Q3 2022 Amerisourcebergen Corp Earnings Call

Okay.

Hello, everyone and welcome to the Marshalls Bakken third quarter fiscal Chief I've been spent you Chi earnings call.

My name is Victoria, and I will be cool names equal today, if you'd like to ask a question. During the presentation. Please press star one on your telephone keypad.

One for Frank to ask your question. Please ensure that your line is on mute the likely on I'll pass over to your host Bennett Murphy head of Investor Relations to begin. Please go ahead. Thank you. Good morning, good afternoon, and thank you all for joining US for this conference call to discuss the Amerisourcebergen fiscal 2022 third quarter results I Am Bennett Murphy Senior Vice President Investor Relations.

Joining me today are Steve Collis, Chairman, President and CEO , and Jim 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, which is available on our website at Investor day at Amerisourcebergen Dot 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 taxes forward looking statements are based on management's current expectations are subject to uncertainty and change for a discussion of kiosks and assumptions. We refer you to today's press release, and our SEC filings, including our most recent 10-K.

Amerisourcebergen assumes no obligation to update any forward looking statements and this call cannot be rebroadcast without the express permission of the company.

I have an opportunity to ask questions. After today's remarks by management. So you could limit your questions to one per participant in order for us to get to as many participants as possible within the hour with that I'll turn the call over to Steve.

Thank you Bennett good morning, and good afternoon to everyone on the call before we discuss our results for the quarter.

Wanted to provide a brief update on opioid related litigation.

As previously disclosed we have reached an agreement for a settlement with the state of Oklahoma that is consistent with the state's allocations and the comprehensive settlement agreement that brings the total number of states saving opioid related claims 248 or 40 non eligible states in July we were.

We're pleased to receive a ruling from a federal judge that held that all distribution of F. D. A approved medications to licensed and Ray just sit health care providers, and Capella County, and the city of Huntington was not a public nuisance and we are optimistic the ruling will hold up upon appeal <unk>.

Surely we reached an agreement with the remaining counties and municipalities of the state of waste, Virginia to resolve opioid related claims. We are encouraged by the continued progress and we will not comment deeply at this time.

So, let's Burger and continues to work diligently with our partners to combat drug diversion, while supporting real solutions that help address the crisis in the communities, where we live work and serve.

Turning now to our third quarter of fiscal 'twenty two.

Amerisourcebergen delivered another quarter of strong results driven by continued high levels of execution across our company and the strength and resilience of our businesses.

During the quarter revenue was up 12.5% over the prior year period to $60 billion adjusted operating income increased by 20% and adjusted EPS grew by 21%.

These strong results and the increase in our full year outlook, which Jim will discuss in greater detail are driven by team members continued strong execution, the resilience of our businesses and our differentiated solutions.

Business is further enhanced by the strength of our foundational pharmaceutical distribution business our position in the market and our strategic focus on the four areas of specialty medicine and services community providers long term customer partnerships and providing global access.

And opportunity.

And our first focus area of specialty medicine and services, we continue to benefit from our market leadership and ability to capture growth opportunities as pharmaceutical innovation continues to advance.

In the U S. We are benefiting from demographic trains, increasing biosimilar utilization and the downstream services, we are able to provide to support specialty physician practices.

They continue to grow along with the market.

We continue to support the growth of Biosimilars, which services, both upstream from helping Biopharma manufacturers with clinical development commercialization and launch two downstream supporting provider education and patient access. We also continue to see good growth across specialties.

Mancala G to ophthalmology, and rheumatology driven by G. P O data and analytics and additional value added capabilities.

Looking to the future the specialty market is driven by exciting scientific developments that enable increasingly precise and personalized treatments for diseases that were once thought off as an incredible.

And we are positioning ourselves to support this innovation and capture these global growth opportunities.

In our specialty physician services business, we are well positioned to continue to support successful product access and utilization.

In the quarter, we continue to benefit from our scale, creating value for our downstream physician customers both around the innovative products in the market and also on the Biosimilar front in oncology and see early stage positive signs in the ophthalmology side on.

On the logistics side, well Korea remains the market leading solution for its expertise in especially the logistics and has stepped up to help our customers navigate global complexities.

Korea's capabilities, including expert execution next generation thin won't packaging and advanced tracking technology enables safe and secure deliveries to their most remote communities and extreme climates.

We continue to enhance our global logistics capabilities through World Korea, low Guy anymore, and all other specialty focused businesses to offer a box clinical and commercial support such as direct to patient logistics and temperature controlled transport and storage solutions.

Recent investments include opening or expanding opposite at east in strategic markets worldwide to add more cold chain capabilities, and especially cryogenic storage to meet increasing demand.

With enhanced capabilities and expertise, we strive to further strengthen our market leadership to capture the opportunities ahead and facilitate pharmaceutical innovation.

Our second focus area is community providers.

Globally community providers are integral to supporting the health of the local communities with key health care services and all critical providers in underserved areas community pharmacies. For example play a key role in helping health care systems, both in the U S and abroad to reach communities of all time.

