Good afternoon. My name is Lisa Gill, and I'm Head of Healthcare Services with J.P. Morgan. It is with great pleasure this afternoon that I introduce Cencora. With us today from Cencora is CEO, Steve Collis, and CFO, Jim Cleary. Steve will make a presentation, and then he will join me for a little fireside chat.
Hi. Lisa, I think you and I provide continuity in this industry, so, I'm very proud to do that. I think I know my material so well, but I do need the slide mover. So, but, thank you. Pleasure to be here. So, let me just tell you a bit about Cencora. I actually landed up seeing Jamie last night, Jamie Dimon. That's something. He's like Beyoncé. You only need to use one word. And he said to me, "Steve, I know AmerisourceBergen. What is going on with Cencora?" So let me tell you. We have over half of our team members outside of the U.S. Cencora is a name that is global. It's translated to seven different Latin languages.
I actually have Gina Clark, who's our Chief Branding Officer, Marketing, and also has other areas reporting to her. But it really is a business strategy to make Cencora an enduring brand that could work in all the different countries. It's very important to us that we integrate our services, that we have one offering. It's important for so many areas, including business strategy, manufacturing strategy, but we want the whole company to be orientated towards making Cencora be the best it can be. And literally, AmerisourceBergen just didn't work for that. It was hard for us to integrate companies under that name. As proud as we have been of AmerisourceBergen, also as happy as Jim was with the ABC ticker symbol, but he's got used to COR, and we're very happy with how COR is going.
So, let me just tell you, 46,000 team members. We have a target. We did Invest or Day in May of 2022, June of 2022. We pronounced an 8%-12% targeted long-term adjusted diluted EPS growth, which will come, you know, through operating income growth, operating income leverage, and also some capital deployment. We wanna have a leadership position in higher margin, high growth businesses, including specialty, and we wanna be a purpose-driven company. Our purpose is to be united in our responsibility to create healthier futures, and all of that is around Cencora and our global positioning. We have the most robust data set. It's important for us to have that data set. We talk about that a lot.
If you think about all the different businesses we're in, it's very important that we manage our data and have it accessible to customers to help them improve their businesses on both the manufacturer and provider side. So a good question for the audience is: Whose customer are we? And I don't know what the answer is to that, but we have a lot of customers. We have, you know, we ship to over 100,000 customers a week, many of them every day, some of them too many times a day, actually. But our customers are upstream, including biopharma, you know, not only the large companies, but also small and emerging biopharma companies that are discovering and developing products. Speciality physician practices is one of the cornerstones of our business.
In fact, we have two long-time friends, Raj Mantena and Jeffrey Scott, who are one of the founders of ION. Raj helped us really understand specialty physicians and practices, and that's been great. Our health systems has been a key area. Under our COO, Bob Mauch, we've really made terrific improvements in our health systems business, and we have some of the largest customers in the country, including a lot of the leading cancer centers. And then, of course, we're very well known for our pharmacy and animal health businesses. Jim Cleary, our CFO, was literally the founder of MWI Animal Health business, and we have a very good, you know, consumer health animal business, companion animal health business.
Our pharmacy business is really important, both with the large companies like Walgreens and Express Scripts, as well as smaller independent practices that typically belong in Europe under our Alphega label and the US under our Good Neighbor Pharmacy label. So if you think about Cencora, we really want to be in the middle of pharmaceutical-based care. Both on the provider side, we have our distribution footprint, the distribution footprint, GPO services, which I was talking about. Somebody was asking me to explain exactly what ION and IPN do, and those are really like P&T committees. They help with product adoption, with product understanding, product economics, clinical understanding. We wanna help throughout the product life cycle. We wanna help both providers and manufacturers manage that.
Regulatory and legislative support, if you look at what's going on with track and trace, with the pedigree implementations, Cencora has had played such a key role in that and will carry on doing that. Clinical trial support on the provider side, we'll be looking to leverage data to help our providers in the community access clinical trial information for the benefit of their patients. That's, you know, a very good example of what we do. On the biopharma manufacturer side, we want to be talking to manufacturers in phase II, looking what their pipelines are. We have very promising companies, like World Courier, that can help commercialize those products, help with clinical trial logistics. Also, particularly with cell and gene therapy, it's a really important part of what you have to do.
