Cencora, Inc. · NYSE:COR
Cencora — AmerisourceBergen — Investor Day (December 2013)
89 slides from Cencora's investor day presentation, Dec 12, 2013
Slide 1: AmerisourceBergen Investor Day, December 12, 2013
AmerisourceBergen Investor Day, December 12, 2013
Slide 2: Cautionary Note Regarding Forward-Looking Statements
Cautionary Note Regarding 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. Words such as "expect," "likely," "ou
Slide 3: President and Chief Executive Officer
President and Chief Executive Officer
Slide 4: Agenda
Agenda 4 Steve Collis President and Chief Executive Officer WELCOME & INTRODUCTION 19 Years Dave Neu President, AmerisourceBergen Drug Corporation James Frary President, AmerisourceBergen Specialty Group Peyton Howell President, Global Sourcing and Manufacturer Relations Tim Guttman Senior Vice Pres
Slide 5: Improving US Market Pharmaceutical Sales
Delivering Growth Improving US Market 5 Pharmaceutical Sales Source: IMS Health 2013 Sales $ millions 2.3% CAGR ORGANIC US INDUSTRY GROWTH IMPROVING + demographics + expansion of coverage + new brand drug launches + better generic launches + strong pricing environment – increased focus on value – sa
Slide 6: Even Greater Opportunities Globally
Delivering Growth Even Greater Opportunities Globally 6 Global Spending on Medicines Global Spending on Specialty
Slide 7: Delivering Growth: Well Positioned to Seize Global Opportunities
Drive greater operational efficiency, cost control, growth opportunities and patient safety. Delivering Growth Well Positioned to Seize Global Opportunities 7 Pharmacy Solutions IMPROVED PRODUCT ACCESS INCREASED SUPPLY CHAIN EFFICIENCY ENHANCED PATIENT CARE Drive practice efficiency, financial perfo
Slide 8: Fiscal 2013 – A Transformational Year for ABC
Delivering Growth Fiscal 2013 – A Transformational Year for ABC Solid financial performance Streamlined our business through divestitures Invested in core business to support growth Deployed capital to enhance returns to shareholders Signed a ground breaking deal with Walgreens and Alliance Boots 8
Slide 9: Strategic Relationship with Walgreens and Alliance Boots
Strategic Relationship with Walgreens and Alliance Boots Affirmed & Enhanced the Role of the Wholesaler Wholesalers can provide full service to a national chain Unmatched efficiency in logistics, inventory, and financial risk management Expertise strengthens supply chain security and integrity Scale
Slide 10: Best Partners and Greatest Reach
Strategic Relationship with Walgreens and Alliance Boots Best Partners and Greatest Reach 10 Year Distribution Contract With Walgreens Global Sourcing Contribution Platform Leverage, Domestic & International Interests Aligned Through Equity Position STRENGTHENS NEARLY EVERY ASPECT OF OUR BUSINESS 10
Slide 11: How Will We Continue to Drive Performance?
Delivering Growth How Will We Continue to Drive Performance? Unsurpassed expertise in pharmaceutical distribution, commercialization, and consulting Global reach in sourcing, distribution, and manufacturer services Innovative collaboration with manufacturers and providers improves efficiency and pro
Slide 12: Priorities for Fiscal 2014
Delivering Growth Priorities for Fiscal 2014 TRANSITION YEAR AS WE INVEST IN AND GROW OUR CORE BUSINESS 12 Walgreens & Alliance Boots Strategic Relationship Onboard generics distribution Negotiate global sourcing agreements Strengthen and Expand Our Core Business Drive solutions through cross compan
Slide 13: Long Term Objectives
Delivering Growth Long Term Objectives Grow revenue with the market Grow adjusted EPS in the mid teens Earn a ROIC that exceeds WACC Generate free cash flow that exceeds net income Return a minimum of 30% of free cash flow to shareholders 13 DISCIPLINED FINANCIAL STEWARDSHIP
Slide 14: AmerisourceBergen. Where knowledge, reach and partnership shape healthcare delivery.
