Michael Cherny

Michael Cherny asked about the swing factors that could lead Progyny to the bottom versus the top end of its 2026 guidance range, especially given the company's strong outperformance in 2025. He also inquired if there have been any changes in the visibility Progyny has into these metrics.

Answer

Mark Livingston, CFO of Progyny, stated that the current data and predictions are closer to the higher end of the guidance range, with the lower end accounting for potential incremental variability such as lower cycles per utilizer or utilization rates, which are not currently observed. Key drivers for reaching the higher end include a faster pace of treatments, an improved mix of treatments (revenue per cycle), better utilization, and potential mid-year client starts not yet factored into the initial guidance. Pete Anevski, CEO of Progyny, added that the contribution from maternal health services and menopause is growing but not yet material, serving more as a value-add and relationship builder.

Michael Cherny inquired about the swing factors that could lead to the bottom versus the top end of Progyny's guidance range and whether there have been any changes in visibility into these metrics. Cherny also asked about the financial contribution from newer maternal health and menopause services, specifically if they are material or primarily value-adds.

Answer

Mark Livingston (CFO) stated that current data aligns closer to the higher end of the guidance, with the lower end factoring in potential incremental variability like lower cycles per utilizer or utilization rates. He identified faster treatment pace, improved mix, and mid-year sales as potential upside drivers. Pete Anevski (CEO) confirmed that maternal health and menopause services are growing but not yet material, serving primarily as value-adds, and will be broken out when financially significant.

Speaking on behalf of Michael Cherny of Leerink Partners, an analyst asked for more detail on the new product modules, specifically which are seeing the most interest, and inquired about any incremental hesitation from employers regarding 2026 benefit decisions.

Answer

CEO Peter Anevski stated that while all new modules are generating sales interest, the menopause product is seeing the highest member engagement due to its larger addressable market compared to maternity. President Michael Sturmer added that despite some macro uncertainty potentially affecting the average size of opportunities, the overall pipeline in terms of dollars and number of deals is comparable to the prior year, highlighting the benefit of a diversified client base across 45 industries.

Michael Cherny asked about the expected revenue and operating profit contribution from Progyny's new ancillary services and sought clarification on the EBITDA impact and potential trapped costs associated with the large client departure.

Answer

CEO Peter Anevski stated it is too early to provide financial contribution details for the new services until member marketing and engagement data becomes available. CFO Mark Livingston confirmed there are no trapped costs from the client loss and noted that its EBITDA contribution was lower than the company average, with the full impact already factored into the 2025 guidance.

Michael Cherny from Leerink Partners asked how the sell-through of new maternity and menopause services is tracking against long-term targets and how they might ramp in 2025. He also inquired about the financial impact of the recent international acquisition.

Answer

CEO Pete Anevski described the initial sell-through as 'positive,' with 1.5 million lives gaining access, but noted that future revenue contribution will depend on utilization patterns. Regarding the international deal, he positioned it as a strategic investment to build a global offering for multinational employers, stating it is more of an opportunity for 2025 with no material impact on current reported lives.

Michael Cherny questioned the breakdown of Certara's 0%-4% revenue guidance for 2026, asking how much is attributable to market conditions, bookings dynamics, or strategic pullbacks. He also sought more detail on the composition of software Tier 1 bookings, distinguishing between market-oriented factors and internal execution challenges.

Answer

CFO John Gallagher attributed the guidance to low single-digit services growth and deceleration in software bookings in Q4 2025, noting the tight correlation between bookings and future revenue. CEO Jon Resnick added that market strengthening, particularly in December services bookings, suggests an opening for discretionary spend. Gallagher detailed market factors like big pharma reprioritization and reduced study counts impacting Phoenix and Pinnacle 21, alongside internal pipeline conversion issues. Resnick noted a lag in Pinnacle's performance tied to past study reductions.

Michael Cherny inquired about the extent to which wallet share gains contributed to strong Q4 bookings and are factored into 2025 guidance. He also asked about the perceived opportunities and risks from the new political administration.

Answer

CEO William Feehery attributed the strong performance to both good execution and strategic investments in new and updated products, which are helping to increase wallet share. He confirmed plans to continue investing in the software suite, AI, and core products. Regarding the political environment, Feehery stated that while they are monitoring developments, it is too early to make any definitive plans or pronouncements.

Michael Cherny asked about the revenue guidance, specifically the pressure on Prescription Transaction Revenue (PTR) despite a stabilizing Monthly Active Consumer (MAC) rate, inquiring about unit economics, recontracting efforts, and changes in GoodRx's positioning with pharmacies, PBMs, and members.

Answer

Chris McGinnis (CFO, GoodRx) explained that the PTR decline is due to non-recurring revenue from 2025 partner programs, a shift of high-cost branded medications to Pharma Direct, and a significant decline from unit economics due to renegotiated lower fees for longer-term durability. He noted that MAC is expected to flatten sequentially from Q4 2025 through Q4 2026. Wendy Barnes (CEO, GoodRx) added that stabilizing volume and optimizing retail partner relationships are key.

Michael Cherny asked about GoodRx's revenue guidance, specifically the pressure on Prescription Transaction Revenue (PTR) despite a stabilizing Monthly Active Consumer (MAC) rate. He inquired about the unit economics, recontracting efforts, and how these changes impact relationships with pharmacies, PBMs, and members. He also asked for a breakdown of the EBITDA reduction, distinguishing between offensive investments and defensive absorption of new economics.

Answer

Chris McGinnis, Chief Financial Officer, explained that the PTR decline is driven by three factors: non-recurring revenue from Rite Aid and other partner programs in 2025, a shift of high-cost branded medication claims to Pharma Direct, and a decline from unit economics due to lower fee negotiations for long-term durability. He noted MAC trends are expected to be flat to slightly declining. Regarding EBITDA, he stated roughly half of the reduction is due to lapping impacts from 2025, with the other half being elective decisions for long-term stabilization.

Michael Cherny of Leerink Partners questioned the drivers behind the strong growth in Pharma Manufacturer Solutions, asking about the mix of company initiatives versus end-market health, and also inquired about capital deployment priorities.

Answer

CEO Wendy Barnes attributed the robust 32% YoY growth to strong ROI studies that lead to portfolio expansion with existing pharma partners, amplified by a regulatory environment favoring direct-to-patient channels. CFO Chris McGinnis expressed high conviction in achieving 30%+ growth for the full year. Regarding capital, McGinnis stated that after reinvesting in the business, the company will continue to use its share repurchase program, believing the stock is undervalued.

Michael Cherny of Leerink Partners asked about the drivers behind the strong performance of the Pharma Manufacturer Solutions segment and the company's capital deployment priorities, particularly regarding share repurchases.

Answer

CEO Wendy Barnes attributed the 32% YoY growth in Pharma Solutions to strong, validated ROI for manufacturers, leading to expanded partnerships. CFO Chris McGinnis expressed high conviction in achieving 30% or higher growth for the full year. Regarding capital, McGinnis stated that after reinvesting in the business, the company will continue to use excess cash for share repurchases, as they believe the stock is undervalued.

Michael Cherny asked about the drivers of the strong EBITDA margin performance, seeking to understand the mix between factors within the company's control, like cost containment, and market-driven factors to assess the durability of the margin.