We help understand the market, health, economic access, quality management, clinical trial design. That's through our new PharmaLex acquisition, which I'll talk about. Safety, quality, validation, and, and also patient accrual, so, recruitment. So Cencora wants to be in the middle of the pharmaceutical life sciences cycle and, throughout the commercialization period.... Our U.S. healthcare segment is about 80% of our profits, and even more of revenues. Of course, the U.S. has a lot of specialty medications. One of the benefits we have in the U.S. is that we get to service all different classes of trade. It is a little bit different in Europe. I'll talk about that. We have very favorable market trends coming out of COVID with utilization.
We started doing the COVID vaccine distribution this year on a commercial basis, and that went well. We have, of course, our leadership in animal health, our leadership in community pharmacy, our leadership in community oncology, and specialty pharmacy is such an important part of what we do. Cencora is particularly strong on the Part B distribution, the products that are administered in the office, and we've built up a whole practice around that, and a lot of it is cemented around our ION and IPN GPO businesses. You should think about those as really a key adjunct to help manufacturers with their commercial policies into the market. So often, when people think about Cencora, they will think about our leadership in specialty.
We have a long-held initiative to drive innovative upstream services and downstream services to providers that are higher margin and more sticky and more differentiated. We want to prove that Cencora is a unique company with pharmaceutical-based care. Our international healthcare solutions segment, we did a large acquisition during the pandemic of Alliance Healthcare. That brought in about 20,000 of our team members that we have now in Europe. We are a leading wholesaler in Europe. We have a number one position in the U.K., for example, which is actually our strongest international market. We also have a position in animal health there. When we think about Europe, we want to be doing more advanced 3PL services.
I would say that the European market for 3PL and advanced logistics services is even more elevated than in the US, and we want to be more of a large player in that. We have a good business practices there, but we'd like to even take that more and tie the distribution into the advanced services we do in areas like World Courier and cell and gene therapy, as we want to play a bigger role in distribution in Europe, including hopefully eventually into the health systems. So we want to take the practices that we've developed in the US, and where it makes sense, apply them in Europe. Specialty products are developing in Europe.
Too many of that is taking place in acute care settings, and we think there would be a trend to do that more in alternate care settings, and we hope we can play a part of that. We also have a robust downstream product solutions, including in areas like Alphega, where we are doing practices for community pharmacy services, and that's an important part of our business. A lot of the countries we work in there are interested in doing more at the counter. You know, and of course, we have the GLP-1s, which will drive a lot of volume through those counters, and there is a lot of clinical information that the pharmacist can interact with the patient in. So those are the areas that we are very interested in helping at the counter.
Again, specialty is a theme you'll consistently hear from me, and you'll hear about it throughout our presentation. We want to be the commercialization partner of choice for the manufacturers. You can see that we continue to add to these portfolios, and it's important that we do that, important that we're an innovator. I've talked about logistics and 3PL services. In the US, we have a business called ICS that does that, and we've talked about Alloga and World Courier that do more advanced services in some cases in Europe and throughout the world. A leader in specialty distribution that has been a real mainstay of AmerisourceBergen, Cencora now, of course. Gina got it. So, inventory management so important for everybody.
When you think about Cencora, just think about that we have over $20 billion in inventory at any stage, and we're turning that and thinking about that and making sure it's in the right place at the right time, and that still becomes a really important function of what we do. Other key specialty areas that we think about in the community setting are ophthalmology, urology, and neurology could be a very exciting therapeutic area for us going forward as well, and we think about that. And as long as the product is being administered in the office, and probably it's being billed through the Part B, we believe we can have a very productive practice and a productive relationship with both the provider and the manufacturer.
As a former accountant, it gives me a great thrill to be able to present some financial slides. Usually, that's Jim's job. We did two hundred and sixty-two billion dollars in revenue. It's about a billion dollars every working day that we do. When we are, you know, forecasting about a eight percent revenue improvement for next year, you're talking about approximately about $25 billion plus. It's amazing, you know, the growth that we've had. When I became CEO, we were doing about $45 billion in revenue, so it's quite amazing the growth that we've experienced. And a lot of that is because of the trends of specialty medication and some of the new leading customers that we have been able to contract even more extensively with and do more categories with them.
