Cencora, Inc. · NYSE:COR
Cencora — AmerisourceBergen — Investor Day (December 2009)
95 slides from Cencora's investor day presentation, Dec 15, 2009
Slide 1: Welcome to Investor Day December 15, 2009
1 Welcome to Investor Day December 15, 2009
Slide 2: Dave Yost, President & Chief Executive Officer
2 Dave Yost President & Chief Executive Officer
Slide 3: Forward-looking statements
Certain of the statements contained in this presentation are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are based on management's current expectations and are subject to uncerta
Slide 4: Today's Agenda
ABC & Industry Environment AmerisourceBergen Drug Corporation AmerisourceBergen Specialty Group AmerisourceBergen Packaging Group Supply Chain Business Transformation Financial Review Questions and Answers Today's Agenda
Slide 5: Today's Speakers
Dave Yost President & Chief Executive Officer Steve Collis Executive Vice President of ABC President ABDC Mike Mullen Chief Operating Officer of ABSG Mike DiCandilo Executive Vice President and Chief Financial Officer of ABC Today's Speakers 35 Years 15 Years 7 Years 19 Years
Slide 6: Today's Theme ...
Today's Theme ... Consistent Growth
Slide 7: EPS from Continuing Ops Since Merger
2001 2002 2003 2004 2005 2006 2007 2008 2009 EPS* 0.52 0.71 0.92 0.95 0.59 1.05 1.26 1.44 1.69 EPS from Continuing Ops Since Merger Consistent Growth GAAP Basis 16% CAGR +17% +14% +20%
Slide 8: Market Growth Last 12 Years
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009E Dollar Growth 0.154 0.193 0.151 0.17 0.123 0.114 0.083 0.054 0.083 0.038 0.013 0.05 Script Growth 0.068 0.09 0.065 0.056 0.04 0.024 0.014 0.033 0.046 0.028 0.006 0.025 Market Growth Last 12 Years Source: IMS Health ABC EPS CAGR 16%
Slide 9: Revenues 7% CAGR
2005 2006 2007 2008 2009 Revenues 54.21 60.81 65.67 70.19 71.8 Revenue Growth 7% CAGR Consistent Growth
Slide 10: Cost Discipline
Consistent Growth Cost Discipline 2005 2006 2007 2008 2009 Operating Expense % 0.0179 0.0179 0.0175 0.0172 0.0169 Operating Expenses Customer Efficiency & Cost Effectiveness Grow Revenues faster than expenses Streamlined organization Consolidated services Continuous Improvement CE2 Philosophy % of r
Slide 11: Environment Improving
Pharmaceutical Market Growth 4.5% to 5.5% in CY 2009 3% to 5% CY2010 Generic drug utilization increasing Healthcare reform coming Economy improving Consistent Growth Environment Improving
Slide 12: FY 2009 Results
Financial Performance EPS from Continuing Operations up 17% Revenue up 2% Operating Margin up 5 bps $638 million in cash generation Consistent Growth FY 2009 Results FY08 +7 bps FY07 +6 bps FY06 +8 bps
Slide 13: ABC Channel Position
Dispensers Branded Pharma Biotech Generic Pharma Manufacturers Products Retail Hospitals Clinics PBM/Mail Physicians LT Care HBA/OTC ABC Channel Position Data/Services Consistent Growth Prime Vendor
Slide 14: Importance of Prime Vendor
Manufacturers Product Delivery Reach over 27,000 pharmacies/physicians daily Data Delivery Credit Management Inventory Management Importance of Prime Vendor Consistent Growth Dispensers Product Delivery Decreased administration costs Financing Source Just-In-Time Inventory For more than 30,000 SKUs
Slide 15: ABC Revenue by Customer Segment
ABC Revenue ABSG PBM Health Systems Alt Site Retail East 20 17 15 15 32 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9
Slide 16: Customer Diversity
Customer Diversity PBM Regional Chains Independents Food/Drug Combos National Chain Niches Apothecaries RetailAlt Site LTC Specialty Pharmacy Managed Care Hospitals Integrated Health Systems DoD Physicians Infusion Centers Dialysis Centers Hospitals Biotech Manufacturers Dialysis Centers Health Syst
Slide 17: Primary Growth Drivers
Primary Growth Drivers Consistent Growth Specialty Drugs Brand and generic Physician administered Strong Distribution Oncology Nephrology/Plasma Services Manufacturers Physicians Generics Growing Market Customer mix advantage Differentiated offer Services Manufacturers Dispensers Broad Sourcing Stra
Slide 18: Acquisition Strategy
