Eric Percher

Eric Percher asked for an assessment of the competitive environment and for more detail on why new workflow products might have longer launch timelines.

Answer

CSO Dr. Nate Gross expressed confidence in Doximity's competitive position and ability to gain share, citing high client trust and ROI. CFO Anna Bryson explained that longer launch times for new products are standard because first-time purchases require new content creation and a full medical, legal, and regulatory (MLR) review process, which takes time.

Eric Percher asked if the elevated macro indicators, such as volume and treatment acuity, observed in the first half of the year are expected to continue for specialty trends in the second half, and requested clarification on the term 'market decision within the US Oncology Network'.

Answer

Brian Tyler, CEO, stated that the oncology business continues to see good traffic and volumes, complemented by network expansion, and is increasingly able to treat more complicated patients, supported by new therapies. Britt Vitalone, CFO, clarified that 'market decisions' refer to entering or exiting specific markets, and in this quarter, two markets were exited, which is unusual to have multiple such items in a single quarter.

Eric Percher asked if the elevated macro indicators, such as volume and treatment acuity, observed in the first half of the fiscal year are expected to continue into the second half for specialty trends, and requested an explanation of 'market decision within The US Oncology Network'.

Answer

Brian Tyler, Chief Executive Officer, stated that McKesson has seen good traffic and volumes in its oncology business, supported by network expansion and patient flow. He highlighted the community setting's role in providing low-cost, accessible, high-quality cancer care and the network's ability to treat more complicated patients. Britt Vitalone, Chief Financial Officer, clarified that 'market decisions' refer to entering or exiting markets based on alignment with The US Oncology Network's strategy, noting that two markets were exited this quarter, which, along with an equity investment realization, contributed to non-recurring gains.

Eric Percher of Nephron Research LLC inquired about the Prescription Technology Solutions (RxTS) segment's full-year guidance, asking if it is conservative and what specific elements could drive performance toward the upper end of the range.

Answer

EVP & CFO Britt Vitalone explained that McKesson is pleased with the segment's consistent performance, which is underpinned by factors like utilization trends and the success of its access, adherence, and affordability programs. He noted that key drivers for future performance include utilization rates, the maturity of drugs within their programs, and the successful launch of new products.

Eric Percher from Nephron Research asked if the upgraded long-term pharma growth guidance reflects a strong macro environment or platform expansion, and also questioned the drivers of the wide 12-16% operating profit growth range for pharma in fiscal 2026.

Answer

CEO Brian Tyler attributed the confidence to a strong value proposition, new customer wins, solid utilization, and the oncology platform. CFO Britt Vitalone clarified the FY26 guidance, noting that acquisitions (PRISM and Core Ventures) are expected to contribute 6-7% to growth. This implies the core business is growing 6-9%, aligning with the new, higher long-term growth target of 6-8%.

Eric Percher from Nephron Research asked about the sustainability of utilization levels in the pharmaceutical and specialty segments into fiscal 2026, questioning what portion is driven by macro trends versus McKesson's specific business, and inquired about any current impact from the Inflation Reduction Act (IRA).

Answer

CEO Brian Tyler stated that overall prescription volume has been stable and consistent, with particular strength in specialty, oncology, and GLP-1s. He anticipates these trends will continue, noting the U.S. Oncology Network's solid 6% same-store patient growth as a key internal driver that will persist.

Eric Percher asked for a post-COVID breakdown of the Med-Surg business, McKesson's role in cell and gene therapy commercialization, the adequacy of GLP-1 reimbursement, potential for facilitating direct-to-consumer pharmacy, and the strategic view on CROs beyond the Sarah Cannon partnership.

Answer

CFO Britt Vitalone detailed that the Med-Surg business is roughly 60% primary care, with growth in lab and Rx solutions. He explained that cell and gene therapy services will leverage existing oncology and 3PL capabilities, tailored to each drug's needs. On GLP-1s, he emphasized ensuring fair value for services provided to manufacturers. He stated that while McKesson has capabilities to support digital pharmacy, the focus remains on its core strategies and not adding another "leg to the stool" like a general CRO.

Eric Percher asked about the international business, specifically what factors are enabling the projected pivot to 5-8% growth in fiscal year 2026 and the long-term guidance, given its past performance and the removal of certain businesses.

