Cardinal Health at Morgan Stanley Conference: Strategic Growth Insights

On Tuesday, 09 September 2025, Cardinal Health (NYSE:CAH) presented at the Morgan Stanley 23rd Annual Global Healthcare Conference, showcasing its strategic growth plans and financial outlook. The company highlighted robust growth across its segments, driven by organic investments and strategic acquisitions. While confident in its business health, Cardinal Health also addressed potential challenges from drug pricing policies and tariffs.

Key Takeaways

• Cardinal Health raised its long-term EBIT growth target for Pharma and Specialty Solutions to 7% to 9%, with organic growth of 5% to 7%.
• Fiscal year 2026 adjusted operating income expectations increased to 11% to 13%.
• The company anticipates more than $10 billion in adjusted free cash flow over the next three years.
• Recent acquisitions, such as Solaris Health, aim to create synergies and value for specialty community physicians.
• Cardinal Health is focused on disciplined capital allocation and integration of M&A activities.

Financial Results

• Pharma and Specialty Solutions: Long-term EBIT growth target raised to 7% to 9%, with organic growth of 5% to 7%. The company expects continued growth in core pharmaceutical distribution, with loss of exclusivity opportunities in generics anticipated to increase.
• Fiscal 2026 Outlook: Adjusted operating income growth target is now 11% to 13%. Cardinal Health expects a $7 billion revenue contribution from new customers and plans $600 million in capital investments across the business.
• Biopharma Solutions: Revenue of $550 million in fiscal 2025, with plans to grow at a 20% CAGR to about $1 billion by fiscal 2028.

Operational Updates

• MSO Platforms: The acquisition of Solaris Health expands the Urology Alliance, the largest urology MSO. The Vista platform now includes 2,200 MSO providers, focusing on oncology.
• Specialty Networks: Expansion into oncology aims to enhance capabilities for providers. The Solaris deal is expected to close by the end of the calendar year.
• At-Home Solutions: The acquisition of ADSG supports inorganic growth, with investments in distribution center networks across the U.S. Cardinal Health reports record highs in efficiency, quality, safety, and service levels.

Future Outlook

• Cardinal Health plans to invest both organically and inorganically in specialty and biopharma solutions. The company is focused on integrating recent M&A activities and aims for normalized growth in the long term.
• The company is committed to maintaining its role within the supply chain while managing tariff implications for its GMPD business.

Q&A Highlights

• Drug Pricing: Cardinal Health is comfortable with its role in the supply chain and its ability to maintain economics despite policy changes.
• MSO Impact: Diverse revenue streams help mitigate risks from policy changes, with a low percentage of revenue tied to Medicaid.
• GMPD: Targeting 2% to 3% market growth, with plans to grow faster through Cardinal Health brand expansion and simplification.

For a detailed understanding, readers are encouraged to refer to the full transcript below.

Full transcript - Morgan Stanley 23rd Annual Global Healthcare Conference:

Erin Wright, Healthcare Services Analyst, Morgan Stanley: Good morning, everyone. Welcome to the Morgan Stanley Healthcare Conference. I am Erin Wright, the Healthcare Services Analyst at Morgan Stanley. For more important disclosures, please see our Morgan Stanley Research Disclosure website at morganstanley.com/researchdisclosures. If you do have any questions, please reach out to your sales representative at Morgan Stanley. We’re happy to have Cardinal Health with us this morning. Thank you so much for joining us. We have Jason Hollar, the CEO, Aaron Alt, CFO, as well as Matt Sims, who is the IR maven himself, that I will hand it over to for some more important disclosures.

Aaron Alt, CFO, Cardinal Health: Great. Thanks, Erin. Thanks for hosting us today. It’s really great to be here. Just before we begin, a few reminders. We will be making forward-looking statements today, which are subject to risks and uncertainties that could cause our actual results to differ materially from those projected or implied. For a description of these factors, please review our SEC filings, which can be found on our investor relations website at ir.cardinalhealth.com. Back to you.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: Great. Thanks so much. I’ll start out with some of the key takeaways from your Investor Day. I thought that was very informative, more recently in June. You raised your long-term Pharma and Specialty Solutions EBIT growth targets at 7% to 9%, 5% to 7% organic. That said, you have been tracking ahead of those long-term targets for some time, helped in part by some of the M&A that you’ve been doing. Can you remind us of some of the key components of the growth algorithm?

