Good day, and welcome to AmerisourceBergen's
Second Quarter Fiscal Year 2021 Earnings Conference Call. Today, all participants will be in a listen only mode. After today's event, there will be an opportunity to ask questions. Please note that today's event is being recorded. I would now like to turn the conference over to Mr.
Bennett Murphy, Head of Investor Relations. Please go ahead, sir.
Thank you. Good morning, and thank you all for joining us for this conference call to discuss AmerisourceBergen's fiscal 2021 Q2 results. I'm Bennett Murphy, Senior Vice President, Investor Relations. Joining me today are Steve Collis, Chairman, President and CEO and Jay Cleary, Executive Vice President and CFO. On today's call, we will be discussing non GAAP financial measures.
Reconciliations of these measures to GAAP are provided in today's press release and are also available on our website investor. Americisburgton.com. We have also posted a slide presentation to accompany today's press release on our investor website. During this conference call, we will 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 tax. Forward looking statements are based on management's current expectations and are subject to uncertainty and change.
For a discussion of the key risks and assumptions, we refer to today's press release and our SEC filings, including our most recent Form 10 ks. You will have an opportunity to ask questions after today's remarks by management. We ask that you limit your question to 1 per participant
you, Bennett, and good morning to everyone joining us today. It's hard to believe that 1 year ago on this call, I addressed for the first time how AmerisourceBergen was responding to global COVID-nineteen pandemic. There were many uncertainties there about how COVID-nineteen would impact our Our families and our communities. Guided by our purpose of being united in our responsibility to create healthier futures, MarisourceBergen acted decisively to protect and support our associates, maintain business continuity and help our customers Navigate increased complexity. Our people and businesses grew resilient, and the pharmaceutical distribution industry demonstrated its vital role as a key pillar in the health care system.
I remain incredibly proud of and inspired by where our associates and teams have adapted and innovated to support our partners' needs and facilitate patient access, Powered by our talent and culture enabled by robust infrastructure and technology, AmerisourceBergen is providing value added Data driven solutions to empower our partners with channel awareness and solutions. Importantly, our differentiated capability Enable us to continue to support pharmaceutical innovation and the pandemic response, both in the U. S. And increasingly abroad. This work is important for our people, our community and our partners and embodies our purpose while bringing value for all our stakeholders.
Turning now to our quarterly financial results. As we announced earlier this morning, AmerisourceBergen delivered year over year growth For the Q2 of fiscal 2021, revenues were $49,000,000,000 representing growth of 4% On the same period last year, and our adjusted EPS grew 5% year over year. These results were driven by strong customer Leadership in specialty, innovative services and solutions are purpose driven culture that unite us It's our responsibility to create healthier futures. One way that we are living our purpose is our leading role to provide COVID-nineteen support globally. In the U.
S, we continue to distribute the antiviral and antibody therapies to health systems Across the country, through our work with the strategic national stockpile, we are supporting government preparedness In the communities, as we facilitate their participation in the federal retail pharmacy program, the efforts are especially important In the nationwide inoculation movement because their role as highly trusted medical professionals in their communities enables them to Outside the United States, we continue to play an active role in global vaccination efforts. In Canada, for example, Our NMR business is working in partnership with FedEx to distribute the COVID-nineteen vaccine on behalf of the Canadian government. As I mentioned earlier, AmerisourceBergen is focused on providing value added services and innovative customer centric solutions, And that focus has only been amplified throughout the COVID-nineteen pandemic. Our associates are facilitating an efficient and resilient to ensure patients have access to the critical medication, Lane Media. In our support of pharmaceutical innovation, We are providing key commercialization and distribution solutions for our partners to help them adapt to the current dynamic environments.
We are leveraging our leadership in specialty distribution and services to further enhance our differentiated value proposition for our partners. This includes expanding our robust suite of specialty capabilities and data and analytic solutions To further deliver our position as a partner of choice and an essential pillar supporting pharmaceutical innovation and access, Since this past week, we were able to leverage the full breadth of Amerisource service capabilities, including our logistical expertise and efficient To be a solution provider for public and private partners. Working with the U. S. Government and our manufacturer partner, We were able to facilitate the transportation of antiviral therapies to India.