Answer

CFO Chris McGinnis explained that the performance is a mix of both revenue strength and cost control, but noted the company has more direct levers on the cost side. He anticipates some marketing spend will increase in the second half of the year but will be offset by ongoing operational efficiencies. CEO Wendy Barnes added that their strategic initiatives are designed to be 'durable' by creating deeply integrated partnerships that are difficult for competitors to displace, thereby increasing long-term control.

Michael Cherny asked about the drivers of the strong EBITDA margin performance, seeking to understand the split between factors within the company's control, like cost containment, versus market-oriented factors to assess the margin's durability.

Answer

CFO Chris McGinnis stated the performance is a mix of revenue strength and cost management, but noted the company has more direct control over costs. He anticipates marketing spend will increase in the second half, offset by ongoing operational efficiencies. CEO Wendy Barnes added that their strategy focuses on creating 'durable' partnerships with retailers and PBMs, which are harder for competitors to displace, thereby increasing long-term control and stability.

Michael Cherny from Leerink Partners asked about GoodRx's positioning and strategy amidst the changing reimbursement landscape and the dynamic negotiations between pharmacies and PBMs.

Answer

CEO Wendy Barnes stated that GoodRx is well-positioned due to its multi-PBM approach and direct or hybrid relationships with 8 of the top 10 pharmacies, allowing it to improve pharmacy profitability. CFO Chris McGinnis added that the goal is an aligned economic model with pharmacies. He anticipates that even with potential headwinds to active consumer counts, a better revenue mix per script will drive top-line growth.

Michael Cherny asked about the success metrics for the VOCAL study, specifically if it aims for TIW non-inferiority versus ESAs or superiority on any endpoints, and the importance of the RBC sub-study in differentiating Vafseo. He also inquired about the reactivation status of the AKB-097 IND and any protocol changes from Q32 Bio's FDA-aligned version.

Answer

Chief Medical Officer Steven Burke explained that the VOCAL study, involving 350 patients at DaVita units, primarily aims for non-inferiority in hemoglobin control (targeting 10) compared to ESAs. He anticipates superiority on hemoglobin-related safety endpoints, such as fewer rapid rises, high hemoglobins, and dose adjustments. Steven Burke emphasized the critical role of the red blood cell (RBC) sub-study in differentiating Vafseo, noting that Vafseo-influenced RBCs are larger, contain more hemoglobin, and have a more uniform distribution of widths, providing a mechanistic understanding for observed clinical benefits like reduced death and hospitalization. Regarding AKB-097, Steven Burke confirmed the IND has not yet been reactivated. He stated that the protocol is being simplified for operational ease but remains fundamentally the same as the FDA-agreed version from Q32 Bio, with IND activation planned upon finalization and resubmission.

Michael Cherny inquired about Medline's M&A opportunities, both product and channel-based, and requested examples of recent successful acquisitions that bolstered Medline's offerings.

Answer

CEO Jim Boyle expressed optimism about M&A, noting $1.9 billion in cash for opportunities and anticipating competitors selling non-core assets. He cited successful past acquisitions like DiaMed (physician office space), ConvaTec's skincare line, Sinclair Dental, Microtek's surgical drape business, and PrefConnect (cartridge card management service). Boyle also sees international M&A opportunities to accelerate growth.

Michael Cherny inquired about Medline's best M&A opportunities, both product and channel-based, and requested examples of recent successful acquisitions that bolstered its offerings.

Answer

CEO Jim Boyle expressed optimism for M&A, noting Medline has $1.9 billion in cash for such opportunities. He anticipates opportunities from competitors divesting non-core assets or moving up the clinical curve. He cited past successes like DiaMed (physician office), ConvaTec's skincare line, Sinclair Dental, Microtek (surgical drape business), and PrefConnect (cartridge card management solution) as examples of product, channel, and service-based acquisitions.

Michael Cherny inquired about the implied margins relative to the recognized margins in Q4 2025, seeking a deeper understanding of the core underlying margins for the business before accounting for remeasurement dynamics, operational benefits, and other P&L moving pieces.

Answer

Ronald N. South, Senior Vice President and CFO, explained that product mix dynamics, such as faster growth in value implants over premium implants, can slightly lower gross margin percentage but increase gross profit dollars. He noted that while DSO customers receive slightly better margins, they are served more efficiently. South emphasized that growing gross profit dollars is as important as gross margin percentage, and G&A expense initiatives are expected to improve operating margins in the back half of the year. Stanley Bergman, Chairman of the Board and CEO, reiterated that the business's direction, guided by the BOLD+1 strategic plan, is towards higher growth, higher margin, and mixed businesses.

Michael Cherny inquired about implied margins relative to Q4 2025, specifically the core underlying margins before remeasurement dynamics and operational benefits, and how product and customer mix (DSOs) are impacting them.

Answer

Ronald N. South, Senior Vice President and CFO, explained that margins have many moving parts due to product mix (e.g., value implants) and customer mix (DSOs), impacting gross margin percentage but driving gross profit dollar growth. He expects G&A expense initiatives to improve operating margins in the second half of the year.

Michael Cherny asked about Accendra Health's targeted investments post-Rotech deal, specifically focusing on future M&A and technology initiatives, and inquired about the progress of revenue recapture efforts, including the preferred agreement with Optum, following a large customer contract loss.

Answer

Ed Pesicka, President and CEO, explained that 2026 investments would primarily target technology to lower costs and improve customer experience, with potential for small tuck-in M&A, while debt reduction remains the main focus. Regarding revenue recapture, he noted it's early, but traction is building, and resources are being redeployed to backfill lost revenue through existing and new agreements like Optum.

Michael Cherny asked about Accendra Health's targeted investments, particularly in light of the Rotech deal's background, and the progress of revenue recapture opportunities, specifically the preferred agreement with Optum.

Answer

Ed Pesicka, President and CEO, explained that 2026 investments would primarily focus on technology to reduce costs and enhance customer experience, with potential for small tuck-in M&A, but debt reduction remains the main priority. Regarding the Optum agreement, he noted it's still early but gaining traction, creating opportunities to redeploy resources and backfill lost revenue.

Michael Cherny asked how Waystar ensures its organic and inorganic R&D investments keep it ahead in AI, continuing to deliver value and differentiate against purpose-built or larger companies attempting to deploy AI to disrupt or intermediate Waystar.

Answer

Matthew Hawkins, CEO of Waystar, explained that while LLMs are tools for coding efficiency, the competitive advantage lies in other capabilities. Waystar stays ahead through continuous innovation, leveraging LLMs internally for productivity gains, and delivering hundreds of feature improvements quarterly. Organically, they invest in R&D, and inorganically, a dedicated corporate development team scans the market for startups with novel AI capabilities that could benefit from Waystar's distribution and network, positioning Waystar as a strong home for such companies.

Michael Cherny asked how Waystar ensures its organic and inorganic R&D investments keep it ahead of the curve, continuing to deliver value and compete against other AI providers, whether purpose-built or larger companies.

Answer

Matthew Hawkins, Waystar's Chief Executive Officer, explained that Waystar invests in innovation, uses LLM capabilities internally for productivity gains, and delivers hundreds of feature improvements quarterly. Organically, they scan the market for startups with novel AI capabilities that could benefit from Waystar's distribution and network, aiming to be a great home for the right companies.