Aaron Alt, CFO, Cardinal Health: Sure.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: For you longer term, thanks.

Aaron Alt, CFO, Cardinal Health: Yeah. Yeah, fantastic. Thanks again, Erin, for having us. I think it’s a great place to start. I think it’s also a great reminder that we did recently have our Investor Day. Just a few weeks ago, we had our year-end earnings call. We have a lot of information out there. This is a good time just to step back and reinforce some of those key points. As you referenced, I think we should focus on the normalized growth because we have done some M&A. We will do some additional M&A in the future. It’s important to understand the core growth of the business. That 5% to 7% growth rate increasing from the 4% to 6% is really a sign of our confidence that the core is very healthy.

The underlying utilization across our entire enterprise, not just the pharma and specialty solutions segment, but across the entire enterprise, that utilization has been strong, stronger than what we’ve seen more historically. Our long-term plans are based upon strong, but a little bit more normalized growth than what we’ve seen historically. That’s certainly a key foundation and tenet to that growth. Importantly, our performance and driving value with that utilization is also continued to expect to be strong. I break that into two key pieces. The core of the business, core pharmaceutical distribution, we anticipate that will continue to march along as it has, whether that’s brand or generics.

Within generics space, at our Investor Day, we highlighted with some pretty good specificity as to the loss of exclusivity opportunities that we see in front of us, that over the next three years, we expect that to be greater than over the last three years. That is an opportunity for us. We continue to invest in the organic elements of our business. On the specialty side, that’s the faster growing side. It’s now the largest part of the pharmaceutical industry. We’ve continued to invest there organically, as well as inorganically there. On the normalized side, we’re seeing pretty consistent mid-teens type of growth rates. In our higher margin services business, the biopharma solutions business and the manufacturing services businesses, we’re seeing even faster growth, around 20% growth. We included that in our long-term plans as well. We’re really excited about that particular part of our business also.

When you step back, what’s most exciting is that we’re seeing that growth across the entire segment and across the entire enterprise. It’s not just one vector that’s driving that.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: OK. You also raised your fiscal 2026 adjusted operating income expectations as well. That was shortly after initiating your initial guidance at an Investor Day. Now you’re calling for 11% to 13% growth, which is pretty significant. What’s changed over the past few months to drive some of that uplift? What are some of the key puts and takes for the year? Can you talk a little bit about the quarterly cadence from here?

Aaron Alt, CFO, Cardinal Health: Sure. Happy to do it. Thank you for noticing. We did take the pharma profit trajectory up a bit following both Investor Day and then our Q4 results. We have an approach, which is we’re going to tell you what we’re going to do. We’re going to do it. Then we’ll report back. Then we’ll do it again. As we were looking at the year-end results, indeed looking at the strong demand that we saw going into our year-end that we reported as part of Q4, we were able to adjust our growth outlook for fiscal year 2026. It is a touch higher than what we had called at Investor Day. Of course, many of you are aware that from a Q4 perspective, we had some individually immaterial one-time items at the end of Q4, which lowered the base a bit.

We have a lot of confidence going into the pharma business for our year. We took the growth rate up to 11% to 13%.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: Can you talk a little bit about some of the new customer growth you’ve seen, what’s embedded in fiscal 2026 in terms of the guidance, Elevance, Publix? What other contract renewals or changes should we be aware of? I think it’s $7 billion in contribution from some of those new customer wins.

