. industry-leading excellent in doing continue lead growing getting high really levels, just level. we which a and that volumes, us, happy at have for our not part and We’re service is Red very really helps an only We of with on also They believe service after

than on to the bankrupt market that customers a seeing we as seen winding we pricing few this due market So other with in side. went dynamics situation, that are and And other is while mentioned, We’ve volumes stores, the some be to going big then lighter Fred’s we were factor a the expected little had down are overall originally the improvement still growth. volume significant just dynamics. year,

really of components the across strong put the perform. So the of that was when strength program had quarter all components we and you together – over launches. all made a on It

Dave Evans

think, I you at – Mike, end out hit there. just Yes, the

the have did new an of That quarter. was we items. for think launch I some earlier-than-expected helpful

that had quarter. second favorable we fairly the we results a addition, In drive mix the in help saw

Kevin Moran

please. question, Next

Operator

with Goldwasser We next go to will Ricky Morgan Stanley.

Ricky Goldwasser

focusing and Yes, improved is just about Mike, the And API and on on pricing, morning, the good dynamics on digging hi, good pricing, bit source quarter. seeing buy think into When very to side side? pricing the on you versus comments of back China sell your important a buy little supply. deeper congrats going a are improved on an generic the we that. side, market

supply outlook? impact Given how And the the potential there be with – implications And in what what inflation? supply of marketplace? we’re the in coronavirus, on potential second could seeing return that does generic half that overall global to is any your

Mike Kaufmann

as the around and second Yes. the we’ve I’ll of the kind taking trends that those programs – far first for we start forecasting the half with the as generics, for the half goes, rest overall just are of year out year. seen outlook of the basically

we’ve activity We’re quarter, that. months that of improvements more really not like good eight that. that a enough that five early versus clearly any projecting is we biggest it, guidance we inflation to confident our have about And or about being here felt necessarily too like or what activity just we feel anything related seeing call feel that – had item. now to It’s we’re roughly just little increasing which the last

historical, performance being any on in being able at much there sell they far with inflation seeing as Oak. on I or to Red just As sell of work less per we’re the get just amount then margin terms important and also a it’s side balance balance focused side what buy because driving color And decreases tandem, it’s good the hard the some to about is, thing what’s between is on better the really happening side really but think unit. it, than in of the

to that So a manage per unit have overall program our grow. can to we in the margin able to continue way be

the and that, And as Dave too. helped said, units to launches the overall

so at And we how that’s it. look really

charge decent Oak are of materials and as right, great you and manufactured And the manufactured. far where is job are a there As the us, China is imagine, API do of of affected a areas. amount in some understanding this monitor. API, over Red we you’re that where from, China they’re coming in something of that they raw for can

to of on, have think we’ve this. increase the and I manufacturers going something worked able hard – supply the with the something We on supplies be where eye last, – to keep long it’s try supply of an is it’s that, to will. and based have it’s do this we ahead industry should we to that to through. to amount work we’re chain, say But something how will and have

Kevin Moran

question, Next please.

Operator

Lisa question go from JPMorgan. We will our Gill with next to

Lisa Gill

Mike, morning. peers? of the potential on Good then the just about Specialty much. impact again in think that? that quarter. us IPI for called Can your the Specialty you reimbursement, talk we some around area as being remind changes as of business? very see about capabilities in growth you the and potential business and thanks And that thoughts Hi, you versus can your could a out you And any size your

Mike Kaufmann

Yes. Thanks question. for the

Our number that business that FY for sales, gave Specialty XXXX where last the we is that so around $XX and finished billion is. that’s publicly we business, in

to across the well providers have expect actual business acute to in areas. space this the significant sales into its downstream continue We growth manufacture. year all to It’s as of upstream that services as

area of to recent and more will including area. announced we helping future, made the So the investments seeing gene a good and business of that cell was that to in [indiscernible] we’re also customers, areas feel some the an the the across but businesses in quality we able to are momentum be all good continue in making here not about investment their in we’ve we’ll only about believe of that three that be in talk service

area. continue the about we specialty to excited be So

U.S. I We of system. costs to in of the for to hope folks. favor important. that’s it to IPI, to We find reduce healthcare that As able can cost folks reduce anything relates to know say far this; would be the all, as of help ways first to we’re look and healthcare

