Charles Rhyee • TD Cowen

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CFO Aaron Alt confirmed the Q4 expenses were not the strategic investments discussed at Investor Day. Regarding the EPS impact, he guided analysts to focus on the forward-looking FY26 impact, where roughly half of the $0.20 guidance raise is from the liability classification.

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CFO Aaron Alt explained that the growth is expected to be broad-based. Key drivers include continued momentum in the Pharma segment (from utilization, generics, specialty, and new customers), strong demand and secular tailwinds in the three 'Other' businesses, and accretive contributions from recent acquisitions like GIA and ADSG. This combined strength supports the outlook even with GMPD's profit expected to be flat.

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CEO Jason Hollar reiterated that while onshoring is a consideration, short-term acceleration is difficult due to regulatory and investment constraints, and decisions depend on the scale and certainty of tariffs. CFO Aaron Alt addressed the generics question, stating that the market dynamic was consistent in the quarter. He emphasized that Cardinal Health manages both sourcing and pricing to maintain a consistent average margin per unit, rather than focusing solely on the rate of deflation.

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CEO Jason Hollar clarified that any disruptions, such as from hurricanes, were not meaningful to GMPD results. He explained that while GMPD utilization is stable, it is not as strong as the pharma side. He confirmed that the forward guidance for Q2-Q4 assumes a 'normal utilization type of environment,' consistent with the company's long-term growth targets.

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CFO John Johnson confirmed their 2026 revenue build-up does assume some decline in the exchange population. CEO Seth Blackley addressed the partner question generically, stating that the Performance Suite is the best value proposition and he expects partners to move that way over time, though timing is uncertain due to factors like membership volatility.

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Executive John Johnson responded that leading indicators for April showed patterns similar to Q1. However, he stated that the company would wait for Q2 results, which will include significantly more completed claims data, before providing a formal update on its trend forecast.

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CFO John Johnson explained that the trend comparisons are different because new contract corridors now bind the potential volatility more than in the prior year. CEO Seth Blackley added that cardiology trends are smaller than oncology and that the company is taking a conservative approach in its 2025 forecast for cardiology as well. He also confirmed that the new risk corridor structures apply to both the oncology and cardiology businesses.

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John Johnson explained that while the claims audit is a normal process, the volume of claims to review has grown tenfold compared to the prior year. He noted that less than 10% of the flagged claims have been reviewed so far and the company is taking a conservative stance. Johnson also confirmed that the small number of partners driving the high MLR represent 40% to 50% of the Performance Suite revenue.

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CFO Chris McGinnis clarified that the revenue impact is split roughly half-and-half between the Rite Aid bankruptcy and the erosion of one ISP program. CEO Wendy Barnes addressed the DTC opportunity, suggesting that the key factor is the price delta consumers experience, creating a meaningful opportunity even for higher-cost drugs.

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CFO Chris McGinnis clarified that the revenue headwind is split roughly half-and-half between Rite Aid and the ISP issue. CEO Wendy Barnes addressed the brand drug opportunity, stating that consumer value is driven by the savings delta relative to the original price, making it a significant opportunity even for drugs with cash prices above historical thresholds.

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CEO Wendy Barnes stated that they are 'close' to securing GLP-1 partnerships, suggesting that recent resolutions of supply shortages and the anticipated launch of more competing molecules will increase pressure on manufacturers to partner. Regarding the HCP strategy, she highlighted the high engagement from over 750,000 HCPs in Q1 and noted the new Chief Pharmacy Officer is focused on better monetizing this audience in partnership with pharma manufacturers, an opportunity she believes was not fully capitalized on previously.

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CEO Wendy Barnes stated they are 'close' with GLP-1 manufacturers, suggesting that recent supply shortages and the newness of their direct models are temporary hurdles. She anticipates that increasing competition will change the dynamic. Regarding the HCP strategy, she highlighted that over 750,000 unique prescribers engaged with the platform in Q1 and the new focus under the Chief Pharmacy Officer is to better monetize this engagement in direct partnership with pharma companies, an area she believes was previously underutilized.

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CEO Wendy Barnes acknowledged that the ISP has evolved since its launch, with a greater focus now on the 'ISP wrap' for non-covered brands, which presents a larger value proposition to PBMs and their clients. She confirmed that dialogues with existing PBM partners are dynamic and ongoing, and that GoodRx is actively working to expand its list of ISP partners to address the significant opportunity in coverage gaps.