FY 06 to FY 09 Acquisitions Acquisition Strategy Consistent Growth Trent Asenda Rep-Pharm Bellco Health ABC will be the packager of choice for pharmaceutical manufacturers ABC will be the leading wholesale distributor of branded and generic pharmaceuticals and related services ABC will be the leadin
Slide 19: The Future: ABC Continually Well Positioned
The Future Consistent Growth The Changes 100% Fee For Service BT/ ERP completed Universal health coverage Generics & Biosimilars Compliance Packaging Manufacturer concentration ABC Opportunity More predictability Customer efficiency More drug utilization Value-added services Packaging leadership Mor
Slide 20: Health Reform and the New Administration
Health Reform and the New Administration Key Reforms and Potential Impact for ABC Uninsured Expands access, and like the implementation of Part D, should increase utilization. Medicare Advantage or Medicaid Rebates Reductions in payment to MA or Medicaid plans will not impact ABC Medicare Part B Ref
Slide 21: Consistent Growth Because...
Consistent Growth Because... Resilient Company in a Resilient Industry Distribution and Related Services deliver value up and down the channel
Slide 22: The ABC Leaders that Drive the Consistent Growth
Consistent Growth ... The ABC Leaders that Drive the Growth
Slide 23: Steve Collis, EVP of ABC & President ABDC
Steve Collis Executive Vice President of ABC & President ABDC
Slide 24: ABDC Key Accomplishments in FY2009
Record revenue Generics growth above market Significant new business Expense dollars below previous year ABDC Key Accomplishments in FY2009 Consistent Growth
Slide 25: ABDC Key Success Factors
Prime Vendor Model Diversified Customer Base Generics Related Services Cost/Capital Efficiencies ABDC Key Success Factors Consistent Growth
Slide 26: Prime Vendor Value to Manufacturers
Daily Delivery Reach more than 22,000 pharmacies daily Provide branded, generic & OTC Credit Management Inventory Management/Security Data (supply chain transparency) Prime Vendor Value to Manufacturers Consistent Growth
Slide 27: Prime Vendor Value to Customers
Daily Delivery Low admin cost Provide all products Provide Credit Inventory Management/Security Data Prime Vendor Value to Customers Consistent Growth
Slide 28: Prime Vendor Supply Chain Efficiency
Consistent Growth Prime Vendor Manufacturers Dispensers Supply Chain Efficiency
Slide 29: Diversified Customer Base
Diversified Customer Base Consistent Growth Health Systems Alt Site Specialty Group PBM Retai l
Slide 30: Retail Customers
Community Independent Pharmacies Retail Chain Pharmacies Regional Drugstore Chains Food/Drug Combination National Drugstore Chains Retail Customers Consistent Growth
Slide 31: Institutional Customers
Hospitals & Health Systems Alternate Site Managed Care Organizations Long-term Care Pharmacies Dialysis Centers Specialty Pharmacy Government Agencies PBMs Institutional Customers Consistent Growth
Slide 32: Generic Market Growth Drivers
Generic Market Growth Drivers Continued Branded Rx patent expirations Increased awareness and acceptance Government and payers promoting use of generics to reduce Healthcare costs Generic dispensing rates continue to rise Consistent Growth
Slide 33: US Generic Scripts Continue to Grow
US Generic Scripts Continue to Grow Source: IMS Health Consistent Growth
Slide 34: Patent Expirations
Patent Expirations Top 3 Products Per Year Source: IMS Health Consistent Growth Effexor XR(r) Aricept(r) Flomax(r) Plavix(r) Seroquel(r) Lexapro(r) Lipitor(r) Actos(r) Zyprexa(r) Aciphex(r) Asacol(r) Xeloda(r) Nexium(r) Rituxan(r) Cymbalta(r) Sales in $ Billions CY 2010 CY 2011 CY 2012 CY 2013 CY 20
Slide 35: PRxO Generics
Formulary that consists of over 7,000 SKUs Value Pricing Portfolio Management Increasing penetration in all segments Tailored programs Focused on customer profitability 100 manufacturers in PRxO(r) Generics PRxO(r) Generics Consistent Growth
Slide 36: Community Independents