14 AmerisourceBergen. Where knowledge, reach and partnership shape healthcare delivery.
Slide 15: President, AmerisourceBergen Drug Corporation
Senior Vice President and President, AmerisourceBergen Drug Corporation
Slide 16: AmerisourceBergen Drug Corporation
Delivering Growth AmerisourceBergen Drug Corporation FY2013 revenues of $68 billion 25 distribution centers in North America Prime vendor contracts with expanding customer base Broad manufacturer relationships Branded Rx Generic Rx Biotech and specialty medicines Over-the-counter (OTC) remedies, hom
Slide 17: Extensive Supply Chain Services
Delivering Growth Extensive Supply Chain Services 17 Brand Rx Global Sourcing and Distribution Services Market and Patient Access Financial Management Information & Data Management Retail Hospitals Clinics PBM/Mail LT Care Other Dispensers Generic Rx HBA/OTC
Slide 18: Pharmacy Solutions
Delivering Growth Pharmacy Solutions 18 Generic Purchasing Programs PRxO® Generics Scale Global Sourcing Individualized Incentives Pharmacy Network and Programs Good Neighbor Pharmacy GNP Network Patient Loyalty & Adherence Business Consulting Services Inventory & Cash Flow Management Claims Collect
Slide 19: FY2013 Accomplishments
Delivering Growth FY2013 Accomplishments 19 ABDC revenues up 14% Completed SAP implementation Performed well with few new generic launches Awarded 10 Year contract to supply brands and generics to Walgreens
Slide 20: Walgreens Contract Implementation
Delivering Growth Walgreens Contract Implementation 20 May-August 2013 System testing Route planning Hiring & training Build brand inventory August – December 2013 Transition over Labor Day Serve all stores on Day 1 Manage working capital Build generic inventory January - TBD 2014 Gradual transition
Slide 21: Walgreens Contract Implementation
Delivering Growth Walgreens Contract Implementation 21 550+ Positions filled Staffing Key Operating Metrics To Date Calls answered within 24 seconds Customer Care 100% of all customers within 60 minutes of expected time On Time Deliveries Strong performance over 99.5% Service Level
Slide 22: New Business Drives New Opportunities
Delivering Growth New Business Drives New Opportunities 22 Expand and Optimize Current Facilities
Slide 23: Investing in Infrastructure
Delivering Growth Investing in Infrastructure 23 Support growing market Increase facility size by 60% Increase throughput by 100% Utilize state of the art automation Replace & Expand Orlando DC Expansion of existing facility Single ship to point for manufacturers Efficient redistribution to ABC netw
Slide 24: Investing in Programs & Solutions
Delivering Growth Investing in Programs & Solutions 24 Community Pharmacy Enhance GNP Specialty Capture Uninsured Volume PRxO Generics Penetration Health Systems Quality Care Solutions Market Growth Solutions Cost Control Solutions Oncology Programs Reduce costs and improve profitability Increase pa
Slide 25: Community Pharmacy
Delivering Growth Community Pharmacy 25 To help our members compete in today’s changing pharmacy environment, Good Neighbor Pharmacy provides tools, resources and support to help our members to ATTRACT new patients, RETAIN existing ones and to OPERATE their business more efficiently. Building a Stro
Slide 26: Good Neighbor Pharmacy Customer Satisfaction Ranking
26 Good Neighbor Pharmacy ranks “Highest in Customer Satisfaction with Chain Drug Store Pharmacies” according to J.D. Power. Good Neighbor Pharmacy received the highest numerical score among chain drug store pharmacies in the proprietary J.D. Power 2013 U.S. Pharmacy StudySM. Study based on 13, 577
Slide 27: Leading Position in Health Systems
27 Delivering Growth Leading Position in Health Systems Leading market share in Hospitals Leader in oral solid hospital unit dose packaging Robust product introduction cycle Barcode ready-to-dispense Solutions Growth through tailored Customer Solutions and Innovation Ambulatory and Transitional Care
Slide 28: Health Systems Value Proposition
Delivering Growth Health Systems Value Proposition 28 Medication process Medication policy Medication tracking Coordinated patient care Quality Care Solutions Employee pharmacy services Employer pharmacy services Community pharmacy services Market Growth Solutions Performance assessment Inventory ma
Slide 29: Expanding Opportunities in Generics & Specialty
Delivering Growth Expanding Opportunities in Generics & Specialty 29 Good organic growth Global sourcing and scale benefits Still room to improve compliance Multi-channel approach a differentiator Customized packaging offering Generics Fastest growing market Significant customer interest across mult
