Syncora at BofA Conference: Strategic Growth and Challenges

On Tuesday, 13 May 2025, Syncora (NYSE:COR) presented at the BofA Securities 2025 Healthcare Conference, offering a strategic overview of its operations amidst evolving drug pricing regulations. The company highlighted its strong financial performance and growth in specialty products while addressing potential regulatory challenges. Syncora remains optimistic about its future, despite anticipating a slowdown in outperformance.

Key Takeaways

• Syncora is actively engaging in Washington D.C. to advocate for community providers and patient access.
• The company reported a 23% growth in US operating income for Q1 2025.
• Syncora’s balanced capital deployment includes strategic acquisitions and a growing dividend.
• The company is focusing on expanding services in oncology and retina.
• Syncora’s operating leverage and productivity initiatives are aimed at controlling OpEx growth relative to gross profit.

Financial Results

• US operating income grew by 23% in Q1 2025.
• COVID-19 vaccine headwind was $15 million, less than the expected $30 million.
• Guidance has been increased four times this fiscal year.
• Capital expenditures are expected to reach $600 million this year.
• The dividend grew by 8% in the recent year.

Operational Updates

• Strong utilization trends and sales of specialty products continue.
• Health systems are expanding services, including specialty pharmacy and infusion.
• Syncora aims to be a strategic partner to healthcare providers by offering consulting services.
• Biosimilar adoption in the physician space is progressing well.
• The company is focusing on productivity initiatives to enhance efficiency and support growth.

Future Outlook

• Specialty pharma growth is a key driver for Syncora.
• The company emphasizes organic growth, including acquisitions of smaller physician practices.
• Continued focus on oncology and retina, with potential expansion into urology.
• Syncora maintains a balanced capital deployment strategy, including investments, strategic acquisitions, share repurchases, and dividends.
• Commitment to customer centricity and active learning is expected to drive future momentum.

Q&A Highlights

• Concerns around the MFN executive order and its potential impact on Syncora’s business model were addressed.
• The company’s ability to navigate drug pricing changes was discussed, with insulin repricing as an example.
• Maintaining strong product access for customers, especially in generics, is a priority.
• Insights were provided into the company’s operating leverage and productivity initiatives.
• The impact of the OneOncology put call structure on Syncora’s capital deployment strategy was explained.

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

Full transcript - BofA Securities 2025 Healthcare Conference:

Alan, Lead healthcare tech distribution, Bank of America: Lead healthcare tech distribution here at Bank of America. We are pleased to have Sankura here with us today. We have a full house on stage. We have Bob Mach, CEO Jim Cleary, EVP and CFO and Bennett Murphy, senior vice president and head of IR and treasury. Thank you, gentlemen, for joining us today.

We’ve gotten a lot of questions, as I’m sure you have, over the past forty eight hours around this MFN executive order that came out. I know details are are limited. Would love to get Bob a sense of your initial thoughts on it because the business model at Syncora has evolved a lot over the past ten or so years as it relates to how you’re compensated specifically for brand medications. Would love to get a sense from you, how would a change to list based or ASP based pricing impact your business today?

Bob Mach, CEO, Syncora: Thanks, Alan. Thanks for having us. Hi everyone. Thanks for coming to the session today. So we don’t know, right, what the impact of anything would be.

So I won’t speculate on whether there would be any pricing changes, but it might be instructive to just hear how we think about it. And this has a multi year assessment, right? There have been a few attempts, a few different attempts by President Trump in particular to normalize pricing or take some of the disparities of pricing between The United States and other countries. So that’s been a theme through the first administration in this one. So it’s something that we’ve been assessing over a long, long period of time.

And when we think about it, we think about it through the lens of our customers to your point, right? So we have a large customer base who are in the specialty space in particular. And what we know, even though we don’t have any specifics, is that this is not intended to harm providers. It’s not intended to harm patient access. It is intended to solve for other issues.