Independents are sizable $3.8 million in sales per pharmacy annually 200 prescriptions per day on average Average independent owns 1.5 pharmacies Provide other services: Delivery, nutrition, compounding, hospice support, medical supplies Community Independents Consistent Growth
Slide 37: 3,700 Members Nationwide: America's Pharmacy Network
3,700 Members Nationwide America's Pharmacy Network Consistent Growth
Slide 38: Good Neighbor Pharmacy Core Framework
Good Neighbor Pharmacy Core Framework Grow Patient & Consumer Base Strengthen Core Business Maximize Profitability Business Coaching Good Neighbor Pharmacy Provider Network(r) InSite GNP Select Vendors (Pharmacy & POS) Central Pay Reconciliation Good Neighbor Pharmacy Patient Care Services Health Co
Slide 39: Good Neighbor Pharmacy Provider Network
Good Neighbor Pharmacy Provider Network Simplified access to contracts Negotiated rates, terms and conditions Help Desk to resolve access / claim issues Central pay speeds cash flow Profitability Analysis Tools GNP Prescription Savings Club(tm) Consistent Growth
Slide 40: Third Largest Network
Third Largest Network Consistent Growth
Slide 41: Health Systems & Alternate Site
Nearly 40% of Hospitals served by ABC PRxO(r) Generics gaining traction Alternate Care PRxO(r) Generics growing GNPPN program for long-term care Distribution and services in most contracts Health Systems & Alternate Site Consistent Growth
Slide 42: Health Systems Services
Health Systems Services Consistent Growth Quality Care Services Medication Process Medication Tracking Coordinated Patient Care Medication Policy Cost Control Services Drug Recovery and 340 B Unit Dose Integrated Services Center Inventory Management Market Growth Solutions Employee Pharmacy Services
Slide 43: Alternate Site Services
Alternate Site Services Consistent Growth Operational Cost Savings Inventory Management Reimbursement Management Procurement Management Automation Solutions Economic Expansion Special Generic Programs Staff management Automation Solutions Multi-Channel Business Planning Medication Safety and Managem
Slide 44: Customer Efficiency - Cost Effectiveness
Customer Efficiency - Cost Effectiveness Does the customer need the service How can we provide it at best value Continued Expense Leverage in FY2010 Continuous Improvement The Power of cE2 Philosophy Consistent Growth
Slide 45: Productivity Increasing
Productivity Increasing Consistent Growth Expense per Warehouse Line Warehouse Lines per Hour 75% 85% 95% 105% 115% 125% 135% 145% 155% 2005 2006 2007 2008 2009 75% 80% 85% 90% 95% 100% 105% 110% 2005 2006 2007 2008 2009
Slide 46: Focus for FY2010
Revenue growth of 5%-7% Grow generics above market Add new value-added business Leverage expense dollars Focus for FY2010 Consistent Growth
Slide 47: Mike Mullen, COO AmerisourceBergen Specialty Group
47 Mike Mullen Chief Operating Officer AmerisourceBergen Specialty Group
Slide 48: Specialty Group
Specialty Group Specialty product distribution & related services primarily to physicians Comprehensive commercialization services for biotech manufacturers Consistent Growth Distribution through all specialty channels Outsourced logistics Health economics and outcomes analysis REMS Compliance and p
Slide 49: $15.6 Billion in FY 2009 Revenue
$15.6 Billion in FY 2009 Revenue Consistent Growth ICS Besse Oncology ASD Services
Slide 50: ABSG Business Units
ABSG Business Units Consistent Growth Distribution Focused Oncology Supply & ION- oncology products & physician services ASD Healthcare - Plasma, nephrology, flu vaccine Besse Medical - Vaccines, rheumatology, ophthalmology ICS - Specialty distribution, 3PL, clinical call center services, REMs Servi
Slide 51: Undisputed Leader in Specialty Product Distribution
Undisputed Leader in Specialty Product Distribution Largest oncology products distributor and physician services organization in U.S. More than half of all community-based oncologists in the country Leading distributor in nephrology/dialysis Largest blood plasma products distributor Strong position
Slide 52: Market Leading Services Provider