Aaron Alt, CFO, Cardinal Health: That’s right. That’s the fiscal 2026 contribution. We had about $10 billion for those same customers that started in the second quarter of last year. It is mainly a second half of fiscal 2025. We saw the $10 billion uplift to our revenue. Think about that $7 billion being the carryover of that primarily within the first half of fiscal 2026 for those customers and several others. It was a successful period there that we have acquired those new customers that we anticipate rolling through this next fiscal year. Outside of that, we don’t have any large contractual renewals or changes that are coming through over fiscal 2026.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: OK. Let’s talk about the MSO platforms. That’s been really topical with investors. Obviously, you know a lot of activity in the space from an M&A perspective. You recently added Solaris Health to the Urology Alliance within the Specialty Alliance business that you have. You detailed at Investor Day, previously noting the Specialty Alliance and the Vista platform of 2,200 MSO providers. I guess, how do all of these entities work together? Can you elaborate a little bit more around the diverse revenue streams within that Specialty Alliance business?

Aaron Alt, CFO, Cardinal Health: Yeah, a lot there, but a great question. Really excited about the further addition to our MSO platforms with Solaris Health. As you highlighted, they’re the largest urology MSO in the marketplace. We already had a number of recent smaller additions to our urology practices within the Specialty Alliance. How you should think about our strategy within the MSO space, which is a part of a larger strategy to make sure that we’re solving those needs of those specialty community physicians. Within the MSOs, we talk about the other 60% of the multi-specialties. You have oncology, 40% of the market, and 60% for these other multi-specialty areas. Within there, two of the very large pieces are autoimmune, as well as urology.

Whether you’re talking about GI, rheumatology, or neurology within autoimmune, or you’re talking about the urology business, there’s a lot of common requirements and necessities that those physicians need to run their business and run their practice. Our multi-specialty strategy is built upon the Specialty Alliance that covers that whole breadth of therapeutic areas. We break it down into the two platforms of autoimmune and urology. There are some clinical differentiation between those two key categories that are important for physicians and ultimately for patients. There’s a lot of synergy within urology and the Urology Alliance. There’s a lot of synergy within the autoimmune space with GI Alliance and rheumatology and urology. We see some synergies amongst those two different categories. Across all of those categories, urology as well as autoimmune, we see different types of synergies.

When you think about some of the, you get the normal back office, HR, IT, finance type of support. What’s getting us really excited is that we can create more value for those physicians, more value for us, by getting into some centralization and creating some synergies with the more specialized ancillary services, like the path labs or the anesthesia, some of the infusion capabilities, these diagnostic imaging. There’s a lot of very specialized services, but are relatively common across those therapeutic areas. That’s the majority of our now 3,000 providers that we have. We do have in the Vista with oncology. That is a separate third platform. That’s because that’s a little bit more specialized and requires even more differentiation, both clinical as well as operational. Even there, some of those back office capabilities we’ll be able to leverage across every one of those 3,000 providers.

It’s about making sure that we’re aggregating where it makes sense to. It’s about where we differentiate where it makes sense to. Importantly, the Solaris deal won’t close until calendar year end or so. We’re still in the integration planning pre-closing process there. Jason, you might want to talk about how Specialty Networks also ties into the MSO platforms.

Jason Hollar, CEO, Cardinal Health: Yeah, when you think about it, that was our first acquisition within Specialty a couple of years ago. It was because it covered all those different therapeutic areas. It wasn’t just one particular area or another, although it did originate with urology, which was an important connection point for us with Solaris. When you think about the urology therapeutic area as an example, we’re a very key leader within the nuclear pharmaceutical space. We have more capabilities than anyone within that nuclear business. We’re the clear leader with our At-Home Solutions, delivery of medical supplies to patients that have urological needs. We, of course, have the MSO and Specialty Networks that allow us to have that full breadth. We are the rightful owner as it relates to an MSO in urology because we’re able to help bring that all together.

What’s exciting about Specialty Networks is that, similar to our MSO strategy, we see that capability and those investments can be spread across other therapeutic areas, which is why we recently announced the expansion into oncology to be able to provide those providers with that capability to go both downstream to help manage their patient set, but also upstream and provide additional, more actionable data to manufacturers.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: OK. How do you think about the growth profile and profit profile of Specialty Alliance? How does it compare to what you’re doing in oncology with Vista and ION?

