Credit Suisse conducted a post quarterly conference call with AmerisourceBergen (ABC) to review FY3Q21 results, individual business trends, the updated FY 21 outlook, and early thoughts for FY22.
As it relates to puts & takes for the FY22 setup, management called out a few puts and takes, including $0.25 of COVID therapies in FY21, interest expense related to the acquisition of Alliance increasing in FY22, and normal employee stock compensation related dilution.
Outside of the aforementioned, ABC is seeing broad-based momentum in the business where the company continues to benefit from customer growth, improvements in utilization and strong end market trends.
As related to prescription utilization trends, results have been better than expected across the business. In terms of describing the trends ABC has been experiencing, management indicated that the business has moved from being “resilient” to then seeing “strength”, and now seeing trends “better than expected.” Management notes when thinking about Rx trends, the most relevant comparison to which FY3Q started to look more favorable would be 2019.
Biosimilars continue to beat expectations. ABC has continued to see biosimilar growth rates (and dollars) come in ahead of expectations and contributing to the momentum ABC has been experiencing in the specialty as a whole.
Interestingly, with ABC’s leading specialty market share, there can always be things that are beneficial in a particular year. This year, for example was COVID-19 therapies, but in other years it could be something else, which is simply another great thing about having the specialty presence.
Credit Suisse analysts respective FY21 and FY22 EPS estimates are now $9.19 and $10.57 versus $9.03 and $10.63, previously. As is the case with other companies in their coverage, analysts are rolling forward their TP approach to CY2023 with our updated TP at $144 (vs $132 previously), which is based on 10x (vs 11xCy2022 EBITDA previously) the analyst’s 2023 EBITDA estimate. Risks include adverse development of opioid litigation, major contract losses, and unfavorable drug pricing trends.
To ask questions, provide feedback, or news, email Jailendra Singh at jailendra.singh@credit-suisse.com or call 212-325-8121.