I am both honored and humbled that we were able to live our purpose in this time of need around the world. This effort would not have been possible without our World Courier business, a Key Global Specialty Logistics Partner. World Courier continues to support the innovation of manufacturers As I now navigate logistical complexes, the importance of World Courier expertise has never been clearer Over the past year, as our partners shifted to perform more clinical trials at patient homes through our industry leading direct to patient capabilities, Given the challenges of interfacing the patients in a traditional clinical setting, World Courier's unparalleled logistical services Combined with partnerships that enable a broad network of field based services, improvement invaluable in keeping clinical trials moving forward. Our teams have been adaptable and creative as they provide solutions to facilitate better outcomes for the communities and patients that our partners serve. Our MWI Animal Health business also continued its strong performance this quarter, thanks to its strong manufacturer and provider relationships as well as its ability to facilitate better health for both companion and production animals.
To support the continued growth of the MWI business and further our operational efficiency, we recently opened a new state of the art animal health This new facility bolsters our animal health distribution network and enhances our service capabilities for veterinarians and other animal health care providers nationwide. AmerisourceBergen's continued ability To provide differentiated value to our customers and partners and deliver on our purpose of being united in our responsibility to create healthier futures is enhanced by our ability to execute on our core growth strategies. First, we remain focused on our customers. One of our core differentiators is our portfolio of key anchor customers across each segment of our business. This customer base enabled us to lead with market leaders and facilitate patient access wherever prescription is needed.
We intend to continue to strengthen our key customer relationships and enhance our customer centric solutions globally. 2nd, we will continue to build upon our leadership in Sessions. We have the strongest portfolio of customer relationships And value added services in the industry, which enables us to advance and benefit from pharmaceutical innovation, Enhancing our capabilities in specialty to support both our upstream partners and downstream customers This is an important area of focus for AmerisourceBergen. 3rd, we continue to focus on delivering best in Analytics, we provide solution oriented and value added innovations that enable all of our customers to grow. This ties into our 1st growth strategies because when our customers grow, we grow.
4th, we seek To enable positive prescription pharmaceutical outcomes globally by facilitating market access and supporting pharmaceutical innovation, By providing value added services that facilitate commercialization as well as integrated solutions to facilitate patient access On top of our unparalleled scale and expertise, we are able to get therapies to both small and large patient populations. This approach enables partnerships that unlock product potential and move health forward. Our associates remain key to our success and our focus on diversity, equity and inclusion As well as investments in our people and culture have long been pivotal in advancing these growth strategies and positioning AmerisourceBergen for long term success. Our strategy and culture are foundational to reinforcing our legacy of Strong corporate stewardship, which focuses on putting people first and ensuring the continued financial health of our businesses while creating long term value for all our stakeholders. To ensure that the value we create is sustainable, We are embedding ESG principles into our culture, businesses and process, making sustainability core to our overall growth strategy.
Our environmental strategy focuses on adapting to a changing climate and advancing a resilient and responsible supply chain. We are leveraging our infrastructure and technology to create an efficient and secure pharmaceutical supply chain It also allows us to reduce waste, lower our global carbon footprint and prepare for unexpected events. For example, We collaborate with our partners and customers to create packaging and transportation efficiencies that result in significant process, costs and environmental improvements. We also understand our climate related physical risks On the social side, our strategy is centered around corporate responsibility and focused on investing in our people and communities To inspire team members and foster healthy communities. We continue now as we have throughout the pandemic To ensure we protect and assist our associates, the many families with enhanced power, Additional bonuses, physical and mental health resources and childcare and Medicare benefits as part of our strong benefit programs, which now will include extended paid parental leave.
For our frontline associates, We implemented additional important measures such as enhanced cleaning protocols, social distancing protections and providing them with PPE. For the long term, we advanced our talent and culture by investing in the development of our people, While these investments in the new leadership competency model and development programs supported by world class learning technology, Underpinned by our purpose and guiding principles, the program focuses our leaders on creating an energized, Diverse and inclusive workplace, leveraging collaboration to create and realize new opportunities, Innovating and executing to prepare for the future with creative resourcefulness and being action based to rapidly adapt to our dynamic landscape. To help all our associates unlock their full potential and empower them to reach their career goals, We have also launched a new enterprise learning model that offers a modern intuitive and tailored learning experience That is also consistent with what we expect and develop in our leaders. By aligning our people strategy with our business strategy, We create value now and for the long term. Another way we inspire team members We're promoting diversity, equity and inclusion and ensuring that the collective voices and perspectives are heard.
