Cardinal Health (NYSE:CAH) FY Conference Transcript

Summary of Cardinal Health FY Conference Call Company Overview - Company: Cardinal Health (NYSE: CAH) - Date of Conference: September 09, 2025 - Key Speakers: Jason Hollar (CEO), Aaron Alt (CFO), Matt Sims (IR) Key Industry Insights - Pharmaceutical and Specialty Solutions Growth: - Long-term EBIT growth targets raised to 7% to 9%, with organic growth of 5% to 7% [3][6] - Core pharmaceutical distribution expected to maintain steady growth, with generics showing increased opportunities due to loss of exclusivity [7][8] - Specialty side of the business is the fastest growing, with mid-teens growth rates and higher margin services growing around 20% [8][9] - Fiscal 2026 Adjusted Operating Income: - Expectations raised to 11% to 13% growth, reflecting strong demand and adjustments following Q4 results [10][11] - New Customer Contributions: - Anticipated $7 billion contribution from new customers in fiscal 2026, following a $10 billion uplift from previous contracts [12][13] M&A and MSO Platforms - Recent Acquisitions: - Addition of Solaris Health to the Urology Alliance, enhancing the Specialty Alliance business [14][15] - Focus on integrating MSO platforms to provide comprehensive support to specialty community physicians [15][16] - Diverse Revenue Streams: - MSO revenue is diversified, with approximately one-third from drug spend, one-third from physician office procedures, and one-third from ancillary services [39] Financial Performance and Projections - Free Cash Flow: - Expected to generate over $10 billion in adjusted free cash flow over the next three years, with $2.5 billion generated in fiscal year 2025 [24][25] - Capital Allocation: - $750 million baseline for share repurchases and $500 million for dividends in fiscal year 2026 [25] Biosimilars and Drug Pricing - Biosimilars Market: - $175 billion in revenue expected to go off patent by the end of the decade, presenting significant growth opportunities [27][28] - Drug Pricing Environment: - Confident in maintaining economics despite potential changes from MFN dynamics and IRA, with a diverse revenue model mitigating risks [34][40] GMPD Business Insights - Utilization Trends: - Consistent demand with long-term market growth expectations of 2% to 3% [41] - Tariff Impacts: - Estimated net impact of $50 to $75 million in fiscal 2026 due to tariffs, with ongoing mitigation efforts [42][43] Other Segment Performance - Profit Growth: - Other segments targeting 25% to 27% adjusted operating income growth in fiscal 2026, driven by investments and market trends [51][52] - At-Home Solutions: - Positioned for growth due to the trend of care moving into the home, supported by recent acquisitions [52][53] Conclusion - Cardinal Health is strategically positioned for growth across its pharmaceutical and specialty solutions, with a strong focus on M&A, diversified revenue streams, and proactive management of market challenges. The company aims to achieve its long-term EPS targets through disciplined capital allocation and operational efficiencies [58].