Slide 30: Outlook for FY2014 and Beyond
Delivering Growth Outlook for FY2014 and Beyond 30 Organic market growth improving ABDC operating earnings increasing Cash generation improves in late fiscal 2014 Investing for future growth Driving future value for our customers and suppliers THE RIGHT PARTNERS IN THE RIGHT MARKETS DRIVE GROWTH IN
Slide 31: President, AmerisourceBergen Specialty Group
Senior Vice President and President, AmerisourceBergen Specialty Group
Slide 32: AmerisourceBergen Specialty Group
Delivering Growth AmerisourceBergen Specialty Group Market leader in specialty pharmaceutical distribution of oncology products, blood plasma products and biotech injectibles Provider of technologies and specialty pharmacy services that help physicians operate more efficiently, while improving patie
Slide 33: AmerisourceBergen Specialty Group 20th Anniversary
Delivering Growth AmerisourceBergen Specialty Group 33 20TH ANNIVERSARY NUMBER ONE SHARE IN MOST PHYSICIAN SPECIALTIES AND DIALYSIS NUMBER ONE DISTRIBUTOR OF BLOOD DERIVATIVES AND OTHER SPECIALTY PRODUCTS COMPREHENSIVE PORTFOLIO OF SERVICES FOR PRODUCT AND MARKET ACCESS GLOBAL LEADER IN SPECIALTY LO
Slide 34: Specialty Market Growth
Delivering Growth Specialty Market Growth ”Specialty” definition varies, including many attributes (site of care, cost, special handling, disease state, etc.) 24% of total Rx is described or defined as specialty 90% of all specialty drugs are handled by distributors Specialty is the fastest growing
Slide 35: Specialty Market Trends
Delivering Growth Specialty Market Trends Need for manufacturers to demonstrate greater product value and differentiation Need for specialty services to support patient access Emerging categories of specialty products (including future biosimilars) Pressure on stakeholders, in particular reimburseme
Slide 36: Provider Solutions
Delivering Growth Provider Solutions 37 Specialty Physician GPO’s Largest collection of specialty physician networks in the country Collective purchasing programs Technology solutions that reduce costs & optimize reimbursement Peer to peer networking and education Business Consulting Services Captur
Slide 37: AmerisourceBergen Specialty Group Structure
Delivering Growth AmerisourceBergen Specialty Group 38 AMERISOURCEBERGEN SPECIALTY GROUP James Frary, President PROVIDER SOLUTIONS Dave Leverette, President ASD HEALTHCARE Neil Herson, President GLOBAL SPECIALTY LOGISTICS Doug COOK, President AMERISOURCEBERGEN CONSULTING SERVICES Amy GRogg, Presiden
Slide 38: Oncology Supply and ION Solutions
Delivering Growth Oncology Supply and ION Solutions Largest network of community oncologists in America Most extensive and successful physician-led contracting Service leadership for overnight distribution for chemotherapy and supportive care products Interactive programs to promote clinical educati
Slide 39: Besse Medical
Delivering Growth Besse Medical Largest physician distributor of vaccines, biological and injectable pharmaceuticals 35,000+ active customers Sole practitioners, large group practices, IDN’s Leading authorized distributor to GPO affiliated practices Alt site programs Novation, Premier, AmeriNet, Med
Slide 40: ASD Healthcare
Delivering Growth ASD Healthcare Largest distributor of blood plasma products, nephrology products and flu vaccine #1 market share in blood products 24/7/365 service and order fulfillment Best in class customer service (TARP) Leader of innovative specialized distribution services and technologies Di
Slide 41: ICS Shipping
Delivering Growth ICS Shipping $12+ billion in product value (3PL and Title) annually Managing 900 million transactions annually with wholesalers, distributors, pharmacies, patients and providers Distribution services manages over 8,000 SKUs across 520,000 sq. ft. of warehouse space North American o
Slide 42: World Courier
Delivering Growth World Courier Specialty provider of transportation, storage and distribution services for multinational biopharmaceutical clinical trials Biopharmaceutical clinical trials Investigational drug storage and distribution Operating in over 50 countries; over 100 offices; and 13 investi
Slide 43: Lash Group & Premier Source: Dedicated to Patient Access
DEDICATED TO PATIENT ACCESS For more than 20 years we’ve ensured patients receive the best possible care, while strengthening product performance at every stage of the life cycle Supporting 100+ patient access programs and 17 of the top 20 pharma companies Serving 12 million patients and counting th
