Steve Collis
President and Chief Executive Officer
Agenda
17 Years 29 Years 4 Years 20 Years Steve Collis
President and Chief Executive Officer
Dave Neu
President AmerisourceBergen Drug Corporation
James Frary
President AmerisourceBergen Specialty Distribution and Services
Peyton Howell
President AmerisourceBergen Consulting Services
5 Years
21 Years
Tony Pera
Senior Vice President, Supply Chain Services
Mike DiCandilo
Executive Vice President and Chief Financial Officer
A Decade of Delivering
A Decade of Delivering
Earnings Per Share from Continuing Operations (GAAP)
$2.54
$2.22 $1.69 $1.44 $1.26
$0.92 $0.95
$0.71 $0.52 $0.59
$1.05
+17%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
+14%
+20%
+14%
+31%
A Decade of Delivering
Retail Retail
PBM PBM
A Decade of Delivering
A Decade of Delivering
The Next Decade
Vision
To be the preferred partner to healthcare providers and pharmaceutical manufacturers
Mission
To improve patients lives by delivering innovative products and services that drive quality and efficiency
Values
Accountability Collaboration Customer Focus Innovation Integrity Passion
A Decade of Delivering
The Next Decade
Continue to take advantage of the growth areas of the market Generics Specialty/Biosimilars
Continue to deliver innovative services and thought leadership
A Decade of Delivering
The Next Decade
Demographics continue to drive organic growth Healthcare coverage expands significantly
Cost containment efforts drive demand for our services Distributors more entrenched than ever with manufacturers
Industry Landscape
Pharmaceutical Sales
400 350 300 7.0% 250 200 150 100 2.0% 50 0 1.0% 0.0% 6.0% 5.0% 4.0% 3.0% sales growth rate 10.0% 9.0%
Trends
+ demographics +expansion of coverage +new drug launches +new uses for existing drugs -generic conversions -increased focus on value -safety concerns -reimbursement pressures
8.0%
Industry Landscape
The Role of Distributors
Replacing distributors with direct service model adds over $41 billion in costs Industry costs to serve declined by 80 bps since 2007 due to efficiency and productivity gains
Source: The Role of Distributors in the U.S. Healthcare Industry by The Center for Healthcare Supply Chain Research and Booz & Company, 2011.
A Decade of Delivering
FY 2011 Financial Highlights
GAAP Diluted EPS of $2.54, up 14%
FY2011 Highlights
Good Neighbor Pharmacy received the highest numerical score among chain drug store pharmacies in the proprietary J.D. Power and Associates 2010-2011 National Pharmacy StudiesSM, tied in 2011. 2011 study based on 12,360 total responses, and measures 7 chain drug pharmacies. Proprietary study results are based on experiences and perceptions of consumers surveyed June-July 2011. Your experiences may vary. Visit jdpower.com
FY2011 Highlights
Operational Excellence
Capitalized on specialty generic opportunities
18
FY2011 Highlights
Strengthened Leadership Areas With Acquisitions
Acquisition Strategy FY2011
Increase value for customers and suppliers Strengthen core competencies Domestic and international niche opportunities Increase shareholder value
* Closed 11/1/11
TheraCom*
FY2011 Highlights
Realigned Business Units
Drug Company Specialty Distribution and Services
James Frary
Consulting Services
Dave Neu
North Region South Region East Region West Region Canada Technology Solutions American Health Packaging
Peyton Howell
Looking Ahead
21
Looking Ahead
GNP/ION Solutions ASD Healthcare/ABDC Retail Telesales Professional Management Solutions for Physicians and Pharmacists
David Neu
President AmerisourceBergen Drug Corporation
Branded Rx Generic Rx Biotech and specialty medicines Over-the-counter (OTC) remedies, HH Care, Health Beauty Aids
Operating Efficiency
Driving Value to Customers and Shareholders
20,000
deliveries/day
Number of Divisions TOTAL:
Distribution Sq. Ft. Inventory $'s Lines Per Day 4.7M $3.9B 800,000
35
24,000
99.4% 99.95%
ABDC revenues up 5%
Gross margin up Expenses flat Operating margin up Excellent management of working capital
Strong Performance
A Decade of Delivering Innovation and Operating Efficiency Continue to Drive Value for Our Customers and Shareholders
Improved System Efficiency with SAP
Improved returns processing Optimized customer service Consolidated inside sales Instituted virtual service model
Operational Improvements
Improved Track and Trace design Increased regional product lines Accelerated PRxO Generics product introductions
FY06
FY07
FY08
FY09
FY10
FY11
Back-Office Migration
Accounts receivable, accounts payable, inventory management; Financial management and reporting
