Cencora, Inc. · NYSE:COR
Cencora — AmerisourceBergen — Investor Day (December 2006)
92 slides from Cencora's investor day presentation, Dec 13, 2006
Slide 1: Investor Day - Welcome
December 13, 2006 Welcome Investor Day Exhibit 99.2
Slide 2: Chief Executive Officer Dave Yost
Chief Executive Officer Dave Yost
Slide 3: Forward-looking statements
3 This presentation may contain certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are based on management’s current expectations and are subject to uncertainty and changes in c
Slide 4: Theme for Today: The Power of Smart Growth
4 Theme for Today … The Power of Smart Growth
Slide 5: Speaking Today
5 Chief Executive Officer President and COO SVP & President ABDC SVP & President ABSG EVP and CFO Questions & Answers Dave Yost Speaking Today The Power of Smart Growth Kurt Hilzinger Terry Haas Steve Collis Mike DiCandilo
Slide 6: GAAP Diluted EPS from Continuing Operations
6 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 GAAP Diluted EPS from Continuing Operations Adjusted for December 2005 Stock Split The Power of Smart Growth FY01 FY02 FY03 FY04 FY05 FY06 $1.06 $1.57 $1.95 $2.06 $1.37 $2.26 CAGR 16%
Slide 7: Suppliers and Dispensers: Products and Solutions
7 Brand Name Rx Generic Rx OTC Biotech HBA HHC Regional Chains Independent Retailers Hospitals Alternate Site Physicians The Power of Smart Growth The Power of Smart Growth Suppliers Dispensers PRODUCTS (12 hours) SOLUTIONS (24/7)
Slide 8: Industry Issues
8 AWP AMP $4.00 Generics at Retail Medicare Part D Industry Environment The Power of Smart Growth Industry Issues
Slide 9: AWP (Average Wholesale Price)
9 Sticker price of branded drugs Retail payments are at a discount, ie. AWP- X% If court ruling lowers AWP; discount will adjust Pricing adjustment over 90 days Makes payor part of channel more transparent No Direct impact on ABC ABC buys and sells on WAC Indirect impact on ABC from retail customers
Slide 10: AMP (Average Manufacturing Price)
10 Proposed Average Price Available in market Generic payment under Medicaid CMS to provide Guidelines Effective date TBD Increased Transparency on Payor Models Key: Definition of Class of Trade No Direct impact on ABC Indirect impact on ABC from retail customers The Power of Smart Growth What is it
Slide 11: $4.00 Generics at Retail
11 Limited number of generics sold at $4.00 Retail Appeals to uninsured Alternative to convenience and service Minimal Impact to Date No impact on ABC No material change in generic usage in Tampa or Florida by our customers What is it? Market Impact Impact on ABC The Power of Smart Growth $4.00 Gene
Slide 12: Medicare Part D
12 Rx coverage under Medicare 80% Satisfaction from Seniors More Choice Than Anticipated Increased Utilization Increased Rx Healthcare Impact Increased Revenue What is it? Market Impact Impact on ABC The Power of Smart Growth Medicare Part D
Slide 13: Industry Environment: Stable
13 Suppliers (FFS) Customers (low concentration) Competitors (always a question) Government (reasons for optimism) The Power of Smart Growth Industry Environment: Stable
Slide 14: Smart Growth
14 Right Markets Right Customers Right Suppliers/Manufacturers Right Products/Solutions Right Use of Cash Right People/Execution The Power of Smart Growth Smart Growth
Slide 15: Right Use of Cash
15 Dividend Stock Repurchase ABDC “green fields” ABSG DC’s Solutions Expansion The Power of Smart Growth Right Use of Cash Return to Shareholders Investment in the Business Acquisitions/Divestitures
Slide 16: Divestiture: PharMerica LTC
16 $1.9 Billion #2 National Company with 330,000 beds Leverage New Technology & Packaging Solutions Internal Growth Acquisitions Tax Free Value Creation $ Distribution to parent ABC Shareholders Own 50% of New Company $30 Million in Synergy Cost Savings for the New Company ABC Focuses on Core Busine
Slide 17: Acquisition Strategy