Michael Cherny inquired about Quest Diagnostics' competitive landscape, asking to identify the company's biggest competitive strengths heading into 2026 and 2027, and to what extent the strong organic growth observed represents market share gains.

Answer

Chairman, CEO, and President James E. Davis confirmed that the organic growth in 2025 and expected in 2026 includes significant market share gains, citing re-inclusion in networks with Elevance and Sentara. He emphasized Quest's national coverage and extensive sales force (over 1,200 reps) as key strengths, enabling broad positioning of advanced diagnostic tests. Mr. Davis also noted that Quest is gaining ground against hospital outreach labs and physician office labs, as larger health systems may prioritize other investments over laboratory testing.

Michael Cherny inquired about the competitive environment, Quest's strengths in 2026 and 2027, and the extent to which the expected organic growth is driven by market share gains, particularly against hospital labs and physician office labs.

Answer

Chairman, CEO and President James E. Davis confirmed that organic growth in 2025 and expected in 2026 includes significant share gains. He cited re-entering networks with Elevance and Sentara as key drivers. Mr. Davis emphasized Quest's competitive strengths, including national coverage, a large sales force, and inroads against hospital outreach and physician office labs, attributing this to health systems prioritizing other investments over laboratory testing.

Michael Cherny asked for further details on the quarter's mix, particularly how wellness and specialty testing performance compares to earlier expectations set in March, and its contribution to the long-range plan's organic volume and revenue growth.

Answer

CEO Jim Davis stated that consumer channels, both direct and partnerships, are performing slightly above expectations, driven by increasing individual engagement in health and demand for tests not covered by traditional plans. CFO Sam Samad affirmed that the long-range plan assumptions from March, including mid-single-digit revenue growth and high-single-digit EPS growth, remain largely intact, with positive trends in utilization and test mix contributing to operating margin.

Michael Cherny of Leerink Partners asked for a deeper analysis of the 3.3% organic revenue per requisition growth, questioning whether it was driven by offensive contracting strategies or broader market developments and how it impacts future guidance.

Answer

CEO James Davis characterized the growth as primarily 'offensive.' He explained that with pricing relatively flat, the increase was driven by strong growth in tests per requisition and a favorable test mix. Key contributors included advanced diagnostics, work with functional medicine entities, and the company's consumer-initiated testing business. He indicated that he expects these positive trends to continue through the rest of the year.

Michael Cherny inquired about market dynamics with payers, asking if cost pressures on smaller labs could create strategic opportunities for Quest to gain more share due to its scale and financial stability.

Answer

James Davis, Chairman, CEO and President, confirmed that discussions with health plans to redirect work from more expensive labs are continuous. He highlighted the new preferred lab network agreement with Optum Health as an example of how Quest partners with large enterprise providers to improve quality and value. He agreed that external cost pressures like tariffs could help accelerate this shift of volume to Quest.

Michael Cherny of Leerink Partners asked about the drivers behind the strong revenue per requisition growth, seeking to understand the contribution from technological advancements versus payer arrangements, and its long-term trajectory.

Answer

CEO Jim Davis attributed the growth to continued strong test per requisition trends, driven by new advanced diagnostics in brain health, cardiometabolic, and autoimmune testing, which are still in early growth stages. He also noted a favorable payer mix shift towards Medicare Advantage. CFO Sam Samad added that while test per req will improve in 2025, the rate of improvement is expected to moderate.

Michael Cherny asked for a breakdown of organic growth drivers, seeking to understand how much is within Quest's control via share gains versus broader market trends, referencing the new Elevance contract.

Answer

CEO Jim Davis clarified that the benefits from the Elevance contract, which expands network access in key states, will begin in 2025 and fuel future organic growth. CFO Sam Samad added that pricing is expected to be flattish to slightly improving and that recent hospital outreach acquisitions are also a key driver of market share gains.

Michael Cherny asked about the Pharmacy & Consumer Wellness (PCW) segment's market positioning for 2026, including progress on CostVantage, the completion of contracting, opportunities to gain share, and the competitive landscape given CVS's omnipresent pharmacy model.

Answer

Prem Shah (Chief Pharmacy Officer and President, Pharmacy and Consumer Wellness, CVS Health) highlighted 2025 as a strong foundation, with PCW delivering growth through high service levels, colleague engagement, and execution. He noted prescription growth from market disruption, including the Rite Aid acquisition which welcomed 9 million new patients. The transition to cost-based reimbursement (CostVantage) is complete and performing as expected. Front-store performance saw its fourth consecutive quarter of comp growth due to value propositions, localized assortment, and customer service. David Joyner (Chair and CEO, CVS Health) added that investments in consumer experience, technology, and assortment are key to becoming a consumer-based healthcare company.

Michael Cherny asked about the Pharmacy and Consumer Wellness (PCW) segment's market positioning for 2026, particularly after completing the CostVantage transition and integrating Rite Aid scripts, and the opportunity to gain share amidst changing competitive dynamics.

Answer

Chief Pharmacy Officer and President of Pharmacy and Consumer Wellness Prem Shah highlighted PCW's strong 2025 performance, driven by high service levels, colleague engagement, and execution. He noted the successful integration of 9 million new patients and 3,500 colleagues from the Rite Aid acquisition, and the completion of the transition to cost-based reimbursement. Chairman and CEO David Joyner emphasized that investments in consumer experience, technology, and localized assortment position CVS as a leading consumer-based healthcare company.

Michael Cherny asked about the tailwinds for the PBM segment, specifically focusing on specialty growth beyond Cordavis, and the strategic advancements CVS Health is making to capitalize on the strong overall market growth in specialty pharmacy.

Answer

Prem Shah, EVP, Chief Pharmacy Officer, and President, Pharmacy and Consumer Wellness, highlighted the significant opportunity in the biosimilar pipeline and CVS Specialty Pharmacy's role as a leading asset, noting its strong track record in gaining access to new limited distribution drugs and technological advancements. David Joyner, President and CEO, added that CVS Health was the first large provider to join the NovoCare program for GLP-1s and recently announced an IVF therapy initiative.

Michael Cherny asked for an update on the Pharmacy & Consumer Wellness segment, specifically on the market impact of the new CostVantage pricing model and any progress on its potential rollout to government programs.

Answer

President and CEO David Joyner positioned CostVantage as a key innovation. Prem Shah, EVP and Chief Pharmacy Officer, added that the model aims to increase transparency and create predictable margins. He confirmed that 100% of commercial scripts and cash discount cards have transitioned to the model, and the company is working to move the remaining scripts for 2026. He described the overall PCW business as performing strongly, with script share growing to 27.6%.

Michael Cherny requested a breakdown of the Health Services segment's outlook, asking about the relative performance of core pharmacy services versus health delivery assets, and the expected contributions from specialty and biosimilars.

Answer

CFO Tom Cowhey acknowledged a slow start to 2024 for the segment but noted that accelerating momentum in Q2 and Q3 provides confidence for the full year. He indicated a cautious initial outlook for 2025. CEO J. Joyner, who previously led the segment, added that it will finish 2024 strong, supported by a successful selling season, biosimilar launch momentum, and high client satisfaction, expressing confidence for 2025.

Michael Cherny asked about the demand curve and booking dynamics, specifically how Doximity views the competitive landscape and its ability to maintain engagement with pharma companies and deliver ROI amidst the broader AI disruption from similar peers and general AI players.