I said yesterday, I was with a bunch of pharma executives. I said, "I'm extremely proud of the $262 billion in revenue. I'm also proud of the $3.3 billion in adjusted income." Taken together, that can be a bit terrifying when you look at the numerator and the denominator, but we manage it very, very well. We focus on our adjusted free cash flow, and we have proven that we can manage this with a 5%-8% long-term target in adjusted operating income growth, which leads to adjusted diluted EPS growth of 8%-12%. So our fiscal year guidance is right within that range, at the top end of that range, about a 9%-12% adjusted diluted EPS.
So you should be seeing us, you know, close to $13 a share in EPS is what the guidance is. So we focus on that really, really hard. I think one of the advantages we have is, if we have problems in our portfolio, which we invariably have, we'll jump on that. We'll work on it. Occasionally, we'll divest of an asset that doesn't fit in. So I think we've become very good at managing the portfolio for the benefit of Cencora and our shareholders.... So if you look at our history, we've had a strong history of growth that's pretty admirable. You'll see that fiscal year 2018 and 2019 was a little bit slower growth.
We were coming out of a severe period of generic deflation, but since then, we really have had very consistent growth leading to a 13% CAGR in adjusted EPS and adjusted operating income increasing from fiscal year 2018 to 2019, aided by a very accretive Alliance acquisition in particular, which was the largest acquisition we did, over $6 billion, from almost $2 billion to about $3.3 billion. And, I think that's really interesting. On the right side, you can see how we've deployed the capital between CapEx, M&A, share repurchases and dividends, which we call a balanced capital deployment strategy. You know, often the internal projects are so important.
The infrastructure that we have, that has led us to be able to take on, over the years, very large customers, like Walgreens, Boots in the U.K., and we'll continue to focus on being the leading infrastructure for pharmaceutical supply chain, distribution, and commercialization services. Dividends are important to a lot of our shareholders, and we increased our dividend 5% last year. You can see that we do take some of our capital allocated to share repurchases. Last year, we did about $1 billion in share repurchases, which was definitely beneficial. So, if you think about Cencora, our areas of focus are specialty medicines, community providers, are really helping those providers get more scale, customer partnerships with the larger customers. We have a whole practice around that.
I think we're doing such a better job of that, talking to those large, complicated customers more frequently, seeing what we can do with them, seeing what further work they'd require from us. A global access is a theme. There are very few companies that have taken on the ambition to be global and have a global brand, and I think you're seeing Cencora be very thoughtful and planful about that, and get into areas where we think we can add value, and where we can impact the human capital that we deploy, as well as the, the businesses, the manufacturers, help them invest to drive innovation, leverage our infrastructure, to increase efficiency. And all of, all of this will be supported by both our distribution and provider strategies, as well as our commercialization strategies with manufacturers.
So we really think we have a virtuous cycle that feeds off each other. Our leadership in specialty, I've talked about a lot, and as we look at the future, we wanna help be contributing to improved Rx outcomes, improved value-based care, improved efficiency of pharmaceuticals, as we think the most efficient form of healthcare and the most effective form of healthcare. So the acquisitions that we did last year, if you take it against that backdrop, how do they make sense? Well, OneOncology was a really big step for the company, even for myself, personally, if you think about it. We've known those practices for many, many years. The two largest practices have been Cencora customers starting back over two decades, and it was a big step for us.
But we looked at the changes in the marketplace. We looked at the imperatives of maintaining this very high-growth customer within the Cencora portfolio, and the opportunity to partner in a deeper basis, given what we see as imperatives, like value-based care, like precision medicine, like you know, a more probably challenging reimbursement environment coming up in the future with the IRA. And we thought here was a time for us to partner with the leading practice in the community and have a different type of relationship, and we did a very unique deal with TPG, which we are proud about, and we think that it works really well, and it's been received well in the marketplace.
PharmaLex is, although it's based in Germany, it's not as well known, and over 40%, about 40% of their profits come from the U.S. A large part of World Courier's profits and status also comes from the U.S. This has really helped us get into more commercialization services. So we were interested in it, not because it was an international asset, but because of the very advanced, clinical quality, design type of improvements, pharmacovigilance. We're very interested in pricing and what the correct sort of pricing is on a global basis, and PharmaLex allows us to do a lot more of those services. So we're happy with the positioning. We think that this is gonna really help us, on the commercialization services side, which feeds the virtuous cycle that I was talking about.