Aaron Alt, CFO, Cardinal Health: Yeah, so they’re all great. Within the specialty area, they’re all seeing a lot of fantastic growth. The specialty part of our business, there’s a reason why it’s now larger than the other legacy part, is because you’re seeing that broad-based growth. We like them for different reasons. Within oncology, it’s a more consolidated part of the market, but it’s growing organically very quickly. Urology, it’s also growing very quickly, but it’s a much less consolidated market. With Solaris Health being the leader in the space, we’ll still have only about 5% of the share, so a huge opportunity for further growth there. Within autoimmune, also the clear leader with our GI Alliance acquisition and the growth that we’ve had since then, but also only no more than 5% of that particular market.

We see growth across the different therapeutic areas organically, bringing on new physicians just with the growth of new therapies coming to market, but also inorganically.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: In speaking of sort of expansion to that, you’ll begin distribution in Specialty Alliance and Gastroenterology or GI in April, I think, in 2026. What’s your strategy in terms of what’s left to transition in terms of the urology business and following the Solaris transaction as well?

Aaron Alt, CFO, Cardinal Health: Importantly, when we do a transaction, we don’t assume distribution as part of the economics. Certainly, we announce at the time of the deal. We work very closely with our partners to make sure that we are able to bring the value of the broader network that is Cardinal Health to any MSO providers. We haven’t yet closed on Solaris. We don’t have a point of view yet. There’s no decision taken relative to what that distribution looks like. That will be a subject of an update down the road. Importantly, what you can take from that is that when we talk about the accretion of the transaction, we have not assumed that we acquire the distribution at the Cardinal Health level relative to the transaction as currently announced.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: Can you give us a sense of where, you know, what is GI Alliance or Solaris and those types of acquisitions you applied for future specialty deals and what you’re focused on? Where do you think that there’s the biggest opportunity and potentially kind of market opportunities for other MSO deals, just generally speaking?

Aaron Alt, CFO, Cardinal Health: Before I touch on where we might invest from an MSO perspective, let me take a giant step back and remind you of a couple of things we said at our Investor Day. The first is that we expect to generate more than $10 billion of adjusted free cash flow over the next three years. That is following us generating $2.5 billion of adjusted free cash flow during fiscal year 2025, a year in which we had to also work through the negative working capital unwind from the transition of the Optum contract. The business, the enterprise, has a strong foundation from a cash flow generation perspective that allows us to invest in the business either organically or through additional M&A. We have a very disciplined capital allocation framework. We start with about $600 million of capital investing for the projects across the business.

Of course, we’re going to look to protect our balance sheet. I’ll come back to that. We have a designated return of capital through our shareholders. We’ve raised that to $750 million of baseline repurchase in fiscal year 2026, along with about a half billion dollars of dividend. We look at additional M&A opportunities, as well as additional opportunities for return of capital of shareholders. In the last 2.5 years, we’ve taken on some big chunks. We acquired ION. We acquired Specialty Networks. We acquired GI Alliance. We acquired, or now we’re acquiring, Solaris Health as well. There have been a series of tuck-in acquisitions in support of each of those efforts as well. For the moment, we are focused on job one, which is integration. We have detailed integration plans. The teams are very motivated.

Metrics of success exist to how we’re going to achieve the business plans that we were looking at as we were committed to each of those transactions. We will continue to look for tuck-in acquisitions in support of GI, in support of autoimmune, in support of urology, oncology. I’m not going to say that we won’t look at deals that make sense for us. For the moment, our job one is to stay very focused on getting done the plans that we have in place and the financial commitments that we’ve already made.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: Let’s talk a little bit about biosimilars. You did highlight at the Investor Day, I think, $175 billion in revenue that will go off patent by the end of the decade. Biosimilars being a big part of that, how important is that for you? How important is biosimilars in terms of those transitions as you think about some of the MSO deals that you’ve done or will do and your multi-specialty approach?