17 ABC will be the leading distributor of branded pharmaceuticals and related services ABC will be the leading distributor of generic pharmaceuticals and related services ABC will be the packager of choice for pharmaceutical manufacturers ABC will be the leading distributor of specialty pharmaceutic
Slide 18: Acquisition Strategy
18 ABC will be the leading wholesale distributor of generic pharmaceuticals and related services ABC will be the leading wholesale distributor of branded pharmaceuticals and related services ABC will be the leading distributor of specialty pharmaceutical products and related services ABC will be the
Slide 19: Right People/Execution
19 The Power of Smart Growth … Right People/Execution Some of the People who make it happen
Slide 20: Kurt Hilzinger
20 Kurt Hilzinger The Power of Smart Growth President and Chief Operating Officer AmerisourceBergen Corporation
Slide 21: AmerisourceBergen Business Units
21 AmerisourceBergen Corporation Pharmaceutical Distribution Pharmerica Specialty Group (ABSG) Drug Company (ABDC) Packaging Group (ABPG) Long Term Care (LTC) Workers Comp (PMSI) AmerisourceBergen Business Units AmerisourceBergen Business Units
Slide 22: Smart Growth
22 Right Suppliers Right Markets Right Customers Smart Growth Generics Smart Growth
Slide 23: U.S. Generic Market Opportunity
23 $0 $10 $20 $30 $40 $50 $60 2005 2006 2007 2008 2009 2010 0 30 60 90 120 150 180 U.S. Generic Market Opportunity Source: IMS HEALTH $28.5 $28.5 $32.8 $32.8 $38.4 $38.4 $41.2 $41.2 $50.3 $50.3 $56.9 $56.9 U.S. Generic Market Opportunity
Slide 24: Branded Patent Expirations
24 Branded Patent Expirations 2006 2007 2008 2009 2010 Zocor Norvasc Fosamax Prevacid Protonix Zoloft Risperdal Topamax Lexapro Levaquin Pravachol Ambien Lamictal Avandia Aricept $ Billions Source: IMS HEALTH Branded Patent Expirations Top 3: $8.8 $6.8 $4.7 $7.4 $4.8 Zocor Norvasc Fosamax Prevacid P
Slide 25: ABC Generic Program Overview
25 ABC Generic Program Overview • $38B US market opportunity • ABC generic program growing faster than market • Market leading ability to aggregate demand – 3 to 5x margin vs. branded products • Large penetration in targeted segments • Leverage scale and supply chain integrity ABC Generic Program Ov
Slide 26: Generic program features
26 • Product Selection – generic SKUs provide comprehensive formulary • Product Availability – 98% raw fill rate assures high service levels • Product Consistency – sole source awards minimize product changes • Competitive Pricing – market based pricing ensures dynamic response • Program Compliance
Slide 27: Generic Commercialization
27 Generic Commercialization • Formulary compliance • New product launch processes • Innovative go-to-market approaches • Geographic expansion • Custom manufacturer services Generic Commercialization • Formulary compliance • New product launch processes • Innovative go-to-market approaches • Geograp
Slide 28: Globalization Impact
28 Globalization Impact 2004 2005 2006 2007 • Leverage scale of ProGen offering • More partners emerging globally • Strategic relationships vs. transactional buying • Manage risk & capital investment • Optimize margin capture ABC Generic Sales from Emerging Market Suppliers (Projected) Globalization
Slide 29: AmerisourceBergen Packaging Group (ABPG)
29 AmerisourceBergen Packaging Group (ABPG) AmerisourceBergen Packaging Group (ABPG)
Slide 30: ABPG Capabilities
30 ABPG Capabilities • Three operating companies on two continents • 12 facilities totaling 1,200,000 sq ft • 1,600 employees, all non-union • Over 100 packaging and manufacturing lines • All operations with strong regulatory compliance profiles • Established and growing channels and brand • Preferr
Slide 31: Right Solutions / Right Customers
31 Anderson Packaging Right Solutions / Right Customers American Health Packaging Brecon Pharmaceuticals Right Solutions / Right Customers Continue to grow traditional contract packaging Add proprietary package formats Add complementary packaging and manufacturing capabilities Key Customers: — Large