So, my final slide is really, I hope that this has been a worthwhile 15 minutes for you, as you look at the differentiated value, at the purpose-driven portfolio that we have, as we at Cencora invest to help drive long-term sustainable growth for our shareholders. So with that, I'll turn over to Lisa, and almost on time, Lisa.
You gave us a couple extra minutes. It's all good.
Okay.
You can come and sit with us. So Steve, I think the first question is really for you. You know, you've highlighted your ability to support specialty drugs through the development as well as commercialization life cycle, with acquisitions like PharmaLex, that you just talked about. When you look at the coming years, how well-positioned competitively do you think you are to continue to grow in specialty? Would be the first question. And then secondly, and my guess would be some of this happens here. How do you communicate your value proposition to some of the manufacturers?
So I think we just have, you know, really vast knowledge and great capabilities. If you look at the dataset that we have, I think that's very interesting. For example, we are able to take the relationship we have with community oncologists in certain cases, you know, intersect that into clinical trial data and look at how we can access patients in the community setting for manufacturers. That's a real guiding factor to be able to drive investment to drive trials for manufacturers. So that's very important. We can also help them manage their business better from a financial point of view. So we think it's really important that we carry on being that leading commercialization partner. There's obviously opportunities to add to that portfolio.
It's important for us that we continue to innovate. We have a lot of expertise on the pharma side. Many times we've done more launches of products in the specialty area than anybody else, including some on the manufacturer side. So there's a tremendous amount of expertise we have. I think what's really, what's really intriguing is how we'll apply that on an international basis. So, you know, when we bought Alliance, I said one of my stated goals was that if there ever was a situation like COVID again, that in the first world countries where we are evident, where we are present, that we could do a global launch. And I think something like that is pretty interesting.
We have got some companies that, you know, don't really have the bandwidth to do European launches, that are saying to us, "Really help us launch in Europe," and, as a second step, once they've done their U.S. launches. And we also have some really extensive partnerships with companies that we are doing, you know, so much more than you'd expect a traditional distribution company. And I think some of those case studies are gonna be very, very interesting and validating of our thesis, that we can help drive commercial success for a product.
In your comments there, you said that we have capabilities today, but it also sounded like there's other capabilities that you think you could potentially add to the offering. Are there things we should be looking out for?
Yeah. Look, I think there, there's so many areas in this that, you know, we'll carry on investing in. I think, we also are able to do things through internal investments. A great example is World Courier.
Yeah.
We were able to really innovate in the cell and gene therapy area. We have these, logistics, pathways using, you know, very protective mechanisms for these products. We actually, if you go to our Heathrow distribution site, you can see four generations of different, transportation methodologies. The latest one is called Cocoon, that we use to transport these products. So we continue to innovate. I think the internal investments we're making and whether it's, you know, in clinical trials or whether it's in, you know, community pharmacy to look at adherence programs that, you know, reimbursement-type programs, at helping them understand their business, are remarkable, and, often provide us the best return, and we'll carry on doing that. As far as acquisitions go, you know, we wanna look at quality.
The first thing starts off with the culture of the company. Is it gonna be a good fit for us? And then we look at, you know, often compliance is very important for us, financial performance, and then how does it fit into the capabilities? So we are very interested. I think we've done more acquisitions than anyone in our industry and, amongst our peers in the last few years, and we'll, we'll continue to be thoughtful about that. And I have Leslie sitting here, who heads up our corporate development and strategy program, and believe you me, they're active. They're always looking, we're always interested, and, she has a really able team, and they partner very well with the businesses. And some businesses are very interested in acquisitions, some aren't that interested, but we look at the marketplace, and we stay very involved.
Jim, you wanna make any comment on that?
Sure. I'll just say with regard to the growth of our specialty business, you know, one of the things that's been driving the growth for the last several years and will continue to drive growth, is the role we play in biosimilars. And we've seen, you know, very good growth in biosimilars, particularly in Part B in oncology, and we're seeing it in ophthalmology also. And given the role that we can play with our wraparound services, including education and those sorts of things, is one of the nice growth drivers for us in the specialty business.
Jim, you gave us detailed guidance in November. For those that don't know, their fiscal year end is September, so we're in fiscal 2024. As we look back to when you gave that guidance and as we sit here today, have any of the headwinds or tailwinds changed in any way, or has any of the utilization trends in the month of December changed since we last spoke?