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<unk> seen the value of independent pharmacies.

Two weeks ago, we hosted our annual thoughts bought conference, where our good neighbor pharmacy network, which coincided with the networks 40th anniversary.

After hosting thought spot promoters during recent years. It was energizing to once again spent time with local community pharmacists in person to collaborate and to set up right. They impact in their communities. This conference was even more special as we were joined by law.

<unk> health care team members that serve its how failure independent pharmacy network in Europe as part of the best practice sharing we are conducting across our business.

Coming out of thought spot I remain amazed and inspired by the resilience passion connection and ability of independent pharmacies to tailor their services to match patient needs and patients are responding with high price.

Our own good neighbor pharmacy network was ranked highest in customer satisfaction with chain drugstore pharmacies in J D. Power's 2022 U S pharmacy study.

Incredibly this is the 11th Tom that G. M. P has earned this recognition in the last 13 years and the networks six consecutive win.

Amerisourcebergen is focused on assisting the professional pharmacy to increase its role in patient care in ways, where the pharmacist has proved they could assist in providing excellent patient care in an accessible sitting.

We are pleased to see that the pharmacist role continues to be more elevated and importantly, we were pleased to see the U S. F. D. A revision to the Pax live with E. U E authorizing state licensed pharmacist to prescribe the COVID-19 antiviral to eligible patients.

This action by the F. D. A reflects the value that can be gained by the U S health care system, if the role of pharmacists can be expanded.

He couldn't rate pharmacies as the most accessible amongst health care destinations, including emergency departments and primary care physicians offices, and many and they all have a pharmacy first mentality when looking to improve their wellbeing.

Pharmacies are providing two out of every three COVID-19 vaccine doses administered in America, and 45% of pharmacy, COVID-19 vaccination shots are reported to be in areas with moderate to severe social vulnerability.

Clearly community pharmacies are a critical extension about public health care system, and then they central access point for those who need care. The most amerisourcebergen is proud of our work to support independent pharmacies, including by advocating on their behalf for health equity policies that.

To ensure access to the critical services.

The third focus area for Amerisourcebergen is a long term customer relationships.

Upstream biopharma manufacturers to downstream pharmacies, veterinarians physicians health systems and government agencies, we leverage our strong core pharmaceutical distribution capabilities to support patient access wherever a prescription he's needed the strength and reach of our distribution capabilities.

Have helped us continue to enhance our relationship with healthcare providers big and small and our relationship with stakeholders worldwide have been further reinforced throughout the pandemic.

We continue to see strong prescription utilization trends across our core distribution business and benefit from our broad portfolio of anchor customers. These long term partnerships position us well to continue to benefit from the well documented resiliency of the pharmaceutical supply chain.

As partners, we also support our customers.

Making make smart investments to help them stay ahead of an ever evolving healthcare landscape.

Digital Therapeutics for example is an area of opportunity for future growth and to help innovate is commercialized treatments and reach patients. We are preparing to launch D. T X Kinect platform that will integrate with E M ores and simplify the prescription and nonprescription digital therapeutics process.

Similarly, we are partnering to provide digital and E. Commerce solutions, so that basically practices can communicate more effectively with the increasingly digital savvy clients and operate more efficiently.

With our knowledge base across all sorts of Kid geographies, Amerisourcebergen is creating increasingly more opportunities with all customers by problem solving and focusing on building enduring long term relationships.

Our fourth focus area is providing global access and opportunity.

Earlier I mentioned the key role that will Korea plays in the global pharmaceutical supply chain with its expertise in especially that just sticks. This quarter. We also celebrated the one year anniversary of our lives health care acquisition.

And as I reflect on the posture.

Word that comes to mind is unity.

Our teams have made great progress on integration and we are more aligned than ever to our shared purpose of being United in our responsibility to create healthier futures.

We are already beginning to realize the benefits of operating in a shared environment that a lot of teams to glean knowledge and best practices from colleagues and other areas of the business and in the other markets.

One example is our recent exchange of visits between our distribution center leaders in which our European team members visited our U S human and animal health distribution centers and our U S. Team members subsequently visited distribution centers in the U K.

Through these visits the team has been able to share best practices around supply management automation performance tracking and productivity management and operational planning and design.

While we recognize the differences that exist between international markets, we are ready to identify adopt and invest in proven best in class technology supply chain commercialization and services solutions. We've also had the chance to do not around our manufacturer partners recently teams from both the U S and Europe .

<unk> met with one of our global partners to hold joint workshops looking at how we can work together to achieve shared successes.

That manufacturer has shared with me at our thought spot conference their desire to be our first truly global partner.

There's no doubt in my mind that we are establishing the right culture and methodologies to capitalize on amerisourcebergen assets in ways that will differentiate us by taking advantage of our global reach and unique knowledge scale wouldn't expect he's in all the markets where we operate.