VE and I remain the key focus of our investments in our workplace culture, and we encourage our associates To participating in employee resource groups. In the past 12 months, we have introduced 3 new ERGs And participation in ERGs has grown 88%. To further our community impact, We have elevated and strengthened our focus on supply diversity with a collaborative, data driven and thoughtful approach to ensure the diversity of our supplier partners and the alignment of this function with our broader ESG efforts. Additionally, AmerisourceBergen empowers our associates to participate in and lead conversations And AmerisourceBergen Foundation has elevated the impact of matching donation at a 2:one ratio For organizations focused on diversity, inclusion and empowerment, I am proud that the foundation has taken these steps Because I personally believe that equality is a fundamental right and that it is important to support social justice. Health equity has also been raised over the past year as one of the many social issues facing our society.
And here, I want to highlight the work that our good paying pharmacy and Elevate Provider Network members are doing to foster Healthy Communities. As Triumphant Health Providers with well established relationships in their communities, They promote health equity on a daily basis and play a major role in ensuring positive outcomes globally. To the Boys and Girls Club of America to support COVID-nineteen vaccine education and awareness in an effort to remove barriers to vital health care access and improve the health of our communities. We are grateful and proud to have the opportunity to For healthy communities across the U. S, our partnering with non profits and independent pharmacies.
Finally, the governance element of our ESG strategy is embracing a culture of transparency, Ethics and integrity, which informs everything that we do and which ensures the highest standards of governance, Our commitment to do the right thing is core to AmerisourceBergen's purpose and principles. By advancing environmental, social and governance initiatives, AmerisourceBergen aims to create healthier futures around the world. This is not only the right thing to do, but it also enables us to further enhance the value we create for all AmerisourceBergen stakeholders. In closing, we remain confident in our ability to provide differentiated value to our stakeholders, Leverage our leadership in Specialty Distribution, capitalize on our innovative mindset and benefit from our focus on strong corporate stewardship. Looking ahead, we have strong confidence in our business and our focus on closing the acquisition of Alliance Healthcare, which will extend our distribution capabilities into key markets and further strengthen our global platform of manufacturing services.
We look forward to building upon our strong talent base with the onboarding of the Lion Health team, including their fantastic management team, and we are We are well positioned to create long term stakeholder value and remain united in our responsibility to create healthier futures. Now I will turn the call over to Jim for a more in-depth review of
our results. Jim? Thanks, Steve, and good morning, everyone. As Steve mentioned, it's hard to believe that over a year has passed since we publicly addressed Our diligence our teams have shown in supporting our partners during these complex times. Our associates have lived on purpose I am appreciative of the hard work of our associates over the past year and I'm proud that AmerisourceBergen continues to focus on cultivating and advancing our talents and culture.
While the pandemic presented new challenges, our long term commitment to investing in our businesses allowed us to We manage through them and to demonstrate the strength and resilience of our business model. As I said on the call this time last Here, we have been able to leverage significant internal resources and capabilities to meet the evolving needs of our upstream and downstream partners. As we sit here today with our eyes on the future, AmerisourceBergen is continuing to invest internally in our businesses and talent To ensure that AmerisourceBergen is not only delivering strong results this fiscal year, but will continue to do so over the long term for differentiated value from our innovative services and solutions. Turning now to discuss our second quarter results, I will review our Adjusted quarterly consolidated results, our segment performance and the updated elements of our fiscal 2021 guidance, including the increase to our UPS guidance. I will note that this updated financial guidance still does not include any we'll focus on our adjusted non GAAP financial results unless otherwise stated.
Growth rates and comparisons are made against the prior year March quarter. For a detailed discussion of our GAAP results, please refer to our earnings release. We finished the quarter with adjusted diluted EPS of $2.53 an increase of 5%, primarily due to solid operating income growth across our businesses. To reflect our continued strong performance, We are raising the bottom end of our full fiscal year EPS guidance, bringing it to a range of $8.45 to $8.60 up from a range of $8.40 to $8.60 Our consolidated revenue was $49,200,000,000 up 4%, driven by revenue growth in both the Pharmaceutical Distribution Services segment and other, includes our Global Commercialization Services and Animal Health Group of Businesses. Consolidated gross Profit increased 7% to $1,500,000,000 driven by increases in gross profit in each operating segment.
In the quarter, gross profit margin increased 9 basis points from the prior year quarter. This gross margin improvement is due to continued growth in the sale of specialty products, including COVID-nineteen therapies and growth in some of our higher margin businesses such as World Courier and MWI Animal Health. Regarding consolidated operating Operating expenses grew 8% year over year due to a number of payroll related costs To operate in the current environment and investments in internal initiatives being made throughout fiscal 2021 with a focus on continuing to differentiate our value proposition for future growth. We are narrowing our Operating expense guidance for the year from growth in the mid to high single digit range to growth in the high single digits. As a reminder, last year, the second half of fiscal twenty twenty benefited from an OpEx tailwind from lower corporate and administrative costs, notably lower travel and lower health care expenses.
