AmerisourceBergen earnings and revenue beat estimates

Steve Collis, AmerisourceBergen CEO, joins Yahoo Finance’s The First Trade with Alexis Christoforous and Brian Sozzi to discuss the company’s third-quarter earnings report, future outlook for the pharmaceutical industry overall including a COVID-19 vaccine and much more.

Video Transcript

ALEXIS CHRISTOFOROUS: The pharmaceutical service company AmerisourceBegen posted a beat on earnings and revenue in its third quarter. Joining us now is AmerisourceBegen CEO Steve Collis. Steve, good to have you on the show again. Good morning.

Profit down slightly year over year. Revenue picked up a bit. I'm curious what drove demand that last quarter. Was it COVID-19-related drugs, or were they like remdesivir, or were they areas outside of the virus?

STEVE COLLIS: You know, hi, and good morning, everybody. And that's quite a segment. I don't think I've ever been introduced with an odd segment before.

But, you know, AmerisourceBegen really is approximately about 30% of all the prescriptions in the US. And, of course, when you look at the dollar value of those, it's much more in the specialty and newer technology products where 90% of drugs-- that a lot of the drugs that are used in COVID treatment would be very affordable generics where there's multisource unless, in some cases-- fewer rare cases there have been shortages, and those have largely been limited.

So our revenues were a strong return across the board. You know, we're in animal-health medications. We're in, of course, specialty medications. We do a lot of services for manufacturers. We do clinical-trial logistics all around the world. So you saw a strong return to business in May and continuing in June, and then in July, we're seeing that that's very consistent. It's not continuing to skyrocket or anything. It's very much towards within a percent or two of where we were pre-COVID. Some businesses are a little bit more positive. Some businesses are still a bit tempered by the virus.

BRIAN SOZZI: Steve, you're currently knee deep with your team in planning out for fiscal '21 or the next 12 months. What type of assumptions are you making with regards to a COVID vaccine?

STEVE COLLIS: You know, Brian, it's an excellent question. You know, we are very, very optimistic that, you know, the pharmaceutical industry could literally be the saviors of the world because, you know, how are we all going to be going back to the arts? How are we going to be getting in elevators until a large part of the population is vaccinated? So our hopes are all with the wonderful work that's going on, the collaboration amongst the top pharma companies.

And I applaud the administration for the investments that they're making. We will be ready, particularly in the US where we have, you know, the presence and the substantive characteristics of our business, along with our peers, to get the product out.

Some of the characteristics of the vaccine could be very interesting. If you're looking at freezing temperatures, so that could-- but we will make investments. We'll get the product out.

For fiscal year '21 planning, it's interesting. I think we will assume that it's a somewhat normal environment, as it has been post-April-- somewhat normal environment in that, you know, with telemedicine, with much fewer acute-care visits, with continuing chronic-care visits, continuing adherence, and we'll believe that the insurance industry and the patients will adapt through the employment shocks that we've seen. I think that's what we're really hoping will happen in the United States.

BRIAN SOZZI: Steve, is the distribution channel prepared to handle an influx of COVID vaccines?

STEVE COLLIS: I believe, again, in the US we will be. Again, it's going to depend a lot on how-- what the variant and how those products will have to be stored, but I believe we'll get it out. It's unlikely that we're going to have 360 million vaccines on day one. You know, no one can have that sort of manufacturing capability. So it will be-- it will be meted out.

And, you know, I think what you've seen with the emergency-use authorization for remdesivir could be a precedent for what happens. It also depends how many products get approved. We could be fortunate that we could have two or three products being approved in short order of each other.

ALEXIS CHRISTOFOROUS: You know, Steve, I know this spring there were reports that AmerisourceBegen was interested in buying Walgreens' pharmaceuticals wholesale business. We know you have a relationship with Walgreens. They're your biggest customer. They own about 27% of the company. Can you share with us, are you still looking at trying to make a deal there?

STEVE COLLIS: You know, Alexis, we're very interested in anything, you know, that expands our access, pharmaceutical access, and our distribution. And we look at a lot of opportunities all the time. Of course, there's nothing specific to comment on at all. You know, we have a good balance sheet. Our priorities are internal investments. We've actually had our best return from internal investments.

And I think you can see our results are resilient for business continuity, planning, the excellent supply chain, the efficiencies we've generated, the technologies, including the ability for people to work from home. Those investments have been incredibly important.

We have, from time to time-- we bought MWI, was a nearly $3 billion transaction. World Courier was a $700, $800 billion transaction. So we have made some big investments, but, you know, we've also just reinvested a lot in the business, and that's been our number-one priority.

ALEXIS CHRISTOFOROUS: Steve, I'd like to get your thoughts on what the Trump administration did just this past week. It tapped the photography giant Eastman Kodak to produce pharmaceutical ingredients for generic drugs in the US, and Kodak says that the production of pharmaceutical ingredients could actually make up to 30% to 40% of its business going forward. What do you make of that situation with the Trump administration and Kodak, and how might that impact your business?

STEVE COLLIS: Yeah, so, you know, I think what's happened is that-- you know, and I was actually on a call with a couple of senators last week. And I think what the US government has realized is that, you know, we have a strategic stockpile need, first of all on PPE, which AmerisourceBegen is not involved with, but also even with some of the pharmaceutical products. And, you know, in this particular virus, we've seen some products that are very necessary to have immediate access to.

And, you know, if it comes to a worldwide pandemic like this, governments are going to be taking care of their own population, and you saw, you know, about a hundred countries put some restrictions on exports of products. So I think this is a long-term issue that all the stakeholders will have to look at together, including Congress, administration, HHS. We'll all look at it together-- and the manufacturing community.

And, you know, we'll be there to help. I think we have access to excellent data. We understand the supply channel. We understand sourcing very well. And, you know, I think there's also always the cost issue. A lot of this has been driven by the efficiencies, including the cost efficiencies of the global supply chain. So I think those issues are all very important and all have to be considered in conjunction to make the right decisions for the safety of our population.

ALEXIS CHRISTOFOROUS: You know, as head of one of the world's largest pharmaceutical wholesale distributors, I'm sure you always have to have one eye on politics. This is an election year. How important is this particular election and legislation that may come from this particular Congress? How important is that for your company?

STEVE COLLIS: Well, you know, AmerisourceBegen-- first of all, we start with our customers. It's very, very important that they get adequate reimbursement. And, you know, 55% percent of drugs are paid for by Medicare and Medicaid, and arguably that will go up. I think inevitably that is going to go up now. So we want to make sure that there's adequate reimbursement for physicians, for community pharmacists, and also that some of those services like inoculations and, you know, adherence programs that pharmacists do can get paid for. So that's one of the important agenda items.

We also would support-- you know, the fact that the life-sciences industry in the United States is one of the most important industries, and it should be supported. And, you know, we want to make sure that any legislation that is passed is thought through carefully in terms of implementation. We don't want any large disruptions in the market.

So there's a lot of strong organizations that advocate pharma and bio on behalf of the manufacturers. So we're there to support, give our understanding. And I think we are seen as a very fair, objective party by members of Congress because we are always talking about our customers, our suppliers, continuity of care, access to care, patients. We often are representing patients that need MS medications, diabetes medications. So I think we have a good reputation, and we are seen as a fair player by all the parties involved, including, you know, manufacturers and regulator.

ALEXIS CHRISTOFOROUS: All right, Steve Collis, CEO of AmerisourceBegen, always good to see you. Thanks.

STEVE COLLIS: Thank you so much. Thanks for the opportunity.