Answer

CFO Jim Cleary explained that the international segment's previous decline was primarily due to PharmaLex, while other businesses grew. He cited a rebound in global specialty logistics (World Courier), easier comparisons, a more tailored portfolio, and strong performance in Alliance Healthcare (especially 3PL services) as key drivers for confidence in the 5-8% long-term growth guide.

Eric Percher questioned the international business's pivot to 5-8% growth in fiscal 2026 and its long-term guide, especially considering that businesses being moved to the 'other' segment might have had better growth than the segment's negative 10% in fiscal 2025.

Answer

EVP and CFO Jim Cleary clarified that the international segment's decline in the most recent quarter was due to Pharmalex, with all other international businesses showing profit growth, including a rebound in global specialty logistics and World Courier. He expressed confidence in the 5-8% long-term guide due to market demand rebounding, easier comparisons, a more tailored portfolio, and strong performance in core businesses like Alliance Healthcare's 3PL services.

Eric Percher of Nephron Research LLC asked about the potential impact of tariffs on the pharmaceutical supply chain, inquiring about differences between brand and generic drugs, any changes to Cencora's sourcing strategy, and the risk of a more inflationary environment.

Answer

EVP & CFO James Cleary stated that Cencora has not identified any material financial impacts from tariffs, as manufacturers are typically the importer of record for pharmaceuticals. President & CEO Robert Mauch added that the company is not changing its sourcing practices but is carefully monitoring the risk of drug shortages, which could be an unintended consequence. He emphasized Cencora's role in educating policymakers in Washington about the complexities of the supply chain to mitigate disruptions to patient access.

Eric Percher asked for a broader framework on the profit streams from MSO (Management Services Organization) operations, seeking to understand the mix between drug vs. medical and government vs. commercial payers.

Answer

CEO Bob Mauch expressed confidence in the MSO income streams, noting they build upon existing strengths in distribution and GPO services. While services differ between oncology and retina, he highlighted the clinical trial services at RCA as a key future growth opportunity that strengthens partnerships with both biopharma and providers.

Eric Percher from Nephron Research asked about key learnings from the OneOncology investment regarding practice management and physician motivation, and also inquired about the financial mechanics of the RCA acquisition.

Answer

CEO Robert Mauch identified strong physician leadership, a focus on value creation via new services, and a clear pathway for attracting new physicians as key success factors for MSOs. CFO James Cleary noted that detailed financials for RCA will be included in reported results starting in Q2.

Eric Percher asked about specialty market trends, specifically whether Cencora observed a third-calendar-quarter uptick and if the strength in higher-margin specialty distribution represented an acceleration or a continuation of existing trends.

Answer

Bennett Murphy, SVP, Head of Investor Relations and Treasury, stated that the strong performance in the specialty market for physicians and health systems was a continuation of positive trends observed throughout fiscal 2024 and prior years, not a new acceleration in the fourth quarter.

Eric Percher inquired about the 'Other' segment's performance, seeking details on the cadence of strength across its three businesses (At Home Solutions, Nuclear and Precision Health Solutions, OptiFreight Logistics) in Q1, including earlier-than-expected synergy realization from the ADS acquisition, and expectations for the rest of the year.

Answer

CFO Aaron Alt highlighted the 'Other' segment's 60% profit growth in Q1, driven by strong double-digit revenue growth across all three businesses, including 51% for At Home (with ADS), 17% for Nuclear, and 21% for OptiFreight. He noted rapid synergy realization from the ADS integration and strong performance in core At Home categories and theranostics. CEO Jason Hollar emphasized that both core businesses and acquisitions significantly contributed to the strong results.

Eric Percher asked for insights into the 'Other' segment's performance, specifically the Q1 cadence, earlier-than-expected synergy realization, and the outlook for the remainder of the year, including the contribution from ADS.

Answer

CFO Aaron Alt highlighted the 'Other' segment's impressive 60% profit growth in Q1, driven by strong double-digit growth across all three businesses (At Home Solutions, Nuclear and Precision Health Solutions, OptiFreight® Logistics). He noted the successful integration of ADS into At Home Solutions, achieving synergies quickly and efficiently moving volume into Cardinal Health's network. CEO Jason Hollar added that both core performance and acquisitions were significant contributors to the strong growth metrics in the 'Other' segment, demonstrating broad strength and execution of Investor Day strategies.

Eric Percher of Nephron Research LLC asked about the Solaris Health acquisition, questioning what new capabilities it adds and how accretion will be generated between MSO share, distribution pull-through, and other revenue streams.

