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Rite Aid CEO talks abortion ruling, earnings, and transforming the pharmacy business

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Rite Aid CEO Heyward Donigan joins Yahoo Finance to discuss the Supreme Court ruling on abortion as an employer, health care, and the pharmacy business.

Video Transcript

AKIKO FUJITA: Let's turn our attention now to pharmacy company Rite Aid, which reported earnings yesterday. We are seeing the stock up in a big way on the back of that in the session today. Let's bring in president and CEO, Heyward Donigan, who's joining us today. And Heyward, it's good to talk to you today. I do have to ask you about this news that we have been following out of the Supreme Court. I know you're not a political analyst, but increasingly, we're seeing corporate CEOs having to weigh in on this. Let me just get your reaction to the decision that just came down.

HEYWARD DONIGAN: Well, I guess I will react as an employer. This is a big decision. We provide health coverage to over 53,000 employees across the company. And our number one concern is and always will be their best interests and their wellness. And Rite Aid's been working with our healthcare administrator in anticipation of some decision on contingencies. We aren't able to address the specifics, but I think this just shows the importance of healthcare in people's lives. And as a pharmacy company, we're really excited to continue to advance healthcare for all and the interests of healthcare for all.

BRIAN CHEUNG: Heyward, it's Brian Cheung here. As a follow-up to that, I mean, you were kind of speaking as an employer as a pharmacy. You also, I'm sure, are watching this very closely. And I feel like this is such an important conversation, especially because you are across state lines. And kind of the federal stance on all of this is very important. Just kind of wondering if, from the pharmacy standpoint of your business, do you have any thoughts on that as well.

HEYWARD DONIGAN: Well, this really doesn't impact the pharmacy business. I mean, we do obviously provide contraceptive and reproductive products and medications. But other than that, I can really only comment as a employer.

AKIKO FUJITA: Let's shift to the numbers that we got out from the company. Obviously, you're getting a big pop on the back of your report there. Talk to me about the real strength that you're seeing right now.

HEYWARD DONIGAN: Well, I think what we're so excited about is, as Rite Aid has been and will continue to define the modern pharmacy, we've really been maintaining the integrity of pharmacists as a trusted healthcare professional, someone that engages with customers on a daily basis and also provides convenience and access to medications and alternative therapies and supplemental therapies for our customers in any way they want to get it, whether it's delivery, by mail, buy online, pick up in store.

And I think what's happened is, coming out of COVID, which has been, I think, if nothing else, showing how important a pharmacist is in the healthcare lives of our communities, we were able to show strong results, even cycling out the significant number of vaccines and testing that we had last year. So we showed $100 million in EBITDA. We showed $6 billion in revenue for the quarter. We beat consensus on both revenue and EBITDA. And we're getting back to business. Our script growth is 1% up, even after cycling those strong COVID results.

BRIAN CHEUNG: Yeah, and Heyward, just to kind elaborate on that, specifically in the pharmacy business, it seems like even though you have fewer people coming in to get their vaccines, you've actually offset some of that decrease by an increase in non-COVID prescriptions. So net, net, how should we be thinking about just kind of the business in terms of revenue on that specific line?

HEYWARD DONIGAN: Yeah, I think that's what's so exciting. And I think that's why people are enthusiastic, is the fact that we could show a 1% increase in scripts, even with 3 million fewer COVID vaccines than we did year over year. So I think what that demonstrates is acute scripts are up almost 12%. That's a big number.

It's really back to where it used to be when we were all going to the doctors and living our lives before COVID. Well, we're all going back to the doctors and living our lives now with COVID. And it's exciting to see people getting back into their healthcare routines. It's very important because mental health and physical health has really been not well attended to over the last two years.

AKIKO FUJITA: Finally, Heyward, if we look at the big picture here, you mentioned this shift that you're seeing within the company. Obviously, you are in the middle of a transformation. I wonder where you are in that. I mean, thinking back to back in 2020, when you talked about where the future of pharmacy is going or retail pharmacy, are you halfway there? I mean, give me a sense of where you are in that pivot.

HEYWARD DONIGAN: I would say Rite Aid is making good strides on our original transformation project, which was to really redefine the role of pharmacists in the communities. That accelerated during the pandemic. Also, to build Elixir, our pharmacy management services company, build out those assets, which includes a mail order pharmacy, specialty pharmacy, a pharmacy benefit management company, and a cash card savings program. And then finally, all of the digital work that we wanted to do, which also was accelerated by COVID.

So I would say we're in a good place, not as far along as I would have liked to have been, just because we did get a bit distracted by COVID. But we're in a good place. So I would say the next two years, you're going to see really meaningful, new, creative opportunities, innovation, and expansion coming out of our organizations, some of which I talked about on the earnings call, and more to come in the next few months.

BRIAN CHEUNG: And then, Heyward, is scale kind of an important part of that story? Because it seems like the strategy right now is to make sure that you're streamlining what you have right now we know that you still have debt that you're handling, although there's no debt due until 2025, but still very much a part of the short-term future for your company. But at the same time, I'd imagine you want to see more growth in specifically the Elixir, the PBM type of side of your business. So do you have to get bigger, just even in terms of total assets, to achieve what you're trying to do here?

HEYWARD DONIGAN: Well, Brian, I think it's a good question. We don't need to buy anything. And that's-- I'm excited about our $1.7 billion in liquidity because we have plenty of room to invest. We have all the assets we need to scale. And what we do need to do is grow into those assets.

So we have exciting opportunities to grow-- mail order, pharmacy benefit management business. We are showing strong growth. We sold 80,000 lives just this year. And it's just the beginning of the sales season. We have a specialty pharmacy that could handle a lot of additional both limited distribution drugs and volumes. And also, our retail pharmacies have capacity to grow as well.

BRIAN CHEUNG: All right. Heyward Donigan, Rite Aid president and CEO, stopping by Yahoo Finance Live. Really appreciate you taking the time this morning. Thanks so much.

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