Brian Tyler: I appreciate the question. I obviously can’t and not in a position to comment a lot on Rite-Aid. What I can tell you is what we’ve talked about for fiscal 2024. And Rite-Aid is not going to have a material impact on our financial results. So I would leave it at that. And in terms of 2025, we will learn more over the next few months. We’ll give you more information as we give you further information on all of our fiscal 2025 assumptions. But Rite-Aid is not material to our financial results in fiscal 2024.
Rachel Rodriguez: Next question, please?
Operator: And next will be Eric Coldwell with Baird. Please go ahead.
Eric Coldwell: Thank you. Good afternoon. This one I think is fairly obvious and fairly simple, but I just want to make sure. The free cash flow reduction versus prior guide, is that specifically and only due to the Rite-Aid impact? And if so, I guess the question is why you didn’t take that last quarter perhaps when — I guess maybe that’s not a fair question given the timing, but I just want to make sure that’s the only topic there. And then on the repo activity as well, slightly lower outlook here, three to three and a half billion versus prior 3.5. Is that also the Rite-Aid impact or perhaps due to valuation in the market or some other topic? Those are my only two. Thank you very much.
Brian Tyler: Yes, I appreciate the question, Eric. And you’ll note that in our free cash flow guide for the rest of the year, the reduction versus the prior guidance that we gave you is not the full impact of the Rite-Aid provision for bad debt. So it is a key driver to that. So to answer your question very simply, yes, Rite-Aid and the bankruptcy is a driver on free cash flow reduction. In terms of share repo, I’d say that there’s two things that are driving that. Clearly, we are taking a look at our free cash flow guide, but going back to our principles of how we deploy capital, one of the things that we’ve talked about is, A, we will buy back shares when there’s excess cash on hand that we can’t deploy in a growth format.
And secondly, we’re going to be looking at the intrinsic value of the stock. We want to be in the market and we want to return capital to our shareholders through share repurchases, but those two factors are going to be important to us. And so we’re going to continue to be disciplined. And so a portion of that is reflected in the lower share buyback.
Rachel Rodriguez: Next question, please?
Operator: And next will be Stephanie Davis with Barclays. Please go ahead.
Stephanie Davis: Hey guys, thanks for taking my question. I know you’ve given a lot of great color on this, but I was hoping we could dig a little bit more into the strong U.S. pharmaceutical growth and how to think about, in the lighter flow through the margin, is there anything beyond GLP-1s kind of doing that? And you made a comment on commercial COVID net of 30 million non-recurring, accounting for some of the growth that we saw. Could you clarify kind of any impact that would have on the margin floater?
Brian Tyler: Yes, so let me comment on a couple of things. We’re really pleased with our U.S. pharmaceutical results. They delivered another strong quarter. Included in that, obviously we are lapping the effects of the government program of COVID last year. This year we do have commercial COVID vaccines that peaked in October and then really fell off. And we did have a one-time non-recurring charge in the quarter. And when you net the commercial COVID vaccine contribution in that charge, it roughly offsets the government program contribution from last year. So the performance within the segment is just strong, continued utilization that we’re seeing in the marketplace, continued strong growth of specialty across all of our customer channels, and the continued growth in our oncology business, as well as, as I mentioned, I provided a number on the revenue impact from GLP-1s, which again, come at a lower margin rate and have been a headwind to year-over-year.
So to just sort of sum up, it’s just continued strong utilization in the marketplace in general, continued good growth of our customers and channels, and continued growth within our oncology business.
Rachel Rodriguez: Next question, please?
Operator: And next will be Erin Wright with Morgan Stanley. Please go ahead.
Erin Wright: Great, thanks. So as I think about 2025, why is 5% to 7% still the right growth target for U.S. pharma, just given the specialty contributions and growth there and favorable generics environment? And just, do you think kind of the long-term growth has inflected higher at this point for longer? Or what are some of those offsets that we should be thinking about in 2025? Thanks.
Brian Tyler: Appreciate the question. Let me just start by stating that at the beginning of the year when we gave guidance, the long-term growth rate for the segment was 4% to 6%. Given the performance that we’ve seen this year, we increased that target, that long-term target rate to 5% to 7%. What I’m trying to provide you now is an early view into some of the qualitative factors that we’re looking at and some of the momentum that we see going forward in indicating that that long-term range that we increased this year, we still see that as being the right number today. Now we’ll continue to do some analysis and work and we come forward with our full year assumptions. We’ll give you more insight into that. But just as a reminder, we have already increased the long-term target range this year from 4% to 6% to 5% to 7%. And we’re certainly pleased with the momentum that we’re seeing in the segment.
Rachel Rodriguez: Next question, please?
Operator: And next will be Daniel Grosslight with Citi. Please go ahead.
Daniel Grosslight: Thanks for taking the question. One of your competitors mentioned that there may be an ability to renegotiate GLP-1 contracts as they come due to potentially extract a bit more margin for the drug supply chain. I was wondering if you could comment on your views of contract negotiations as those contracts renew and if there may be an ability to boost the margin profile of GLP-1s going forward.
Brian Tyler: Well, I would say this. I think we’ve talked many times in these calls that the first most important thing for us to do is make sure we get fair value for the services that we provide. And then obviously we want to provide as many services as we can in support of those products. And that philosophy is no different for the GLP-1 class than it is, frankly, for all of the products that we distribute. So, we are always in close contact and communication with our biopharma partners to talk about the value that we deliver, to talk about maybe the ancillary services that we could offer in support of those programs and to find ways that we can both support the growth of our respective businesses. And that’s exactly the lens we’ll bring to this product class and it’s really no different than the way we run the business day to day.
Rachel Rodriguez: Next question, please?
Operator: And next will be Elizabeth Anderson with Evercore ISI. Please go ahead.
Elizabeth Anderson: Hi guys, thanks so much for the question. You guys talked about continuing to invest in some of the longer term drivers of the pharma growth in terms of oncology, biopharma services, etcetera. I was hoping you could unpack that a little bit more and sort of talk a bit more about where you sort of see the most attractive opportunities versus the assets that you already have. Thanks.
Brian Tyler: Sure, I’ll start and then Britt can tack on. First thing I would say is, I’m really pleased over the last several years, we have been very disciplined in making sure that we made organic investment or reinvestment back into the business. And, we view that as part of good portfolio management. I mean, our goal is to continue to extend the growth that we see in our markets and to innovate, innovating new solutions as part of that. So, now when we allocate that investment capital, certainly some goes into the core where we think we can get efficiency, better services, extend our base value proposition, but a lot will go into what we call our growth pillars and that would be oncology. So in one instance, we’ve talked a lot, it’s about, green fielding our Ontada business or our data and analytics business.
Obviously we’ve gone inorganic with SCRI and extended into clinical trials and research. We talked a quarter or two ago about some innovations that we’ve made in our RxTS segment when enhancing some of our solutions and frankly building and innovating and bringing new solutions. So, much like our inorganic investment, we are tied to our strategy and committed to business cases that we think will deliver more return. I think the one area that we probably highlighted more this quarter than we have in the past is investments in technology, AI, machine learning. Obviously, the developments and advancements in that field have come on fast and when you think about a business that operates at our kind of scale, we’re very excited about the opportunities we see there.