So when we think through that and the fact that the community side of care is lower cost, high quality, it’s the most accessible to patients, we find ourselves believing that if anything is implemented, it would be in a way that’s not going to harm community providers. The second thing that’s, I think it’s worth knowing, and this goes back to the long period of time that we’ve been thinking about this and other pharma pricing ideas is we spend a lot of time in Washington, DC. We have an office in Washington, DC. We have a staff there. As an executive team, we spend a lot of time there.

I personally spend a lot of time there. We have a unique opportunity because when we’re there talking to regulators and legislators, we’re rarely ever discussing direct impacts to Sankora. We’re able to advocate on behalf of providers, on behalf of access to care, to pharmaceuticals. And we have a unique perspective. You know, we’re one of the only players in the supply chain who really understands and sees how everything, you know, works end to end.

So, you know, I believe there are a lot of really bright, well intentioned people in Washington, you know, despite what you see on TV sometimes. And so our job is to make sure that, you know, while it might be a good idea on the surface, we are there to educate on trying to make sure that we don’t have unintended consequences of what seems like a relatively good idea. So we’re committed to doing that. We’ve done it over a long period of time. Obviously, there are no specifics that we can comment on, but we’re confident that we have a handle on what could happen.

We’re fully engaged, we’d certainly believe that whatever the outcome is, it wouldn’t be something that would hurt community care.

Alan, Lead healthcare tech distribution, Bank of America: Got it. That’s really helpful. I guess taking a step back as it relates to list prices and branded drugs, think over the past ten years your contracts have evolved where inflation was a bigger component ten years ago and now it’s more fixed fee. I look at things like insulin, for example, and some of the repricings that went through a few years ago there as indicative of Syncora’s ability to navigate changes to drug pricing. Can you talk about either insulin or are there any other proxies that could be a reasonable comparable or just any color on sort of how the brand contracting has evolved over the past few years?

Bob Mach, CEO, Syncora: Yeah, happy to. Jim, you me to take the first one? Sure. So it’s a great question. And there are really two pieces to that, so I’ll try to address both of them.

Over an extended period of time, we have worked hard to evolve our business model and evolve our pricing model so that we’re not overly dependent upon any one category of drugs. So if you go back almost a decade now when the industry was highly dependent upon generics growth, value in the generic product category, and in many cases that would subsidize brand pricing. At Secora, we’ve been working for a long period of time to make sure that that’s not happening. So that we’re providing products, we’re providing services, and that there’s a fair remuneration for those services. So you’ve seen that over time and that’s why as mix changes, you’re not hearing from us that that’s creating pressure.

So as the pharmaceutical market grows, as the innovation continues, as biosimilars come to market, as the generic market deflates less, you see that that works well within our business model. And that was very intentional in terms of how we’ve changed the way that we are working with providers and manufacturers over a long period of time. So that’s part of what you’re seeing in the marketplace and part of why the performance in our business has been as strong as it has given the growth in pharmaceutical utilization. The second piece was, and you used the insulin example. And we’ve said, you know, over time that if there is a list price reduction, that we believe that our value proposition is strong, very low margin, high value, a lot of services provided for that, that we would be able to go to the manufacturers and convince them that we should not be damaged economically by the lowering of the list price.

And you mentioned insulin and that’s where, that has worked out well. We believe that would be the case in other categories if that was necessary.

Alan, Lead healthcare tech distribution, Bank of America: I want to talk about some of the recent trends in your business because earnings growth has been really, really strong. Momentum and utilization has been very robust for a long period of time and you’ve outperformed your guidance for a long period of time. As we think about some of the drivers of growth in 2025, strength in specialty, less of a headwind from COVID than you expected in the initial guidance. Can you talk about anything that you’re seeing in 2025 that is different than 2024? Are there any new areas of growth that you’re seeing?

I think one of the questions we get is around changes to benefit designs. Is that driving less script abandonment? Just curious, Bob or Jim, if there’s anything that you’re seeing that’s new in 2025 or is it just a continuation of the strength that you’ve seen from the business that you’ve been building for for, you know, a

Jim Cleary, EVP and CFO, Syncora: period of many years? Is there anything new so far in 2025? Yeah. It’s it’s really the same things that we’ve been calling out for a couple years now. We’ve seen continued strong utilization trends.

