Cardinal Health, Inc. (NYSE:CAH) Q1 2024 Earnings Call Transcript

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I recently saw our customer-focused mindset on display when I visited our specialty pharmaceutical distribution facility in La Vergne, Tennessee, where team worked extensively to prepare for commercial distribution of COVID-19 vaccines, while maintaining their terrific service for our other specialty products. Our team successfully navigated complex cold chain requirements for the vaccines, enabling us to quickly meet demand and begin making shipments immediately following FDA approval in time for the fall immunization season. We’re pleased to support our customers in this manner, which patients rely upon for care, convenience and accessibility. We’re committed to supporting customers and manufacturers, and our strategic sourcing and manufacturer services team recently hosted hundreds of our supplier partners for our annual business partners’ conference.

It was energizing to hear the excitement around various industry opportunities, such as biosimilars and emerging areas like cell and gene. We are confident about our ability to continue to be a strategic partner for manufacturers, investing in the important drugs being developed and commercialized in this space. We’ve continued to see strong momentum across our specialty business, both downstream and upstream, and have reiterated our focus on this space. We are very sizable today in specialty with over $30 billion in fiscal ’23 revenue, which we noted at Investor Day has grown at a 14% CAGR over the last three years. We are making progress building out our Navista network offerings, with investments in the platform that will scale over time.

Our differentiated model in community oncology is focused on driving practice growth and sharing value, while maintaining practice independence. Our approach is being refined through engagement with clinicians and our customer advisory board. Overall, we are developing solutions strategically aligned supporting the clinical and operational needs of community oncologists that drive long-term practice independence and allow physicians to focus on patient care. In nuclear, the business continues its double-digit growth trajectory, with strong performance across our core categories and Theranostics. We continue to experience increasing demand for our Center for Theranostics Advancement, with more than 60 projects at various stages in our pipeline with our pharmaceutical manufacturer partners.

We’re progressing on our Phase II investment that we announced at Investor Day. Our innovation center and pre-commercial manufacturing center are already highly utilized. We’re underway in progressing according to plan with the expansions of our central pharmacy capability and our commercial manufacturing center. With our strong foundation and continued investment, the nuclear business is well on track to deliver its long-term target of doubling profits by fiscal ’26 relative to our fiscal ’21 baseline. Now, turning to medical and priority number two. The medical business has now delivered back-to-back quarters of meaningfully improved profitability, and we expect more to come. As part of our medical improvement plan, we’ve been taking action to address the challenges in the core products and distribution business, with the number one priority being mitigating supply chain inflation.

We remain on track to address the impact of inflation and global supply chain constraints by the time we exit fiscal ’24, and we’re pleased to note we are now over 70% to target. On the cost side, while overall still elevated, we’ve seen lower international freight costs reflected in our results as anticipated. We continue to execute our mitigation initiatives to offset elevated inflation are making progress with our commercial contracting efforts and are seeing benefits from our additional actions, such as our sourcing initiatives. Additionally, we’ve been taking action through our five-point plan to grow Cardinal Health brand volume, which has yielded improvements. We are utilizing a balanced portfolio approach and have made important line extensions within our core products to fill portfolio gaps critical to our distribution offering.

We’ve also highlighted investments we’re making in new product development and commercialization for our clinically differentiated specialty medical products, which culminated in two notable product launches during the quarter. We launched our anticipated Kangaroo OMNI Enteral Feeding Pump in the U.S., designed to help provide enteral feeding patients with more options to meet their nutritional needs throughout their enteral feeding journey, from hospital to home. We also announced the launch of our next-generation NTrainer System 2.0, a medical device designed to help premature in newborn infants develop with the oral coordination skills to make the transition to independent feeding faster and help reduce their NICU length of stay. I’m excited about what our products can do for patients and the progress we’re making as we now turn to playing more offense to grow our Cardinal Health brand portfolio.

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