Answer

Jeff Tangney, Co-founder and CEO, affirmed the health of the core business, citing record highs in news feed and workflow tool usage, and strong telehealth performance. He highlighted Doximity's 'large moats,' including extensive hospital relationships and a vast doctor network, and emphasized the unique Peer Check program with over 10,000 physician experts. He clarified that Doximity currently has no commercial AI product for pharma, with no AI revenue included in current forecasts, but plans to launch products later in the year.

Michael Cherny asked about the demand curve and booking dynamics, particularly how Doximity navigates the competitive landscape and maintains pharma engagement amidst the broader AI disruption narrative.

Answer

Jeff Tangney, CEO and Co-Founder, highlighted the robust health of Doximity's core business, including record usage of its newsfeed and workflow tools, and its strong position in the telehealth market. He emphasized Doximity's competitive 'moats,' such as its extensive network of doctors and hospitals, and the unique Peer Check program with over 10,000 physician experts. He also noted that Doximity has not yet commercialized its AI tools for pharma, with no AI revenue included in current forecasts.

Michael Cherny from Leerink Partners inquired about the qualitative differences in the Q1 upsell cycle compared to previous years and the specific role the client portal played in driving this performance.

Answer

CFO Anna Bryson attributed the strong upsell season to broad-based strength across SMB customers, news and workflow modules, and health systems. She described the client portal as a "game changer" that provides crucial ROI insights, helping drive over 100% year-over-year bookings growth in the SMB cohort. She also noted that a diversified commercial product portfolio was a key contributor.

Michael Cherny asked for historical context on how Doximity has navigated past periods of market trepidation, seeking to compare the current macro uncertainty with previous challenges to better understand the potential impact on business performance, especially given the strong recent net revenue retention rate.

Answer

CFO Anna Bryson acknowledged that Doximity has learned from past volatility, such as the post-COVID downturn, that upsells can be more variable. She confirmed that while no slowdown has been observed yet, the company's guidance prudently assumes client budget growth will be at the lower end of the 5% to 7% market range to account for this potential variability in upsell dollars.

Michael Cherny asked if the 'flight to quality' benefiting Doximity was driven by macro factors and how potential regulatory changes, such as restrictions on direct-to-consumer (DTC) advertising, might impact market growth.

Answer

Co-Founder Dr. Nate Gross responded that it is 'too early to make calls' on administrative changes. He suggested a full DTC ad ban is unlikely, with pricing transparency being more feasible. He emphasized that Doximity is not basing its strategy on potential regulatory shifts but is focused on its current execution with clients.

Michael Cherny asked how Cardinal Health's experience with specialty, combined with the pipeline for new launches and biosimilars, has influenced its strategic advancement and prioritization of internal and external capital towards achieving its long-range plan (LRP).

Answer

CEO Jason Hollar stated that their view on specialty remains consistent, emphasizing the 'specialty flywheel effect' where distribution, MSO, and biopharma solutions capabilities are interconnected. He highlighted improved credibility and strong relationships, seeing ample opportunity to expand within existing customer, product, and platform capabilities rather than diversifying into new areas, thus avoiding portfolio gaps.

Michael Cherny asked how Cardinal Health's experience with specialty (MSO and distribution capabilities), combined with the pipeline for new launches and biosimilars, has influenced its strategic advancement and capital prioritization towards achieving and potentially exceeding its long-range plan (LRP).

Answer

CEO Jason Hollar affirmed that the company's view on the 'specialty flywheel effect' remains consistent, with distribution, MSO strategy, and biopharma solutions working synergistically. He highlighted broad performance improvements in specialty, enhanced credibility, and opportunities to integrate 'other businesses' (Nuclear, at-Home, OptiFreight) with pharmacy capabilities. He emphasized expanding within existing customer bases, products, and platforms rather than venturing into new areas, as there are ample growth opportunities within the current portfolio.

Michael Cherny asked for a deeper understanding of the Pharmaceutical and Specialty Solutions segment's growth outlook, specifically differentiating between growth driven by controllable factors like customer penetration and operational improvements versus the strength of the overall market.

Answer

CEO Jason Hollar emphasized the company's focus on controllable factors, including significant organic and inorganic investments to ensure capacity, service levels, quality, and safety. He believes these efforts make Cardinal Health an attractive partner, helping maintain and grow market share, while acknowledging strong, though not 'outsized,' underlying utilization growth.

Michael Cherny asked for a breakdown of the Pharmaceutical and Specialty Solutions segment's new growth outlook, distinguishing between factors Cardinal Health can control (e.g., customer penetration) and external market strength, to understand the drivers of significant outperformance.

Answer

CEO Jason Hollar emphasized Cardinal Health's focus on controllable factors, including significant organic and inorganic investments to ensure capacity, service levels, quality, and safety. He believes this focus makes Cardinal Health an attractive partner, helping to maintain and grow market share, while acknowledging strong underlying utilization trends, though not assuming an 'outsized' level of market growth.

Michael Cherny of Leerink Partners asked about the gross profit performance in the quarter, specifically the margin trajectory within the core distribution business and the key drivers of that performance.

Answer

CFO Aaron Alt stated the company focuses on total enterprise and segment profit improvement rather than just core distribution gross margin. He highlighted that the emphasis on higher-margin specialty distribution and new revenue streams from MSO acquisitions are helping the overall gross profit profile.

Michael Cherny sought to clarify the fiscal 2026 outlook for the GMPD segment, asking if the expected $200-$300 million tariff impact is the primary factor in the updated guidance.

Answer

CEO Jason Hollar confirmed that the tariff impact is the most significant variable. He explained that the outlook for GMPD profit to be 'at least consistent' with fiscal 2025 is based on continued Cardinal Health brand growth and cost reductions being partially offset by the net impact of tariffs. He noted a recent reduction in force in Q3 as part of these cost mitigation efforts.

Michael Cherny from Leerink Partners questioned how Cardinal Health's newly expanded specialty portfolio positions the company to accelerate growth, especially in light of market dynamics like the IRA Part D redesign.

Answer

CEO Jason Hollar explained that the investments in specialty demonstrate the company's commitment and understanding of the space, which is crucial for winning business with specialty physicians. He noted that while the impact varies by customer type, for specialty physicians, having a partner that can address all their needs—beyond just distribution—is critical. He described it as a 'flywheel effect' where enhanced capabilities attract partners, leading to growth that is currently outpacing the market.

Michael Cherny requested a breakdown of the drivers behind the 300-basis-point increase in the full-year Pharma guidance, specifically asking about utilization, the COVID-19 headwind, and the role of GLP-1 economics.

Answer

Executive Aaron Alt attributed the guidance raise to strong Q1 execution, successful management of the customer transition, simplification efforts, and contributions from new customers. He reiterated that COVID-19 remains a modest headwind for the full year and that GLP-1s contribute to revenue growth but are not a significant profit driver. He also outlined the expected cadence, with Q2 being slightly down before growth resumes in the second half.

Michael Cherny asked about the implied acceleration in North American Pharmaceutical's growth for fiscal Q4 and the full year, seeking drivers for this trajectory and clarification on the wider-than-normal guidance range.

Answer

CFO Britt Vitalone explained that Q3 results included a prior-year held-for-sale accounting benefit that impacted year-over-year comparisons. He highlighted strong Q4 growth in specialty products, particularly to health systems, and consistent improvements in operating expenses as a percentage of gross profit due to efficiency gains and investments in distribution centers and demand planning, all contributing to positive momentum.