Market Leading Services Provider Over 10 million unique patient contacts across 80 unique manufacturer programs Over 1,700 seat call center capability-reimbursement and nursing professionals Over 750 consulting projects with 90+ pharmaceutical, biotech and medical device companies in 2009 Advisory b
Slide 53: ABSG FY2009 Performance
ABSG FY2009 Performance Record revenue of $15.6 billion Continuous, consistent growth Record revenue for Oncology Group, ASD Healthcare, ICS and Besse Medical Record revenue for most services units Realized operating efficiencies again in FY09 Leading provider in Canada with Innomar Strategies acqui
Slide 54: ABSG Generic Opportunity
ABSG Generic Opportunity Eloxatin - Recent generic conversion August 2009 Additional, widely-used specialty products scheduled to go off patent CY2010 - Gemzar, Taxotere CY2011 - Alimta CY2012 - Zometa Consistent Growth
Slide 55: Biosimilar Opportunity
Biosimilar Opportunity ABSG extremely well positioned for biosimilars Current expectation: Complexity on par with branded version Biosimilar would likely require same services as branded product in same therapeutic class e.g. Compliance/persistency, infusion, REMS Legislation yet to define process a
Slide 56: Oncology
Oncology 850+ cancer drugs in pipeline, 175+ in phase III trials* ESAs stabilized Generics entering the market Physician customers seek new ABSG services and technology to improve operational efficiency: Protocol analysis and inventory management Consistent Growth *(PhRMA, 2009)
Slide 57: Integrated Distribution & Services
Integrated Distribution & Services Customer Need Biotechnology company needs reimbursement counseling and call center services for its new product ABSG Response Presented combined distribution, call center, reimbursement services and analytics services Results ABSG awarded contract for integrated se
Slide 58: Traditional vs. Integrated Model for Product Commercialization
Traditional vs. Integrated Model for Product Commercialization Consistent Growth
Slide 59: The Power of cE2
Significant impact on FY 2009 Performance Revenue grew faster than operating expenses Bad debt well-controlled Capital efficiency improved Expense dollars down in FY2010 Realization of FY09 initiatives Continue to leverage scale Management attitude and incentives The Power of cE2 Consistent Growth
Slide 60: Summary
Summary ABSG will continue to lead specialty product distribution and services in 2010 and beyond ABSG well positioned to benefit from specialty drug pipeline in brands and generics Operating momentum in revenue growth, expense control, capital efficiency Diversified, innovative and integrated offer
Slide 61: Mike DiCandilo, EVP & Chief Financial Officer
61 Mike DiCandilo Executive Vice President & Chief Financial Officer
Slide 62: AmerisourceBergen Packaging Group
AmerisourceBergen Packaging Group
Slide 63: Packaging Group Overview
Packaging Group Overview Three operating companies: 2 in US, 1 in UK 8 US facilities totaling 1.3 Million sq ft 1,200 employees Over 200 packaging lines Strong regulatory compliance profiles Preferred supplier to top global brand manufacturers and preferred relationships with large segment of generi
Slide 64: Packaging Group Financials
Packaging Group Financials Challenging FY2009 Project delays & deferrals in contract packaging Expect Strong FY 2010 30+ new projects expected in contract packaging Hospital unit dose continues growth, capacity increased Consistent Growth
Slide 65: Packaging Group Opportunities
Packaging Group Opportunities Big pharma outsourcing increasing Expanding prepackaged Hospital Unit Dose generics line has grown to 3rd largest in US Clinical Trial Services expanding internationally Packaged products targeting growing segments Proprietary package line expanding Global awards in con
Slide 66: Supply Chain FAQs
Supply Chain FAQs
Slide 67: Supply Chain FAQs
Supply Chain FAQs Is Fee-for-Service still working in a challenging brand environment? Are generics more profitable than brands? What is your generic sourcing philosphy? What is the impact of the pharma mega mergers?