Order management, customer service, and credit management; New customer order entry platform
ABC PassPort
An integrated procurement platform for all customer interactions with AmerisourceBergen A customer portal integrated with other AmerisourceBergen back office processes Developed based on customer input Built with usability in mind
Legislative changes will erode the commercial market and grow Medicaid and Exchange participation Medicare reimbursement declines expected to increase pressure on productivity As a result providers will experience:
Increase capacity utilization Reduce variable costs Lower administrative costs Reinvent revenue streams and alter their business models
Marketplace
Retail Independent Retail Chain Long Term Care Behavioral Health Pharmacy Health Maintenance Organization (HMO) Pharmacy Mail Order Pharmacy Specialty Pharmacy Home Infusion Home Healthcare Clinic Services Dialysis Surgery Center Rehabilitation
Strategic Approach
Help community pharmacists attract new patients, improve retention and medication adherence, and drive down operating costs Continuously improve generics offering and drive enhanced compliance and penetration Help customers prepare for upcoming generic launches and AMP implementation
Health Systems
Channel Strategy Focuses on Quality Care, Market Growth and Cost Control
ABDC Will Continue to Invest in Our Core While Leveraging the Improved Solution Portfolio
Our Promise
Our ultimate goal is to focus our business to best serve our customers. We have, and are continuing to provide, services and solutions that align directly with our customers needs.
Operations
Enabling Technologies
Enabling Technologies
Customer Experience
Business Processes
Solutions
In Conclusion
ABDC has had a decade of strong performance.
Our investments in operations, technology, and the commercial organization will ensure the sustainability of earnings growth going forward.
Generics, Generics, Generics
AmerisourceBergen Drug Corporation is well-positioned for continued success for FY12 and beyond.
James Frary
President, AmerisourceBergen Specialty Distribution and Services
ABSG at A Glance
ASD Healthcare
Other Services
Oncology Supply
Replacing specialty distributors would add $3.5 billion in costs to manufacturers and providers (~13% of product value studied)
Traditional distributors create similar savings
Source: Specialty Pharmaceuticals and the Role of the Specialty Distributor; Arthur D. Little, 2011
Specialty Generics
Historic performance in FY2011
On top of historic FY2010 Successful oxaliplatin buy-in, gemcitabine and docetaxel launches
Biosimilars
ABSG extremely well positioned for biosimilars, in collaboration with ABCS Commercialization of biosimilars will follow mold of branded products and require more services than traditional generics
e.g. Market analysis and access strategies, special distribution and administration, compliance and persistency programs, REMS
Sources: National Health Expenditure data, , National Cancer institute, 2010; Unhealthy America: economic burden of chronic disease (Milken institute), Oliver Wyman analysis;
Nucleus Solutions
Flexibility Interoperability
IntrinsiQ Acquisition
Expands ABSG offerings to help providers and pharma to improve the quality of cancer care
ION Solutions providing technology and informatics Practices receive new compensation structure to improve efficiency and patient outcomes
Summary
Specialty market continues to be a growth driver
Growth fundamentals are strong Generics and biosimilars create new opportunities
Peyton Howell
President, AmerisourceBergen Consulting Services
Consulting Services
A Decade of Delivering
Consulting Services
Review our expanded service portfolio to support the manufacturer including recent acquisitions
Provide highlights of capabilities and review how businesses have reached significant scale and are positioned to leverage growth
Describe how the market environment supports strong growth for outsourced manufacturer services across the product life cycle
Summarize how our services support core distribution and product access
Expertise
Focused on innovation to provide value and expertise to manufacturers and support product access
A trusted, essential partner to manufacturers
Innovation
Value Efficiency
Quality
Innovative capabilities People Technology investment & engineering Quality Management 1,500 Associates US and UK
Scale
225 Associates Field-based and remote associates across the US Europe & Canada