Michael Cherny asked about the implied acceleration in North American Pharma's growth for Q4 and the full year, seeking insights into the drivers of this growth trajectory and any factors influencing the wider-than-normal guidance range.

Answer

Britt Vitalone, CFO, clarified that prior year's Q3 results included a held-for-sale accounting benefit, impacting year-over-year comparisons. He highlighted strong specialty growth, particularly in health systems, and consistent efficiency gains (improving operating expenses as a percentage of gross profit) driven by operational excellence and investments in distribution centers, inventory management, and demand planning.

Michael Cherny asked about the mega trends influencing the Prescription Technology Solutions (RxDS) segment beyond prior authorization, and opportunities for platform expansion, both organically and inorganically, over the next few years.

Answer

Brian Tyler, CEO, discussed leveraging McKesson's existing networks in pharmacy and the provider base, along with its technology, to streamline manual and complicated processes, aiming to reduce friction for patients, payers, and pharmacists. He emphasized actively seeking similar healthcare problems where their broad and diversified capabilities can be applied to advance healthcare goals.

Michael Cherny asked about other 'mega trends' McKesson is considering for its Prescription Technology Solutions (RxTS) business beyond prior authorization, and the potential for platform expansion, both organically and inorganically, in the coming years.

Answer

Brian Tyler, Chief Executive Officer, highlighted McKesson's ability to leverage its networks in pharmacy and provider bases, along with its technology, to streamline manual and complicated processes, similar to what was achieved with prior authorizations. He emphasized that the company is continuously seeking other healthcare problems that can benefit from their existing assets and broad, diversified capabilities, and is actively engaged in exploring external changes and policy shifts for future growth.

Michael Cherny of Leerink Partners asked for a breakdown of the drivers behind McKesson's specialty pharmaceutical growth, seeking to understand how much is attributable to market growth versus market share gains to assess its durability.

Answer

CEO & Director Brian Tyler explained that the strong specialty growth is broad-based across all segments. He attributed the durable performance to a successful formula that combines capturing strong organic market growth with their strategy of expanding provider networks. This expansion includes recruiting physicians, adding smaller practices to existing ones, and executing large-scale acquisitions like Florida Cancer Specialists.

An analyst on for Michael Cherny at Leerink Partners asked about the Medical-Surgical segment, inquiring about expectations for the Q4 flu season and what could drive stabilization in the primary care channel in fiscal 2026 beyond just easier comparisons.

Answer

CEO Brian Tyler described forecasting the illness season as a 'hazardous activity' and declined to speculate on Q4. For the longer term, he expressed confidence in the alternate site market, citing macro trends like aging demographics, patient convenience, and cost-effective care as fundamental drivers that align with McKesson's strategy and assets.

Michael Cherny asked about the dynamics driving the projected 100 basis points of operating margin improvement, including any strategic changes or surprises. He also inquired about the performance of the iTero Lumina scanner in terms of conversion opportunities and volume dynamics since its launch.

Answer

CFO John Morici explained that margin improvement is driven by a product portfolio mix shift towards more profitable lower-stage products and productivity improvements from equipment upgrades, with volume leverage also contributing. President and CEO Joseph Hogan stated that the Lumina platform has been well-accepted by both GPs and orthodontists, noting that increased Lumina presence in accounts correlates with better performance. He expressed confidence in continued Lumina growth and future technology iterations.

Michael Cherny asked about the dynamics behind Align Technology's projected 100 basis points of operating margin improvement, including any changes from Q3 guidance and the strategic nature of growth. He also inquired about the performance of the iTero Lumina scanner, its conversion opportunities, and whether it's meeting or exceeding targets a year post-launch.

Answer

CFO John Morici explained that margin improvement is driven by a mix shift to more profitable lower-stage products without refinements, and productivity improvements from equipment upgrades. President and CEO Joseph Hogan expressed strong confidence in the Lumina platform, noting its wide acceptance by both GPs and orthodontists, and its positive correlation with account performance. He emphasized that the platform is well-positioned for future growth and technological iterations.

Michael Cherny of Leerink Partners asked about any changes to Align's demand stimulation strategy, such as promotional activities, to improve patient conversion in the current macroeconomic climate.

Answer

President & CEO Joe Hogan responded that the focus is shifting to the "last mile" by working more closely with individual doctor practices. The strategy involves helping them channel national advertising demand more effectively and implement conversion tactics, including ensuring patients have access to financing options, similar to what larger DSOs do.

Michael Cherny asked about the drivers behind the expected full-year operating margin expansion, seeking to understand the split between operational improvements and market factors like FX. He also requested the DSP case number for the quarter.

Answer

CFO John Morici attributed the margin expansion primarily to operational improvements within Align's control. He cited enhanced manufacturing efficiencies, material and logistical savings, and productivity gains from innovations like touchless ClinCheck. He stated these factors help offset known tariff impacts. Morici confirmed that the company did not disclose the specific DSP number for the quarter but noted its contribution to growth.

Michael Cherny asked for a breakdown of the 2025 Clear Aligner guidance, specifically the dynamics between volume and price, and inquired about the current competitive landscape.

Answer

CFO John Morici stated that 2025 Clear Aligner volume growth is projected to be in the mid-single digits. CEO Joe Hogan added that he does not foresee a significant shift in competitive dynamics, believing Align's innovations like 'ClinCheck in minutes' provide a distinct advantage and that the company is building momentum.

Michael Cherny inquired about the rollout strategy for the upcoming direct 3D-printed products, including the target customer base. He also asked if there were any other one-time dynamics, similar to the U.K. VAT issue, that should be considered for 2025.

Answer

CEO Joe Hogan explained that the new products will offer greater design freedom and will be particularly appealing to the orthodontic community for treating complex cases, though they will also benefit general practitioners. CFO John Morici confirmed that there are no other significant one-time impacts like the U.K. VAT issue anticipated for the upcoming year.

Michael Cherny asked about the durability of the U.S. Healthcare Solutions segment's operating income (USAOI) performance, specifically the mid-20%+ EBIT growth, considering the impact of RCA and the loss of an oncology customer, and how this is reflected in the updated long-range plan (LRP).

Answer

CFO Jim Cleary detailed that USAOI grew 25% overall, or 13% excluding RCA, despite headwinds from COVID and the oncology customer loss. He indicated that while strong performance is expected, the same level of outperformance is not anticipated in FY2026, but expressed confidence in the new LRP's durability.

Michael Cherny of Leerink Partners asked for insight into the key factors influencing the fiscal 2026 outlook, particularly in relation to the company's long-term growth targets. He noted the annualization of the RCA acquisition and the expected recovery in the international segment as key moving pieces.

Answer

EVP & CFO James Cleary stated that while formal 2026 guidance will come later, the company is confident in its long-term targets of 5-8% organic operating income growth and 8-12% EPS growth. He confirmed that fiscal 2026 will benefit from a full year of RCA contribution. Key variables for the upcoming year include utilization trends, the timing of capital deployment like share repurchases, and an assumed improvement in the international segment's performance after a soft fiscal 2025.

Michael Cherny requested a deeper analysis of the specialty business growth, asking to distinguish between market growth, share gains, and the impact of new value-added services.