We’ve seen continued strong sales of specialty products to physician practices and health systems. We’ve seen just really strong broad based execution across our core US distribution business. One of the things that we did see this most recent quarter that we called out is, we, we we did expect a $30,000,000 COVID vaccine headwind in our most recent quarter, and it was only a $15,000,000 headwind during the quarter. So that’s one thing that benefited us. But for the most part, it’s really the same trends that we’ve been calling out for a couple of years now.

And so, as a result of that, and I would say in the most recent quarter, it was, stronger than we had expected. The outperformance was stronger than we had expected. And as a result of that, we’ve increased guidance four times this fiscal year. And our, you know, most recent quarter, our US operating income grew at 23%, and the outperformance was really driven by our core US distribution business. And so, you know, it’s it’s it’s the same thing we’ve been we’ve been seeing for quite some time, but a little bit of an acceleration in

Alan, Lead healthcare tech distribution, Bank of America: the most recent quarter. And then that kinda brings me to my next question, Jim, around what you’re seeing so far in April, now we’re through mid May. As we think about this quarter, we think about the trends in April, is there anything you can speak to about how growth looks like relative to the first calendar quarter of the year? Just any any insights you can share there.

Jim Cleary, EVP and CFO, Syncora: Yeah. Well, what what I what I will say is that, you know, we we have had the extraordinary performance in in the first half of the year, And it’s been driven by things, as I said before, that have been going on for some period of time. In the guidance we have out for the full year, it does assume that we don’t have the same level of outperformance in the second half of the year, but that’s really just based on an assumption that it was just so strong for the for the first half. But in terms of, you know, things like utilization trends and specialty sales and the way that we’ve been executing, those are factors that have been going on for quite some time.

Alan, Lead healthcare tech distribution, Bank of America: And then on the call last week, also brought up hospitals and health systems as a customer. We were seeing really robust growth. One trend that we’ve observed looking at other companies in our coverage is that health systems are more likely to be setting up pharmacies. That’s been a big trend for a long period of time, seems to be continuing. Does Syncora play a role in that space?

And then more broadly, are hospitals gaining share in in specialty? Is there any way to talk about the relative growth rates you’re seeing in hospital drug distribution? I called out specialty, but really all types of drugs. Can you talk about the relative growth in that specific part of your business?

Bob Mach, CEO, Syncora: Yeah, thanks, Alan. I’ll take that. So we did call out specialty in our hospitals, in our earnings call. And the reason for that is we talk about that we’re well positioned. We talk about that we’re resilient.

And I always think to myself, well, we should explain a little more why, why we are. And so we talk about certain segments of our business the conversation is overweighted to them in many cases. There are good reasons for that, but the health systems business is one of the reasons that we’re well positioned. If you think about our strength in the specialty growth in the market, one of the reasons we’re so well positioned is because of our position in health systems. So that’s the only reason to call it out.

We don’t want to complicate the story certainly, but we do want people to understand that we have a broad portfolio of customers, that we’re strong in each one of those categories. We have key anchor customers in those categories, And we really liked the customer portfolio that we have. And that’s not just the individual accounts, that’s the distribution of those accounts across the sites of care. And that includes health systems. We just don’t talk about it much.

So I wanted to make sure that that was just on the radar because it’s an area of strength and there is a strong specialty growth there. The second part of your question is the services that we provide to help them meet the needs of their health systems and their patients. Your hypothesis that you’re saying is right. So the health systems are expanding services. With all of our customers, we work really hard to be the best strategic partner that we can be.

Right? So there’s, you know, a lot of focus on price, and that’s certainly part of the equation. I would say these days, that’s not the primary part of the equation. The primary part of the equation is who will be the best strategic partner for us as a healthcare provider as we go forward. And so when you go back to the health system example, yes, they are building out services.

They’re building out specialty pharmacy. They’re building out infusion. They’re building out ambulatory pharmacy, and we do help them across that continuum. So we have consulting type services where we work with them to build those out. In fact, we are going to be bringing our board of directors to a customer soon.