So that’s us. important to

they the is is first I I that to say does at, or would list change to us it prices, of it programs way establish second list could does when in The about price folks they the we thing magnitude us order where looking as think the you it think, is, these impact of us, are order first IPI of impact any types increases? have do are their kind do mean of at. Those the manufacturers that to that them, reduce lower prices, look that have impact generally

and in And you as me others first the years have we that an really a think so heard part over well make any might as have with to model company the do and that of all, the industry – deflate margin overall anything of say, or I protect be fee-for-service than worked or dependent that’s us helps rates. folks to inflation X% what rate, that’s on less inflation our from as impact

been we to ability that’s that way manage to effectively time and impact very customers. the important secondly, feel still renegotiate as prices industry. we’ve as prices is fluctuate company our the as WAC a that that our though can And we over to an really us able to any piece to impact DSAs demonstrate The very confident list through

commented to impact legislation actual we and care and ability of that reduce that’s to deserve. sure true work on our able legislation they provide we and doesn’t at the been customers type the have and there that be past lens to of the to theirselves know with customers the we that type access of to look really on out our that patients legislation this to careful reduce or be of want any really them, with have We make the

Lisa Gill

Thank you.

Mike Kaufmann

Thanks, Lisa.

Operator

go Bank. And next to we’ll Hill Deutsche with George

George Hill

and guess, Hey. I Dave, contribution seem – at the guys looking Good beat and I Texas in years. more And for what generics beats the ask taking Thanks a fiscal program quarter. in the is, demonstrated highlighted in guess, repeatable either morning, bit Mike little generics quarter guys. you I’m I’d question. the next don’t you and quarter the in big guys of balance of your this related, friends that earnings kind your you were big about

basis? bit maybe commentary that could lot. Thanks. a expected than the items what around maybe one-time color some that’s quarter? you the and I seem that the repeatable earlier quarter highlighted a more of the contribution on was provide little seem versus in So new on might the in was delivered And more know forward a what more launch might maybe go

Mike Kaufmann

George, we dynamic, QX. QX in of those Look, me to trends a are the when elements generic we answer as four Yes we described in talk what continuation let expect that see and would of that. about

in you quarter we So because we see last the inflection – QX some expect that, expect at QX. of year-over-year don’t the and trend. improvement see healthy a year-over-year where go we was improvement to year back began quarter the first deflationary QX was same look to this see if to

have in much more we challenging a so comp QX. And

just With a later timer the a that something of anticipated was respect that’s it’s to forward not one year. of in items, the pull accelerated new launch necessarily

So on think QX. the expect, today can which year-over-year see positive called in results in to moderation George? our QX. some why to Does we is up expect question, what answer your somewhat pharma, that in possibly guidance And see we based comparison then we I you specific help

George Hill

it you. think, I Yes, Thank covered clearly. you

Kevin Moran

Next question.

Operator

next from We’ll question ISI. Elizabeth take Anderson with our Evercore

Elizabeth Anderson

you the Hi more an quarter it of that good in specialty wish Any you and the in a of sort the beyond talk can additional drivers bit Is this launch some guys. color little that services? could broadly profit be I calendar? would provide morning on if about more helpful. maybe increase is

Mike Kaufmann

the do to in with specialty. normal of I this think just lot a growth specialty has of

some Part some slightly of than that, items lot and value our been continued uptake nice indications smaller to the that’s don’t like and that. some of There particularly in generally success, to it. and biosimilars getting growth. hub more grow. really while space, provide That’s business, really just of the in of upstream of grow big drugs here in marketplace our piece opportunities of they certain We’re the our are a and and their some businesses there normal seen there because oncology continuing earning a of normal side see services new it they that of of the We’ve business with a our branded some in the better it. on earn have growth act a other wins XPL piece is

So just like nothing unique of anything. about nice business it’s the pieces large of that movement growth like with solid or One-timers board. volumes across the

Elizabeth Anderson

helpful. That’s you. Thank

Mike Kaufmann

Next question.

Operator

go We’ll to Wolfe Stephen with next Baxter Research.