Slide 68: Is Fee-for-Service still working? Yes!
Is Fee-for-Service still working? Yes!
Slide 69: Value to Manufacturer
Value to Manufacturer Delivery of Products 22,000 ship to points per day 99+% customer service levels Pick / Pack / Ship approximately 6,600 SKU's Inventory Control Smooth and predictable demand Supply chain safety and integrity Transparency to customer purchasing patterns Credit Risk and Management
Slide 70: Credit Risk Management
Credit Risk Management Now more important than ever Manufacturers have receivables with several investment grade companies Distributors manage credit relationships with tens of thousands of customers Prime Vendor model provides credit leverage Value to Manufacturer
Slide 71: Accounts Payable Cost
Accounts Payable Cost in bps Cost in dollars $8.5 billion 40 $34 million annually Hypothetical cost to suppliers if ABC were not Investment Grade Current: Accounts Payable Approximate Cost in bps Cost in dollars $8.5 billion 300 $255 million annually Hypothetical: Cost would be prohibitive, if prote
Slide 72: Supply Chain FAQs
Supply Chain FAQs Is Fee-for-Service still working in a challenging brand environment? Are generics more profitable than brands? What is your generic sourcing philosophy? What is the impact of the pharma mega mergers? ^
Slide 73: Impact of Big Pharma Mergers?
Impact of Big Pharma Mergers? Value of prime vendor model re-enforced Largest manufacturer still less than 10% of sales Current contracts are being honored ABC Value remains intact No scale economies at distribution level Pricing not expected to move to lowest common denominator
Slide 74: Supply Chain FAQs
Supply Chain FAQs Is Fee-for-Service still working in a challenging brand environment? Are generics more profitable than brands? What is your generic sourcing philosophy? What is the impact of the pharma mega mergers? ^ ^
Slide 75: ABC Generics Philosophy
ABC Generics Philosophy Procure products from a broad base of reliable global sources Over 100 manufacturers on PRxO(r) Generics Ensures competition while maintaining access to new product pipelines Mitigates regulatory issues Monitor and react to industry trends Utilize business process software to
Slide 76: Supply Chain FAQs
Supply Chain FAQs Is Fee-for-Service still working in a challenging brand environment? Are generics more profitable than brands? What is your generic sourcing philosophy? What is the impact of the pharma mega mergers? ^ ^ ^
Slide 77: Are Generics Profitable?
Are Generics Profitable? Make as much or more gross profit dollars per unit on generics Reduced receivable risk Reduced working capital Can negotiate better terms, ie 60 days DPOs Produces higher ROCC Economics of Generic vs. Branded Holds true even after exclusivity periods
Slide 78: Business Transformation
bY) AmerisourceBergen Business Transformation
Slide 79: Business Transformation Value
Foundation for Growth IT processes and infrastructure Back office processes Business unit integration / coordination Operational & Cost Efficiencies Customer connectivity Flexibility to support business processes Transforming data into information Acquisition integration Ease of Doing Business With
Slide 80: BT Program Timeline
F M A M J J A S O N D F M A M J J A S O N J F M A M J J A S O N D J D Program Timeline BT Timeline Realization-Build Realization-Testing Go-Live Deployment Blueprint- Design Final Preparation 2009 2010 2011
Slide 81: BT Investment