Answer

CEO Jason Hollar explained that Solaris adds scale and diverse revenue streams in the key urology therapeutic area, which aligns with Cardinal's strengths in Specialty Networks, nuclear, and at-home solutions. CFO Aaron Alt added that accretion will come from scale, operational efficiencies, and cross-portfolio opportunities.

Eric Percher asked for details on how Cardinal Health plans to offset tariff exposure, specifically questioning the difference in strategy between Cardinal brand and national brand products.

Answer

CEO Jason Hollar explained that after implementing several hundred million dollars in operational mitigations, the majority of the remaining $200-$300 million gross tariff cost is expected to be offset through price adjustments. He clarified that national brand tariff impacts are largely a pass-through, meaning the pricing actions are almost entirely focused on the Cardinal Health brand portfolio.

Eric Percher of Nephron Research asked about the impact of macro weakness on the medical businesses, specifically whether Cardinal Health branded products in GMPD are still growing and if there is any spillover effect into the at-Home business.

Answer

CEO Jason Hollar confirmed slight growth for both overall products and Cardinal Health branded products, with no significant differentiation. He noted some softness in respiratory and lab products within GMPD but clarified these do not drive volume in the at-Home business. CFO Aaron Alt added that the at-Home business remains a bright spot, with 13% revenue growth in the quarter driven by CGM and other categories, and expects future profit contributions from investments in automation.

Eric Percher asked about GLP-1 inventory management, questioning if the company builds inventory and whether any optimization of these products contributed to the improved cash flow outlook.

Answer

CEO Jason Hollar stated that Cardinal Health manages GLP-1 inventory very closely, maintaining static and relatively low levels to ensure product reaches patients quickly. He confirmed they do not build inventory and that these products were not a significant driver of cash flow. He reiterated that while GLP-1s are meaningful to revenue, they are not a meaningful driver of earnings.

Eric Percher asked for clarification on whether the pressure on Caremark's performance stemmed from the adoption of the "true cost" model or changes in drug mix. He specifically inquired if GLP-1 formulary adjustments or biosimilar private label initiatives were impacting rebate guarantees.

Answer

Prem Shah, EVP, Chief Pharmacy Officer, and President, Pharmacy and Consumer Wellness, clarified that the pressure was not from the "true cost" model. He identified three primary drivers: slower growth of GLP-1s in the back half of the year (due to less compounding volume returning to benefits), and issues with a couple of products in the autoimmune and HIV categories (unrelated to Cordavis). He stated that CVS Health is actively working with clients to adjust guarantees.

Eric Percher of Nephron Research LLC asked for more visibility on the Health Care Delivery business's medical benefit ratio, the timing of the guidance headwind, and an update on pharmacy services client pricing and retention costs.

Answer

CFO Brian Newman stated the guidance reduction was entirely from the Health Care Delivery business due to higher MBR at Oak Street and that H2 earnings for the segment would be roughly evenly split. EVP & Group President, Prem Shah, confirmed the PBM selling season is strong, with retention on track for the high 90s, driven by transparency and creating competition in categories like GLP-1s.

Eric Percher from Nephron Research LLC asked for details on the GPO admin fee renewal process, including the cadence of fee share stabilization in fiscal 2026, the underlying gross administrative fee growth assumption, and the expected impact on segment EBITDA levels.

Answer

CFO & Chief Administrative Officer Glenn Coleman explained that the GPO fee share is expected to ramp up to the mid-60% range during fiscal 2026 and stabilize in the high-60s thereafter. He noted that gross administrative fees are projected to grow around 4% in fiscal 2026, up from 3% in fiscal 2025. Directionally, Mr. Coleman expects Performance Services EBITDA margins to expand due to advisory growth, while Supply Chain Services EBITDA margins will decline due to the fee share resets, with an overall inflection to growth expected in fiscal 2027.

Eric Percher inquired about specific customer actions in response to tariff threats, such as inventory stockpiling, and whether the impact is concentrated in low-value consumables. He also asked about the significance of pharmaceuticals, particularly sterile injectables, within Premier's portfolio.

Answer

President and CEO Michael Alkire stated that customers are leveraging data and analytics for strategic management rather than stockpiling, a practice refined since COVID to enhance supply chain resiliency. He mentioned a dynamic pricing model helps find products with minimal tariff impact. CFO Glenn Coleman added that a special member-led committee reviews supplier price increase requests. Alkire later clarified that pharmaceuticals constitute about 18.5% of gross administrative fees and mentioned a recent executive order aimed at boosting domestic drug manufacturing.

