AmerisourceBergen Corporation

Ladies and gentlemen, thank you for standing by. Welcome to the Q1 fiscal 2019 earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session and instructions will be given to you at that time. Should you require offline assistance with an operator during the call, you may press a star, then zero. As a reminder, this conference is being recorded. It is now my pleasure to turn the conference over to your Vice President of Investor Relations, Mr. Bennett Murphy. Please go ahead.

Thank you. Good morning, and thank you all for joining us for this conference call to discuss the AmerisourceBergen Fiscal 2019 First Quarter Financial Results. I am Ben Murphy, Vice President of Investor Relations for AmerisourceBergen, and joining me today are Steve Collis, Chairman, President, and CEO, and Jim Cleary, Executive Vice President and CFO of On today's call, we will also be discussing non-GAAP financial measures, which we use to assess the underlying performance of our business. The GAAP to non-GAAP reconciliation provided in today's press release are also available on our website. During this conference call, we will also make forward-looking statements about our business and financial expectations on an adjusted non-GAAP basis, including but not limited to EPS, operating income, and income taxes. Forward-looking statements are based on management's current expectations and are subject to uncertainty and change. A marriage with Bergen assumes no obligation to update any forward-looking statements or information, and this call cannot be rebroadcast without the express permission of the company. We remind you that there are uncertainties and risks that could cause our future actual results to differ materially from our current expectations. For discussion of key risk factors and other cautionary statements and assumptions, we refer you to our SEC filings, including our most recent Form 10-K and to today's press release. I'd also like to remind you that we have posted a slide presentation to accompany this morning's press release. You can find it on our website, investor.MaristarsBergen.com. You'll have an opportunity to ask questions after today's remarks by management. We do ask that you limit your questions to one per participant in order for us to get through as many participants and inquiries as we can within the hour. With that, I'll turn the call over to Steve.

