Cardinal Health (CAH) Morgan Stanley 22nd Annual Global Healthcare Conference Transcript

Summary of Cardinal Health, Inc. Conference Call Company Overview - Company: Cardinal Health, Inc. (NYSE: CAH) - Date: September 5, 2024 - Participants: - Matt Sims - VP, IR - Aaron Alt - CFO - Erin Wright - Morgan Stanley Healthcare Services Analyst Key Industry Insights - Pharmaceutical and Specialty Solutions Growth: - Long-term EBIT growth target of 4% to 6% adjusted to 1% to 3% for the current year due to a significant contract nonrenewal [6][4] - Core pharma business expected to grow low single digits, while specialty is anticipated to contribute positively [6][10] Financial Performance - Revenue Trends: - Pharma revenue projected to decline by 4% to 6% for the year, but excluding the large customer nonrenewal, it would increase by 15% to 18% [7][6] - Organic growth assumption within the pharma portfolio is 10% [8] - Specialty portfolio has shown robust growth with a CAGR of 14% over the past three years [24] Strategic Initiatives - Customer Relationships: - Focus on partnerships with key customers like CVS and new relationships with Publix and Bioplus [18][14] - Strategy to "win with the winners" by aligning with strong customers [18] - Cost Optimization: - Aggressive actions taken in fiscal 2024 to optimize SG&A and improve margins [15] - Continued focus on cost mitigation and simplification across the organization [44][45] Market Dynamics - Drug Pricing Environment: - No significant changes expected in drug pricing; generic portfolio managed effectively due to scale and partnerships [20][21] - Inflation in branded drugs expected to remain consistent with previous years [21] - Impact of COVID-19: - Modest impact from COVID-19 anticipated, primarily affecting Q2 [12] Specialty Business Development - Acquisitions and Investments: - Recent acquisition of Specialty Networks to enhance capabilities in urology, gastroenterology, and rheumatology [27][25] - Focus on organic and inorganic growth strategies, particularly in specialty and other segments [54][56] Medical Segment Performance - EBIT Goals: - Targeting $300 million in EBIT by fiscal 2026, with a current guidance of $175 million for fiscal 2025 [38][39] - Medical segment growth driven by brand growth and cost optimization [41][38] Other Segment Insights - Diverse Business Focus: - Commitment to nuclear, at-home, and OptiFreight businesses, with expectations of 10% profit growth [51][52] - Investments in technology and automation to drive efficiency [52] M&A and Capital Allocation - M&A Strategy: - Focus on specialty assets for acquisitions, with a disciplined approach to inorganic growth [56] - Planned share repurchase of $750 million for fiscal 2025 [55] Conclusion - Cardinal Health is navigating a challenging environment with strategic adjustments in its pharmaceutical and specialty segments, focusing on customer relationships, cost optimization, and targeted growth initiatives. The company remains committed to its long-term EBIT goals while adapting to market dynamics and operational challenges.