The progress we've made so far to integrate our business and teams is as a result of the tireless effort of all of our global team members I've mentioned in the past the strength of the lines health care team and they continue to impress with their resilience and their ability to execute and deliver strong operational performance.

We look forward to finding more opportunities to further strengthen our operations and to partner with our customers to offer a truly global solutions that help them stay ahead of a continuously evolving environment.

Our team members are a fundamental driver of our long term sustainable growth.

At Amerisourcebergen, we firmly believe that our people are our most important asset and all benefits and talent development programs are data driven and based on employee input.

During the quarter, we conducted our 2022 employee experience survey, which showed that our team members feel connected to our purpose their managers and each other and make it a positive impact on our customers and the health care supply chain.

The valuable insights we have gained through the survey around cultural inclusion team member satisfaction and engagement will help guide us as we build that you're not a culture.

Our board and executive management team are committed to being a company that is transparent ethical and a fair employer.

We take our responsibilities to all 42000 team members very seriously and our goal is for them to always not only respect the company, but also to be inspired by the work, we do and fulfilling our purpose.

In addition to unity, we value a diverse equal an inclusive culture.

Our goal is to foster a global workplace that values, all cultural experiential and philosophical perspectives creates pathways for every team member with Rob make a positive impact on our communities through equitable access to health care in a transparent and accountable for progress.

To further our goals, we published our first D. A summary report, which shows where we stand today and how are we going to hold ourselves accountable for making progress as we move forward.

An important part of Amerisourcebergen D E and our strategy as well as our broader ESG strategy is having a positive impact on our communities through equitable access to health care.

One of the key channels through which we support healthy communities worldwide is Amerisourcebergen Foundation, which recently committed funds to the United Nations foundations shocked at loft campaign.

The campaign is instrumental in supporting global vaccine equity and protecting the world's most vulnerable children from devastating diseases.

The funding will be used towards vaccine interventions in marginal as populations such as refugee communities and what specific T support vaccine delivery transportation logistics and community engagement we.

We are proud to support such important work that truly reflects the global impact we have when we live our purpose of being United in our responsibility to create healthier futures.

Today's strong results reflect the value of our core global pharmaceutical centric businesses and the value created by the execution and intellectual confidence about team members.

Driven by our purpose and supported by a proven resilience, we remain confidence in amerisourcebergen ability to deliver long term sustainable growth by maintaining a leading share of pharmaceutical distribution and best in class efficiency, while growing our higher margin high growth businesses.

Strong position enables us to achieve this vision as we deliver on our strategic imperatives and focus on specialty medications and services community providers customer partnerships and ensuring access and opportunity for patients around the world.

Now I will turn the call over to Jim for a more in depth review of our third quarter 2022 results and to discuss our updated financial guidance Jim.

Thank you Steve and thank you all for joining us on today's call before I turn to our results as usual my comments will focus primarily on our adjusted non-GAAP financial results.

Growth rates and comparisons are made against the prior year June quarter for more details on our GAAP results. Please refer to our earnings press release.

And our third quarter Amerisourcebergen continues to deliver strong results as our teams executed on our strategic imperatives are core foundation in pharmaceutical distribution and suite of complementary higher margin higher growth services around the world position us well to deliver differentiated.

Long term value creation supported by our commitment to talent diversity equity and inclusion and E. S. G.

As Steve mentioned in June we passed the one year anniversary of the Alliance Health care acquisition. Our purpose driven teams have worked diligently on integration and execution and we are pleased that the acquisition has delivered high teens EPS accretion in its first year as expected.

Turning now to our third quarter results Amerisourcebergen finished the quarter with adjusted diluted earnings per share of $2.62 at 21% increase with solid operating income growth in both segments. Our consolidated revenue grew approximately 13%.

$60.1 billion driven by revenue growth in both segments.

<unk> gross profit increased 27% to $2.1 billion as a result of increases in gross profit in both segments gross profit margin grew by 39 basis points to 3.44% driven by the alliance health care acquisition and increase.

In the U S Health care solutions segment and good performance in the International Health care solutions segment.

Consolidated operating expenses were $1 $3 billion up from $996 million as a result of higher distribution selling and administrative expenses as well as depreciation expense, primarily due to the alliance healthcare acquisition Consol.

Consolidated operating income was $756 million up 20%. The increase was driven by operating income growth in both segments, which I will discuss in more detail when reviewing segment level results.

Turning now to interest expense and the income tax rate net interest expense was $53 million in the quarter, an increase of 3% due to an increase in debt related to the alliance healthcare acquisition, and partially offset by higher interest income Uninvested cash.

Our effective income tax rate was 22% compared to 21.0% in the prior year quarter as it relates to our full year fiscal 'twenty two tax rate guidance of approximately 21% to 22%. We would expect our full year tax rate to be at the lower.

End of that range, our diluted share count increased one 4% to $211 7 million shares as a result of dilution related to employee compensation and the June 2021 issuance of 2 million shares to Walgreens Boots Alliance in connection with our acquisition of Alliance healthcare.

Offset in part by share repurchases in the quarter.