Slide 32: AmerisourceBergen PMSI
32 AmerisourceBergen PMSI AmerisourceBergen PMSI
Slide 33: PMSI - The Trusted Source
33 PMSI – The Trusted Source • Leading single source provider for of cost containment outsourcing solutions for the workers’ compensation and catastrophically injured populations across every aspect of care • 30 years of industry leadership, knowledge and experience • Nations largest network provide
Slide 34: PMSI - The Right Markets
34 PMSI – The Right Markets PMSI – The Right Markets Need access to the right medications and services at the right time – from injury right through settlement. They demand convenience, safety checks and responsive customer service. Need effective and efficient work processes for both adjudication a
Slide 35: Workers' Compensation Market
35 Workers’ Compensation Market PMSI Target Market $12.4 Billion Total Market $142.2 Billion Wages & Lost Productivity 65% Medical Costs 19% Source: National Safety Council Injury Facts – 2004 & 2005 Edition Workers’ Compensation Market PMSI Target Market $12.4 Billion 6% Imaging 12% Pharmacy 14% DM
Slide 36: Patient Demographics
36 Patient Demographics 21% 12% 67% Permanent Partial Temporary Permanent Total and Fatal 38% 62% DOI Greater than 5 Yrs DOI Less than 5 Yrs Patient Demographics Percent of Benefits 2006 Bill Volume from Date of Injury (DOI)
Slide 37: PMSI - The Right Customers
37 PMSI – The Right Customers • Services over 2.5 million active patients and 300 payors • Preferred vendor for 5 of the top 10 insurance carriers and 4 of the top 7 third-party administrators • Nations largest network provider including 54,000 pharmacies and 10,000 specialty service and DME supplie
Slide 38: PMSI - Capabilities
38 PMSI – Capabilities PMSI – Capabilities
Slide 39: Health Advocates
39 • Acquisition for $85 MM in October 2006 • Provides Medicare set-aside (MSA) services to workers’ comp payors and workers • Medicare Part D creates new need for pharmacy set-aside services • Win – win – win for payor, worker, and CMS • Acquisition driven by common payor customer base and ability
Slide 40: Market Leadership
40 Market Leadership • Insurance premium increases • Broader definitions of work- related injuries and illnesses • Shifts in medical costs from group health plans to the workers’ compensation system • Increase in the severity of work related injuries • Aging work force • Medical and pharmacy cost in
Slide 41: Terry Haas, ABDC
41 Terry Haas Distribution & Services SVP and President AmerisourceBergen Drug Corporation (ABDC)
Slide 42: ABDC Strategic Foundation
42 ABDC Strategic Foundation ABC Associates ABC Associates ABC Associates ABC Associates Right Infrastructure Right Market Segments Right Customers ABDC Strategic Foundation ABC Associates ABC Associates Infrastructure Infrastructure Infrastructure Infrastructure Customer Service Customer Service Cu
Slide 43: Optimiz - Operations
43 Hawaii and Puerto Rico included in 51 Optimiz – Operations Hawaii and Puerto Rico included in 51 As of August 29, 2001 As of August 29, 2001 Optimiz – Operations 51 DCs 51 DCs
Slide 44: Optimiz - Operations
44 Optimiz – Operations 51 DCs Down to 26 51 DCs Down to 26 Optimiz – Operations
Slide 45: ABDC Distribution Network
45 ABDC Distribution Network Hawaii and Puerto Rico included in 26 ABDC Distribution Network Hawaii and Puerto Rico included in 26 As of December 13, 2006 As of December 13, 2006 26 DCs 26 DCs
Slide 46: ABDC Revenue Per Warehouse Associate
46 ABDC Revenue Per Warehouse Associate $0 $5,000 $10,000 $15,000 FY03 FY04 FY05 FY06 FY07 (Projected) Optimiz – Operations Impact ABDC Revenue Per Warehouse Associate $11,443 $10,046 $9,488 $7,671 $13,001 Optimiz – Operations Impact
Slide 47: Percentage of Revenue on PkMS