Answer

CFO Jim Cleary explained that the Q2 outperformance was driven by organic growth in the core U.S. distribution business, fueled by strong utilization and broad-based specialty sales. He positioned the RCA and OneOncology investments as a 'natural evolution' of adding value-added services. CEO Bob Mauch added that Cencora remains committed to investing in its specialty capabilities.

Michael Cherny of Baird inquired about Cencora's overarching strategy for its specialty business, asking where the company is best positioned to outgrow the market following its investments in OneOncology and the acquisition of RCA.

Answer

CEO Robert Mauch explained that Cencora's strategy is centered on pharmaceuticals, building a comprehensive portfolio of services, and partnering with market-leading customers. He emphasized that expanding into managed service organizations (MSOs) is a logical strategic extension of Cencora's long-standing support for community providers.

Michael Cherny inquired if the potential loss of an oncology customer is factored into the fiscal 2025 guidance and asked about the dynamics within the specialty market, including biosimilars and IRA impacts.

Answer

Bennett Murphy, SVP, Head of Investor Relations and Treasury, confirmed that the potential oncology customer loss is included in the FY2025 forecast. He clarified that excluding the headwind from commercial COVID vaccines, the top end of the U.S. Healthcare Solutions operating income guidance range would be 8%, rather than the stated 6.5%.

Michael Cherny questioned the drivers of TASS growth, including contributions from inorganic advancements, and identified key opportunities for expanding the business, such as AI and R&D.

Answer

Ari Bousbib, Chairman and Chief Executive Officer, explained that inorganic contributions primarily benefit TASS, with a recent large acquisition (Next Oncology) boosting R&DS. He emphasized expanding TASS through acquiring technology and analytics companies, particularly in AI, medical affairs, and real-world evidence. Ron Bruehlman, Executive Vice President and Chief Financial Officer, added details on Next Oncology.

Michael Cherny questioned the growth drivers for the Technology and Analytics Solutions (TASS) segment, including contributions from inorganic advancements and opportunities in AI, Medical Affairs, Clinical Affairs, and Real-World solutions.

Answer

Chairman and CEO Ari Bousbib clarified that inorganic contributions, while significant overall, primarily benefit TASS, though a recent large acquisition (Next Oncology) was in R&DS. He emphasized IQVIA's strategy of acquiring technology and analytics companies, highlighting strong performance in real-world evidence and ongoing innovation in AI.

Michael Cherny from Leerink Partners asked about the underlying conditions required to achieve the preliminary 5% R&DS growth outlook for 2025 and the key variables influencing this forecast.

Answer

CEO Ari Bousbib explained the 5% growth expectation for R&DS in 2025 is based on current information, including major cancellations and the two significant trial delays. He anticipates the IRA-driven reprioritization cycle will conclude by year-end. He suggested the quarterly growth cadence for R&DS in 2025 could be a 'mirror image' of 2024, starting low and accelerating through the year.

Michael Cherny inquired about ICON plc's proactive strategies to offset gross margin pressures, particularly concerning the impact of mix and pass-throughs, and the company's approach to pricing in competitive markets.

Answer

CFO Nigel Clerkin noted that increased pass-throughs and pricing competitiveness are weighing on margins for the balance of 2025 and into 2026. He highlighted cost management, resource adjustment (5% lower staffing year-to-date), and technology leverage. CEO Barry Balfe emphasized winning more direct fee opportunities, enhancing the technological ecosystem, and differentiating through superior capabilities and solution design rather than price cuts.

Michael Cherny asked for more detail on ICON plc's gross margin commentary, specifically regarding mix and pass-through dynamics, proactive strategies to offset these, and the approach to pricing in competitive markets.

Answer

CFO Nigel Clerkin acknowledged that increased pass-throughs and pricing competitiveness are weighing on margins for the balance of 2025 and into 2026. He highlighted ICON's track record of cost management, including a 5% reduction in staffing numbers since the end of last year, and leveraging technology for efficiency. CEO Barry Balfe added that the focus is on winning more direct fee opportunities, enhancing the technological ecosystem, and differentiating through superior capabilities and solution design rather than cutting prices.

Michael Cherny from Leerink Partners asked for more detail on the reported improvement in the biotech sector, questioning how it aligns with the challenging funding environment and what is driving awards to conversion.

Answer

CEO Steve Cutler advised caution, stating it's too early to 'declare victory' on a biotech recovery. However, he noted that three of the top four awards in the quarter were from the biotech segment. He suggested there might be a lag between broader funding market data and the execution of well-funded projects, expressing encouragement but acknowledging continued volatility.

Michael Cherny asked for insights into biotech demand, questioning if there were discernible pockets of strength or weakness by disease state or funding status, and about the confidence level in the timing of a biotech recovery.

Answer

CEO Dr. Steve Cutler explained that the biotech segment remains challenging and uncertain, admitting previous recovery forecasts were premature. He noted that while capital can be raised for good science, customers are cautious, leading to delayed decisions, de-scoped projects, and some cancellations. Dr. Cutler stated that while RFP flow is solid, converting opportunities into revenue-generating projects is the primary challenge, and the company is not yet ready to call the end of the difficulties in this segment.

Michael Cherny of Leerink Partners inquired about the timeline for normalizing stranded costs following the divestiture and the medium-term outlook for the diabetes business, including potential impacts from competitive bidding.

Answer

EVP & CFO Jon Leon projected that stranded costs would begin to decline by the second half of 2026. Regarding the diabetes business, both Leon and President & CEO Edward A. Pesicka noted the ongoing shift from DME to pharmacy, where the company has its own capabilities. They stated it is too early to assess the full impact of competitive bidding, which they believe would not affect pricing until 2028 or 2029.

Michael Cherny from Leerink Partners asked for a breakdown of the drivers behind the Patient Direct segment's mid-single-digit growth forecast, seeking details on volume, price, and market share. He also questioned the rationale and potential cadence of the $100 million share buyback given upcoming cash needs for the Rotech deal.

Answer

Executive Edward Pesicka highlighted strong growth in diabetes and supplies within Patient Direct, noting that home respiratory remains an area for improvement. Executive Jonathan Leon added that the share buyback was initiated because the stock is viewed as highly undervalued, representing a strong ROI. He stated the company is comfortable being a net debtor in Q1 and will manage the buyback's cadence based on stock performance.

Michael Cherny inquired about the business setup for 2025, considering Q4 headwinds and potential macro or operational factors, and also asked about opportunities for incremental share gains and the status of exiting low-margin business.

Answer

Executive Edward Pesicka stated that 2025 should see positive momentum from the 'Sleep Journey' program and a reset of procedural volumes. He highlighted the 2025 tariffs on Chinese goods as a potential tailwind for OMI due to its non-China-dependent sourcing. Pesicka also noted that while exiting low-margin business is ongoing, the company sees share gain opportunities in its product portfolio, like gloves, driven by the tariff environment.

Michael Cherny of Leerink Partners inquired about the Accelerator lab business, asking how its trends in clinical trials and order bookings compare to the broader CRO space, and about the academic market, questioning what is needed to restore customer confidence and spending.

Answer

CEO Masoud Toloue responded that the Accelerator business shows strong vitality, with a 40% year-over-year growth in 2024 and an increase in new customers, though project sizes are currently smaller. For the academic segment, he highlighted the resilience of the consumables franchise, which is generating approximately $100 million in pro forma revenue and has remained stable.