Stephen Baxter

Hey, thanks for question. the

the amount renewal percent too. so renewals guidance opioid of indicate on to changed, relative renewals have underlying higher to you’re revised based impact moved the decent single components single seem decline like digit low profit now the which of how seemed size the would low of at assume the decline growth you year, into excluding least digit double hasn’t a coming Pharma I driving assuming. digit the the for So high the the guidance it and are half expenses,

the basis see as check we to whether has to throughout with wanted anything or move a And to growth the you expecting reported just agree therefore, about on the Thanks. So return segment of we renewals and year? be into changed whether that next should year? profits sizing logic

Dave Evans

Steven is Dave.

we’re would though your really So say on. pretty I’d that I per assumptions practice. spot say usual are all

good on. a I understand hand in at got been this And XXXX to articulating. we’ve you’ve not what early position overall, date. comment I a on We’re But think,

Kevin Moran

question. Next

Operator

Erin Credit to next Wright Suisse. with go We’ll

Erin Wright

as from Do longer meaningful to for assume Does sort you biosimilars? opportunity contribution you thanks. your guidance an term? view Great, of any continue that

Mike Kaufmann

the related Yes, – new stuff launches normal new our nothing that. type related the any would to that no guidance But created assume of there increase for is biosimilars.

their that’s an for right something now keep I believe And make particularly I keep in a like on midterm on. are act little bigger of this drugs driver on big on to a they large be to be a similar. a bit they more anything a it put place to the depending continue short longer There’s their we’ll eye driver sure opportunity on we’ll our able would a short we might programs to ability bit eye rates be think think the will little and because over margin some interchangeable. the term to be overall more branded opinion over something term don’t biosimilars, money for in that that We that of us or But for of then term. us. with But if them customers. call over not year I my – something more would driver, become change much driver of is

Erin Wright

trends you specifically, Okay, be where you the progress initiatives a and in out commercial recent but could the would that’d little suggested the say terms are your seeing if that streamlining you of you’re the then of recalls, of side helpful. you Thanks. on terms in face chain quarter’s great. And of on here still recent supply a the also medical maybe some and focused that of setback break And business? front? You bit

Mike Kaufmann

profit what that expectations there growth be we’re outside is on we expectations or I’ll expected and are, exceed grow, for Yes, we the is have or to this slightly one continuing really of really Cordis it handle real with year on Cordis, there see the a our to doing Nothing what continue to outside team in of the to report year. other. for our happy driver just that way quick. meet that seeing being the what don’t But the business we we business

have would of to time, medical, I them. we in make been is feel the realignment about nothing at incredibly the both There initiatives of our than committed say, we initiatives remain as far me commercial that differently this any or underlying strategies As talking our about. chain supply

noted but It a slowed probably I well in little the them, with gallons as of the bit recall. has commercial even particularly more been then But side. both

our the sales of reps, to us well it’s patients. important field manage into take be to locations, out the and there. hospital actually people of that some as challenge And our as that have We we our really deployed them at located care this other customers is helping through

of that down we expect because be. where So would it to slow

and look said that that but done at would we of global plan customers. overall the re-evaluating get on working piece, implementation to no and we we have we’re chain all plan a folks changes of and then supply plan are would account QX. chain we’re make we we on have jobs on look sure challenges. the – track and as the of commercial there’s deployed do disruption our some that at to by have to overall hired supply And So based was again just done, end make recent be we committed the taking into this on we the make That that, sure but

Kevin Moran

Next question please.

Operator

go We’ll Securities. Michael Cherny with to next BofA

Michael Cherny

morning and details the for thanks all Good far. so

any business areas think or your think as think How beef have pieces So you for versus sense against there well you you’ve the that where you are previous deployment? as And about highlighted of areas do components in about the deployment backdrop Specialty How you M&A you and opportunities, you to you think as you’re so Obviously that – customers far of other asking you performing makes now? growth think do medical. – up right opportunity. capital the do of are to capital said more? is about a opportunity, you

Mike Kaufmann

with good really connected care being and trend, about of the significant These talked our the on as the bottom consider highlight go that businesses line. various feel At medical I towards Home all businesses are the mentioned, of pharma care our four them. would line growth areas top that home right on along Yes, things we growth the business would one services seeing still really several them, are we’re our also and Specialty I that There service are having Specialty businesses. about we’ve businesses. and areas. and we services on strategic moving and

So you be are would we areas these where organic to those areas on our are the there those on. make would are we out see if focus And can growth. focus that expenditures M&A really would prioritizing sense, that opportunities so capital us there areas

for, But and sure would do maintain expenditures our the that right to are being to I going capital extra those. businesses focus that those to we’re areas what continue allocation to our going Now we’re be things to make said, capital, core key all of going say, we in grow on.