BT Investment Approximately $300 million over 3 years FY 2009, approx. $100 million 2/3 capitalized, 1/3 expensed FY 2010, approx. $110 - $120 million 60%-65% capitalized, 35%-40% expensed FY 2011, approx. $60 - $70 million 30% capitalized, 70% expensed Included in our guidance Value realization pre
Slide 82: Financial Review
bY) AmerisourceBergen Financial Review
Slide 83: Long Term Financial Goals
Consistent Growth Long Term Financial Goals EPS growth of approximately 15% Revenue growth with market Operating margin expansion ROIC>WACC Free cash flow approximates net income Minimum 30% of free cash returned to shareholders
Slide 84: EPS from Continuing Ops Since Merger
2001 2002 2003 2004 2005 2006 2007 2008 2009 EPS* 0.52 0.71 0.92 0.95 0.59 1.05 1.26 1.44 1.69 EPS from Continuing Ops Since Merger Consistent Growth GAAP Basis 16% CAGR +17% +14% +20%
Slide 85: Revenues 7% CAGR
2005 2006 2007 2008 2009 Revenues 54.21 60.81 65.67 70.19 71.8 Revenues 7% CAGR Consistent Growth
Slide 86: Operating Margin Expansion
2006 2007 2008 2009 Operating Expense 0 4 3 3 Gross Profit 8 2 4 2 total 8 6 7 5 Operating Margin Expansion Consistent Growth bps +8 +6 +7 +5
Slide 87: Asset Management
Consistent Growth Asset Management Inventory Days A/R Days 25 25 27 30 36 16 18 19 18 20 0 5 10 15 20 25 30 35 40 2005 2006 2007 2008 2009
Slide 88: Cash Generation and Deployment
Cash Generation Consistent Growth 2005 2006 2007 2008 2009 income from continuing ops 0.254 0.435 0.475 0.469 0.512 ocf 1.527 0.807 1.208 0.737 0.784 Cap Ex 0.203 0.112 0.111 0.137 0.146 Dividends 0.011 0.021 0.037 0.049 0.063 Acquisitions 0.004 0.213 0.086 0.169 0.013 Share Repurchases 0.786 0.718
Slide 89: FY 2009 Results
FY 2009 Results Record Diluted EPS From Cont. Ops. of $1.69, Up 17% ^ Record Revenue of $71.8 Billion, Up 2% ^ Operating Margin 1.23% Up 5 bps ^ Free Cash Flow: $638 million ^ $450 Million of Share Repurchase ^ Consistent Growth ^ Met or Exceeded FY 2009 Guidance
Slide 90: Fiscal Year 2010 Targets
Consistent Growth Fiscal Year 2010 Targets Diluted EPS of $1.82 to $1.92, up 8% to 14%, comfortable with higher end of range Q1 EPS will exceed the current consensus estimate of $0.43 by several cents Total revenue growth of 5% to 7% Q1 greater than 10% Operating Margin expansion - flat to low singl
Slide 91: FY10 Drivers: EPS Growth Estimate
EPS Growth Estimate 1Q highest growth 4Q lowest growth 8-14% 17% EPS Growth Share repurchase $350 million Net interest expense -- $400 million bond 3-4% 10% Cash Deployment 5-10% 7% Op Inc Growth +Expense leverage +Generics - -Customer mix, Kaiser - -Business Transformation 0-3% 5% Margin Expansion
Slide 92: FY2010 Targets by Business Unit
Fiscal Year 2010 Targets Revenue Growth and Operating Margin by Business Unit Business Unit % of Revenue Revenue Growth ABDC ABSG ABPG Total 5% - 7% 5% - 7% 15% - 20% 5% - 7% 77% - 80% 20% - 22% ^ 1/2% 100% Operating Margin Range 1.02% - 1.07% 1.70% - 1.80% 10% - 12% 1.23% - 1.26% Consistent Growth
Slide 93: Fiscal 2010 Capital Deployment
What's Available? $1.0 billion of cash @ 9/30/09 ($500 million available) Free Cash Flow of $500-$575 million expected for FY10 Net $100 million provided by $400 million bond issuance Total available for investment about $1.1 billion - $1.2 billion, excluding additional borrowing capacity Where to d
Slide 94: Focused on Growth Areas in Drug Channel
Consistent Growth Focused on Growth Areas in Drug Channel Positioned in Channel for Growth Right Investments for Future Growth
Slide 95: Q&A
N) AmerisourceBergen Q&A