And one of the areas that we’ll visit is a shared services center within that health system that they built, but Senkora was very involved in the design and the implementation of that. So it’s a big part of what we do. And again, it’s to make sure that we’re the best strategic partner that we can be for them. And that creates that long term relationship. So as the market grows, pharmaceuticals continue to grow, as specialty continues to grow, we’re positioned with the best customers in the space to grow with them.

Alan, Lead healthcare tech distribution, Bank of America: I want to switch gears a little bit to generics. There’s been, there was a really interesting financial times article this morning that talked about stakeholders looking to buy inventory of drugs ahead of what, you know, could be tariffs on on on pharmaceuticals. Obviously, no one knows, but your quarter ended threethirty one, Liberation Day was, I believe, fourtwo. As you think about inventory buying, specifically around generics, Is there a way that we should think about how Sankura is thinking about buying generics today? Curious if there’s any change to thinking about maybe buying a little bit more than you need given potential risk around pricing.

Is there as we look back a quarter from now, should we expect the inventory levels within your generic book to be higher than where they were at the end of threethirty one? Curious if that’s any part of the conversation that you’re having internally.

Jim Cleary, EVP and CFO, Syncora: Yeah. Let me take a stab at that, Bob. And, you know, I think, first of all and and there are a few things there. From Syncora inventory standpoint, you know, we’re kinda keeping our inventory levels constant. It’s one of the great things about our company is our working capital and how our working capital structure is one of the things that really drives our very strong free cash flow.

And so and so we’re very disciplined in inventory levels and and keeping that keeping that constant and very efficient. From a in from a generic purchasing standpoint, we we purchase generics with our in a partnership with Walgreens, which we’ve been doing for quite some time. And we contract out and typically have, you know, contracts there, which which which work very well for us. Now I think one of the kind of really key things as we think about generics now, and you mentioned tariffs, is, you know, just making sure really the most important thing is making sure that we have really strong product access for our customers. And so that’s what we’ve always been focused on and are focused on now.

And of course, there are many suppliers in in the market and just maintaining excellent product access for our customer base is what we really specialize in and have always been focused on.

Alan, Lead healthcare tech distribution, Bank of America: Got it. That’s great. Thanks, Jim, for that. And then, you know, Jim, I’ll I’ll stick with you here. The operating leverage in the Syncora business has been incredibly strong for the past few quarters.

You kind of back out RCA and OpEx growth was pretty modest year over year on really strong gross profit dollar growth. As we think about Syncora’s ability to grow gross profit dollars on an organic basis and we think about the operating expenses, whether it’s in technology or labor, how should we think about the growth algorithm there or the incremental OpEx expenditures that you expect to spend more thematically, not necessarily just from this year, but how much incremental OpEx is required to fund this type of business? And because the growth that we’ve seen over the past couple of years has been really, really strong, trying to get a

Jim Cleary, EVP and CFO, Syncora: sense of whether or not that type of OpEx management is sustainable moving forward. Yeah. So I will start out with the answer to this question, and then I’m gonna turn it over to Bennett Murphy, who leads IR and treasury for us and also has responsibility now for our productivity initiatives and our productivity capabilities and ask Bennett to talk a little bit about that. But, I would say that operating leverage is a really important part of our business model. If you look at the most recent quarters, you said, Alan, if you exclude, RCA, we had very modest growth in operating expenses.

One of the key things for us that we’re always looking at is making sure that operating expenses are growing slower than gross profit, and it’s something that we always are focused on. And one of kind of the key things that really Bob is having the company focus on is productivity as an initiative and a capability. And we’ve asked Bennett to lead that. So I’ll ask Bennett to talk a bit about that.

Bennett Murphy, Senior Vice President and Head of IR and Treasury, Syncora: Sure. Thanks, Jim. Certainly. And, you know, the other thing that Bob talks about consistently is customer centricity. Right?

And that, as we continue to focus on leading with market leaders and differentiating ourselves with our customers, both upstream and down, we’ll continue to need to do more to support those customers, but we’ll also continue to need to do the things that we do now better and more efficiently. So as we continue to grow, we’re focused on productivity initiatives across existing processes and procedures and teams, and also making sure that as we expand and do new things for our customers, that we’re setting those up in a way that is productive, efficient, and helps contribute to the overall growth for the company.