Regarding free cash flow and cash balance fiscal year to date adjusted free cash flow was $1.55 billion for the nine months ended June 30, we ended the quarter with $3 $3 billion in cash, including approximately $270 million of restrict.

Cash on our balance sheet and.

In the quarter, we repaid $500 million in senior notes due March 2023.

As we continue to make progress in paying down debt issued to acquire alliance health care the.

The remaining balance on the senior notes due March 2023 is $1 billion.

This completes the review of our consolidated results now I'll turn to our third quarter segment level results, starting with our U S Health care solutions segment.

Segment revenue increased by 6% to approximately $53 $4 billion driven by an increase in sales across our portfolio, including increased volumes and mail order and growth in sales to specialty physician practices.

Segment operating income was $580 million representing growth of nine 5% versus the third quarter of fiscal 2021 in.

In the quarter specialty physician services experienced strong broad based growth to oncologists another specialist as our industry, leading solution set continues to drive growth.

U S health care solutions segment operating income margin increased three basis points in the quarter due to fees earned from the distribution of government owned Covid treatments. As a reminder, we distribute both commercial COVID-19 therapies and government owned COVID-19 therapies like <unk>.

Contribution from government owned Covid therapies is not a meaningful revenue driver given the fee based nature of the business.

As it relates to Covid therapy earnings impact Covid therapies contributed 14 cents to the June quarter exactly half of the 28 contribution we called out on our May earnings call. That's remaining for the balance of our fiscal year in the U S Health care solutions segment.

As a reminder, our full year estimate for Covid therapy contribution in the U S Health care solutions segment is still approximately 60.

46 cents of which we have realized in the segment through our third quarter.

If COVID-19 therapy volume trends in July were to continue through August and September we would expect to see a couple of pennies worth of decline in Covid therapy contribution sequentially, but clearly in that 60 cents full year ballpark.

I will now turn to our international Health care solutions segment in the quarter International Health care solutions revenue was $6 $7 billion, including $5 $5 billion in revenue from Alliance healthcare segment operating income for the third quarter was $176 million up 75%.

Driven by the two months incremental contribution from Alliance health care and strong operating performance at World Courier, both of which had good performance despite higher than expected foreign exchange pressure related to the strong dollar.

Alliance healthcare continued to have resilient volume trends that were in line or better than expectations, demonstrating the strong fundamentals of its pharmaceutical centric business.

At World Courier, we had better than expected performance driven by increased weight per shipment.

The World Courier team also ensured that we are getting good value for the incredibly important logistics services, we offer for these high priority shipments.

I will also note that in early June as expected, we closed on our sale of the pro forma specialty business. This business contributed approximately five cents to EPS for the International Health care solutions segment for the first eight months of fiscal 2022.

This completes the review of our segment level results.

Now I will turn to our updated fiscal 2022 guidance, we are raising our fiscal 2022, adjusted EPS guidance from a range of $10.80 to $11.05 to.

Our new guidance range of $10.90 to $11.10 representing growth of approximately 18% to 20% from the prior fiscal year.

The increased guidance reflects stronger than expected performance in several businesses and a lower than expected average diluted share count.

Turning now to operating income there.

There is no change in our expectation for consolidated operating income growth.

We expect to be at least in the high teens percent range.

In our U S Health care solutions segment, we are raising the lower end of our operating income guidance. We now expect U S health care solutions operating income to be in the range of $2.44 billion to $2 four $8 billion representing growth of 8% to 10% the <unk>.

<unk> range reflects the strong performance. The segment has shown to date and continued strength in execution in the fourth quarter.

As a reminder, in the fourth quarter of fiscal 'twenty 'twenty. One we had elevated operating expenses as we made investments in our talent and growth initiatives. This impacts the year over year comparison for the segment in the quarter as we benefit from lapping those prior year expenses.

Turning now to international Health care solutions. There is no change in our full year guidance, but I would like to discuss the impact of foreign currency fluctuations on the segment.

The International Health Care solutions segment has faced significant foreign exchange headwinds as a result of the strong dollar since our second quarter earnings call. In May. The dollar has continued to strengthen increasing the expected foreign exchange impact on our actual dollar results for the fiscal year to approximately 130.

Dollars versus constant currency up from our prior estimate of $80 million. Despite this headwind our businesses have been performing well and we are impressed with our team's strong execution.

While the strong dollar has been a translation headwind for our reported results. There are some items that mitigate the impact.

And may I called out the larger than normal annual manufacturer price adjustment in the March quarter, and a developing market that offset the negative impact of the decline in value of its local currency.

Now given the continued depreciation of that country's local currency and unusual second price adjustment was announced in July which will offset currency pressure in our fourth quarter.

As I said in May these price adjustments have historically been on an annual basis, but now given the significant decline in the value of the local currency second unexpected price adjustment occurred which will support our full year results.

Turning now to share count, we now expect average diluted shares outstanding for the fiscal year to be in the range of 211 to $211 5 million down from approximately 212 million as a result of the resumption of our share repurchase program in may.