Aaron Alt, CFO, Cardinal Health: Yeah. Yeah. Similar to my opening comments, what is exciting about where we’re at is that we see broad-based opportunities across the entire enterprise. Biosimilars is not one I stress. I think you’re right to call it out, as that is an area of growth and opportunity for us. It’s been a very consistent contributor to our results for quite some time. As you highlighted, similar to what you’re seeing with generics, we also see lots of exclusivity benefits for biosimilars. As I step back and think about both those categories, it’s just a great example of how innovation really does benefit us. It may benefit us in different ways at different times. The fact that we have all this LOE that’s happening across the enterprise is because of those innovative actions that took place decades ago.

We do see a long pipeline in front of us of that LOE and multiple categories that will benefit our business for many years to come as we continue to see that roll through year to year going forward.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: OK. One other area you highlighted at your Investor Day, too, was the Biopharma Solutions business. You actually broke out some of the key components, which I thought was really helpful in calling for a 20% CAGR through fiscal 2028. I guess, can you speak to where you see some of the greatest opportunity there? You highlighted, for instance, the Nexus in the patient access business. Where are some of those key moving pieces and dynamics that we should be focused on in terms of the drivers across that business?

Aaron Alt, CFO, Cardinal Health: Yeah, I appreciate you highlighting that. We did spend some time breaking it out. On the surface, we asked some questions as to, well, it’s only, with air quotes for those that are not able to see me, only $550 million of revenue in fiscal 2025. We have plans to grow that at a 20% CAGR to about $1 billion by fiscal 2028. This is a high margin, fast-growing revenue that we believe is very much a part of the overall specialty story. I think it’s a great example of how distribution and these other services really do need to go hand in hand. We’re really pleased with the mid-teens % growth rate that we’re seeing in specialty distribution. That just then creates the opportunities for us to do more with the manufacturers within the Biopharma Solutions business, whether it’s the Nexus or 3PL or others.

Specifically with the Nexus, we called that out then additionally this last quarter a few weeks ago to just stress that that continues to be an area of fast growth of this business. Similar to the broader Biopharma Solutions business, relatively small revenue, but growing very, very quickly. Specifically, we’re excited about the 40 new products that we’re putting under our support this calendar year. That then translates to a doubling of the number of products that this business is supporting by fiscal 2028. How we’re doing that is through a lot of investment. This is a great example of organic investment. It’s a fantastic leadership team. It’s a great group of individuals that are driving the business hard, but also looking longer term. We’re investing in our next generation hub, using technology to digitize and automate that patient access process. It is historically a fairly labor-intensive process.

Not only does that create efficiencies for ourselves and our customers, more importantly, it creates the platform that we’re then able to scale much more quickly going forward. We can go to our customers and demonstrate with very high confidence that we’re able to scale on new products because we’re able to utilize that infrastructure that was largely kind of thrown away and redone in the prior generations. We feel really great about the technology and the team that’s going to continue to drive that business well into the future. These businesses are really a good example of the part one of our discipline capital allocation framework, where we see a growth opportunity at better margins, us investing our capital dollars against driving the growth there.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: OK. I have to ask on drug pricing. How are you thinking about the implications of potential kind of MFN dynamics, as well as IRA? How can MSO businesses navigate potential MFN dynamics? What do you expect kind of the impact from IRA as well? I guess both from a positive and negative standpoint in terms of volume uplift from Part D redesign or otherwise, and then just general visibility on the pricing environment.

Aaron Alt, CFO, Cardinal Health: I’d be disappointed if you didn’t ask a question on that. The overall environment remains very consistent, competitive, stable in terms of the backdrop. Specifically to policy changes, which I think is very much the essence of your question, we continue to feel very comfortable about our role within the supply chain. That’s where I think we should always start with this conversation. Think about the value we create, both upstream with manufacturers, as well as downstream with our customers, and the value and the margin we get paid for that. I don’t think there’s any better payback in health care. We feel really good about that value. No one can safely, securely, and efficiently deliver these products the way that we do.