Kevin Moran

than as in I so And our I’d add, focusing past. partnerships in well about about we capital, internal think different say categories. it four if we’re so we Michael do that on more probably in the a really, thinking we’re when can way have Yes really

where maintenance we areas type for also we we’re deploying get of supply out You you’ve explore growth our cost But new capacity some wrote then in chain, clearly we’re projects, capital providing are where on initiatives capital growth. capital areas. deploying focusing to capital our to need like

pretty a a balanced it’s disciplined CapEx. on approach, So approach getting return to our

Michael Cherny

Okay, thanks.

Kevin Moran

Michael. Thanks

Next question.

Operator

Barclays. next go Steven with We’ll to Valiquette

Steven Valiquette

Great, morning thanks. everyone. Good

things out a quick. just follow-up little just two bit Specialty of to So I real done want

about brand the was little some traditional from First, was played better Thanks. and bunch suppliers had in segment experience have changes But specialty really customers the pricing surprised biosimilar with actually separating dollars the either Pharma bit that result. pricing, Distribution a that may whether a of because [indiscernible] role physician driver I a just not channel. there of price biosimilar or of been a [indiscernible] the

Mike Kaufmann

Thanks.

got was I but being on There think I I pieces. them your picked think I hear, to up. little a able all spotty

let make we’ve in pharma some so adjust. standpoint, sure continued renewals before, look several if to profitability wrong it specialty with been our in maintain priced of can if specific I’ve that them years we’ve pricing From penalties either, area over and goes as the – disciplined with to to than cost our or we new very we’re appropriate the is splitting I walk business mix discipline differently that all. can don’t through that see on So so brand, a business in out drugs that that me any our the on sure agreements so – overall way, that pricing it make or I’ll price types in type distribution normal change their said that goods Specialty fair make mix return a of we at of

very be the in we on PD So to focused area. that continue

specialty in in remain area generics And that space individual more a And standpoint. priced we careful. also to business that very in there’s be is the disciplined overall since again drug little on that very

is I driver ignoring So I something is growth that or wouldn’t say specialty, a headwind of from – it’s a that standpoint. that also would changes in say a we’re not either pricing our is but

market growth launches comes it as drug that would from say far I As really indications, in is growing the. specialty significantly overall, market itself growth. The with new new

when you’re because it volume necessarily you’re replacing about a branded biosimilar. either biosimilars, is question think current with new getting either way biosimilars, – drug to biosimilar to it you’re launches, a not Your speak of think the to of about on

either So overall up And capabilities dollars opportunity other. we our with bit little when able brand to go your the potentially to prefer where because generally or a extra of prefer make are an customers over just biosimilar. customers the can have volume to market work it’s have biosimilar movement a those one the some downstream we to of be doesn’t

in drivers, a it at think I that driver, potential that a specialty. be for more but But driver I and to over time, time say from this of an point overall perspective more is would will significant not get

question, Next please.

Operator

We’ll from go Rhyee & Company. next our question to with Charles Cowen

James Auh

this to on much the opposed perhaps you on Can dropping Hey, us achieved? maybe our savings Charles. of give incremental tracking it’s been reinvested And expectations? million to program, that’s bottom line Is line? update in quick much has cost of how savings $XXX expected how for it year been a the James of with

Dave Evans

James the question. for thanks Yes

realize achieve that on against million as to track the We’re say we’re to more and previously And $XXX fiscal this or million progress track making I’d $XXX we’re also the still year. great program communicated. on target

all kind confidence So stages sorts tracking And now we’re you pipeline, strong a We’ve imagine, of through we’re entire and making of million. of the $XXX good ability we’re with opportunities progress. as seeing attain can working maturation. to got our

continuing value the throughout that that do capabilities more just continue cost focus increase belief not will drive simply on our with out, to but we the the really to savings future. throughout speed organization, we’re improved how try So to drive more

with seek encouraging that, we the to press the as can’t Mike I cost With more organization I, challenges to we that encouraged high you cetera. of we ongoing of with are opportunities returning reinvestment we’re continually to within level choices but are this projects. exact et seeing out difficult our and the for quantify improvements, reinvest and encouraging of – culture respect cetera, lots for people to and amount opportunities growth new of build more this drivers, et organization

deem real a is So, should that program one as success. the I think we

James Auh

in guidance, question additional any the ASR? $XXX share share that the count does just and technical Okay another the include million from beyond repo

Mike Kaufmann

fiscal No. James, the that million, assumes further that will contemplated purchases for in completed there this that and $XXX we year be guidance. no

James Auh

great. you. Okay, Thank

Kevin Moran

for questions. the Thanks

Next question please.