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Interim CEO Scott Wagner acknowledged that industry announcements on footprint changes and retail-PBM interactions are factored into their outlook. He highlighted that GoodRx's value proposition, particularly its brand programs, helps retain consumers by providing affordability, which can lead them to switch pharmacies and demonstrates the company's ability to direct volume.

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EVP & CFO Britt Vitalone attributed the strong quarter to successful prior authorization programs for both GLP-1 and non-GLP-1 drugs, as well as lumpy but strong 3PL revenue. CEO & Director Brian Tyler added that prior authorization policies have been largely steady, and a mix shift between program sponsors has not negatively impacted overall prior authorization volumes.

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CFO Britt Vitalone explained that the fiscal 2026 guidance of $4.4 billion to $4.8 billion is still historically strong. He attributed the year-over-year decrease primarily to the timing of working capital, which can be affected by which day a quarter ends on, and a few non-operational cash flow items that favorably impacted fiscal 2025.

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CFO Britt Vitalone clarified that specific fiscal 2026 guidance has not been provided. He acknowledged the current soft flu season's impact but declined to predict future seasons. He confirmed the company is on track to achieve its $100 million cost savings goal for fiscal 2025 and is continuing to align the business with market conditions.

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CFO Britt Vitalone explained that prior authorizations can be initiated at the provider or pharmacy and the revenue model depends on the services provided, which can change as a drug matures. He does not expect significant cash flow changes from IRA impacts on receivables, as terms are set by customer contract. He described Health Mart as a resilient network that McKesson supports with sourcing and reimbursement services, noting its membership has remained stable through natural churn.

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CFO Flavia Pease confirmed the second-half margin headwinds are driven by increased DSA hiring, the absence of high-margin CDMO revenue from H1, and the timing of annual merit increases. Regarding the DOJ investigation, she explained that the associated legal costs and inventory write-offs were previously treated as non-GAAP items. The NHP inventory will now be expensed as a normal cost of goods sold as studies are run, unwinding the prior non-GAAP adjustment.

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CEO James Foster explained that cancellation rates have been declining for over a year and are approaching target levels, indicating market stability. Regarding the FDA inspection, he stated that the company is working closely and productively with the agency to respond to their requests, giving them confidence in their ability to support future commercial clients.

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EVP & CFO Flavia Pease explained that margin expansion is also driven by company-wide cost savings initiatives benefiting all businesses, including biologics testing and CDMO. Chair, President & CEO James Foster confirmed that the client mentioned in the filing was one of the two commercial clients previously discussed at the JPMorgan conference.

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President & CEO Robert Mauch explained that there is no simple answer, as the lead time and sales cycle are variable and depend on factors like the project's size, the market, and the specific type of work. However, he assured that the company has good visibility into its pipeline and future growth tracking, and that teams are focused on sales execution and optimizing services to capitalize on a market recovery.

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CFO Jim Cleary confirmed that subdued clinical trial activity has pressured the global specialty logistics and pharma consulting businesses, with a market rebound occurring slower than anticipated. This led to the lowered guidance for the International segment. He expressed confidence in Cencora's ability to capitalize on an eventual recovery.

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CEO Robert Mauch stated that the retina market is healthy with both new innovation and biosimilars. He noted that biosimilar adoption in the Part B space has historically been strong and is expected to continue, but physicians will ultimately make the best clinical decisions for their patients.

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CEO Bob Mauch stated that Cencora respects the governmental review process and is prepared to participate. He defended the MSO model as a vital tool for supporting community providers, arguing that it enhances patient access and promotes a more cost-effective healthcare system.

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CEO Jon Rousseau explained that the company's clinical liaison team effectively acts as a sales force for generics, driving rapid conversion and market share. Regarding 'most favored nation' pricing, Rousseau stated it's uncertain but believes pharmacies are not the intended target. He emphasized the company's diversification, strong balance sheet, and the likelihood that payment models would evolve to ensure provider stability.

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President and COO Brian Evanko described serving health systems as a key growth opportunity, as they seek to manage their own specialty pharmacy capabilities. He clarified that CuraScript focuses on the provider-administered medical benefit market, differentiating it from traditional wholesalers. He also confirmed CuraScript is a distribution vehicle for new biosimilars, like its Stelara biosimilar, capitalizing on the growing biosimilar wave.