47 Percentage of Revenue on PkMS 24.5% 7.9% 96.6% 47.4% 89.4% 63.4% 0% 25% 50% 75% 100% FY03 FY04 FY05 FY06 FY07 FY08 (Projected) (Projected) Optimiz – Operations Impact Percentage of Revenue on PkMS Optimiz – Operations Impact
Slide 48: Electronic Pedigree Leadership
48 • First wholesaler to establish Electronic Pedigree inter-operability with large retailer • ABC offering includes: – Fully operable electronic pedigree system in Florida – Pedigree for all returns – Pedigree services for fee to secondary distributors Electronic Pedigree Leadership • First wholesa
Slide 49: ABC's Track and Trace Solution
49 • Distributed electronic data system designed for scalability and speed • Unique electronic identification of unit and shipping container (RFID or 2D barcode) • Tracks chain of custody authentications • Pedigree created on demand ABC’s Track and Trace Solution • Patient safety enhancement • Excee
Slide 50: Fee for Service Accomplishments
50 Fee for Service Accomplishments • FFS complete • More than 75% of buyside margin not contingent on price increases • Service level increases • Improved relationships with manufacturers • Transparency in supply channel Fee for Service Accomplishments • FFS complete • More than 75% of buyside margi
Slide 51: Taking Optimiz to the Right Market Segments
51 Optimiz An AmerisourceBergen Program Optimiz An AmerisourceBergen Program Optimiz An AmerisourceBergen Program Taking Optimiz to the Right Market Segments Taking Optimiz to the Right Market Segments
Slide 52: Market Segment Definitions
52 Market Segment Definitions Operates four or more “for-profit” pharmacies open to the public; includes supermarket and mass merchant stores A combination of one to three stores that are open to the public and fill prescriptions, but not part of a chain Independent Independent Chain Chain Instituti
Slide 53: ABDC FY07 Revenue Segmentation
53 Total U.S. Distribution Market ABDC FY07 Revenue Segmentation U.S. Drug Distribution Market Total U.S. Distribution Market ABDC FY07 Revenue Segmentation U.S. Drug Distribution Market 50% Hospital Alternate Care 50% Chain Independent
Slide 54: Taking Optimiz to the Right Customers
54 Optimiz An AmerisourceBergen Program Optimiz An AmerisourceBergen Program Optimiz An AmerisourceBergen Program Taking Optimiz to the Right Customers Taking Optimiz to the Right Customers
Slide 55: ABDC Customer Segments
55 ABDC Customer Segments Independent Independent Chain Chain Hospital Hospital Alternate Care Alternate Care ABDC Customer Segments
Slide 56: ABDC Customer Focus Areas
56 ABDC Customer Focus Areas ABDC Customer Focus Areas Pharmaceutical Performance Optimization Revenue Enhancement Operating Efficiency Increased Market Share Margin Enhancement
Slide 57: Optimiz Rx - Expanded Service Offerings
57 Optimiz Rx – Expanded Service Offerings • Initiative to accelerate development of new, innovative, and integrated solutions • Connected to segment go-to-market strategies • Commercialize proven ABC Optimiz leading practices, methods and tools • Migrate from transaction based to performance based
Slide 58: Optimiz Rx for Hospital, Alternate Care and Retail
58 Optimiz Rx for Hospital and Alternate Care Optimiz Rx Optimiz Rx for Independent & Chain Retail Supply Chain Solutions Clinical Solutions Community Care Solutions Optimiz Rx Pharmaceutical Performance Optimization Retail Value Engineering Services Patient Health Data Tracking Business Coaching an
Slide 59: Smart Growth
59 0 3,000 0 1,000 2,000 3,000 4,000 5,000 2005 2006 2005 2006 Smart Growth Smart Growth 1,800 3,200 2,700 4,900
Slide 60: Performance Plus Network (PPN)
60 174 5 32 Performance Plus Network (PPN) Third Largest Managed Care Network Guam: 22 Alaska: 4 Hawaii: 33 Virgin Islands: 1 Performance Plus Network (PPN) Third Largest Managed Care Network
Slide 61: Taking Optimiz to the Right Market - Canada