Eric Percher from Nephron Research sought clarification on the fiscal 2026 outlook, questioning if the target for the aggregate fee share to stabilize in the 'high 60s' was achievable and how the rate would progress through the end of fiscal 2025.

Answer

CFO Glenn Coleman stated that the fee share was stable from Q1 to Q2 and expects only a modest increase in the second half of the year. He reaffirmed the 'high 60s' target for fiscal 2026, noting it could potentially be better. CEO Michael Alkire added that technology investments to capture more spend will act as a tailwind for gross admin fees, and the improvement comes from higher penetration, not the roll-off of lower-return customers.

Eric Percher inquired about the outlook for administrative fees, specifically whether the expected Q2 step-down changes the full-year forecast, and asked for an update on Premier's efforts to mitigate the Baxter IV fluid shortages.

Answer

Chief Administrative and Financial Officer Craig McKasson confirmed the GPO renewal process is on track and the full-year fee share expectation in the low 60s remains unchanged, noting strong underlying member purchasing in Q1. CEO Michael Alkire detailed a three-pronged strategy to address the IV shortage: coordinating with government agencies to fast-track new solutions, working with health systems on conservation, and seeking additional capacity from other suppliers.

Eric Percher of Nephron Research asked whether the behavioral and automated care components of the DHA contract were easily severable or if the agency would need to re-engage on them. He also questioned if any revenue was pulled forward into H1 2025.

Answer

CEO Dr. Ido Schoenberg stated the programs were well-received and their exclusion is believed to be for broad budgetary reasons, making them easy to add back later. CFO & COO Mark Hirschhorn confirmed the EBITDA guidance change reflects the net effect of delayed DHA revenue and earlier cost reductions, with no revenue pull-forward or impact from the recent APC divestiture.

Eric Percher followed up on a previous question, asking for specific details on Amwell's exposure to tariffs, particularly concerning its hardware endpoints.

Answer

CEO Ido Schoenberg clarified that Amwell's direct tariff exposure is minimal to nonexistent, as the company no longer manufactures most of its hardware, which constitutes a very small part of the business. He stressed that the core business is software developed in the U.S. and provided client ROI examples to highlight the platform's value.

Eric Percher asked about the key variables and dependencies in the 2025 guidance outside of the DHA contract, and as COO, what changes to the sales strategy are expected for government and commercial markets.

Answer

CFO & COO Mark Hirschhorn expressed high confidence in the 2025 guidance, citing over 90% visibility from contractual subscription revenue and a conservative visit volume forecast. On sales strategy, he emphasized a focus on selling existing, implementable solutions and noted they are pursuing at least six material government opportunities that could impact 2026, with the overall pipeline being multiples larger than in prior years.

Eric Percher of Nephron Research LLC asked for clarification on the GLP-1 revenue decline from $230M to $190M, questioning if further declines should be expected. He also sought to confirm if the $725M annual weight loss revenue target is inclusive of the oral offering.

Answer

CFO Yemi Okupe clarified the Q2 decline was primarily due to off-boarding users of commercially available GLP-1s and that the company expects renewed growth going forward, with some revenue recognition dynamics causing a steeper acceleration in Q4. Both Okupe and CEO Andrew Dudum confirmed the $725M target is holistic, including oral, personalized, and branded weight loss products.

Eric Percher questioned how Hims & Hers balances the growth opportunity in personalized GLP-1s against the opportunity to grow via brand partnerships, given manufacturer scrutiny.

Answer

CEO Andrew Dudum stated that the company will continue to offer personalized semaglutide for clinically necessary situations, such as side effect mitigation, viewing it as an additive part of the ecosystem. He emphasized that the company's primary duty is to provide a wide choice of clinically and regulatorily appropriate options, allowing providers and patients to make the final decision.

Eric Percher questioned the transition plan for subscribers currently on commercial semaglutide and asked for clarification on the components of the $725 million weight loss revenue guidance for 2025.

Answer

CEO Andrew Dudum stated that customers on commercial compounded doses will be notified to seek alternatives, acknowledging many will likely pursue branded options, a factor built into the guidance. Both Dudum and CFO Yemi Okupe expressed confidence in the $725 million guidance, attributing it to the strength of the comprehensive platform, high-touch care model, and the success of its oral offerings, which they noted can deliver significant weight loss at a lower cost.