Operator

with next comes Percher Research. from Our Nephron Eric question

Eric Percher

to provide Thank recognize kits context recall. Medical maybe potential going working through broadly, your us where elements of market other impact you. I’d I and return medical for are impact still the the turning into forward. could to surgical like the with gowns some fit share, on how you’re starting But and you customers business?

Mike Kaufmann

in has the kits – kits, we We I of with on in space, color tied this design think ability of is different appropriately, a give the to that but is large impact, and lot There’s use market several to services and I market obviously a of a able to price U.S. can compete type effectively. folks why you the there quality detail but a compete a Yes, reason those that that leading surgeries very such cetera. – is kits. et do little those lot share, be won’t that give

idea of the the every small kits a kits relatively you the gowns gowns a Even a because because this more surgeries at it’s that of larger here is you an they’re use percentage in lot though having might why expect. than and U.S. – impact when So U.S. almost across kit. look are in that’s in do as overall sold

be so you. I’ll just stop right might is, sure there make see for just And to what things question the your and follow-up I’m that, on hitting

Eric Percher

So impacts around the I think purchasers utilization from and hospital their on business. concerns on impact

to the started this head has and relationships done this an any to impact But You are ability apology on that take what what remedy the on. is taking with on here? from your business and

Mike Kaufmann

Yes.

life time as you we’re centers the way responded, respond, have accountability into taking any challenge going said, the think everything can make good leader, knowing any that business, you customers’ we I this and I all with down as the often we makes And to be have the impressed and people can, Medical how to our couldn’t a to distribution Steve, do ownership circumstances. for the way from team more difference. the in the it’s

to sent do Medical to deployed team things segment, we’ve the Pharma also best at and our for kits out, can. the So but field only people President taken and have the of people, we’ve level, customers hundreds Functions their volunteered to Vice not the together to even pull to locations out – make Corporate pack we

this believe we’re way the important. the our can so customers understand respect think things really, I that appreciate that responding. majority is responding so way And far they And really like feedback and to I from is this the we’re happen, of but they

said, is that some going created know say But it have we’re they patients our focused doesn’t. our to this and us that thing we affect this don’t we pain, know foremost hoping on take important of hard business to we we – know so as And are first that care how forward. Dave the how they them It’s and that ultimately could that. can the most that customers that treat

lot we’re also products. of make replacement It’s similar or production taking people about actions, only other increasing But a also is field but too. specific to not into better, things of deploying the it

the more production to locations. We’ve source offering gap. For these bridge supply our up do multiple instance, level protective X gown in ramped because we’re we gowns help

And up so ramping we’re elsewhere. sourcing

ramp that folks those in that make products, both get products through label we to go I’d up so have to with similar with working surgeries. and going We’re those private say, brand them

from So at to make these actions as customers of possible. it’s all keeping sure that really and look keeping the we’re customers our as small important surgeries we our pain going that

Kevin Moran

Next question please.

Operator

We’ll next from UBS. from Kevin take Caliendo our question

Kevin Caliendo

want to thanks for back question. opioid comment. Hi, taking my to just the go I

have terms done. in coming this two anything the now it to maybe state could that do your two those get out of spending? And longer would this weeks high what timeline? it how trials are months months of take in before? run trials a that Or Does called How think or context profile spend pretty to about up we you with should does that that think scheduled. into increase state versus expected I

Mike Kaufmann

just are clearly they’re not our we’re Yes, will be feel know or good prepared that will defend trying do is up, for those happen. happen, they really a those to which won’t. out where we ourselves. intend that We to that if and spending vigorously We gave trials why goes indicate range, trials we We they there.

to those trials and doesn’t We’re make to panic or do cause us trials use not those that have going something sense.