61 Optimiz An AmerisourceBergen Program Optimiz An AmerisourceBergen Program Optimiz An AmerisourceBergen Program Taking Optimiz to the Right Market - Canada Taking Optimiz to the Right Market - Canada
Slide 62: AmerisourceBergen - Canada
62 AmerisourceBergen - Canada • Aggressive acquisition pace – Trent Drugs (October 2005) – Asenda (March 2006) – Rep-Pharm (September 2006) • Creates strong opportunities for growth – #2 in Canada ($1.5 billion revenue) • Quickly leverage and apply Optimiz program processes, methods and tools Ameris
Slide 63: AmerisourceBergen Canada - Distribution Network
63 AmerisourceBergen Canada – Distribution Network Richmond Mississauga Calgary Dartmouth St. John’s Chatam Hamilton Scarborough Kingston Montreal (2) Hawksbury AmerisourceBergen Canada – Distribution Network Richmond Mississauga Calgary Dartmouth St. John’s Chatam Hamilton Scarborough Kingston Mont
Slide 64: Summary - Smart Growth
64 • Unique Business Strategy: • Operational Excellence: • Operating Philosophy: • Expanded Service Offering: Summary - Smart Growth • Unique Business Strategy: Transform • Operational Excellence: Optimiz • Operating Philosophy: CARE • Expanded Service Offering: Optimiz Rx Transform Optimiz CARE Opt
Slide 65: Steven H. Collis, ABSG
65 Steven H. Collis Specialty Distribution & Services SVP and President AmerisourceBergen Specialty Group (ABSG)
Slide 66: Specialty Market - Right Market
66 4-year CAGR = 10%-15% Oncology Market = 15%-20% By 2010, half of FDA approvals specialty drugs Specialty Market Right Market
Slide 67: Specialty Market - Right Market
67 Specialty drug spend increasing at twice the rate of traditional drug spend Growing number of oral drugs; approx. 140 in pipeline Specialty Market Right Market
Slide 68: Specialty Market - Right Market
68 Increased use of outsourced services Specialty pharmacy channel increasing in importance IMS 2006 Data over 60 % in key Oncology Drugs in Physician settings Specialty Market Growth of specialty pharmaceuticals is driving growth for specialized distribution and services ABSG Market Share in Key Ma
Slide 69: Specialty Group Services
69 Specialty Group Services Right Solutions Our Services
Slide 70: ABSG Companies - Right Solutions
70 Distribution Services Manufacturer Services Phys & Patient Services ABSG Companies Right Solutions
Slide 71: Oncology Revenue as a Share of Specialty Business
71 Oncology Revenue As a Share of $10 Billion Specialty Business Oncology Revenue Non-oncology Revenue Right Position
Slide 72: Oncology Platform - Right Position
72 Over 4100 community oncologists Over 2400 practices Accredited CME & market research Reimbursement consulting Oncology Platform Nation’s Largest Oncology Distributor Largest Oncology Physician Services Membership Organization Manufacturer Support Services Right Position
Slide 73: Specialty Manufacturers - Right Customers
73 Reimbursement Commercialization Product education Pricing integrity, real-time data Specialty Manufacturers More discerning about the channel used Pedigree/product integrity Manufacturers need solutions related to: Right Customers
Slide 74: Specialty Physicians - Right Customers
74 Increasingly complex contract relationships with pharmaceutical manufacturers Practice management Patient access Medical education (CME) Clinical trials Product information Rapidly changing reimbursement landscape Specialty Physicians Healthcare providers need solutions: Right Customers
Slide 75: Specialty Product Life Cycle
75 Specialty Product Life Cycle Right Solutions
Slide 76: Manufacturer Services
76 Data Analytics & Business Intelligence Solutions Reimbursement Consulting Customer Care Centers (Single point of access programs) Market Access Education Patient Assistance Programs (Manufacturer, Foundations & Card Programs) IME & CME Clinical Practice Analytics Payer Advisory Boards & Payer Edu
Slide 77: Product Launch Solutions