Steve? Thank you, Ben, and good morning to everyone on today's call. I am pleased to discuss Ameris Holzbergen's solid first quarter fiscal 29 performance, our role in the supply chain, both new value creation opportunities and ongoing responsibilities, and finally, our company's strong position for long-term growth and shareholder value creation. First, our quarterly financial performance. Revenues were up an impressive 12% to $45.4 billion for the quarter. and our adjusted diluted EPS was $1.60 for the first quarter, an increase of 3% compared to the previous fiscal year period. As we left the last significant quarterly contribution from Pharmadium, it is important to highlight the strong results from our core pharmaceutical distribution businesses. The continued execution by these businesses that are supporting growth of our customers and delivering strong performance in the specialty distribution along with shared buybacks and tax reform, have helped offset the headwind caused by Farmadium over these past four quarters. We are extremely proud of the strong start for fiscal 2019 and recognize that this success would not have been possible without the hard work of our dedicated associates. I personally want to thank our 21,000 associates who every day are driving this performance and maintaining a high impact culture that unlocks expertise and facilitates collaboration with our customers, partners, and fellow colleagues. As I mentioned, the pharmaceutical distribution segment executed extremely well despite the ongoing challenges at Pharmadium. The segment's double-digit year-over-year revenue growth reflects several key successes. First, our relentless focus on execution in the evolving and dynamic marketplace. Deepening relationships with our partners, providing the solutions they need and enabling patient access to pharmaceuticals wherever and whenever they need them. Next, our market-leading specialty distribution franchise of oncology and physician-administered products continues to perform exceptionally well. Our deep expertise in specialty distribution and comprehensive offering of services and solutions built over the last several decades continues to empower community-based providers to best service their patients while enhancing their ability to maximize business performance. Finally, we have had great success growing volumes with existing customers. We believe that our portfolio of fast-growing customers is a key differentiator, and we are continuously seeking new ways to unlock value for our partners. With regard to our medium, We are disappointed with where we are, but are actively working to resolve the challenges. First, we have continued to communicate with regulators regarding potential resolutions. As those discussions continue, we are in the midst of conducting a comprehensive strategic and financial review of the Farmadium business. Our approach is both thoughtful and decisive. In fact, We have already engaged with a new CGMP expert consulting firm to support remediation efforts and enhancements across the entire Pharmadium business. In addition, we have begun a workforce reorganization to appropriately position the business to execute once remediation is complete. Jim will provide more details in his comments. However, I want to reiterate that Pharmadium's focus remains on patient safety and delivering the safest and highest quality products. The strategic and financial review of the business will be all-encompassing and could result in further investments, other business optimization activities, or even a potential sale of the business. Amerisource Bergen will ensure that decisions made from this review consider both the needs of our medium customers and what is best for Amerisource Bergen and its shareholders. It is important to take a step back and appreciate the overall strength of AmerisourceBergen's core pharmaceutical distribution businesses, which has helped to offset the financial headwind from our medium during the same period. I'm extremely proud of our core distribution teams' outstanding performance and want to personally recognize their operational excellence, best-in-class expertise, tenacity, and relentless focus on customer experience. AmerisourceBergen is executing, innovating, and supporting customer growth, and we continue to find new ways to expand upon our robust and pharmaceutical-centered value proposition to create additional value for our customers and partners. Specific to manufacturers, our value proposition includes services that support enhanced access for pharmaceutical commercialization and companion and production animal health products through our global commercialization services and Animal Health Group, reported as other. As a group during the first quarter, these businesses achieved high single-digit year-over-year revenue growth, led by the standout performance of World Courier. As a leading global specialty logistics, World Courier continues to achieve double-digit growth by delivering high-tax logistics services and enhancing the customer experience with new offerings and technology improvements. Beyond World Courier, two of our other specialty commercialization services businesses serving customers outside the U.S., operations in both Brazil and Canada, hosted solid performances. The focus of these businesses on delivering differentiated services is showing promising results. This call in particular, AmerisourceBergen Consulting Services, benefited from strong performances in our Canadian operations. while also making good progress at Lash Group. Turning back to Lash, customer launches onto the game-changing Fusion platform continue to advance. Lash has also successfully extended key customer relationships, providing a stable and growing base of customer partnerships that position the business well for the long term. Finally, NWI expanded its relationship with our key animal health anchor customer, Adding to its corporate account, customer base demonstrating another example of our ability to deepen relationships with strategic partners throughout Amerisource Bergen. As an enabler of access and creative efficiencies, Amerisource Bergen plays an important role in the supply chain, unlocking value for our partners and customers and delivering on our purpose to create healthier futures. Amerisource Bergen delivers complex logistics and financial services, driving cost efficiency within the healthcare supply chain and expanding patient access to vital pharmaceuticals. Our focus on innovation and efficiency, together with scale, security, and capital we provide, enable us to facilitate a broad range of functions that are crucial to multiple players within the ever-evolving U.S. healthcare supply chain. Over the past few months, there have been discussions in the U.S. regarding limitations around the ability of patients to realize the benefits of net prices for pharmaceuticals that are negotiated on their behalf. Amerisource Bergen is at its core a healthcare solutions provider. As we look into the future, we believe there could be an opportunity for Amerisource Bergen and the distribution industry as a whole to help facilitate this possible solution for patient access to pharmaceuticals at the negotiated net prices. Let me explain. The U.S. pharmaceutical distribution industry possesses the fundamental tools and relationships to possibly facilitate patient access to discounted or net price pharmaceuticals at the pharmacy counter, given our unique positioning in the supply chain as a physical link between manufacturers and pharmacies and ultimately patients. In fact, AmerisourceBergen and our peers have a long history of managing net price adjudication in health systems and alternate care settings. Every day, AmerisourceBergen provides the financial services to health systems and manufacturers that allows for patient or provider access to pharmaceuticals at the negotiated net prices based on their agreements with manufacturers, and we execute hundreds of millions of these transactions annually. Given the strength of our business strategy and ability to be a driver of all solutions, AmerisourceBergen believes similar processes could be utilized for adjudicating negotiated discounts in other settings, most notably retail pharmacy. Certainly, this added service for the healthcare system would require time and investment. However, we are confident in both our value proposition and the industry's ability to work together with policymakers and commercial partners to further enable access and create additional efficiencies within the supply chain. This opportunity demonstrates one of the many ways a Marisource program can employ our unique strengths and abilities to increase efficiency and create additional value for manufacturers, payers, the US healthcare system, and most importantly, patients. At AmerisourceBergen, we believe our responsibility to create healthier futures extends to social issues, such as engaging and mobilizing to help address the opioid epidemic, a crisis that is facing all of us in the healthcare industry and in our country. Amerisource Bergen's role in the supply chain is one of a logistics provider and distributor. We are responsible for getting FDA approved drugs from pharmaceutical manufacturers to DEA and state registered pharmacies that dispense them based on prescriptions by licensed healthcare providers. Notably, as a logistics provider and distributor, we do not have access to patient information and we are not qualified to interfere with the very personal clinical decisions made between patients and their physicians. We take our role in the supply chain very seriously. We have adhered to all monitoring and reporting requirements and provided daily reports to the DEA of all controlled substances shipped to our customers, including opioid-based medications. We proactively stop suspicious orders using algorithms and data analytics tools to identify orders of interest and to stop shipment of suspicious orders. We partner with our good neighbor pharmacy network, Walgreens, and others on safe drug disposal programs. On the philanthropic side, the Marisol Spurgeon Foundation works closely with other foundations and organizations to educate patients and support programs to help combat the crisis. Finally, Marisol Spurgeon remains engaged Our board, our management team, and all our 21,000 associates know that the opioid epidemic is a top priority that we must work collectively to address. We are continuing to work to combat the crisis while defending ourselves against litigation and being responsible stewards of shareholders' capital. In closing, Amerisource Bergen provides connectivity for stakeholders throughout the healthcare system, and whether the themes are efficiency, effective use of data, transparency, new ways to support value-based care, or the widening role of specialty medicines and precision medicine, AmerisourceBergen is well positioned to continue playing an integral role in helping our partners in what is certain to be an exciting future. We have a clearly defined strategic focus on the U.S. pharmaceutical market, where we continue to see growth, strong patient demographics, significant value capture from increased pharmaceutical utilization, and a focus on delivering the best patient care. Healthcare is a critical, integral part of the economy, and pharmaceuticals clearly represent the most efficient form of patient care. Amerisource Bergen is a trusted partner that helps enable success of our stakeholders, both large and small, to deliver care in what is a complex healthcare market. We are intensely focused on the problems or opportunities our customers have in their business and respond by modifying, enhancing or investing in our offerings to meet the different needs of manufacturers and providers. We remain confident in our ability to execute, evolve and transform our business to meet the needs of our customers, drive value for our stakeholders and ultimately serve patients. More than ever, we are united in our responsibility to create healthier futures. Now I will turn the call over to Jim for a more in-depth discussion of our quarterly financial results and our financial guidance updates for fiscal 2019. Jim?