Turning now to consolidated operating income. Our operating income was $707,000,000 up 5% compared to the prior year quarter. This increase was driven by the increased gross Profit in both the Pharmaceutical Distribution Services segment and our Global Commercialization and Animal Health Businesses, which I will discuss in more detail when I review segment level performance. Operating income margin grew 2 basis points to 1.44 percent as a result of the continued strong performance by our higher margin businesses. Net interest expense was $35,000,000 roughly flat year over year.
During the quarter, we issued $2,500,000,000 of new debt ahead of closing the Alliance Health Care acquisition. The new debt is comprised of Approximately $1,500,000,000 of senior notes due 2023, which have a coupon of 0 0.737 percent $1,000,000,000 of senior notes due 2,031, which have a coupon of 2.7 Our updated fiscal 2021 adjusted EPS guidance includes this incremental interest expense, but does not include Alliance Healthcare operating income, which of course would be included in our future consolidated P and L after the transaction closes. Moving now to our effective income tax rate for the 2nd quarter. Our tax rate was 21.9%, up from 21.5% in the Q2 of fiscal 2020. Our diluted share count was 207,300,000 shares, roughly flat compared to last year's share count.
We now Our average share count for the fiscal year to be approximately 207,000,000 to 208,000,000 shares, up from approximately 207,000,000 shares. The revised guidance range reflects the impact of dilution from stock comp and does not reflect the share count impact of the 2,000,000 shares that we will deliver at the close of the Alliance Health Care transaction. As you begin to revisit your model, I will remind you that when we announced the Alliance acquisition, We noted that we would immediately begin a period of deleveraging following the transaction close. Accordingly, in lieu of share repurchases, We are committed to paying down over $2,000,000,000 in total debt over the next 2 years to ensure AmerisourceBergen maintains its from investment grade credit ratings. Turning now to adjusted free cash flow.
Our adjusted free cash flow year to date was $298,000,000 keeping us on track with our adjusted free cash flow guidance of approximately 1 point $600,000,000 in cash, including approximately $2,500,000,000 of proceeds from the issuance of the senior notes that I just discussed. This completes the review of our consolidated results. Now I'll turn to our segment results. 1st, Regarding the Pharmaceutical Distribution Services segment, it is important to keep in context the environment last year in the month of March. Last year, we experienced increased pharmaceutical demand as many of our customers increased their purchases at the onset of COVID-nineteen, resulting in higher revenue and gross profit.
This elevated level of sales in the prior year period does have an impact on year over year growth rate comparisons for the quarter. This year Pharmaceutical Distribution Services segment revenue was $47,100,000,000 up 3% for the quarter, driven by increased sales of specialty products, including COVID-nineteen therapies. The growth rate may have been negatively impacted by there being 2 less business days in the current year of March compared to the prior year period. Segment operating income increased about 5% to $589,000,000 with operating income margin up 1 basis point to 1.25 percent. We saw continued solid performance related to sales of Specialty products, including COVID-nineteen therapies and for our Ion Solutions business, which continues to be a differentiator.
As a reminder, the best debt reserve that we reversed in the Q4 of Fiscal 2020 was originally recorded in the Q2. The reserve and subsequent reversal Both happened in fiscal 2020, therefore resulting in a tailwind to the current quarter operating income growth will be a headwind to operating income growth in the 4th quarter, but will have no impact when comparing to full fiscal 2021 with fiscal 2020. Now I will turn to Color, which includes businesses that focus On global commercialization services and animal health, including Rolls Courier, Amerisource Starting Consulting and MWI. In the quarter, Total revenue was $2,100,000,000 up 12%, driven by growth across the 3 operating segments, particularly for Wealth Carrier. Operating income for the group was up 14% to $123,000,000 primarily due to the continued growth in performance of World Courier Carrier and MWI.
World Courier's direct to patient capabilities differentiate the business and have gained meaningful traction in the market as clinical trials have begun utilizing the in home setting. Additionally, our traditional commercial offerings and industry expertise at World Courier continue to be valued by manufacturer partners, resulting in higher volumes and waste in a time when global logistics continue to be complex. MWY has maintained its strong growth trajectory, particularly in the companion animal market, where pet ownership has been on the rise and pet parents are paying closer attention to their pets' health. Our investments Thus, our businesses, including a new Animal Health Distribution Center and in Data Analytics Technologies, allowed us to remain a best in class provider and offer innovative services and solutions to our partners. As a result of exceptional performance and strong business fundamentals in other, we are raising our Operating income guidance for the group from mid to high single digit growth to low double digit growth for the fiscal year.