it’s Again, the And there the particularly so Gs still around, the going of is look work initial rest framework we’re and the spending negotiations. to up more done our continue is to related I this around wouldn’t states the a goal. finishing But at range, four with trials. but to the to get increased

things all significant you’ve details. through then those some and will that like work time And process, – take to And actually papered papering through got go it. get takes lawyer a to documentation

overall So like in those. is monitoring cost. work the more would be done implementation an through take that we how then process the There working things – a the free I can of to lot goods. make legal changes And distribute think will it’s systems. What we

we focused we put on and why so continue that to it, And be out. that’s range

Kevin Caliendo

If issue, up one ask the can follow-up on I think, it brought really I API quick Ricky earlier.

eight-week quantify still the you be were chain in feel a to supply actually manage enough it. much issue still comfortable in the If you be that how would supply Can said or six-week the You product? would was – in issue, chain there that? an that terms you China of is with thought to like

Mike Kaufmann

have of of of been the looked know are. extra. raw competitors of working our those those where we product, and I the And add we supply don’t to Yes I looked think risk the challenges that it’s a to this bit give that a potential detail. level importance have really something of specifically system. know a where because products great in is little that carry more question. products we’ve at, few supply materials you I healthcare to by ramp that up at really product can’t

in for, to challenges, the creates we now, abilities time. what best time. from this in not our shutdowns problems. think at we’re hard or right it’s other But if were point any go So at point it and to But anticipating the this in China see, of we’re longer just it spreads we know managing to

Kevin Caliendo

really That’s much. helpful. Thanks so

Mike Kaufmann

Welcome.

Operator

And we’ll last go Coldwell to our – question our Eric we’ll Baird. with take from

Eric Coldwell

Good morning. Hey thanks.

data according that call We’ve for med-surg the So last, we you external volumes department to it, the seen take, accelerating I’m internal a data give bit only or some two, as little increase four at it’s surprised. least have. inpatient emergency increasing, a to not it’s revenue cited headwind in both both guess three, distribution, I and for – and here quarters. increasing profit. And and

season. We flu also an had early

So med-surg core are that distribution the And – what what’s challenges seeing med-surg you’re now? the in U.S.? on going in

Mike Kaufmann

seeing to anything is I has historical actual think this, that would would and not if out add, can Dave volumes the do necessarily anything are type there. say first I’ll we’re significantly then all, of say changed med-surg I there that. that growth start low-single-digit of here, very

last to that our quarters in comment seen, year, of to me would TSAs. what on for in hard first spot. lot anything, couple the seen it’s So dramatic of haven’t had a I related we lumpiness you’ve but say, we Remember,

last And those is, going of we our year TSAs. off fact were that the some comparing as we by the we’re think, so compare caused

if we’re up at seems line. And X%, our look half, which in first more you roughly so

think so overall. two or another And us get understand I behind we quarter to need really to

And there is recall challenges again, a and with gown few this kit there. recall,

talking mid long commercial that’s these for to we’ve creator But would our doing restructuring I through. our be by feel there value to in trying our all on. say, happen. customers still get challenges And work us. a to work to still confident But to the term, from We’re that the reps, over going debt large through to is nothing, we’re we big about and really we’ve the going for what done got to

Eric Coldwell

know I January. pop until didn’t And the Right. really kit up recall

more I quarters. the of clearly was So about last talking couple

Mike Kaufmann

Absolutely.

Eric Coldwell

just It’s if but maybe guess and up I revisit, We to – this an can go back need topline. take is the TSA we issue.

Dave Evans

I’d much first half how first wouldn’t is a said, much very all on expectations. half little the is into transitions what I’m in compared our – Yes. year. the Mike really line because Eric to at of looking reiterate really our which it’s going first too is, read of with last And saying, half expectations. our quarter QX I and bit single a the

Kevin Moran

for Thanks the question. again

Kevin Moran

strategic we their me and close and All to to let right, remain Take our questions patients, with forward saying so care. for I’d soon. we our customers Thanks speaking time on and your focused continue priorities. will deliver and close. to today, on of each your like by we look you

Operator

And you this concludes Thank for today’s. your participation.

You may now disconnect.

Cardinal Health (CAH) 6 Feb 202020 Q2 Earnings call transcript