68
Collaboration to support growth includes: Business Development Solution Selling (eg Compliance solutions) Operations & Quality Management Tools Expansion of Global business development
69
US Locations
Charlotte, NC Dallas, TX Lincoln, RI Pittsburgh PA Rockford, IL Rockville, MD Portland, OR San Francisco, CA Tampa, FL Washington, DC
United Kingdom
Hay-on-Wye, Wales
Patient Services
Lash Group Premier Source TheraCom
71
Patient Services
A Full Strategic PartnerDedicated to Supporting Patient Access
72
TheraCom
Closed on Acquisition of TheraCom on November 1 Provides outsourced reimbursement support and product hubs for pharmaceutical and biotech manufacturers
Founded in 1996, acquired by a Caremark legacy company in 2002. Exceptional growth over the past three years Over 950 associates
Unique from Lash in that services are focused on pharmacy benefit products that include test claims capabilities
Includes two business units: Services and Distribution
Services Business is the core asset but the distribution services are integrated within the reimbursement programs to meet unique product needs such as training kits and patient assistance
Opportunity to differentiate service levels and operational offering Opportunity to expand services including strategic consulting and clinical programs Geographic expansion also supports growth
- 74 -
Over 131 programs for 69 different manufacturers including programs for 14 of top 15 pharma manufacturers
Acquisition of TheraCom and Premier Source further differentiates patient service model to include emerging biotech and molecular diagnostic manufacturers
75
Increased need for reimbursement support services to navigate access barriers Need for new copayment assistance resources
Increased need for adherence and patient-centric support services Increased need for streamlined solutions that reduce MD administrative work
Strategic Consulting
Xcenda
77
Xcenda Highlights
Strong double-digit top line growth continues
Over 1,130 projects across 120 active clients Significant growth in managed markets agency clients, field reimbursement and international projects
78
A Decade of Delivering
Xcenda
No one competitor is an analog to the breadth of services we offer Value: Managed Markets Agency Services, Reimbursement Analysis & Market Research Evidence: Health Outcomes, Analytics, Risk Management & Epidemiology Access: Payer & Provider Access Strategy and Field Reimbursement Services for the full lifecycle of healthcare products Scientific excellence partnered with commercial applications
Current unmet need in the market and your product as solution Reason to Listen
Data showing your product addressing that need clinically Reason to Believe
80
Medicaid expansion
Integrated healthcare systems Impact of ACOs and paymentbundling pilots
AndersonBrecon
Largest contract packager in US
Long history of quality and scale across wide range of packaging needs Branded, Generic, OTC, Specialty and Biologics 1,522 associates across over 1 Mil square feet of facilities Global business model with UK facility Anderson & Brecon now united under one leader to support global approach Dramatic growth and expansion of business New expanded capabilities including clinical trials packaging and specialty pharma center
Unique Strengths
Speed & Scale
Unequaled packaging capability for 14 of top 15 manufacturers
Expertise
Quality
Opportunity to build early manufacturer relationships and pipeline tracking as part of AmerisourceBergen Consulting Services
Concluding thoughts
Regulatory environment
Ability to develop very unique, measurable capabilities to support quality Compliance concerns, risk management and HIPAA
Services that require scale and ability to respond to volume changes Importance of speed shifts manufacturer to buy vs build options
Opportunity to better understand product opportunities, lifecycle, and market changes impacting ABC customers
Services directly support patients and providers including ABC customers (doctors, pharmacies, hospitals, patients)
Market leadership
Leading market position and differentiator for ABC that is positioned for above market growth
Tony Pera
Senior Vice President Supply Chain
Branded Pharmaceuticals
A Decade of Delivering
The Status of Fee For Service Effectively all manufacturers covered FFS renewals continue to pay us for the value we provide
Performance very near 100% Less than 10% is now subject to price fluctuation
A Decade of Delivering
Manufacturer
Distribution Services
Financial Management
Order Mgmt.