Alan, Lead healthcare tech distribution, Bank of America: And then changing gears a little bit, talking about the provider landscape, the opportunity and really the competitive landscape around more MSO deals. You’ve talked in the past about focusing on oncology and retina because they’re the most, I think, drug centric ologies. As we think about, because a lot of your competitors are doing similar things, I guess a couple of questions here. How many good assets are still out there? And do you think that oncology and retina, how big is the roadmap from here to continue to build out your provider exposure within those specific classes?

Bob Mach, CEO, Syncora: Okay, I’ll start. Thanks, Alan, good question. So if you think about the MSO space in general, I would be thinking about, you know, organic growth from here. And by organic, I’m including in that acquiring, you know, smaller physician practices. So the big MSOs, there are some others out there, but I tell you, our primary focus is going to be growing oncology and growing RCA.

And that’ll be through both physician attraction. So one physician coming in or a small group or, you know, bringing in a practice. And we would put both of those kind of in the organic growth category. There’s a lot of room to run there. There’s a lot more smaller practices that are still out there.

There are physicians and fellows coming out of school every year that we work hard to attract. So that’s an important part of the growth algorithm and both One Oncology and RCA are doing very well in those spaces. To get to the specialties, you said it well, Alan, we’re focused on oncology and retina because they are pharmaceutical centric, like our strategy is pharmaceutical centric. So that aligns very well. And I’ll note urology is a good tuck in with oncology.

It has a good drug makeup and also more men’s health and other growth areas are happening there. That’s a natural synergy with oncology. Right now, we don’t see other specialties with the same profile. And I’ll emphasize right now, in the future that could change. There could be another disease area where that becomes heavily physician based pharmaceutical treatment.

And I think that would be an area that we would be attracted to at that point. But as we sit here today, those are the areas of focus that we’re very happy with. And we have excellent assets and expertise. And I should say too, long term partnership with those physicians. So the MSO part of this is new, but we have multi decade relationships with these physician practices in both retina and oncology.

And we’re just expanding our services to those very same physicians, as well as the manufacturers.

Jim Cleary, EVP and CFO, Syncora: Bob, and just the the one detail I’ll add, which I’m sure everyone in the room is aware of, is, of course, with RCA, we own 85% of the business and the physicians and management own the other 15%. And with OneOncology, our present ownership is 35%. And then, of course, we have the put call structure where we’ll likely own all of the business in 2026 or 2027. And so a lot of our capital deployment is spoken for right there with OneOncology.

Alan, Lead healthcare tech distribution, Bank of America: And around that, I want to ask about biosimilar adoption in the provider channel. You know, clearly you’re gaining more scale in the provider channel, but I’m curious, are there any ways for you to incentivize, these affiliated providers to switch to biosimilars? And I guess, can you talk about the adoption of biosimilars within this channel maybe versus in the pharmacy channel? Is it different? Obviously, the way that the drugs reach the patient is different.

Curious if you could talk about some of the differences there and whether or not there’s any opportunity for Syncora to drive biosimilar adoption.

Bob Mach, CEO, Syncora: Yeah, I’ll say, Alan, just to start, biosimilar adoption in the physician space is very good already. So in these community specialty physicians, the biosimilar adoption has been excellent, and we expect it will continue to be. We don’t incentivize or drive utilization of any product in that space. However, we have a broad suite of services that allow the physicians to understand the clinical profiles, the cost profiles, therefore what might be the most cost effective treatment for the patient, right? So the best outcome for the lowest cost.

So the physicians in every case are making that decision for themselves and the services that the MSO or other parts of Syncora would provide are simply to facilitate that understanding. So help them do that faster. You’ll see if you read about, and this would be most true in the oncology space, physicians are not shy about saying it’s really difficult to keep up. The pace of innovation is massive, which is a great thing for the industry. It’s a great thing for patients.