Slide 44: Xcenda: Proving Product Value and Maximizing Access
PROVING PRODUCT VALUE AND MAXIMIZING ACCESS Recognized for two decades as a premier provider of commercialization consulting services Access to a broad, yet strategically connected, array of expertise to help manufacturers navigate the dynamic global healthcare landscape Product launch strategy and
Slide 45: Expertise across Pharmaceutical Life Cycle
Delivering Growth Expertise across Pharmaceutical Life Cycle 46
Slide 46: Unsurpassed Global Reach
Delivering Growth Unsurpassed Global Reach 47 UNSURPASSED SPECIALTY LOGISTICS NETWORK North American Distribution Centers (29 Total) Investigational Drug Storage Depot (13 Total) Office Locations (150+ Total)
Slide 47: Trusted Partnerships
Delivering Growth Trusted Partnerships 48 Absolute dependability Long track record for service and product leadership Right product, right time, right cost Partner for business growth Improved inventory management and practice performance Established partnerships with stakeholders across the industr
Slide 48: AmerisourceBergen. Where knowledge, reach and partnership shape healthcare delivery.
AmerisourceBergen. Where knowledge, reach and partnership shape healthcare delivery.
Slide 49: President, Global Sourcing and Manufacturer Relationships
Senior Vice President and President, Global Sourcing and Manufacturer Relationships
Slide 50: Manufacturer Solutions and Global Sourcing
51 Delivering Growth Manufacturer Solutions and Global Sourcing Improve market access and patient access 3 key trends related to global market access New Global Sourcing Strategy New, more integrated approach to manufacturers Unique area of strength for AmerisourceBergen Expand Manufacturer Solution
Slide 51: New Global Sourcing Strategy
Delivering Growth New Global Sourcing Strategy 52 Consultative approach to manufacturer relations focused on shared value Coordinated across unique breadth and depth of capabilities Focused on long-term global growth to support patient access to care
Slide 52: What is Market Access? Patient Access?
53 What is Market Access? Patient Access? Market Access – Access to markets is as significant a hurdle to product uptake as registration itself Patient Access – Quickly evolving as a preferred term and particularly appropriate for specialty care needs. Opportunity for “patient access” to serve as a
Slide 53: Why Global Matters?
54 Why Global Matters? The US is the key market for specialty products. Outside of the US, specialty products have had limited patient access. Greatest growth for specialty will be outside of the United States US payment models for specialty care will evolve Today Over next 10 years:
Slide 54: Why Global Markets Are Positioned to Grow in Specialty
Why Are Global Markets Positioned to Grow in Specialty More Than the US? 55 Growth of middle class Expansion of private health insurance Emerging Markets – Especially Brazil and China as two of the four “BRIC” (Brazil, Russia, India, China) countries. Specialty will be a growth market even within ma
Slide 55: Key Trends Related to Global Market Access
3 key trends related to new focus on global market access 1 2 3
Slide 56: Key Benefits of a Global Partnership
Delivering Growth Key Benefits of a Global Partnership 58 Global Supply Chain Efficiencies Informed and coordinated global launches Improved Market Access Patient support, education and specialty models Customer insights and innovation
Slide 57: New Relationships to Drive Value
2 Delivering Growth New Relationships to Drive Value “Thinking Global” also means thinking in new ways within local markets New types of partnerships focused on driving value Align on outcomes and drive for efficiency CMS Pilot Program are focused on new types of partnerships Example ACO models 59 B
Slide 58: Example: New Relationships to Drive Value
Delivering Growth Example: New Relationships to Drive Value 60 ACO Hospitals and Physicians Community Pharmacy Specialty Care Home Care Skilled Nursing Care Payment models that will drive partnerships based on outcomes, efficiency and value. Opportunity for providers that can impact patient adherenc
Slide 59: Expansion of Patient Focused Services
3 Delivering Growth Expansion of Patient Focused Services 61 New Global Focus on Patient Focused Services Reimbursement Support Services Care coordination support (Discharge, Across Sites of Care) Patient Assistance Programs Adherence programs and Nurse care lines Patient education and engagement pr
Slide 60: Do Patient Focused Services Exist Outside of the United States?
