Optum Contract Impact
Q: Is increased pharma growth tied to Optum win?
A: Management confirms that the new contract with Optum contributes to the increased pharmaceutical operating profit guidance for fiscal 2025, raising growth expectations from 5–7% to 8–10%. The Optum contract expands services to include pharmaceutical distribution across home delivery, infusion, care, and specialty pharmacy. While specific contributions from Optum are not disclosed, management emphasizes the significant momentum and investments in the segment, with the Optum partnership reflecting their enhanced capabilities.

Pharma Segment Momentum
Q: What drives higher pharma profit outlook?
A: The U.S. Pharma segment's adjusted operating profit has grown at a compound annual growth rate of about 6% over the last four years, aligning with long-term targets. Excluding COVID-related programs, the segment grew 12% in fiscal 2024. The increased guidance reflects strong momentum, continued investments, and enhanced sourcing capabilities, positioning the segment for sustained growth.

RxTS Growth and Margins
Q: Why is RxTS revenue up but margins down?
A: The accelerated top-line growth in RxTS is driven by the 3PL business, which represents over half of the segment's revenue but less than 10% of adjusted operating profit. As 3PL revenue grows faster, it dilutes overall margins due to its lower profitability. Underlying technology businesses continue to grow consistently, with investments in the business supporting future growth.

Oncology Expansion Opportunities
Q: How will you expand in oncology?
A: Management prioritizes investing to grow the oncology business organically and through strategic acquisitions aligned with their community oncology strategy. They seek assets that enhance their U.S. Oncology footprint, EMR capabilities, data insights, and clinical trials acceleration. Recent investments in AI and small acquisitions improve efficiency and support record growth in the oncology segment.

Competitive Edge in Specialty
Q: Do you have scale advantage in specialty?
A: Management highlights significant investments in modernizing distribution infrastructure, including efficient cold chain handling and a compliant network. Scale is acknowledged as beneficial, and the company positions itself as a solution-oriented, value-added partner with a broad array of capabilities. Investments in oncology and pharma services have enhanced their value proposition and attractiveness to large clients like Optum and CVS.

Pricing Environment Outlook
Q: What are assumptions on pharma pricing?
A: The company anticipates a stable and competitive pricing environment for both branded and generic pharmaceuticals, consistent with prior years. They do not foresee significant changes in pricing trends for fiscal 2025 and plan to continue driving value through sourcing operations.

Biopharma Investment Focus
Q: Nature of investments in RxTS?
A: Investments in the prescription transaction business are primarily in technology to enhance scaled networks and provider connectivity. The aim is to innovate and solve new problems for biopharma partners, increasing the value and returns their products provide. The company is committed to increasing investments when opportunities arise.

Med Surg Data Strategy
Q: How is data used in med surg segment?
A: The acquisition of Compile is seen as a foundational data investment to augment existing datasets and accelerate value-added services in the medical business. By leveraging extensive provider relationships, the company aims to unlock unique value through enhanced data service offerings in the med surg segment.

Impact of Insulin and COVID
Q: Effects of insulin price cuts and COVID vaccines?
A: Management reports no specific impact from insulin list price changes to call out. Regarding COVID vaccines, they noted a non-material contribution in the fourth quarter, as they lapped prior year COVID programs and saw lower contributions from commercial vaccines compared to the third quarter.

GLP-1s and Prior Authorization
Q: Did GLP-1s boost prior authorization business?
A: The prior authorization business saw growth in the first quarter, but overall 3PL performance was lower due to customer contract considerations. While employer coverage for GLP-1s increased, the company's investments in access solutions support future growth, and they achieved a 23% year-over-year bottom-line growth in the business.