I will note that this new guidance range of low double digit growth implies a 2 year compound annual growth rate for the group in the high single digits, helped by the continued performance of World Courier and MWI. Turning now to touch on the 3rd quarter To provide some color and reminders as you look at your models, given the continued strong performance across our business And a favorable comparison to last year, we expect revenue and gross profit to be strong and the operating expense Growth rates remain elevated. Below the operating income line, we expect EPS to be up only slightly in the 3rd quarter due to 3 main factors. 1st, higher tax rate year over year as we lap discrete items in the Q3 of fiscal 20 2nd, higher interest expense due to the debt raise and third, higher share count. With share repurchases on hold as a result of the Alliance Health Care transaction debt, we expect share count to continue to move up to the stock comp.
At this point in the year, we are happy to have been able to raise our EPS guidance again, driven by the strong performance we are seeing across our business. The new EPS range represents growth of 7% to 9% versus 2020 And it's clearly driven by the strong operating income growth expected in both the Pharmaceutical Distribution Services segment and in our Global Commercialization Services and Animal Health Group. Before I conclude my prepared remarks this morning, I will provide a brief update on the Alliance Health Care transaction. We continue to make progress toward closing the transaction and continue to have valuable discussions of the leadership and teams at Alliance in preparation for closing. We remain on track As a reminder, we expect the acquisition to generate high teens percent of pretense to adjusted EPS and the 1st 12 months post close.
This acquisition is an important strategic and financial step into the future as it will enhance our abilities. AmerisourceBergen is well positioned to create long term value for our commercial partners through our key differentiators of strong customer relationships, leadership and specialty and our commitment to innovation. We are also continuing to build on our Corporate stewardship initiatives to ensure the value we create benefits all of our stakeholders. As an executive co sponsor of our ESG Council, I'm excited by this quarter's release of our 5th annual Global Sustainability and Corporate Responsibility Report, which aligns with global sustainability frameworks, including SaaS Fee, GRI and the UN Sustainable Development Goals. For the first time, the report also aligns with TCFD and the World Economic Forum Frameworks and presented on its own sustainability microsite.
As a member of the SaaS Based Standards Advisory Group, AmerisourceBergen's leading ESG reporting approach was featured as a case study in a recent workshop. I encourage everyone to visit the MyCare site and look forward to continuing to provide updates on our growth to ESG. I would be remiss if I did not also take a moment to highlight an important recent acknowledgment that CEOs Steve Collis and AmerisourceBergen In April, the Anti Defamation League Philadelphia presented the Americanism Award to Steve and AmerisourceBergen Our commitment to fighting hate locally across the country and the world. This award is valued recognition of Steve and AmerisourceBergen living our purpose. In closing, AmerisourceBergen remains committed We're running our business with an eye to the future and will continue investing in our businesses, people and communities to our business for long term growth and value creation, driven by our purpose of being united and our responsibility to Thank you for your interest in AmerisourceBergen.
Now I will turn the call over to the operator to start our Q and A. Operator?
Today's first question comes from Glenn Santangelo with Guggenheim.
Yes, thanks. Good morning and congrats and thank you for taking my question. Steve and Jim, I'm guessing you've heard by now, but earlier this earnings season we've received varied from different companies with respect to changes in generic pricing. Could you maybe comment on what you've been seeing in your generics business both in terms of pricing and the supply chain? Any notable changes And the supply chain, any notable changes worth calling out?
And thanks in advance.
Hello? Generic pricing are trending relatively in line with our original expectations for the year. With regard to generic deflation you asked about, overall deflation rates are relatively in line with the last couple of years. There are currently a few product specific pockets of pressure, but overall, the rate is still relatively in line with our expectations for the year. Supply and demand dynamics remain balanced.
And for the balance of the year, we expect overall Thanks for the question.
The next question comes from Eric Coldwell with Baird.
Thanks very much. And unfortunately, I joined a little bit late, but thought I heard you mention something about 2 less selling days. I was hoping to get a little more specificity on that, what that was in relation to. And Selling day and distribution is obviously a tremendous amount of money if that's what that was in relation to. So I'm just Curious if that was one of the factors in the revenue update versus The Street, which was a bit higher.