In the June quarter, we repurchased $249 million of our shares.

And have approximately $1.1 billion remaining on our current board approved share repurchase authorizations.

Lastly, we now expect adjusted free cash flow to be in the range of $2 $3 billion to $2 $5 billion and have raised the lower end of the previous range of $2 billion. As we continued to have good cash flow trends in the business.

That concludes the updates to our fiscal 2022 guidance, while we are in the middle of our planning process for fiscal 'twenty 'twenty three I want to repeat the earlier commentary that I gave at our Investor day in June about our expected organic consolidated adjusted operating income and adjust.

The diluted EPS growth for fiscal 2023.

If you exclude the contribution from Covid treatment distribution.

Our operating income growth should be in the 5% range and EPS growth in the 8% range again ex COVID-19.

As it relates to the potential COVID-19 contribution.

<unk> and treatment utilization remain difficult to predict too far out, but we continue to believe the contribution from COVID-19 treatment distribution in 'twenty twenty-three could easily be less than half of the approximately 70 cent contribution included in our 2022 guidance.

Our segment level Covid contribution expectations remain unchanged for fiscal 2022 as a reminder, we expect about 60 cents of contribution in the U S segment and around 10 cents and the international segment.

As usual, we will provide our full detailed fiscal 2023 guidance that is fully informed by our comprehensive planning process when we announce our fourth quarter results.

Before I conclude my prepared remarks today I would like to provide a brief update on our ESG efforts and progress in June Amerisourcebergen was honored to be invited to the white house as signatories of the administrations health sector climate pledge alongside many of our peers in the health care industry signatories of the play.

<unk> commit to reducing greenhouse gas emissions, while producing detailed plans to prepare their facilities and communities for climate impacts these commitments align with our ESG strategy with one of the core pillars of our strategy being resilient and sustainable operations.

Other related efforts include our commitment to a set of science based emissions reduction target and then May we submitted our draft target to the science based targets initiative for official validation.

As I mentioned last quarter. We've also conducted physical risk assessments of our top 100 locations to inform our business strategy and continuity planning process by having strong business resiliency plans and reducing our emissions footprint.

Can help mitigate the impact of climate change and advance health equity, particularly in communities most vulnerable to climate change.

Well my comments today focus on our environmental efforts Amerisourcebergen embraces all aspects of ESG and in doing so we live our purpose and help create healthier futures.

To close Amerisourcebergen has proven its ability to deliver strong results throughout each phase of the pandemic.

Driven by the talent and execution of our 42000 team members the resilience of our pharmaceutical centric businesses and supported by the strength of our balance sheet. As we look ahead in the complex economic environment globally, Amerisourcebergen is well positioned strategically operationally.

<unk> and financially to continue to deliver sustainable earnings strong cash flow and long term value for all our stakeholders. Thank you all for your interest in Amerisourcebergen and now I will turn the call over to the operator to begin our Q&A operator.

Thank you you'll now start our Q&A session.

I'd like to ask a question. Please press star one on your telephone keypad member parents asked a question. Please ensure that your line is on mute to locally.

And our first question comes from Elizabeth Anderson.

Paul. Please go ahead your line is open.

Hi, guys. Thanks, so much for the question and thanks for all the details on that.

I was wondering you know given all the puts and takes that you've been talking about and sort of trying to establish as you said, it's sort of like whatever phase. We are in the pandemics like run rate trends can you talk about the underlying volume growth assumptions in not only our.

Well what happened in the third quarter, and then sort of underlying your guidance in the fourth quarter I'm, just trying to sort of parse out like where you're seeing strength in those and relative areas of weakness in both the sort of you know visits in sort of core retail scripts versus maybe some of that may all acceleration that you talked about.

The U S and Europe . Thank you.

Yeah. So thanks, a lot for that for that question Elizabeth and I'd say overall, what we're seeing across our businesses.

The aliens and strength in our core selves and words, we used a lot in the prepared remarks, but I'm getting kind.

Kind of a little bit more into the detail and we are seeing you know strong underlying fundamentals, we're seeing good utilization trends and we're seeing good volumes in both in the U S and international and I describe that as being in line or somewhat ahead of our expectations.

We're definitely aided by our leadership in specialty distribution and that's allowed us to capture the strong trends there and the benefits of a strong specialty utilization trends, which we would expect to continue and so that's one area, where we've seen strong trends and you did comment as we did.

In our prepared remarks that we did see some increased volumes and mail also during the quarter, but overall.

I think that we've just continued to demonstrate resilience and strength in the various phases of the pandemic as we look over the last two.

Two and a quarter years or so.

The the.

Fundamentals in the utilization trends.

I'm really been quite good and we're seeing really the same thing and the various phases of the.

Economic cycle, you know, we're continuing to see.

Strong fundamentals and utilization trends really across our businesses in the U S and international which is largely due of course to the pharmaceutical centric nature of our businesses.

Thank you.