You have the biosimilars in the midst of all the innovative products. And so what we’re doing is help them learn faster. Honestly, obviously they’re more than capable of learning, but we’re providing means to do that in a way that is easier for them, allows them to make decisions faster. And I think it’s very encouraging that through that process, see that the community physicians are adopting biosimilars at a very high rate, which is great for patients. It’s great for the healthcare system.

Alan, Lead healthcare tech distribution, Bank of America: Really helpful. Thanks, Bob, for that. And then Jim, one for you. So you mentioned the one oncology put earlier. As we think about Syncora’s capital deployment here with the potential to put out capital to exercise that, does that have any impact on your capital deployment strategy today?

I would think that maybe it would be I guess, you know, I don’t wanna lead the witness. How does that, if at all, impact your capital deployment strategy today?

Jim Cleary, EVP and CFO, Syncora: Sure. So at SENCORA, we have balanced capital deployment. We have, had that, of course, for quite some time and will continue to have balanced capital deployment. And we’re very fortunate that we have, really good free cash flow. And, you know, the and so the balance capital deployment is investing in the business, and that always has a good return.

And so you’ll have seen historically, we spent about $500,000,000 a year in capital expenditures. This year, it’ll be about 600,000,000 that we spend in capital expenditures. That’s typically in things like technology and infrastructure. And then we’ll do strategic acquisitions. The most recent strategic acquisition is, of course, RCA.

And as we talked about, Alan, with the put call structure on OneOncology, a good deal of our capital deployment regarding strategic acquisitions is spoken for now. And we’ll, of course, be looking at other things, but, you know, that’s that that does use a a good deal of capital in ’26 or ’27. Then we’ll continue to do opportunistic share repurchases. I think we’ve been very successful and opportunistic share repurchases over the past three years, which are one of the things that’s really benefited our EPS growth in addition to our organic growth and acquisitions. And then we’ll have a reasonable growing dividend.

And most recently, we’ve been growing our dividend at 8% this most recent year. And so that’s been, you know, a very successful approach for us in the past, and we’ll continue to have balanced capital deployment.

Alan, Lead healthcare tech distribution, Bank of America: That’s great. And then we have two minutes left here. I guess, you know, I’ll just ask a question to each of What do you think is the most exciting thing about Syncora over the next year that maybe you think is not fully understood? Or maybe you don’t talk about it relative to other things? What are you most excited about over the next calendar year?

Bennett Murphy, Senior Vice President and Head of IR and Treasury, Syncora: Bob?

Bob Mach, CEO, Syncora: Okay, I’ll go first. I think we are talking about it. I hope it’s well understood, but what I’m most excited about is how well positioned we are for the growth of specialty pharma. So as I said, the pace of innovation is at historic pace. Technology, AI, and others will only increase that.

And when you think about how those products get to market in The United States and Western Europe, Sankora is uniquely well positioned to help manufacturers and providers with that specialty pharmaceutical growth. So that’s something that is not only exciting because we’re well positioned, but we also want investors to understand that if you believe in the long term growth of the pharmaceutical industry and specialty pharma, then that’s also an enduring growth thesis for Secura as well.

Jim Cleary, EVP and CFO, Syncora: Okay. I’m gonna say, in Bob’s first year as CEO, the customer centricity he’s bringing to the company and the philosophies of active leading and active learning. And as a leadership team, he’s really making sure that we’re out in the field a lot, meeting with our team members and all of our stakeholders, including our customers. And so that’s one thing that I think has been, you know, really, energizing to our company and is one of the things that’ll help us continue the momentum that we’ve had.

Bennett Murphy, Senior Vice President and Head of IR and Treasury, Syncora: You know, to say, as Bob said on the earnings call, there’s no complacency at Syncor. We’ve had several years of really strong performance. We’re focusing on continuing to contribute to that outperformance in the future.

Alan, Lead healthcare tech distribution, Bank of America: That’s great. It looks like we just ran out of time. I appreciate all three of you for joining us. Thank you again for joining us.

Bob Mach, CEO, Syncora: Yeah. Thanks, Alan.

Jim Cleary, EVP and CFO, Syncora: Thank you.

Bob Mach, CEO, Syncora: Right on time.

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