Yes, let
me comment on that. Those of us who have been in distribution for a long time, which includes about everyone on the call, and they exposed to it, Days are sorts of things that we tend to track. There were 2 less selling days this quarter for AmerisourceBergen versus the same quarter last year. 1 was simply due to the calendar. The other was due to the fact that this year we did not operate our distribution centers on MLK Day, which We felt it was important and so that was why we had the 2nd less selling day during the quarter.
And so on the selling day Probably have some impact on the revenue during the quarter. But I would say overall, we feel quite good about The revenue growth during the quarter, we're comping against the quarter last year where there was a real uptick in revenue during the month of March, during the onset of the pandemic. And so we were pleased with the revenue growth during the quarter and that we were Against the high revenue growth quarter last year. And then also, I think most importantly, that we're keeping our revenue growth Guidance the same, which is strong in the high single digit percent range for the fiscal year.
The next question comes from Lisa Gill with JPMorgan.
Good morning and thank you for taking my question. Jim, I just want to go back to your comments around the higher interest cost, tax rate and share count. So by my math, it looks like those three things combined would be somewhere in the neighborhood of close to $0.10 Am I doing the math correctly? When we think about the fact that you raised your numbers today, But at the lower end of $0.05 was there if everything else were equal, would there have been another incremental Upside to your numbers and the guidance?
Yes. Thank you very much for the question. And obviously, we don't do quarterly guidance, but we thought it was important to give that Caller, and what we indicated is that we're expecting for our adjusted EPS to be up Only slightly during the Q3. And I think really the key thing is we're expecting revenues to continue to be strong, GPs to continue to be strong, And we're expecting very solid operating income growth. So it's really the below the line items that are driving it.
The higher tax rate year over year because we had discrete tax item that benefited the Q3 of last year, We have the higher interest expense during the Q3 because we've done the Alliance acquisition financing before closing the acquisition. We have the interest expense related to it in our guidance, but of course, we won't have the alliance operating income in our guidance until we close the deal. And then we have a Slightly higher share count also. And so, yes, those are the kind of things that are driving what I said in the 3rd Quarter, but I think kind of the key thing is that from an operating standpoint, in our guidance is we expect The business to continue to perform well and we have operating income guidance overall for the business in the high single digit
The next question comes from Robert Jones with Goldman Sachs.
Hi, thanks for the question. I guess, Jim, maybe just to follow-up on that. You talked about 3Q ETFs being up slightly. Just to be clear, is that mostly below the line that would maybe have that EPS growth looking
a little bit more subdued?
And then last quarter, you called out the COVID treatment benefit in the quarter, specifically. I was wondering if you'd be willing to share that specific contribution for this quarter as well. Thanks. Yes. So there were 2 things there.
I'll address Both of those. First one was the detail that we did on the Q3. Yes, all of those All the things that caused adjusted EPS to be only slightly in the quarter, they are below the line Yes. I just went through and we are expecting Solid sales and operating income growth and our operating income guidance once again for the year is some high single digit percent growth. And on the COVID treatment benefit during the quarter, it was roughly half as large and half as impactful And our Q2 as it was during the Q1 of our fiscal year.
And so while it still would still have positive impact, it was only about as much during the Q2 and we do expect this to continue to decline over the balance of the fiscal year.
The next question comes from Ricky Goldwasser with Morgan Stanley.
Yes. Hi, good morning. I wanted to focus on the Pharma segment. You reported about 3.5% revenue growth and 4.5% operating income growth. So as prescriptions pick up to a more normalized level, Should we see more leverage flowing to the bottom line?
And along these lines, what are you seeing in terms of utilization
Yes. With regard to utilization, broadly speaking, our sales have been Sales across our businesses during the pandemic. We've begun to lap the onset of the COVID-nineteen pandemic, of course. There's been a lot of external noise around cost holding blue, which isn't a significant driver of our business. But that being said, moving forward, the script data We'll compare against past year, they had very low cold, cough and flu season.
There has been Tom, lower preventative and diagnostic physician activity, but we're optimistic now as we look To the current situation and balance of the year that with vaccines and lower incidence of COVID-nineteen in many parts
The next question comes from Eric Percher with Nephron Research.
Thank you. Your comment on supporting pharma innovation and commercialization struck a chord and I'm thinking that relative to Bringing specialty customers upstream and World Courier having a expanded role. Is it time to consider and the value proposition of working with the CRO a little bit more intently than it was worth a couple of years ago. And Even if not a large scale combination, are there areas in oncology or regulatory affairs that could fit well with the business?