Do Patient Focused Services Exist Outside of the United States? 62 Innomar – Largest patient services and specialty manufacturer provider in Canada Despite a national health care systems, navigating patient access is a key challenge in Canada Patient programs are fundamental to patient access for sp
Slide 61: Unique Breadth and Depth of Manufacturer Solutions
Delivering Growth AmerisourceBergen has a Unique Breadth and Depth of Manufacturer Solutions Global sourcing and distribution Strategic consulting services Global specialty logistics Market leading specialty physician GPOs Patient support services Product awareness and marketing services 63
Slide 62: Growth and Development of the Global Generics Market
Growth and Development of the Global Generics Market
Slide 63: Global Generics Market Transforming and Poised for Growth
Global Generics Market 65 Transforming and Poised for Significant Growth INCREASING DEMAND ACROSS ENTIRE HEALTHCARE SPECTRUM New Generic Launches in 2014 Vidaza® Nexium® Cymbalta® Shortages remain but have not accelerated Opportunities with biosimilars on the horizon Tremendous value in an era of co
Slide 64: Generic Drug Prices and Changing Market Conditions
Broad manufacturer economic needs How long on the market Role of the brand product Market share Contract changes Any supply issues 4 or less market participants Generic price have dropped very low (30% or less of brand price) Price increase primarily driven by market leader Generic Drug Prices and C
Slide 65: Generic Drug Price Increases on Relatively Few Products
Generic Drug Price Increases are on a Relatively Few Number of Products However, Less than 20% of our top 250 generic SKUs had any price increase in Fiscal 2013 Vast majority either saw no increase or had a decline in price 67 Significant Number of Generic Price Increases in Last 6 Months LARGE PRIC
Slide 66: Value Proposition of Global Generics Purchasing
Delivering Growth Value Proposition of Global Generics Purchasing Improved manufacturer access to global markets Single GPO negotiating on behalf of aggregated demand from Walgreens, Alliance Boots, and AmerisourceBergen Increased scale provides improved coordination, fewer orders, and smaller numbe
Slide 67: Global Generics Sourcing Negotiations Underway
Delivering Growth Global Generics Sourcing Negotiations Underway Working collaboratively with generic manufacturing partners to provide “win-win” solutions and a platform for shared global growth Significant progress to support implementation: Demonstrating value through scale and volume On track to
Slide 68: Global Sourcing Summary
Delivering Growth Global Sourcing Summary Our new approach to manufacturers has been well received by both generic and brand manufacturers Consultative Focused on bringing new opportunities for shared value Positioned for growth Delighted by our progress working with Walgreens and Alliance Boots on
Slide 69: Knowledge, Reach, Partnership
71 Knowledge: Unsurpassed sourcing, distribution, commercialization and health policy expertise in brand, generic, specialty and OTC markets. Reach: Market leadership positions that drive supply chain efficiency and improve product access – from pharmacies to practices and patients. Partnership: An
Slide 70: Senior Vice President and Chief Financial Officer
Senior Vice President and Chief Financial Officer
Slide 71: Financial Model
Delivering Growth 73 Financial Model Focus on the right markets Choose the best partners Grow Core Revenues Capitalize on benefits of scale Exercise expense discipline Drive operating leverage Increase Operating Earnings Manage working capital Drive ROIC Generate Cash Flow Invest in key internal pro
Slide 72: Historical Financial Results
Delivering Growth Historical Financial Results Adjusted Operating Income / Diluted EPS Presented on a consistent basis with 10/31/13 Fiscal Year 2014 Guidance and excludes: anti-trust settlements LIFO special charges deal intangible amortization Warrant impact Continuing Operations Excludes business
Slide 73: Revenues 5% CAGR
Delivering Growth Revenues 75 5% CAGR Billions
Slide 74: Adjusted EBIT 9% CAGR
Delivering Growth Adjusted EBIT 76 Millions 9% CAGR
Slide 75: Adjusted Diluted EPS 17% CAGR
Delivering Growth Adjusted Diluted EPS 77 17% CAGR $1.48 $1.74 $2.21 $2.67 $3.08 $3.21 2008 2009 2010 2011 2012 2013
Slide 76: Cash Generation
Delivering Growth Cash Generation 78 Billions Working Capital Impact
Slide 77: Excess Cash Returned to Shareholders
Delivering Growth Excess Cash Returned to Shareholders 79 Billions
Slide 78: Total Shareholder Return
Delivering Growth 5 Year Total Shareholder Return 80 *Peer Group includes MCK, CAH, HSIC, OCR, PDCO, OMI TSR includes equity and dividend returns over the five year period and assumes dividends accumulated are reinvested in additional shares of the respective equity.