Michael Cherny from Leerink Partners asked new CEO Dan Scavilla for his perspective on the company's portfolio, potential gaps, and his philosophy on organic versus inorganic growth. He also followed up on the status of the implant business reboot.

Answer

CEO Dan Scavilla stated his belief that the company has a complete portfolio and that the key is focus and execution. He expressed a preference for organic growth but remains open to opportunistic M&A. Regarding the implant business, he endorsed the current direction, stating he wants to accelerate progress and go 'deeper and faster' rather than making disruptive changes.

Michael Cherny asked for an update on the orthodontics business, specifically regarding the SureSmile pitch to customers and the company's strategy for expanding beyond the general practitioner market to re-engage with orthodontists.

Answer

CEO Simon Campion explained that the company is actively working to improve the SureSmile software user interface to make it more seamless for orthodontists and their staff, with an update expected by year-end or early 2026. He emphasized the strategic importance of re-engaging the orthodontist community, which represents the majority of the market volume.

Michael Cherny asked a high-level strategic question about whether the current major initiatives—the Byte wind-down, Wellspect review, and G&A benchmarking—should prompt an even broader re-evaluation of the entire portfolio to ensure the company has the right assets for long-term top-line growth.

Answer

CEO Simon Campion responded that the company regularly assesses its portfolio but emphasized the unique value of its end-to-end dental offering. He stressed that scanners are the hub for digital workflows and that the DS Core platform is key to connecting procedures and driving growth across essential assets like implants and aligners, highlighting the significant under-penetration of digital dentistry globally.

Speaking on behalf of Michael Cherny, an analyst asked about the potential organic growth for the Orthodontics business excluding Byte, the factors limiting SureSmile's adoption by orthodontists, and the expected top-line impact from the reduction of revenue-generating SKUs in 2025.

Answer

CEO Simon Campion explained that SureSmile's commercial team primarily focuses on general practitioners and will target orthodontists after software front-end improvements are complete. He highlighted SureSmile's healthy growth in Europe and mid-single-digit growth in North America (excluding one partner). He also noted that talented personnel from Byte are being redeployed to accelerate SureSmile software development. He did not quantify the top-line impact of SKU reduction.

Michael Cherny of Leerink Partners inquired about the specific drivers of LabCorp's strong volume and mix, asking if an offensive growth strategy in certain customer segments or test types was contributing to the stable growth.

Answer

President, CEO, and Chairman Adam Schechter explained that the robust 9% growth in Diagnostics was evenly split between organic growth and acquisitions. He highlighted that organic volume growth of 3.5% is well above historical norms, driven by successful hospital and regional lab deals that expand geographic access and a strategic focus on specialty testing areas like oncology and neurology, which grow 3-4 times faster than the overall market and pull through routine test volume.

Michael Cherny of Leerink Partners inquired about the specific drivers of LabCorp's strong volume and mix dynamics, asking where the company is taking an offensive approach to growth amid potential regulatory changes.

Answer

President, CEO, and Chairman Adam Schechter explained that the 9% growth in Diagnostics was evenly split between organic growth and acquisitions. He highlighted that organic volume growth of 3.5% is well above the historical 1-2% rate, driven by two key strategies: winning hospital and regional lab deals to expand geographic access and focusing on high-growth specialty areas like oncology and neurology, which pull through routine testing.

Michael Cherny inquired about the Biopharma Laboratory Services (BLS) segment, asking about demand variability and potential project delays due to the uncertain regulatory and administrative environment.

Answer

Chairman and CEO Adam Schechter stated that the BLS segment grew 3% and maintained a strong book-to-bill of 1.13. He explained that the 3-5% full-year guidance range was held steady, despite favorable currency, to account for potential macro uncertainties like study start delays. Schechter confirmed that while they are monitoring the situation, no significant study delays have been observed to date.

Michael Cherny of Bank of America inquired about the underlying margin assumptions embedded in Labcorp's 2025 guidance and the key factors that could drive results to the high or low end of the EPS range. He also asked about the sustainability of the strong organic volume and price/mix performance seen in the Diagnostics segment.

Answer

CEO Adam Schechter explained that margin expansion is expected in both Diagnostics and Biopharma, driven by the Invitae acquisition becoming accretive in the second half of 2025 and overcoming headwinds from weather. He noted that while recent volume growth has been historically high, he expects it to normalize over time, though Labcorp may continue to gain market share. CFO Julia Wang added that 2025 Diagnostics growth is expected to be balanced, with half from organic business and half from acquisitions completed in 2024.

Michael Cherny inquired about the primary sources of the underlying 120 basis points of margin expansion, the pull-through on revenue growth versus restructuring, and how cost-cutting benefits will carry forward into 2025.

Answer

CFO Glenn Eisenberg stated that the underlying business is benefiting from top-line growth and LaunchPad initiatives, which are on track to deliver $100-$125 million in savings. He noted that many of 2024's headwinds, such as Invitae, weather, and calendar days, are expected to become tailwinds for margins in 2025. CEO Adam Schechter added that LaunchPad is about continuous improvement, with technology and AI presenting new opportunities for future cost reductions.

Michael Cherny of Leerink Partners asked if the higher mix of pass-through business is a new normal, sought more detail on the drivers of the lower win rate, and inquired about the company's strategy for share buybacks.

Answer

CFO Kevin Brady described the elevated pass-through mix as the "new normal" for the near term due to a therapeutic mix shift. CEO August Troendle attributed the lower win rate to losing a couple of very large projects, not a weakness in any specific area. Regarding capital allocation, CFO Kevin Brady reiterated their opportunistic approach to share repurchases.

Michael Cherny from Leerink Partners inquired about the timing of cancellations throughout the first quarter, asking if there was an acceleration in March potentially linked to FDA uncertainty. He also asked what feedback Medpace is receiving from clients regarding the conditions needed to return to a 1.15 book-to-bill ratio.

Answer

CEO August Troendle stated that he did not perceive any specific monthly cadence to the cancellations, noting they were spread across the quarter and not necessarily linked to FDA news. Regarding client sentiment on a market recovery, he commented bluntly, 'I don't think anybody knows,' indicating a high degree of uncertainty in the channel.

Michael Cherny asked for an update on the fee share dynamic, specifically if there were any developments that differed from expectations during the recontracting cycle. He also questioned if the expansion of partnerships was primarily a defensive strategy against tariff uncertainty.

Answer

Chief Administrative and Financial Officer Glenn Coleman confirmed that the fee share renegotiations are proceeding in line with expectations, noting they are now over 75% complete, which is slightly ahead of their prior schedule. President and CEO Michael Alkire explained that expanded partnerships are driven by a holistic need for performance improvement beyond just tariffs, encompassing broader cost reduction, labor productivity, and revenue cycle management as health systems face mounting financial pressures.

Michael Cherny of Bank of America inquired about Premier's strategy for potential tariffs, including proactive measures to protect customers, and asked for details on the better-than-expected performance of administrative fees amid the ongoing recontracting process.

Answer

CEO Michael Alkire explained that Premier focuses on supply chain diversification and relies on 'firm for the term' pricing in most contracts to shield providers from tariff impacts. CFO Glenn Coleman added that strong gross administrative fee growth of nearly 5% year-to-date, favorable fee share renegotiations, and new member wins contributed to the outperformance in Supply Chain Services.