Sure. And, first, let me quickly comment again on our guidance, and Steve briefly mentioned this up on the slides. You know, when we gave guidance in early November for our fiscal year 2024, we indicated that our adjusted operating income growth would be in the 8%-10% range, and that's excluding exclusive COVID products and also on a constant currency basis. And we indicated that our EPS guidance would be $12.70-$13.00, which is 9%-12% growth, excluding the exclusive COVID products. And, when we gave that guidance, of course, it's based on a number of assumptions.
You know, as I look at our business, one thing that Steve and I, you know, talked about during that call, is just kinda how, you know, we're seeing broad-based, strong performance across so many of our businesses. We're seeing strong utilization trends, again, you know, broadly across our businesses. We are seeing, you know, continuing to benefit from leadership in specialty. Other things that we're seeing is we've done a lot of work over the past year on the OpEx front, and that kinda enables us, when we see the strong utilization and volume trends, and the work we've done on the OpEx front, it gives us some opportunity for operating leverage in our business. And, you know, one of the other things I'll just quickly comment on is branded inflation and generic deflation.
We get a lot of questions on that at these conferences. In our guidance, we assume branded inflation and generic deflation kinda comparable to what we've seen the last couple of years. You know, with regard to branded inflation, we expect it to be in line with our expectations, and with regard to generic deflation, we've been talking for the last several months that we've seen a moderation of generic deflation. So it's less of a headwind, and that's favorable for us if that continues to be the case. So, given all those factors, you know, we feel very good about our businesses opportunity and our team members' opportunity to execute and deliver on our guidance.
You've had very strong utilization when I look at your numbers. Double-digit growth, even excluding GLP-1s that have contributed to that growth. When I think about, for example, GLP-1s specifically, I think that Cencora, I was going to call you AmerisourceBergen. Cencora has been the most transparent company when we think about, one, breaking out the revenue, and then, two, really discussing the margins. And so as we think about GLP-1s and the growth in GLP-1s, you have talked publicly about the fact that they carry a lower margin, but the opportunity for that margin to get better over time. So can we maybe just spend a minute and talk about two things as it relates to that category? One, you know, the expectation for growth in that category as we move into 2024.
Then, two, I think that, you know, part of it is the cold chain handling, right? How quickly you need to get the prescription to the pharmacy because of the timeline. But, are there other things that can improve from a margin perspective as we move forward?
Sure. And so, during the most recent quarter, we indicated that our revenue growth was almost 13%, and if we exclude GLP-1s, our revenue growth was 10%. And so I think that really speaks to the strong utilization trends, that even without GLP-1s, our revenue growth was 10%. So you can see that they are driving a lot of top-line revenue growth. We've also indicated that GLP-1s are profitable for us, but not as profitable as some other products, in part due to the margin and in part due to the handling costs. But that's something that we'll always continue to work on over time.
And then I'll repeat one thing I said earlier: kind of given the scale of our business and given the efficiency of our business, as we see these kind of double-digit revenue growth that we saw this most recent quarter, we can also, you know, start to see some operating leverage in our, in our business.
And going back to that 10% growth, 'cause that's clearly better than what we're seeing in IQVIA data, so you're growing above the market. Are there pockets or areas of growth that are really driving that outperformance?
It's, as Steve and I have talked about, it's broad-based across our businesses. I think we benefit from leading customer relationships across all of our businesses, and one of the other things that we benefit from, of course, is our leadership in specialties, such a fast-growing part of the market.
Great. And I think that, Steve, you made the comment that branded inflation coming in line, or maybe, Jim, you made the comment of branded inflation coming in line with expectations or what we've seen in the last few years. And I know you rely a lot less on branded -price inflation than you did many years ago. I f I think about that, and I think about branded inflation, what are some of the things for us to think about when we think about the distribution model? We understand that your pricing is still based off of an average wholesale price, right?
Yeah.
Pricing does have some level of an impact, and so should I think, like, mid-single digits is the right way to always think about drug price inflation?
Well, we're gonna have the IRA that, you know, that, that could conceivably-
Yeah.
change things, so... But, you know, I think there's a lot of water still to go under the bridge for that. But, you know, the other thing that is really important about our business and our competitors, our peers as well, is that we bill at the gross level.
Yeah.
And so, you know, the rebates happen after us. So, you know, if you think about even the GLP-1s, the reported numbers that we're doing are very high compared to the-
agree.