Slide 79: Fiscal Year 2014 Targets
Delivering Growth Fiscal Year 2014 Targets 81 Adjusted Diluted EPS in the range of $3.60 to $3.73, up 12% to 16% Growth in 28% to 31% range Revenue Dollar growth in the 12% to 16% range, margin decline in the high teens Operating Income In the range of $500 to $700M including CapEx in $300M range Fr
Slide 80: Diverse Mix of Revenues
Delivering Growth Diverse Mix of Revenues 82 Alternate Site Manufacturer Services Specialty Health Systems Retail *Estimated FY2014 Revenues *
Slide 81: Fiscal Year 2014 Adjusted EBIT Expectation
Delivering Growth Fiscal Year 2014 Adjusted EBIT Expectation 83 12% to 16%
Slide 82: Fiscal Year 2014 Targets by Business Unit
Onboarding lower margin Walgreens business Significant EBIT dollar growth Delivering Growth Fiscal Year 2014 Targets 84 Business Unit % of Revenue Revenue Growth Operating Margin Range ABDC 81% - 82% 35% - 37% 1.03% - 1.10% Oncology Supply flat Lower margin businesses growing faster ABSG 16% - 17% 7
Slide 83: Fiscal Year 2014 Dynamics
Delivering Growth Fiscal Year 2014 Dynamics 85 Impact of on-boarding Walgreens: Inefficient OPEX due to ramp Working capital impact – Oct. brand payables Complete the Hedge Sequester headwind in oncology First Half New GRx launches expected Walgreens GRx ramp Procurement JV contribution later in yea
Slide 84: Looking Ahead
Delivering Growth Looking Ahead Better organic growth Improving generic opportunities Increasing operational efficiency Significant EBIT expansion Disciplined capital deployment 86
Slide 85: Question & Answer
Question & Answer ee oe a ‘Where knowledge, reach ani partnership shape healincare delivery.
Slide 86: Knowledge, Reach, Partnership
88 Knowledge: Unsurpassed sourcing, distribution, commercialization and health policy expertise in brand, generic, specialty and OTC markets. Reach: Market leadership positions that drive supply chain efficiency and improve product access – from pharmacies to practices and patients. Partnership: An
Slide 87: Appendix: GAAP to Adjusted Reconciliations
Appendix GAAP to Adjusted Operating Earnings and Earnings Per Share Reconciliations 89
Slide 88: Adjusted Operating Income
Adjusted Operating Income Fiscal Years Ended September 30, 2008 through September 30, 2013 ($ millions) 90 GAAP Operating Income $ 898 $ 1,304 $ 1,190 $ 1,087 $ 876 $ 791 Anti-Trust Litigation (23) (15) (2) (21) - (3) Warrants 90 - - - - - Deal Amortization 24 18 10 10 10 10 LIFO 277 1 35 30 15 21 S
Slide 89: Adjusted Diluted EPS from Continuing Operations
Adjusted Diluted EPS from Continuing Operations Fiscal Years Ended September 30, 2008 through September 30, 2013 91 EPS from Continuing Operations $ 2.10 $ 2.96 $ 2.51 $ 2.18 $ 1.68 $ 1.40 Anti-Trust Litigation (0.06) (0.04) - (0.04) - (0.01) Warrants 0.32 - - - - - Deal Amortization 0.06 0.04 0.02