That then leads you to when you look at the distribution side of MFN, IRA, whatever comes out of that, we feel incredibly comfortable about our ability to maintain our economics. If you think about it, the value that we’re paid does not change based upon the price point. We will make sure that we continue to be compensated for that. We do have plenty of data points, such as most recently the insulin repricing that happened about a year ago. You saw that that was a non-event for our business, as you expect it to be. Perhaps there are some top-line adjustments that happened with that. In terms of margin dollars, bottom line, we would not anticipate that being impactful to our business. As it relates to the MSO provider side, there’s more moving pieces to that part of it.

We knew about this uncertainty well before we made our most recent significant acquisitions, namely the GI Alliance and the Solaris Health acquisitions, as well as all the tuck-ins that go around it. This is something we’ve been modeling out and thinking about for quite some time. What got us comfortable then in terms of when we made the decision to acquire these businesses remains the facts today. I break it into a couple of different pieces. First of all, I might have not answered fully a prior question. I’ll go and answer it now. In terms of the diversity of our revenue in our MSOs, it’s much greater than in some other therapeutic areas. It’s another reason we like the spaces that we participate in.

It’s roughly a third of our revenue is drug spend, roughly a third physician office and procedures, and then roughly a third for those other ancillary services. Very diverse revenue streams. We have a total of about $4.5 billion when you include Solaris Health into our portfolio of total revenue for MSOs. A third would be roughly $1.5 billion of that for drug spend. Within that, particularly these therapeutic areas and these specific practices of which these MSOs work with have a very low % of that revenue being tied to Medicaid. A low % related to drug spend and a low % related to the payer mix gives us a very, very low % that would be potentially impactful to our MSOs in these areas. We feel very comfortable about our ability to manage through that.

The underlying growth of the business, we would expect to be able to manage through that. With that all said, and that’s presuming no mitigation and other adjustments in other areas, we don’t believe it’s the intention of the administration to go after and harm the economics of those community specialty physicians. It’s already the lowest cost site of care. It’s also where patients want to go, closer to their home. It would not make sense for them to be targeted on the margin side of it to dissuade them from participating in some of those more often rural locations. We feel good about that setup. Irrespective of what happens through the administration and the policy side to further adapt that, we feel really good about our model.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: I want to switch a little bit to GMPD. How would you characterize current medical utilization trends right now? How do you think about the competitive backdrop and just underlying demand trends?

Aaron Alt, CFO, Cardinal Health: Yeah, really no changes. In fact, a lot of my commentary around broad utilization strength in the industry, I think, is consistent with GMPD. I think specialty is different in terms of innovation is driving an even faster growth in the pharma side than on the GMPD side. The concept of having broad needs and requirements for health care and medical services continues. We continue to believe our long-term assumptions of 2% to 3% market growth are appropriate. Our objective is to grow just a little bit faster than that by increasing Cardinal Health brand mix just a slight bit above that, and then drive additional value through simplification and other cost reduction actions. The competitive backdrop remains at that.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: OK. You detailed some of the geographic exposure and potential tariff implications to the GMPD business. In terms of that, I think it’s $50 to $75 million in net impact in fiscal 2026. What are you now targeting in terms of the impact, and any changes on that front in terms of how you’re thinking about that?

Aaron Alt, CFO, Cardinal Health: Yeah. It feels like everything changes every day from a policy environment perspective. The net sum of it is that today we’re not providing any real change in estimate. We know what we have to do. We had a $450 million plus gap when we first started talking about this several months ago. We took a couple hundred million dollars of direct actions within our business to offset the impacts of tariffs. We knew coming into fiscal 2026, we had more than $100 million of additional actions we needed to take. From a guide perspective for us for GMPD, we’ve guided the year at $140 million of profit for the year. That includes a net $50 to $75 million of impact on tariffs in our business.

I have confidence that we are out doing what we can to offset the impact, having the right conversations with our customers about what does the future look like, and ensuring that pricing where we should and where we can is being rolled through the network.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: How much of the mitigation effort is pricing? How is the mitigation effort progressing relative to your plan? How receptive are TPOs or other entities in accepting those price increases?

