Brightspring Health Services Inc at Bank of America Home Care Conference (Virtual) Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Joanna Gajuk - BofA Global Research - Analyst : So Jon, thanks so much for joining us. And maybe we should start with the pharmacy segment because, obviously, there's been a lot of nice outperformance there or much more, I guess, significant outperformance in there specifically the specialty pharmacy, but with that growth of 40%, I guess, tracking for this year after growing 30% the year before that. So can you kind of give us a state of the union in terms of the sources of outperformance? Any specific therapies that came in better? I guess, the new contracts, the LDDs, but also maybe something about competition during the change system outage and such? So kind of give us a sense of what's driving that outperformance there?

Question: Joanna Gajuk - BofA Global Research - Analyst : And I guess you mentioned the oncology. The industry is growing 15%, but I guess you're growing even faster than that. So who are you taking share from?

Question: Joanna Gajuk - BofA Global Research - Analyst : Okay. That makes sense. And I guess since we're talking about oncology and [possible] there some -- there's been some interest in owning oncology clinics, but I would want to ask you whether are you interested in going that route as well?

Question: Joanna Gajuk - BofA Global Research - Analyst : Okay. That makes sense. And the other piece of that specialty, right, is the home infusion, it's much smaller maybe 10% of the company. But can you talk a little bit about growth there in terms of what it's been, but also how do you think about the growth outlook going forward?

Question: Joanna Gajuk - BofA Global Research - Analyst : Right. And I guess, in that business, a lot of interest about STELARA, which you guys made a comment on your call that it's immaterial to your company in the aggregate. But maybe -- can you kind of give us your thoughts about this dynamic, which there's some uncertainty how that particular one is going to play out. But in general, biosimilars in that business because you alluded to like the generics, very positive when that occurs. So is it something similar in the infusion business when you have biosimilar launches? And I guess, would that STELARA dynamic change your view of the biosimilar switches going forward?

Question: Joanna Gajuk - BofA Global Research - Analyst : So as you think about that business growth, how would you characterize it?

Question: Joanna Gajuk - BofA Global Research - Analyst : So staying on the topic of pharmacy and policies. So you mentioned Medicare fix in infusion, but I guess bigger picture, some other topics or relevant topics for that segment is the IRA. There's some changes right under IRA to Part D essentially lower the cost for the patients. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 10, 2024 / 7:10PM, BTSG.OQ - Brightspring Health Services Inc at Bank of America Home Care Conference (Virtual) So some payers indicated they already saw high utilization for specialty -- of specialty drugs already this year because there are more changes happening to that patient cost in 2025, really, right? So how would you think about that impacting your business? Have you seen this already this year and kind of the magnitude of things that you were expecting to next year?

Question: Joanna Gajuk - BofA Global Research - Analyst : And thinking about IRA, but also in the context of the administration change, right. I know we don't have much details in terms of where things are going to be heading to. But I think -- I guess to ask your thoughts in terms of just high-level expectations for any changes under the new administration and what those could be? How those could impact the company? I guess the pharmacy, but also maybe provider side.

Question: Joanna Gajuk - BofA Global Research - Analyst : But I guess talking about the elections and the changes, the company has relatively high Medicaid exposure, right? And Republicans and corporates have talked about custom Medicaid spending. So obviously, there are specific ideas, but we don't know exactly which way it's going to go, but I guess a couple of things being discussed reducing federal margin percent or the work requirements or maybe cutting some supplemental payment programs, block grants. A lot of different things being thrown out there. But I guess, if one of those things were pursued, how would you think about the potential impact to your business, thinking about specifically the Medicaid areas that being kind of discussed?

Question: Joanna Gajuk - BofA Global Research - Analyst : And since you mentioned the -- specifically your Medicaid business and provider side, right, the IDD business that's targeting very specific patient population is the way its designed. So we usually don't talk about that business much, right? We started with the pharmacy because that's where the excitement is. But maybe you can kind of remind us about the main drivers for that business and also how to think about the reimbursement from the state? Because clearly, this is Medicare reimbursed. Because obviously, rates been pretty good, but I guess there's always questions how long this could last. So maybe you can spend a couple of minutes talking about that business specifically and the main drivers and also specifically the reimbursement outlook in that business?

Question: Joanna Gajuk - BofA Global Research - Analyst : Right. And I guess staying on that business because there's been an increase in litigation and media articles about quality issues and behavioral health providers. So it's not really what BrightSpring does, but I guess there was one also BrightSpring a while ago. Maybe can you comment on any changes in operating environment for that business at all because of that attention that's being put on behavioral, I guess, with the picture of behavioral industry?

Question: Joanna Gajuk - BofA Global Research - Analyst : Right, exactly. And I guess to that point, since you mentioned the company is quite diversified. I counted like 10 different business lines. I mean you can even go more narrow, and you can come up with even bigger numbers. So there's a lot of different things going on inside this organization. So obviously, that's a question of examples of what are actual benefits of owning all these verticals under one roof?

Question: Joanna Gajuk - BofA Global Research - Analyst : So you mentioned M&A, but I guess if you strip M&A, you mentioned a lot of these business lines growing double digits. So just to confirm, I guess, I assume the pharmacy business, that's largely organic. But in the provider segment, there's been more acquisitions that you've been doing. So when you say double digits growth in some of these segments, like how much is organic and how much, I guess, the acquisitions when you talk about the expectations for the growth rates being double digits? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 10, 2024 / 7:10PM, BTSG.OQ - Brightspring Health Services Inc at Bank of America Home Care Conference (Virtual)

Question: Joanna Gajuk - BofA Global Research - Analyst : All right. So we should think more about like packing acquisitions rather than anything material?

Question: Joanna Gajuk - BofA Global Research - Analyst : Right. Because you also stated your target leverage of 3 times, right? So should we assume essentially that the free cash flow should be going towards debt paydown versus acquisitions? That's the way to think about next 12 months?

Question: Joanna Gajuk - BofA Global Research - Analyst : Right. Exactly. And I guess we are out of time. So I appreciate Jon for spending this time with us. And to the audience, we still have one more session for today, so please stay tuned. And thanks so much for joining at the conference.