Michael Cherny asked about health system customers' preparedness for sustained utilization, the impact of tariffs on purchasing decisions, and Premier's technology development pipeline for both its core GPO and Performance Services suite following recent portfolio changes.

Answer

CEO Michael Alkire stated that utilization is stable to slightly increasing and that Premier is using technology to identify new contract opportunities and help members manage high labor costs. He outlined a capital investment strategy focused on expanding the supply chain portfolio (PPI, purchase services), enhancing the ordering platform, and growing Performance Services (HCC, prior authorization, real-world evidence). CFO Craig McKasson added that moving the Remitra platform into supply chain services will improve digital alignment and invoicing capabilities.

Michael Cherny asked about the M&A environment and whether Envista sees an opportunity to acquire smaller players who may be struggling with macro pressures and a lack of scale.

Answer

President and CEO Paul Keel affirmed that accretive M&A is a key capital allocation priority after funding organic growth. He stated that with private market dental multiples having decreased, Envista views the current environment as an opportunity to leverage its strong market position and balance sheet to pursue attractive assets at more favorable valuations.

Speaking on behalf of Michael Cherny, Ahmed Muhammad asked about the potential operating margin contribution from Spark achieving profitability and the assumptions for the diagnostics business in the 2025 guidance.

Answer

CFO Eric Hammes explained that as a business representing about 10% of sales, every point of margin improvement in Spark contributes 10 basis points to Envista's total margin. For diagnostics, he stated the 2025 guidance assumes a performance of flat to low single-digit growth, an improvement over 2024's decline, aided by favorable comps but not assuming a significant market recovery.

Michael Cherny of Leerink Partners questioned the company's strategy for investment levels going forward, asking about the push-and-pull factors and what lessons from the initial Nobel investments could be applied to future scaling decisions.

Answer

CEO Paul Keel explained that Envista's strategy involves balancing investments to accelerate growth with productivity improvements to fund them. He noted that while 2024 is a rebalancing year where investments exceed incremental gross margin, the goal is for future growth to make these investments self-funding.

Michael Cherny of Leerink Partners asked about Teladoc's long-term philosophy on generating profit, specifically the balance between driving growth for revenue contribution versus implementing discretionary cost cuts.

Answer

CFO Mala Murthy outlined a dual approach. For the variable-margin BetterHelp segment, profit growth is contingent on achieving revenue stabilization and growth. For the Integrated Care segment, which has operating leverage, the strategy is to drive top-line growth through engagement and higher-value services while maintaining discipline on COGS, OpEx, and stock-based compensation.

Michael Cherny asked how management will measure the success of the investments being made to reposition the business in 2025 and what the key signposts for returns will be.

Answer

CFO Mala Murthy explained that the capital allocation process aligns investments with strategic priorities and balances them with expected returns. She stated that success will be measured by both financial metrics, like revenue growth, and key operating metrics, such as Chronic Care Management (CCM) conversion rates and enrollment gains.

Michael Cherny asked how Teladoc's management will measure the success of its strategic investments and business repositioning throughout 2025. He sought to understand the key financial and operational signposts that will indicate whether the investments are yielding the desired returns.

Answer

Chief Financial Officer Mala Murthy explained that the company undergoes a detailed capital allocation process to align investments with strategic priorities and balance them with expected returns. She stated that success will be measured by both financial metrics and, importantly, key operating metrics. Examples include improvements in Chronic Care Management (CCM) conversion rates and enrollment gains, which provide confidence in future financial outcomes. The full planning process is currently underway.

Michael Cherny asked for a qualitative update on the drug procurement work with Cencora and whether any benefits from improved procurement are factored into the fiscal 2025 guidance.

Answer

CEO Tim Wentworth stated that the company has not broken out specific contributions from procurement improvements in its guidance. Qualitatively, he described the goal as becoming 'world-class at buying drugs,' which they are not today. He emphasized that discussions with Cencora are focused on creating a long-term, modernized, and competitive drug purchasing model that would be mutually beneficial, and he is pleased with the progress of these ongoing discussions.

Michael Cherny asked about the factors preventing a faster monetization of VillageMD, given the company's stated focus on deleveraging and improving its balance sheet.

Answer

CEO Tim Wentworth explained that the priority is to monetize VillageMD without unnecessarily destroying value, which makes the process methodical and longer than ideal. He cited the complexities involving physicians and other investors as reasons for a deliberate approach. He assured that WBA has other short-term liquidity levers, such as its revolver and other non-core assets, which allows them to be patient and get the process right.

Michael Cherny of Leerink Partners questioned the timeline for monetizing assets within the U.S. Healthcare segment, specifically VillageMD. He asked what factors are preventing a faster process, given the company's stated focus on deleveraging and financial flexibility.

Answer

CEO Tim Wentworth acknowledged the process for monetizing VillageMD has been longer than hoped but emphasized the goal is to preserve value and not rush a complex transaction that involves many stakeholders, including physicians. He stated the company is being 'methodical' and can manage its short-term cash needs through other means, such as its revolver and proceeds from other asset sales like Cencora, thus avoiding a fire sale of VillageMD.

Questioned the methodology and confidence in identifying 25% of stores for the optimization program and asked how the company will ensure the remaining footprint is adequate for payer and local customer coverage.

Answer

The company used both internal models and an external firm to validate the number. They believe the retail pharmacy industry was overbuilt and that reducing capacity is a positive step. The remaining footprint will be sufficient to serve payers effectively, especially considering the evolution of technology and home delivery.

Michael Cherny of Leerink Partners asked how management arrived at the 25% figure for underperforming stores and how they will ensure the remaining footprint is adequate to serve payers and local communities.

Answer

CEO Tim Wentworth explained that the number was determined using internal models and challenged by an external firm. He noted that the industry has been overbuilt, and reducing capacity is not a bad thing. He expressed confidence that the remaining footprint will be well-positioned to serve payers effectively, as network adequacy requirements have evolved with technology and home delivery.

Michael Cherny questioned how management determined that evaluating 25% of stores is the correct scope for its optimization program and how it will ensure the remaining footprint provides adequate coverage.

Answer

CEO Tim Wentworth responded that the analysis was conducted using both internal models and an aggressive outside firm to challenge their assumptions. He noted that the retail pharmacy industry has been overbuilt, and reducing capacity is a necessary step. He expressed confidence that the resulting footprint will be well-positioned to effectively serve payers, who no longer require the current level of store density.

Sought clarification on the components of the in-year revenue guidance change, specifically asking how much is tied to the typically predictable advocacy business versus other factors, in order to bridge the $22.5 million reduction.

Answer

The revenue outlook change is primarily driven by usage-based revenue, not the core PMPM advocacy business. The two main drivers are dialing back the growth rate for the direct-to-consumer business to around 20% and reducing spend on platform-connected revenues (like EMO and virtual primary care) that sit on top of the advocacy platform.

Asked how Accolade is positioning its evolving business model with consultants and in RFPs, and what the education process and feedback have been like.

Answer

The company has a dedicated team focused on partnering with and educating consulting firms on their expanded capabilities beyond just advocacy. A key part of their strategy is to educate the market that while an RFP might start with advocacy, their integrated platform offers much more clinical and financial value. This education is a crucial day-to-day activity.