Yes. Hi, Eric. So we're really not broadly interested in commercialization services and Helping with particularly specialty physicians with market challenges, which would include patient accruals and And helping find those patients post pandemic, we expect that there will be a broad resumption of innovation in clinical trials. Obviously, the FDA from our understanding has been very focused on the pandemic and getting those therapies approved. So we always do And we can feel that our portfolio is very adequately positioned.
And we don't have any specific needs or holds right And have had a history of working with our physician customers on analytics and data mining. So we feel like We're well positioned, but it's important to keep in mind the benefits that could come from using community oncologists, in particular, In clinical trial accruals, but very important.
The next question comes from Charles Rhyee with Cowen.
Yes. Thanks for taking the question. James, I wanted to talk about a follow-up with the Question from Lisa, when you talked about the puts and takes on the rest of the guidance here and with some of the offsets, I think talked about a higher expense related to the alliance financing, etcetera. But given that in the other segment You raised the guidance there. Royal Courier seems to be doing quite well here.
Can you talk a little bit more about the trends that you're seeing here and in the rest Fiscal 2021. And I guess with Royal Courier, you've built this great infrastructure. Have you guys thought about adding more capabilities To support pharma manufacturers in the clinical trial process itself, would you be at can you see yourself adding more different capabilities besides maybe the logistics piece? Thanks.
Yes, sure. So I think the first part of your question was about Kind of some of the moving pieces in guidance in general and then second part more specifically on World Courier. And I think kind of the key thing is We are seeing positive trends across our businesses, particularly in our higher margin businesses. We're also seeing just really strong execution across our businesses, both in pharmaceutical distribution and in the commercialization and animal health businesses. So some of these positive trends we're seeing is, of course, and continued very good performance in specialty physician services.
We're seeing strong performance also in Health Systems. And then as you called out in other, We're seeing strong growth in both the World Courier business and the MWI businesses, and we expect to see positive trends there in those businesses for the rest of the year. And beyond these overall positive trends, there are a number of moving pieces that we Talked about in the prepared remarks and on this call, we're continuing to lap some significant year over year growth rates related to bio Similar utilization and so the operating income from biosimilars will continue to grow, but probably not at the Same. Percentage growth rates that we saw as utilization was really increasing during the last three quarters of last year and the Q1 of this fiscal year. Our guidance, as I said, does assume that COVID therapy sales will be lower in the second half than they were in the first half.
And of course, we're very proud of what we're doing there. And it is good that we do feel that, of course, utilization of Therapies, we do
feel will be lower in
the second half. And then we're lapping part of the fiscal year, again, very low expense growth At the back half of last year, we had less than 1% operating expense growth. So we're lapping that operating expense growth. We also 6 months of interest associated with the Alliance Health Care transaction. And so those are some of the things that are Thanks, guys.
Thanks for our guidance, but overall, we feel very good about the positive trends and execution across our business. Steve, is there anything that you'd like to add there? No, I
just would say that we've owned World Courier for ages or so now and So I think it's a completely surprise that the management team and our Board, how resilient and innovative they are. We talked a lot about clinical trials at home, but we keep on finding new ways for this business to be importantly relevant to our stakeholders. An example we can give you is just what occurred this week with India, where we were able to facilitate the shipment of an important Actually, in fact, the product for India is really using the capabilities of World Courier because it is such a high capability, Highly targeted niche area that we continue to find new users for. I also do believe that Part of our synergy thesis is looking at the combination of World Courier and Alliance Health Care in different markets. Just having more footprint and more presence, I do believe that, of course, it's going to be another strong additive characteristic for World Courier's Opportunities in the future.
Next question please.
The next question is from Steven Valiquette with Barclays.
Thanks. Good morning, guys. Jim, it seemed that the first 10 or 15 seconds of your answer on the first generic pricing question might have been cut off a little bit. I did hear you mentioned the pockets of pressure on generic pricing on the buy side. I guess I was just curious whether the math and dynamics in relation to that are Such that those pockets will convert or is that just more of a permanent reduction, but just in your guidance range?
The other quick question, just given the COVID surge
in India, essentially targeting the
economy there including full fledged urban Is there any early signals at all from generic suppliers in India that there could be disruption to supply engineering for the U. S? Is there something on your radar screen or are you not really
Yes. What I'll do is I'll handle the first part of that and then Steve will take the second part of that. And Obviously, it's a really important question. And you can say that I cut out during part of the question. So let me kind of go through the answer again, obviously, it is such an important topic.
