Cardinal Health (CAH)
Q2 2013 Earnings Call
February 05, 2013 8:30 am ET
Executives
Sally Curley
George S. Barrett - Chairman, Chief Executive Officer and Chairman of Executive Committee
Jeffrey W. Henderson - Chief Financial Officer
Analysts
Ricky Goldwasser - Morgan Stanley, Research Division
Lisa C. Gill - JP Morgan Chase & Co, Research Division
Robert P. Jones - Goldman Sachs Group Inc., Research Division
Glen J. Santangelo - Crédit Suisse AG, Research Division
George Hill - Citigroup Inc, Research Division
Charles Rhyee - Cowen and Company, LLC, Research Division
Ross Muken - ISI Group Inc., Research Division
Steven Valiquette - UBS Investment Bank, Research Division
Colleen Lang - Lazard Capital Markets LLC, Research Division
John Kreger - William Blair & Company L.L.C., Research Division
David Larsen - Leerink Swann LLC, Research Division
Robert M. Willoughby - BofA Merrill Lynch, Research Division
Eric W. Coldwell - Robert W. Baird & Co. Incorporated, Research Division
David H. Toung - Argus Research Company
Presentation
Operator
Good day, ladies and gentlemen, and welcome to the Cardinal Health Second Quarter Fiscal Year 2013 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.
I would now like to turn the conference over to your host, Sally Curley. Ma'am, you may begin.
Sally Curley
Thank you, Shannon, and welcome to today's second quarter fiscal 2013 earnings conference call. Today, we will be making forward-looking statements. The matters addressed in these statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected or implied. Please refer to the SEC filings and the forward-looking statements slide at the beginning of the presentation found on the Investor page of our website for a description of risks and uncertainties.
In addition, we will reference non-GAAP financial measures. Information about these measures is included at the end of the slides. I would also like to remind you of a few upcoming investment conferences and events in which we will be webcasting, notably, the Leerink Swann Global Healthcare Conference on February 13 at 10:30 in New York; the Cowen & Co. 33rd Annual Healthcare Conference on March 5 in Boston; and the Barclays Global Healthcare Conference on March 13 in Miami. The details of these events are or will be posted on the IR section of our website, at cardinalhealth.com, so please make sure to visit the site often for updated information. We look forward to seeing you at one of these upcoming events.
Now I'd like to turn the call over to Cardinal Health's Chairman and CEO, Mr. George Barrett. George?
George S. Barrett
Thanks, Sally. Good morning, everyone, and thanks to all of you for joining us on our second quarter call today. We've now completed a strong first half to our fiscal 2013. Total revenue for the second quarter was $25.2 billion. Although this represents a decline of 6.8% from the prior year's period, it was not unexpected given this past year's brand-to-generic conversions and the movement of the Express Scripts contract. Most important, our focus on value generation for our customers and our continued attention to portfolio, product and customer mix, along with disciplined performance management by our people, resulted in year-over-year growth in non-GAAP operating earnings of 10.6% to $525 million; non-GAAP EPS of $0.93, growth of 15%.
Based on our results for the first half of our fiscal 2013 and the way we see the balance of the year, we are now guiding to the upper half of our prior guidance range with the new non-GAAP EPS range of $3.42 to $3.50.
Stepping back for a few moments from the quarter's half, this really is an extraordinary time in health care. It seems clear that powerful forces, specifically the aging of our population, public health challenges and legislative actions to improve access to care for those who've lacked adequate care, will drive long-term demand. It is also clear, however, that unless we can approach things differently as a system, the cost of providing care will present overwhelming economic challenges. While I am largely describing U.S. phenomenon, this is true throughout the world. It is in this context that our Essential to care tagline is more than a slogan. It drives our strategy and the motivation of our people who serve our customers and drive our performance.
Cardinal Health not only represents an essential, seamless and highly-efficient system for linking pharmaceutical and medical products companies with the provider and even the patient, but our other offerings make us increasingly important at this unique time. Let me give you a few examples.
Our surgical kits reduce unnecessary movement around the operating room and the potential for errors. Our provider-directed oncology tools are designed to facilitate the patient-centered practice of medicine and help with the focus on outcome. Our medical-preferred products program take advantage of our scale to aggregate demand across multiple providers, to bring costs down and standardization up. Our nuclear medicine organization facilitates diagnosis of cardiac disease, cancer and neurological diseases. Our generic product programs enable all customers to access these important products through our best-in-class network. Our enterprise footprint allows us to serve integrated delivery systems at their modeled shift and our organization continues to pursue innovative ways to change the game while making sure the patient is the center of the universe.
So with that high-level overview, I'll now briefly discuss the performance of our segments.
First, the Pharmaceutical segment. Under Mike Kaufman's leadership, the Pharma segment continued its momentum with a profit gain of 12% for the second quarter. Led by Pharma Distribution, our Pharmaceutical segment profit margin expanded 34 basis points versus last year. We continue to work closely with our pharmaceutical partners across branded, BioPharma and generic, developing the support and services to meet the unique and evolving needs of each.
Generics now represent approximately 80% of all prescriptions billed in the United States and clearly, continue our strong momentum and performance here is a priority. While much attention is devoted to the ups and downs of generic launches, and we are certainly affected by these fluctuations, our model focuses on value creation throughout a generic product's lifecycle and this will help sustain growth in this product area.
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