Eric Percher asked about the company's ability to flex between 503(a) and 503(b) pharmacy investments as the regulatory environment changes and the efficiency differences between them. He also questioned the sourcing of liraglutide, asking if it was an API or a manufactured generic.

Answer

CFO Yemi Okupe stated that the company will invest in both 503(a) and 503(b) capabilities concurrently, noting that while 503(b) is generally more efficient, both are significantly more cost-effective than using third-party pharmacies. CEO Andrew Dudum clarified that liraglutide sourcing will follow their extensive internal protocols for APIs, including in-house and third-party testing and authentication, to ensure safety and quality.

Eric Percher inquired whether the actions taken on reimbursement for 2025 are leading to an absolute reduction in pressure compared to prior years, or if the focus is on creating stability now for future improvements.

Answer

CEO Tim Wentworth responded that it is both. He stated that the contract restructuring is designed to be more resistant to the shifting of risk onto Walgreens. He also confirmed that for calendar 2025, the company projects reduced reimbursement pressure compared to the past, aligning with their goal to eventually reach a point where value generated from new generics is not entirely offset by reimbursement cuts. He emphasized this is the first year of a three-year plan to stabilize the pharmacy's profitability.

Eric Percher questioned how the U.S. Healthcare segment fits into the new retail pharmacy-led strategy and asked if the improvement at VillageMD is driven primarily by cost reductions or a stabilization of the underlying business.

Answer

CEO Tim Wentworth identified core clinicians and specialty pharmacy as crucial to the strategy, with Shields and CareCentrix as complementary assets. Global CFO Manmohan Mahajan explained that the U.S. Healthcare segment's improvement was driven by both Shields' continued growth and significant cost discipline at VillageMD, along with a higher contribution from its risk-based business.

Eric Percher from Nephron Research asked about the U.S. Healthcare segment's role in the company's new retail pharmacy-led strategy, questioning which components are considered core. He also inquired about VillageMD's operational focus, asking if it involves reduced investment or a stabilization of the business.

Answer

CEO Tim Wentworth identified the core of the healthcare strategy as its own clinicians and specialty pharmacy, which he called a 'critical asset.' He described Shields and CareCentrix as complementary. CFO Manmohan Mahajan added that U.S. Healthcare's FY25 improvement will be driven by continued growth at Shields and cost discipline benefits at VillageMD, along with better contribution margins from higher fee-for-service volume.

Asked for more details on the retail gross margin pressures from discounting and its expected trajectory, and questioned the outlook for the NADAC impact, including whether it has peaked or could expand further.

Answer

Retail gross margin pressure from promotions is expected to continue in Q4 due to a challenging consumer environment. The NADAC impact is volatile, and while some commercial contracts are linked, the focus is on achieving neutrality. Other pharmacy margin pressures include generic procurement dynamics and branded drug mix.

Eric Percher of Nephron Research questioned the drivers of the low retail gross margin, specifically the impact of discounting, and asked for clarification on the NADAC pricing impact, including whether it has peaked.

Answer

CFO Manmohan Mahajan attributed the retail gross margin pressure to increased price and promotional investments in response to a challenging consumer environment, as well as rising shrink. On the pharmacy side, he noted that besides NADAC fluctuations, margins were impacted by certain generic launches with brand-like procurement dynamics and an unfavorable branded drug mix.

Eric Percher asked for more detail on the drivers of retail gross margin pressure, its expected trajectory, and whether the negative NADAC pricing impact is expected to expand beyond Medicaid.

Answer

Global CFO Manmohan Mahajan attributed retail gross margin pressure to increased promotional activity in a challenging consumer environment, which is expected to continue in Q4, as well as higher shrink. For pharmacy margin, he cited NADAC fluctuations, unfavorable procurement dynamics on certain generics, and negative brand mix. CEO Tim Wentworth noted that while some commercial contracts reference NADAC, those discussions aim for neutrality.

Inquired about the company's perspective on direct-to-patient programs like Lilly Direct, the feasibility of direct relationships with pharmaceutical manufacturers given PBM contracts, and whether this potential influenced recent comments about changing their distributor relationship.

Answer

Executives believe Walgreens is a natural, independent partner for pharma companies in direct-to-patient programs due to its ability to help with adherence and safety, and stated their ability to work directly with pharma is unencumbered by PBM contracts. The comments about their distributor relationship were not related to this, but rather about ensuring the partnership remains dynamic and competitive.