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Chairman and CEO David Cordani reiterated that the Arkansas bill is flawed and suggested recourse includes fact-based engagement, amplifying client choice, and embracing transparency, with litigation as a final option. President and COO Brian Evanko announced that a $0 patient out-of-pocket biosimilar for STELARA would be available this month, expecting gradual adoption through the year, which is contemplated in Evernorth's outlook.

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CFO Brian Evanko clarified that the stop-loss pressure was driven by high-cost specialty injectables like KEYTRUDA and OCREVUS and high-acuity surgeries, not GLP-1s. Regarding Evernorth's 2025 outlook, he explained that after normalizing for the absence of VillageMD income, stranded overhead from the Medicare divestiture, and new investments, the segment's growth falls within the company's 5% to 8% long-term target range.

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CEO Matt Hawkins stated that Waystar has not observed this behavior and has maintained excellent retention among the clients that switched over. He reiterated his view that as time passes, the ongoing unrest at the competitor creates a significant opportunity for Waystar to gain further market share from a second wave of clients looking to switch.

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CEO Charles Divita responded that a key opportunity is to evolve virtual care from being transactional to being more longitudinal. He explained that the company's strategy is to use its millions of engagement points not just as visits, but as opportunities to address care gaps, navigate patients, and resolve issues more holistically. This shift aims to make each interaction more valuable and impactful, thereby driving more volume.

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CFO Mala Murthy responded that capital is being prioritized for acquiring capabilities to drive long-term growth, though share buybacks remain an option. CEO Chuck Divita added that recent organizational restructuring has streamlined the company, putting leadership in place to effectively execute on the distinct strategies for both major segments and unlock value from the company's scale.

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CEO Chuck Divita stated that marketing strategies are broad-based, leveraging the main Teladoc brand, rather than being specific to TRICARE. CFO Mala Murthy explained that when transitioning clients to visit-fee models, the goal is to be gross margin neutral over time, often achieving gross profit dollar accretion by bundling additional services.

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Chief Financial Officer Mala Murthy acknowledged that with rapid new member growth, it takes time for utilization to fully ramp up across the new base. However, she stressed that the company is seeing strong visit volume growth and, more importantly, robust visit revenue growth. This is driven by volume and an accretive mix from areas like mental health and Primary360. She expects this trend to continue as the company focuses on improving engagement across its entire member population.

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CFO Mala Murthy acknowledged that it takes time for utilization to ramp up with a large influx of new members. She emphasized, however, that the company is seeing strong visit volume growth and, more importantly, robust visit revenue growth, driven by accretive visits in high-value areas like mental health and Primary360.

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CEO Steve Cutler clarified that the Q3 cancellation forecast will be in the 'same sort of postcode' as Q2's number and should not be viewed as containing an exceptional item. CFO Nigel Clerkin added that the change in revenue guidance is 'fundamentally driven from the uptick in pass-throughs,' with foreign exchange having a neutral impact since the April guidance was issued.

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CEO Dr. Steve Cutler reported that there were no specific themes, with cancellations spread evenly across the business, though perhaps slightly more in large pharma for the full year. He expects cancellations to remain on the 'higher side of normal' through 2025, particularly until biotech funding becomes more broad-based. He confirmed this elevated cancellation rate is fully contemplated in the company's reaffirmed guidance.

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CEO Dr. Steve Cutler confirmed that ICON's strong balance sheet allows for both M&A and share repurchases. He characterized the M&A pipeline as consisting of non-transformational, bolt-on acquisitions similar in size to the recent Eastern Europe deal. The focus is on supplementing and improving current operations in areas like laboratory services, patient and site solutions, and late-phase evidence to enhance overall performance.

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CEO August Troendle confirmed that while the overall environment had weakened previously, the biggest recent variable has been cancellations, which he stated are "very highly related" to funding. He also attributed the accelerated client decision-making primarily to improved funding, which allows sponsors to move forward with awarded projects.

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CEO August Troendle confirmed that sponsors pulling back on funding commitments is part of the current dynamic. He clarified that while backlog cancellations were within a manageable range, pre-backlog cancellations were 'significantly worse and very high.' President Jesse Geiger also reiterated the company's plan for mid-single-digit headcount growth, dependent on the market.

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CEO August Troendle explained that the impact of 2024's elevated pre-backlog cancellations will persist through 2025, causing weak bookings in the first half. He clarified he is not projecting future RFPs but expects bookings to be weak, though hopefully above a 1.0 book-to-bill, before accelerating in the second half of the year as the impact of prior cancellations wanes.