- the net numbers. But yeah, look, when we think about it, 9%-10% revenue growth that, you know, that we've been reporting in the fourth quarter, a bit higher than that, actually, but even net of GLP-1s, it's, you know, obviously, having a robust pricing environment, having some level of inflation is beneficial to that. .. You don't see it in other countries as much, so.
You talked about across all customer categories, and I think over the years-
Yeah.
... many times investors are concerned about what's happening with the independent market and-
Yeah.
... we know you have a very strong offering, more than 4,000 Good Neighbor Pharmacy pharmacies, where, for those of you that don't know it, it's an opportunity almost where you bring those pharmacies together collectively to help them to negotiate price, to bring in different services from Cencora, right? Private label branded-
Yeah.
... et cetera. But as we think about the independent pharmacy, has anything changed in your view post-COVID? My understanding is that we've seen more closings of independent pharmacies post-COVID than we saw pre-COVID.
Yeah, but I think there's closings, and then a lot of them are strengthening, and some of them are acquiring others, and, you know, we're seeing it stay steady in the low 20% market share. Our customers are doing, you know, pretty well. And, you know, they remain robust community providers. I think there is a trend for people to want to go back. Honestly, I believe that GLP-1s will drive more counter interaction in the long run because they are, you know, refrigerated products. They are products that require some explanation. It could bring in a whole new category of patients, if the weight indications are-
Yeah.
... carry on gaining traction. So I think it's pretty interesting, and I think there's an opportunity to be more of a, a diagnostician and a, a clinician around that practice. So we, we're encouraging our community practices to stay involved and to keep, you know, dispensing them, despite, hopefully transitory challenges on the reimbursement side. And there will be more choice. I think you're gonna see more manufacturers coming into this. It's a tremendously exciting category, and you're seeing people get a lot of clinical benefits from it. So I think the pharmacists staying involved is good. But to be honest, they, they stay very resilient. They, they are great customers for us. I'll, I'll just tell you, Lisa, when I became CEO in 2011, Dave Yost used to get irritated about answering this question.
He would say, "My whole 38 years in this business, Peter, people have been predicting the demise of independents-
Right.
-and they're still here. That was 2011, so look how much else has changed.
Right, exactly.
Yeah.
No, I couldn't agree more. But I get the question, so I have to ask the question of you.
No, no, it's fair. No, we understand it. I mean, it's a little bit counterintuitive, but these are just really good businesspeople that stay close to their patients. You know, I had something weird happen to me on Saturday, so I rushed out to my Good Neighbor Pharmacy, and they were awesome. They explained it to me, and they told me what to do.
... That's good to hear.
It's just the itch, that's all. Nothing serious.
So just switching for a minute over to specialty, because this is an area that-
Yeah.
that you have incredible strength, and the OneOncology deal was very positively received by the market, us included. Where you're able to really take a key customer and be able to shift that key customer and maintain that key customer, but also grow with that key customer, expand the offering with that key customer. When we think about offerings around specialty, when we think about managed service offerings in the market, MSO is what people talk about. But can you talk about, you know, the growth expectations here, the continued expansion and the continued opportunity that you see within OneOncology?
You know, they continue adding... I think they're up to 14 states that they have representation in. So they continue executing on their business plan. I think the TPG relationship has been actually very helpful. It's the first time we've done such in, you know, integrated work-
Yeah.
with a private equity company, and they understand the space well, and I think have given us a whole new approach. And frankly, both on the M&A side as well as on the operating and implementation and board side. So we're getting ready. We're getting our training wheels. I think there's a lot of work we have to do in terms of owning this whole business, so it's giving us a chance to really study it up close and prepare. We also wanted to manage the channel conflict. Channel conflict, in my experience, is very pronounced, and once you announce the deal, and then it tends to, like, die down. But we have to always make our customers believe. We have other aggregator customers as well, and we want to be very fair.
It's important that ION and Oncology Supply, or our specialty physician distribution businesses, get perceived to be a fair player, and we want to do that. I think there's expertise as OneOncology carries on developing, that we can relay across the whole, whole network. You know, one day, I think if you look at, you know, the importance of community oncology, you might see us even playing a greater role with trying to do reimbursement and value-based care. And, so we have some interesting partners that do some work there. I think it's, it's just important for us to carry on being innovative and being a leader and staying very close to practices, and I don't think there was a better mechanism for us to do it based on the situation that arose and the way that we approached this.