Our next question comes from Lisa Gill at Jpmorgan. Please go ahead.

Good morning, and thanks for the question.

First I just wanted to start Jim with your comments initially around 2023, and just get your thoughts on how you're thinking about foreign exchange and you know you talked about the dollar being stronger.

And you didn't specifically call that out as we think about 'twenty 'twenty three so that that would be my first question and then second more broadly speaking just given your position and how strong you are in the specialty side and given what we're seeing on the Biosimilar side can you talk about was there any impact in the quarter from Biosimilars and how do you think about biosimilar.

Over the next couple of years since we have a number of drugs that will lose patent protection.

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Okay, well I'll I'll start out and.

Talk about 2020, three and importantly.

And there's really no change from what we indicated during our Investor day on a consolidated basis.

You can expect is organic.

Organic operating income growth of 5% and then an incremental 3% from capital deployment, whether that be share repurchases or M&A. So we would expect EPS growth of 8% on a consolidated basis of course that ex COVID-19. So you'd have to start by taking 2022 and subtracting out the 70 <unk> expected.

Fit from Covid, and then grow them.

8% from there and then add back in whenever the assumption would be for Covid in 'twenty.

'twenty 'twenty three and we're seeing a lot of the drivers in 2020 to continue to be drivers in 2020 three continued strength in our U S. Business is you know clearly our leadership in specialty will well continue.

Continue to benefit us and then when it comes to internationally as I said, we're seeing the business is performing well with good fundamentals now two things that we are monitoring in international of course, our FX, which you've mentioned and inflation.

Also and you know both of those things will impact fiscal year 'twenty three and you know there have been some opex on some offsets to FX in fiscal year, 'twenty, two including the price adjustments that we saw in the developing countries, Turkey, which have helped.

Help to offset some of the FX impacts in fiscal year 'twenty, two and when we report fiscal year 'twenty three results and when we are discussing international will discuss it on a constant currency basis. In addition to a <unk>.

As reported basis, but overall, we feel very good about 'twenty three is where from done doing our planning we're going through a detailed planning process now and we feel very good about 'twenty three and feel very good about the fundamentals in the business and you know as I said before there's really no change to our initial thinking that we talked about at Investor day ex Covid operating in.

Organic growth of 5% and an incremental 3% from capital deployment for EPS growth of 8%.

Hi, Hi, Hi, Lisa on the on the Biosimilars.

We continue to see positive trends in Biosimilars. In fact, there was a recent announcement in the ophthalmology space, which is our sweet spot the part D. Sade and we'll see how that goes we will certainly keep you updated therapeutic comparability and good contracting support or helping enable physician utilization.

And taking cost out of the system, which will make more room for innovation.

And.

We are you know we we we are very encourage by the Biosimilars, we don't specifically call it out, but it's part of the general growth that about all strong specialty position in health systems, and physician practices, including oncology, but as we just had voted in ophthalmology, where you're going to see an important role into as well.

So are we.

We all saw noting a regulatory enhancements including into Changeability on some of the molecule. So.

This is a very dynamic space in which Amerisourcebergen was clearly an early adopter and we expect to strongly participate in that in the system and in the and the launch of these products, particularly on the part D side.

Thanks.

Yeah.

Thank you. Our next question comes from Eric Percher at Nephron Research. Please go ahead.

Thank you like to drill into Turkey, just a little bit more and I know the operators that you have long experience in the international. So question, one would be what youre seeing in Turkey with hyperinflation and the price adjustment have you seen this in other countries before and maybe I'll ask you. If you can just once.

More help us on that.

Mechanics on the P&L and then on the balance sheet and I am right in seeing the adjustment this quarter as completely related to the balance sheet, the $28 million and as a matter of revaluation.

Going to the hyperinflation.

Yeah.

Yeah sure I'd be happy to take that question and thank you for asking it and first of all I think you're absolutely right. We've been very pleased with the management team at alliance and of course, they have a lot of experience and their markets and.

And really you know I've just shown a lot of expertise and are managing the business with regard.

To your question on the Turkey high inflation accounting, which was covered in our press release today very importantly.

There's no change in how we translate the P&L Alliance Healthcare's Turkish subsidiary in our adjusted results.

Just as you were saying.

When you asked the question the GAAP to non-GAAP adjustments relate to the accounting impact of re measuring various components of their balance sheet and of course on a consolidated basis and Turkey is a very small part of our overall results, but I will get into a little bit more.

Detail here, the GAAP accounting items, driven by Turkey, coming a highly inflationary economy as defined under U S. GAAP and the result is remeasurement mirrored denominated assets and liabilities at each balance sheet date, using the U S dollar exchange rate and that in effect and that impacts recorded in.

Our P&L and previously that translation groups were recorded as an adjustment in there too.

<unk> equity on our balance sheet and Theres a detailed discussion of this in our 10-Q, but I think very importantly theirs.

No change in how we translate the P&L of alliances Turkish subsidiary in our adjusted results.

Yeah.