Customers
Generic Pharmaceuticals
A Decade of Delivering
Patent expirations Use of generics reduce healthcare costs Increased awareness and acceptance Generic dispensing rates continue to rise
# of Scripts
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
% MARKET SHARE
61.2%
65.3%
69.7%
72.3%
75.5%
77.8%
84.4%
83.8%
83.2%
82.3%
80.0%
79.0%
38.8%
34.7%
30.3%
27.7%
24.5%
22.2%
2006 2007 2008 2009 2010 YTD Sep 2011 Source: IMS Health
Brand
2012
Zyprexa Lipitor Plavix Seroquel Singulair Actos
2013
Diovan & Diovan HCT Oxycontin Aciphex Niaspan
2014
Cymbalta Nexium Celebrex
U.S. Branded
Specialty Physician
Oncology/Rheumatologist/Ophthalmologist
Make as much or more gross profit dollars per unit on generics Reduced receivable risk Reduced working capital
Can negotiate better terms, i.e. 60 days DPOs
Exclusivity
Post-Exclusivity
Mature
Time
Date of expiry/launch Status of exclusivity Authorized Generic (AG) Number of players expected Who the players are Channel Consideration Mail Order/Retail/Hospital/Oncology Expected conversion
Database of more than 100 recent launches
Price as a % of brand
Higher is better
17 are expected to have an exclusivity period All are predominately retail/mail order
17 are large mail order products (> 25% of scripts)
Lipitor: Generic launch generally as expected Conversion rates appear to be lower than expected
A Decade of Delivering
Summary
Branded Rx market is challenging
ABC expects to retain value
Mike DiCandilo
Executive Vice President and Chief Financial Officer
A Decade of Delivering
A Decade of Delivering
Earnings Per Share from Continuing Operations (GAAP)
$2.54
$2.22 $1.69 $1.44 $1.26
+20%
+14%
+17%
+31%
2010
$0.71 $0.52
$0.59
2001
2002
2003
2004
2005
2006
2007
2008
2009
2011
+14%
$0.92 $0.95
$1.05
A Decade of Delivering
Revenues
(Billions)
$70.2
$65.7 $60.8 $71.8 $80.2
$78.0
2006
2007
2008
2009
2010
2011
A Decade of Delivering
bps
+8 +6
+7
+8 +5
A Decade of Delivering
Asset Management
35 30
30
25
Days
27
25 20 20
15 10 2006 2007 2008
25
25
25
18
19
18
17
17
2009
2010
2011
A/R Days
Inventory Days
A Decade of Delivering
13.8%
11.6%
Value Creation
12.3%
10.2%
ROIC WACC
2006
2007
2008
2009
2010
2011
A Decade of Delivering
100%
% of FCF returned to shareholders Income from Continuing Operations Free Cash Flow 30% Minimum FCF returned to shareholders
billions
80%
$0.8
60% $0.6 $0.4 $0.2 $0.0 40%
20%
0%
2006
2007
2008
2009
2010
2011
A Decade of Delivering
Revenue
Operating Margin Free Cash Flow
Expansion in the high single digit to low double digit bps range In the range of $700 to $800 million including CapEx of $150
Share Repurchases
$400 million
Margin Expansion
Op Inc Growth Cash Deployment EPS Growth
5-7%
5-8% 3-4% 8-12%
+Share repurchase $400 million -Net interest expense up Fourth quarter highest growth rate
FY2012
$0.14-0.15
A Decade of Delivering
79% - 81%
-1% - 0% 5% - 6% >100% 0% - 1%
1.43% - 1.47%
1.95% - 2.05%
18% - 20%
1%
5% - 6%
1.57% 1.62%
100%
Where to deploy?
$400 million of shares expected to be repurchased in FY12 $400 million debt repayment in September 2012 $130 million for dividend $250 million for TheraCom acquisition $1.3-$1.4 billion available for further investment
Ample Liquidity
$700m avail on Revolver $700m avail on A/R Securitization Facility New Commercial Paper Facility
Q&A
Steve Collis
President and Chief Executive Officer