Aaron Alt, CFO, Cardinal Health: Yeah, connecting to what Erin just said, no one likes price increases. There’s not a single one of us here nor a single customer that wants to take a price increase. What they want to see is that we’re doing everything possible to mitigate it. We’ve mitigated through operational actions 2/3 of that $450 million that we were originally faced with, and then we’re effectively splitting with our customers this year that impact. We’re doing our part in this relationship to minimize it. We’re doing whatever we can to further minimize it going forward. We’re dealing with a lot of variables with that. I think they see the value.

What’s really fantastic from our perspective is that in this environment where we’re having to change sourcing locations, the countries of origin, things of that nature, and we’re seeing other supply chain types of challenges, we are now at service levels that are at an all-time high. Our customers are seeing fantastic service. They’re getting the products that they desperately need. While they don’t love pricing, what we’re talking about is typically in the health system, this is somewhere in the low single-digit range as to their % of their overall operating costs, med-surg products like this. What we’re talking about is kind of a low to mid-single-digit type of price increase overall on average to our portfolio as a result of this. You’re looking at something, again, a fairly small % of a fairly small %.

While not something that is desired, it’s something that, given our mitigation efforts, we’re talking about relatively small %s that we’re flowing through. We’re, of course, working with them to try to find other win-win opportunities so that we can even avoid those where possible.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: OK. The bigger picture on GMPD, what is the long-term vision? Give us an update on the improvement plan. What are some of the most important factors driving that $50 million in profit improvement annually?

Aaron Alt, CFO, Cardinal Health: Yeah. About a year ago, just a little more than a year ago, we completed the formal portfolio review of our entire portfolio. This was the last piece of that. We highlighted at that point that we are prioritizing the execution of the GMPD improvement plan, as that’s the logical next step to ensure that we create the most value for not only ourselves, our shareholders, but certainly for customers as well. That continues to be where we’re at, and we see a lot of opportunity there. We took the business from significant losses just a few years ago to very solid profitability. At a 1% type of margin rate, we’re clearly not where the business’s potential is at.

How we’re going to get after that is through the Cardinal Health brand expansion, growing with the market, and then a little bit more for mix improvements, as well as that further simplification work. Those remain the two primary tenets, while certainly mitigating inflation along the way, that we would anticipate being able to continue to grow the underlying profitability of the business by that $50 million per year over the next three years. Our guide for fiscal 2026 is $140 million from a profit perspective on GMPD with that additional $50 million thereafter. It’s really being driven by the three things, which is the Cardinal Health brand growth, where we continue to invest in the business, continued simplification, and cost mitigation efforts. The team has done an excellent job of finding those ways to do what we do better, more efficiently. Of course, the tariff mitigation as well.

As we continue to work on that business and deliver against our year, those are the levers we’re pulling as we look around.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: OK. I want to switch to the other segment. I have a whole other page of questions on the other segment. The other segment has seen significant profit growth of 22% in fiscal 2025. You’re targeting 25% to 27% AOI growth in fiscal 2026, and underlying kind of organic growth of about 10%. I guess, what’s driving that?

Aaron Alt, CFO, Cardinal Health: Yeah. I know you have a lot of questions on this. Let me try to answer as many of them as possible with one response. These are really three separate independently run businesses. There is no other segment leadership team. Those presidents report directly into me. That allows us to move at speed, but also have clear access to the investments, whether it’s capital or inorganic M&A. That’s exactly what we’ve demonstrated to date. Really great progress across the board. We saw double-digit growth rates in earnings for both Q4 as well as fiscal 2025 overall. They’re all contributing very nicely to the underlying growth of the enterprise and other segment. Let’s break apart each one and what are the drivers of that and why we believe each will be able to continue to drive double-digit % growth rates in their earnings over the next three years.