And with respect to the P&L it sounds like the adjustment being made by the manufacturer. It's in their interest to make that adjustment given hyperinflation, you don't really have a bearing on that but it helps offset is that the right way to think of it.

Yeah, So the way that it works there is due to the.

Due to the currency devaluation that happened, there's an annual price increase that happens in that annual price increase is based on the value of the Turkish lira versus a basket of currencies and that price increase happens every year and this year and that price increase.

Was particularly large and theres actually been two of them because of the devaluation has been higher than typical.

Thank you.

Next question comes from Charles rate at Cowen. Please go ahead. Your line is open.

Yeah, Thanks, Hey, guys.

So I just wanted to follow up on international a little bit more and maybe pulled into what Eric was asking but.

So you you maintain the full year alliance.

EBIT Guide right 685 to 715, I think Jim you said last quarter.

Because of the currency headwind you expect to kind of come in towards the lower end. It sounds like now you're saying, though that currency has gone even worse, we're maintaining the guidance. So clearly kind of suggests that underlying operating performance has been better.

I guess two questions then.

When we think about then modeling fiscal 'twenty three should we be.

Assuming currency stays flat or are we actually should be modeling on a constant currency basis, let's say on.

On EBIT profile that is higher than the $6 85 to $7 15 range and then secondly, or is some of this how much of the benefit that keeps us in the range is coming from maybe something like Turkey. Thanks.

Yeah sure and so there are really two things to keep us in the range. One is the is.

The second price increase in Turkey that we talked about and then really the other thing is just very strong performance out of World Courier and we're seeing just I'm, just particularly strong performance there in world Courier has had a.

Long history of growth and good margins and what we've seen in the most recent quarter is higher weights of world Courier shipments and also world Courier receiving them good value from manufacturers and for the services that we provide and so those are really the two things that.

Our that are enabling us to to maintain our guidance for the international business and.

Fully offset what we've seen from the FX.

FX standpoint, and like I said, when we talk about fiscal year 'twenty, three and report fiscal year 'twenty three we'll do that and talk about it on both eight.

Constant currency.

Currency basis, and a and a as reported basis.

Great and just to follow up a little Courier, obviously, you've been highlighting how strong it's been performing you know when you look at some of the <unk> that have been reporting some have talked about potential slowdown in R&D or just kind of kind of delays or cancellations others seem to have reported fine results.

Just maybe what you're seeing in sort of the clinical trial space as it relates to world Courier.

So I think you know.

We did have a strong quarter with World Korea, as we've got a bunch of highway shipments and the team is driving value on incremental services, we provide including our home direct to patient services, which are important for in home trials.

<unk> certainly seen a development out of the pandemic.

But well Korea is expertise and reputation and helping customers.

Navigate the complexities of global logistics is very well established we've owned the business for hanging on 10 years now.

I'm proud of the investment we have made.

And allowing it will create to deliver best in class solutions, while seeing a rapid growth.

It's been a really long history of growth and good margins, which we expect to continue into Q4 and.

Hopefully into next year in the future as well.

Thank you.

Next question comes from Steven Valiquette with Barclays. Please go ahead.

Oh, Thanks, good morning, everyone.

So just a couple of interrelated questions on generic drug pricing.

Just for some of the third party data that's tracked by investors there was a bit of an inflection in recent months on some moderation of generic drug price deflation I guess.

Just wondering if you're also seeing any changes from your on your point of the market and then also tie it into this is there any early view that generic drug manufacturers maybe.

Maybe looking to raise prices to offset some of the inflation that they're seeing in their own the higher cost of generic drug manufacturing.

Yeah, So with regard to your question.

On.

Generic deflation yet.

And in line with the past few years, it's been in line with our expectations as supply and demand.

Remain in balance and as we've talked about before.

Our business is not as reliant.

On the generic pricing as it has been in the past our teams have done in a very good job of rebalancing contracts and ensuring that we receive fair compensation across brand generic and specialty which is important, especially as more specialty goes through mail and retail and with regard.

Hard to.

Generic inflation, there certainly are on higher input costs.

For manufacturers and it remains to be seen if there'll be able to pass on the higher costs. We're not currently expecting generic inflation, but if that does occur of course, it would be a tailwind for our business, but as a reminder.

And.

Due to our contract rebalancing our business model isn't as reliant on generic pricing as it once was thank you for the question.

Yeah.

Thank you. Our next question comes from Kevin Caliendo UBS. Please go ahead.

Great. Thanks for taking my question first I guess on the animal health segment of M. Wi <unk>.

Year over year basis, what was the contribution better or worse like what what's happening with that business in terms of growth and margin on a year over year basis.

And then.

As a follow up you mentioned that ophthalmology youre seeing encouraging signs in the ophthalmology business, what exactly do you mean by that is that.

Bios.

Biosimilar possibilities or is that just straight.

Supply demand.

You know I can start with the ophthalmology business and then we'll make that Jim who is the expert of course on M. W. I talk about it.

We are especially physician services business.