And based on so while we don't have specific guidance metrics, broadly speaking, both brand and generic pricing are in line with the last couple of years regarding generic deflation. And as I said, and as you noted, Eric, I know there have been A few product specific pockets of pressure, but overall, the rate is still relatively in line with our expectations for the year. Supply and demand dynamics remain balanced. And for the balance of the year, we expect overall deflation to be generally consistent With year to date. And with that, I'll turn it over to Steve.
Yes. As far as the situation in India, Obviously, heartbreaking. Of course, most of the media attention will be focused on the high outbreak areas, and We've seen unfortunate payout in other areas. Let's just point to a few mitigating First of all, we believe that manufacturers have had some business continuity planning and The expectation that
there could be outbreaks
and they're preparing for this. So we don't expect any very large interruptions in the Cargo is continuing to be transported as usual operations continue. China is currently functioning. It's also very important to apply at normal level, which is especially important for raw materials. And Amerisource working throughout this process, We're very close with our supply chain partners, and we've been able to come up with solutions in almost all situations.
So we feel that we can get through it, but we're very cognizant and empathetic with what's Just tremendously proud of the organization about the work we were able to do just this week to get this very unique product into And we'll support that effortlessly get through our foundation and corporate brands as well. Okay. All right. Thanks.
The next question comes from Kevin Caliendo with UBS.
Great. Thanks for taking my call. You mentioned you're going to start to lap some of the COVID therapies and also some of the biosimilar benefit. We're seeing biosimilar uptake continue to increase every month. So I'm wondering why that still wouldn't be a little bit Tailwind for you guys.
And if you could in any way shape or form sort of size The benefit you've gotten from biosimilars, I know you've always sort of given us some heads up around the COVID therapy sales, but
if we could also include That would
be really helpful as we think about modeling going forward.
Yes. And so With regard to biosimilars, we absolutely believe in our guidance that they'll continue to grow the operating income dollars from Biosimilar. So we do expect to have continued meaningful growth there. The point that we were making is that the growth
percentage rate will not be as high
as it was last year. Ted, it's great. We'll not be as high as it was last year when biosimilar utilization was growing from a much smaller base. But we absolutely I expect the operating income dollars from biosimilars to continue to grow in our Specialty Business. And we haven't specifically sized the dollar figure, has And a meaningful contributor to both the $100 growth and the gross profit percentage improvement.
Yes. We continue to see positive trends in biosimilars, including our health systems. And we've begun to see significant utilization of biosynthesis in the 2nd quarter in health systems, but also oncology, We have some therapies we've seen 40% utilization for biosimilars. So very important, important more subjects, as we mentioned before, To create room for other innovative therapies to come up. And in other specialties that haven't been as prevalent, It's not being quite as quick.
Long quality when it comes to community and when it comes to specialty and trials Seems to be on the cutting edge. So we believe that this trend will be led by oncology, but will continue into that as well. So we think our customers are and will continue to be very important for our future.
The next question is from George Hill with Deutsche Bank.
Hey, good morning guys for sneaking me in. I guess, Jim, if I could just ask a follow-up kind of Volumes, I was wondering if you could talk about the outperformance of specialty versus kind of the regular way business in the quarter. You mentioned the 2 The fewer days in the quarter, which I think explains a lot of the numbers coming in a little bit below street expectations, But I'd kind of love to hear commentary on how things like oncology performed during the quarter.
Yes. I'd be happy to We saw some continued performance in our specialty physician services business In oncology supply and in other parts of the business, including our ION GPO, we also saw strong performance as we noted during the quarter, during health systems. But I will say, if we look overall at the company, we have really strong performance and across many of our businesses and focusing in on the revenue growth rate during the quarter. Of course, once again, we were comping Against the quarter last year, there was a real surge in business during the month of March, during the onset of COVID. So we were quite Pleased by our performance during the March quarter and the Friends that we're seeing for the balance of the year, which is included in our guidance.
Okay. I'm going to wrap up by just thanking everyone for
their attention today. In preparing for this call, I was a consultant with Bennett and his people, and They were telling me how many more companies you're all typically covering. So we really appreciate your attention as we focus on a tremendous future ahead for AmerisourceBergen. As we've said many times, ever, has our purpose been more clear during this pandemic During this pandemic, I'm incredibly proud of the role that our industry has played and we're playing in that industry. We're We're confident in our business and value proposition.
Looking forward in the months ahead to closing the Alliance transaction, which Key key development in AmerisourceBergen's history, important to our 20 year anniversary coming up later this fiscal year And to broadening our distribution and global footprint as we are united in our responsibility to create healthier futures. Thank you for your time today.
The conference has now concluded. Thank you for attending today's presentation And you may now disconnect.