Within At-Home Solutions, I’m going to talk normalized because certainly the ADSG acquisition is a real shot in the arm that allows us to further drive inorganic growth there. On the organic side, it’s just a fantastic business. We’ve been investing heavily into it. Each of these businesses also has the, they’re on the right secular growth trends. They’re all growing faster than the overall market because of where they play. Within At-Home, it’s the trend of care going into the home. That is a secular trend that we expect to continue. We are the only skilled distributor and provider of those services. With ADSG, we’ve been able to increase the provider side. Now it’s roughly balanced. We have very good scale on both sides of that. That’s where a lot of the synergies and value come.

On the legacy side of the business, we’ve been investing heavily for the last three years in our DC network. Part of our challenges in the past because of some of the operational challenges was that we didn’t have enough capacity. We had too much density in our DCs. By getting more capacity, not only can we improve the efficiencies, but we’re also able to bring in new business that we were constrained with in the past. Now the business has much less of those constraints. We’ve had one new DC in the Southeast, one in the Midwest, one in the South. Those were our first three new DCs. We just announced this last week a new DC in the West in California. Now we got kind of the four corners kind of taken care of so that we can grow even more aggressively going forward.

What’s so exciting is not only are we getting more capacity, but we’re at all-time highs in efficiency and quality. Even metrics like safety and service levels are at those all-time highs. We see just a much better overall process. Within the Nuclear business, we’ve also invested heavily here. We just committed another $150 million for the Cyclotron capacity in 11 fast-growing markets. We look at a submarket basis for this business. There is a lot of growth in the high-energy PET products. This is Theranostics, as well as the accompanying PET products. We see that has a long tail still in front of it, a long runway to be able to further grow.

It’s what I mentioned earlier, some of the urology leadership that we have, the oncology leadership that we have with this business, very fast-growing areas and performing very, very nicely across the board there. There are so many new products. We have a pipeline of 70 products that’s coming to market over the next several years. Not all of them will succeed, but we don’t need anywhere near all of them to succeed to be able to maintain that growth rate. Within our OptiFreight® Logistics business, this is about getting really more of the same. It’s been a great driver the last few years as they’ve been able to increase the scope of the support that they have for customers. We don’t necessarily need new customers.

What we’re able to do is help bring more of their freight needs underneath the OptiFreight® Logistics umbrella, saving them money and also allowing us to grow the business along the way. In addition to that, we’re investing into the pharmacy side of that. We’re a clear freight management leader. We’re a clear pharmacy leader. It makes sense that we bring these capabilities together to enter into a space that we’ve largely not been present in. These are all three examples of having a strong core that we continue to invest in, as well as incremental growth opportunities that will allow us to grow even faster.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: OK. We’re almost out of time. What year would you say that we’re in now in terms of the broader Cardinal Health transformation?

Aaron Alt, CFO, Cardinal Health: Yeah, I would just go back to some of the similar comments I just made. Whether we’re talking about the other businesses or GMPD or our pharma and specialty solutions segment, each of these five operating segments have a very strong core that’s even stronger today because of the investments, the organic investments we’ve made. We’re seeing good growth across each of those five businesses in the core. We’re being very deliberate, very intentional around where each of those five businesses then are allowed to grow in a way that is responsible. It’s getting a good return, but it’s also giving great value to our customers. We’re being very thoughtful about that in our strategy and planning processes because we recognize we do need to grow. There’s a lot of unmet needs out there in the marketplace. We’re well positioned to be able to address that.

Our long-term plans that we laid out at our Investor Day was based on that. Contributions from each of those businesses are starting with the highest priority, clearly being our largest, most significant segment, the pharma and specialty solutions business. The other growth businesses, the nuclear, at-home, and OptiFreight® Logistics, have taken their rightful spot as the second priority within our enterprise because they do need more of that investment to continue to grow. We’ve demonstrated we can invest in these businesses while still growing the business at double-digit rates. While GMPD is still in the transformation phase of their business, that is a lot of opportunity for them as well to continue to deliver value on their part. That, combined with the responsible capital allocation, I think we’re in really good shape to build to meet our 12% to 14% EPS targets that we’ve laid out.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: OK. Great. Excellent. Thank you so much for your time. I appreciate the conversation.

Aaron Alt, CFO, Cardinal Health: Thank you. Thank you.

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