We have talked a lot about increasing our services to other positions as the formulary increases as is more products available in the administration area and probably ophthalmology is our second largest area. After oncology that's been an area, where we've been very involved are particularly with the launch of eylea in many years.

Though was really what got us into that business and we continue to develop services and as they all biosimilars and is there more therapies available for in office administration and physicians have out for over a decade.

You used to administering products, there's more relevance for our what we call our IP in network and out basically medical distribution, which all fundamental parts all of our <unk> business. So we see growth there and we see.

Our market share, which we've always enjoyed in that segment.

Consistent with or even higher than oncology market share right. So.

The robust area for us and particularly we look forward to the opportunity to assist physicians in adopting biosimilars. So that's.

That's really a gem and over to you on M. W. R and so during the quarter M. W. I had growth during the quarter that revenue growth during the quarter, but that but the <unk>.

Both rate was lower than it had been in fiscal year, 'twenty or 'twenty, one and of course as you well know there were a lot of pet adoptions during the pandemic and really good growth in the in the companion animal business in particular during the first part of the pandemic and so some of the.

Some of the comps.

Comps were up a little bit tougher now for <unk> and Wi, but that's still had growth and.

It's a very strong business and we have.

Kind of very.

Very good confidence in the long term prospects of both the animal health market and our M. W y business.

Thank you.

Our next question comes from George Hill at Deutsche Bank. Please go ahead.

Yeah. Good morning, guys and thanks for taking the question and I hopped on a little bit late so I apologize. If you guys covered this but Jim maybe could you talk about the outlook for Covid therapies as it looks like the Covid market is going to prove to be a little bit more durable than we might have thought three or five months ago. So maybe kind of the contribution of coke therapies. The evolution of how you guys are.

Thinking about durability.

Yeah, I'll start out here, we've been really transparent about our contribution from Covid therapies and in Q3 our contribution from.

Covid therapies was.

14 cents on.

For EPS versus <unk> in the same quarter last year.

As we.

We're having problems shipping volumes of the government owned emergency use authorization pills and that and we're kind of keeping our guidance for the full year in the U S.

60 cents and on a consolidated basis.

70, including international and so if we compare it to what we would've thought a year ago. It's certainly been a lot more durable than we than we would have thought and it is something that is hard to predict and estimate and so that's why when we talk about our guidance for fiscal year 'twenty.

Three we pay out well do our guidance.

Ex COVID-19 and that.

8% EPS growth rate that we talked about effects COVID-19, so back out COVID-19 growth, 8% and then make an assumption for COVID-19 and add that on top.

One other point that we were pleased to see the HCA.

See you April packs, COVID-19, making it easier for patients to access treatments at pharmacies and.

We're really proud of the increased role that pharmacists will be playing in patient care and I think that that's as I said in my prepared remarks, that's a tremendous access to consumers and patients as they look to access these treatments conveniently so.

When we think about living our purpose during the pandemic.

There's nothing more theres nothing that embodies it more than the work we've done with these products and Amerisourcebergen and our associates are tremendously proud of it. So this is definitely something that has been distinguishing us in the last couple of years.

Next question please.

Yeah.

Thank you our.

Next question comes from a J rice ask quite a Smith. Please go ahead.

Oh, hi, everybody I might just take a second and ask you about the capital priorities and any updated thoughts on that I know you called out that you continue to pay down debt.

You took on associated with appliance and you also highlighted.

In your availability for.

Share repurchases, maybe just updated thoughts on.

Priorities looking out over the next six to 12 months and anything else that will be a major.

Consumption are.

Outlay point for capital deployment.

Yeah, so yeah, so our capital deployment.

Which of course remains.

Similar to what it's been for quite some time of course investing in the business, where we have.

Great returns.

Strategic M&A share repurchases.

Of course, having a reasonable dividend on our stock and we have steadily increased.

The dividend that we pay.

We have been paying down debt and we will meet or beat our timeframe for paying down two thirds of the alliance acquisition debt.

And also we started repurchasing shares earlier than we anticipated we started repurchasing shares in the month.

May we saw good opportunity to do that we repurchased about $250 million.

During the quarter and at a board meeting after that our board increased our share repurchase authorization to.

$1 billion. So we have about $1 $1 billion in total authorizations now and we would look forward to any share repurchase opportunities in fiscal year 'twenty three.

Thank you this concludes our Q&A session.

Now I'd like to turn the T C I, Steve Collins for any final remarks.

Thank you everyone for your attention on this on this busy Wednesday morning Emera.

<unk>, Bergen, and Jim and I and been at all pleased and proud to have delivered another strong quarter and another guidance raise our business.

Talent and our capabilities have we have seen on show throughout this quarter and throughout the pandemic and historically through throughout various economic cycles. Amerisourcebergen has demonstrated tremendous resilience, we are well positioned strategically with a strong track record of execution to continue.

To deliver long term value for all of our stakeholders. This concludes our remarks. Thank you for your time.

Yeah.

Thank you everyone for joining today's conference call you may now disconnect.

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