77 ABSG utilizes a product launch process map to drive and support product launches, including a modified “soft” launch process to invigorate and enhance existing products or services. While each new product/service or partnership has unique aspects, these guides provide a general framework of the c
Slide 78: Distribution
78 Three distribution centers CGMP and ISO certified Lot-Controlled Inventory 99.95% accuracy rate Pedigree capability Distribution Right Solutions
Slide 79: Distribution services
79 Inventory management Physician contract management Business continuity Data services Returns processing Supply chain safety Dashboards and web portals Distribution Right Solutions
Slide 80: Inventory Management
80 Inventory Management Right Solutions
Slide 81: Physician Contract Management
81 Physician Contract Management Right Solutions
Slide 82: Physician & Patient Services
82 Contract Pricing Publications Meetings, webinars, and webcasts Advisory panels Large Practice Program Market research and data capture projects Clinical trials and clinical guideline development Practice management consulting Group Purchase Organization (GPO) Physician & Patient Services Right So
Slide 83: Taking Specialty to Canada
83 Cost reimbursement (incl. co-pay assistance) Maximum therapy benefit (compliance) Pharmacy services (home delivery) Homecare (injections, infusions, training) AMD Group acquisition Leader in its field Manufacturers Can Deliver: Taking Specialty to Canada Right Market
Slide 84: Michael D. DiCandilo, CFO
84 Michael D. DiCandilo The Power of Smart Growth Executive Vice President and Chief Financial Officer
Slide 85: Long Term Financial Goals
85 Revenue growth with market Operating margin expansion ROIC > WACC EPS growth of 15% Free cash flow approximates net income Minimum 30% of free cash returned to shareholders The Power of Smart Growth Long Term Financial Goals
Slide 86: Fiscal Year 2006 Results
86 Record operating revenue of $56.7B, up 13% Pharmaceutical Distribution Operating Income grew 21% (Margin Expansion) ROIC > WACC Diluted EPS from continuing operations of $2.26, up 65% Excluding special items, $2.14 up 30% Free cash flow 148% of net income Returns to shareholders>100% of free cash
Slide 87: Fiscal Year 2007 Targets
87 Operating revenue growth of 7% to 9% Operating margin expansion – single digit basis points ROIC > WACC Diluted EPS of $2.40-$2.55, up 12-19% PharMerica LTC 9¢ to 11¢ for full year Free cash flow of $425 to $500 Million Includes CapEx of $100-$125 Million Repurchase $450 Million to $500 Million o
Slide 88: Revenue Growth and Operating Margin by Business Unit
88 ABDC ABSG ABPG 30% 70% 5-7% 15-20% 10-15% 80% 18-20% <1/2% PMSI LTC 8-12% 6-9% 1% 2% 10% 10% 3% Fiscal Year 2007 Targets Revenue Growth and Operating Margin by Business Unit Pharmaceutical Distribution % of Total Segment Revenue Growth Range PharMerica Total Revenue Growth 7-9% Operating Margin R
Slide 89: Capital Deployment
89 $1,200 (in millions) $800 $400 $0 Dividends Dividends Dividends Acquisitions Debt Repayment Debt Repayment The Power of Smart Growth FY04 FY05 FY06 CapX CapX CapX Dividends Dividends Dividends Share Repurchase Share Repurchase Share Repurchase Acquisitions Acquisitions Acquisitions Capital Deploy
Slide 90: Fiscal 2007 Capital Deployment
90 $1.3 billion of cash and short-term investments @ 9/30/06 ($1.1B available) Free Cash Flow of $425-$500 million expected for FY07 Total available for investment $1.5-$1.6 billion, excluding additional borrowing capacity $752 million available under share repurchase program $450-$500 million expec
Slide 91: Well Positioned for Growth
91 Pharmaceutical Supply Channel Generics Specialty Pharmaceuticals Retail and Institutional Pharmacies Physicians Pharma Manufacturers The Power of Smart Growth The Power of Smart Growth Right Markets Right Customers Right Financial Position Well Positioned for Growth
Slide 92: Questions and Answers
92 Questions And Answers