So I'm proud of the way that we approached it. You want to add anything?
Steve, I think that covered it very well.
Okay. Okay. Maybe too much. Okay.
Never too much.
Okay, never too much.
You've been very bullish on the opportunity in cell and gene therapies in the most recent quarters. I think you've read it up on almost every earnings call, including with the launch of your therapy integration hub. It's not a large dollar contribution today, but what are some of the avenues for you to benefit from the pipeline as the pipeline continues to grow in cell and gene therapy?
Well, World Courier has been literally involved with every single launch, and I talked about the different, you know, safety mechanisms and transportation mechanisms that they've used. It's really very impressive. So, you know, initially when I went to an ION meeting, probably 2008, 2009, Jeffrey may actually remember it, when we heard the Provenge story. And I thought, "Crap, we could be out of this business because it's gonna go straight from the laboratory to the provider." And so we immediately started thinking about it, and we've actually been very thoughtful about it because, you know, we always want to try and stay relevant.
It's very important for us to be the financial intermediary as well as the distribution intermediary, and here we were gonna have the distribution taken away from ourselves. So I think, did that lead to the World Courier acquisition? No, not necessarily, but I think we've always been very thoughtful about trying to extend our services, trying to be within that lane of being the pharmaceutical and commercialization partner. You know, I think good things have happened from that. But just always being thoughtful about staying involved, listening to the customers, seeing what we can do. And also, we don't talk about it much, but that role as a financial intermediary is tremendously powerful and important, and we should never give up on that. It's fundamental to our business.
When I think about the contribution of biosimilars, you mentioned how important biosimilars are to you-
Yeah.
to the industry. So first, can you maybe talk about that progression and that shift of educating the physician, right? So in many cases, the oncologist is used to using one product, and that education process and how quickly you can shift them over to a biosimilar. And then the second question is really for Jim: How do we think about the margin differential and the opportunity, as we know that there's a number of biosimilars coming to the market?
So I think that, you know, biosimilars have definitely created some headroom. I mean, they've been very important. The sweet spot for us is when there's two or three manufacturers.
Okay.
Once it gets to, you know, 5, 6, it, you know, the ASPs tend to drop pretty quickly. So, then it's, you know, it's probably not as interesting. We may make more margin percentage, but the-
Margin dollars.
ASPs coming, the margin dollars. So, but also for our practices, they're important drivers. I think for payers, it's important because it creates headroom. So they... You know, it's been a really important driver for us. Some products have been better than others. I mean, there's no, you know, some of the Epogen-type products have been very quick to decline, and others have, you know, stayed up there. On the Part D side, it's been a little bit disappointing. I thought we'd have a higher role, but so many of the specialty pharmacies that are the leaders in that have contracted directly, so it's been a little bit disappointing. But on the Part B side, we've definitely held our own, and it's important for our customers.
We do some of that distribution on the Part D side, but it's not nearly as impactful to us.
And then, I'll comment briefly on profitability. Biosimilars are just one of the, you know, many opportunities that we have at Cencora from a profitability standpoint. And as we've commented many times, you know, the margin we earn on biosimilars is in between the margin we earn on brand and generic, and the, you know, margin dollars is also very good for us on biosimilars. And I just think it's one of many examples, if we look at our company, that we're so well-positioned, and we have such good scale and such good efficiency, that when these sorts of new opportunities come along, we're very well-positioned to take advantage of these opportunities. And biosimilars, particularly in Part D, which kind of give us the opportunity to, you know, move up within our long-term guidance range.
We only made it through half the questions, so we're gonna have to meet after.
Okay.
Um-
I'm pleased you still have time for us.
Uh-
You've got a pretty full dance card.
Yeah, it is a little full-
Yeah.
... but never too full for you. In our last minute, you know I always like to ask this question, Steve, and, and I have to say, it feels like people really do understand the story because the stock has done so well in the last two years. But, what do you hope that investors will appreciate a year from now that maybe they don't appreciate about Cencora today?
Yeah, I hope that Cencora will be more prominent in people's minds, and that we will reach the promise, the purpose-driven potential that we have to be united in our responsibility to create healthier futures, and that we will become this global brand that people will, you know, immediately associate with excellent pharmaceutical care. That would be my goal, and I hope that you'll all understand that.
Great. Thank you very much.