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CEO August Troendle explained that the H1 funding was not evenly distributed; some clients did receive funding and continued their projects, while others did not. CFO Kevin Brady stated that the company's share repurchase plans are disciplined and opportunistic, but the pre-set plans did not trigger in the quarter. He also clarified that pass-through volatility is due to various factors like site invoicing timing and is not necessarily a new trend or solely due to trial delays.

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CEO Tom Pike clarified that the primary impact from funding concerns is increased caution and slower decision-making from biotech clients, not cancellations. CFO Jill McConnell added that Fortrea's booking policy requires clients to have funding for the trial's duration, which mitigates risk. She confirmed there has been no spike in bad debt provisions and the company is proactively managing collections.

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CEO Tom Pike explained that the pre- versus post-spin analysis became a focus in recent months as they dug into the portfolio's profitability to confirm that new business was meeting economic targets. Regarding capacity, he stated it is 'closely managed' as they 'thread the needle' between having sufficient resources for quality delivery and maintaining cost efficiency.

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President and CEO David Joyner called the Arkansas law 'bad policy' that harms patients and increases costs. He expressed confidence that other states would reject this approach, making strategic divestitures unnecessary. He affirmed the value of the integrated model. On Wegovy, he confirmed that the PBM's role is to create competition and lower costs for customers, which the new agreement achieves, and this benefit will now extend to its retail pharmacies.

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CEO Peter Gassner suggested that the Veeva Development Cloud has likely played a small part in enabling large pharma to shift towards more functional outsourcing by providing an efficient, integrated technology stack. However, he noted this was a contributing factor rather than the primary driver of Development Cloud's uptake.

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CEO Peter Gassner stated the Walgreens deal is part of an ongoing effort to expand their industry-leading data network, which powers both Crossix and Compass. He expressed confidence in their competitive position. CFO Brian Van Wagener declined to provide a specific growth rate for Crossix but noted it is performing well and taking share in a healthy market.

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CEO Peter Gassner stated he would not call it a 'thawing,' but rather a better flow of some pent-up demand in the absence of new negative macro news. Interim CFO Tim Cabral explained the billings forecast is shaped by a harder Q3 year-over-year comparison and the impact of billing term changes, primarily related to renewal date shifts.

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Ari Bousbib, Chairman and CEO, detailed that within TAS, the information business remains a stable low-single-digit grower. Analytics and Consulting, which had been negative, recovered to mid-single-digit growth. The higher-growth Real-World and Technology businesses returned to double-digit growth in Q4, driven by the execution of previously delayed but necessary client projects related to new drug launches.

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CEO Tim Wentworth clarified that the Q1 strength was driven by good pharmacy volumes, partly from successful script retention during store closures, and favorable reimbursement on vaccines. He noted that the positive impact of the new 2025 contracts is already factored into the full-year guidance. While the new contracts are expected to result in a better reimbursement environment than in 2024, the full-year outlook remains unchanged to account for various factors, including the strong but non-recurring drivers of Q1.

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CEO Tim Wentworth clarified the reimbursement reset is a dynamic, multi-year structural process, not a static baseline. Global CFO Manmohan Mahajan outlined the drivers for FY25 free cash flow, noting headwinds from lower AOI and higher legal payments would be partly offset by $500 million from working capital initiatives and a $150 million reduction in CapEx. He also highlighted the potential for non-core asset monetization.

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CEO Tim Wentworth clarified the reimbursement reset is a dynamic, multi-year process to restructure contracts, not a static new baseline. CFO Manmohan Mahajan outlined the key components of FY25 free cash flow, noting that while AOI will decline, about $400 million of that from sale-leasebacks and Cencora earnings does not impact cash. He highlighted headwinds from higher legal payments, offset by $500 million in working capital initiatives and a $150 million CapEx reduction.

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CEO Tim Wentworth explained that many store locations are prime real estate, creating opportunities to mitigate lease liabilities upon closure, and that lease economics are a key factor in the closure analysis. Tracey Brown, President of Walgreens Retail, added that underperformance is driven by multiple factors, including consumer trends, competitive landscape, and product assortment, not just shrink.

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CEO Tim Wentworth explained that many stores are on prime real estate, creating opportunities to mitigate lease liabilities, and that lease economics are a key factor in the closure analysis. President of Walgreens Retail Tracey Brown clarified that underperformance is multifactorial, stemming from shrink, consumer behavior, market competition, and assortment, not a single issue.

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