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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 17, 2009
MEDCO HEALTH SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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1-31312
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22-3461740
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| (State or other Jurisdiction of Incorporation) |
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(Commission File Number) |
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(IRS Employer Identification No.) |
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100 Parsons Pond Drive, Franklin Lakes, NJ
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07417
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(Zip Code) |
Registrant’s telephone number, including area code:
201-269-3400
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| (Former name or former address if changed since last report.) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 7.01 Regulation FD Disclosure.
Senior members of Medco Health Solutions, Inc.’s (the “Company”) management team will be making a presentation at
the Lazard Capital Markets 6
th
Annual Healthcare Conference on Tuesday, November 17, 2009, at 10:25 a.m.
Eastern Time at The St. Regis Hotel in New York, New York. A live audio webcast of the Company’s presentation at the
conference will be available on the Company’s Investor Relations website at
www.medcohealth.com/investor
. A
replay of the Company’s presentation will also be available on the Company’s website for one month following the
presentation. The slides accompanying the presentation are attached to this Current Report on Form 8-K (“Current
Report”) as Exhibit 99.1 and are incorporated herein solely for purposes of this Item 7.01 disclosure. These materials
will also be available on the Company’s Investor Relations website at
www.medcohealth.com/investor
.
The information in Item 7.01 of this Current Report, including Exhibit 99.1 attached hereto, is being furnished
and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or
otherwise subject to the liabilities of such section. The information in Item 7.01 of this Current Report, including
Exhibit 99.1 attached hereto, shall not be incorporated by reference into any registration statement or other document
pursuant to the Securities Act of 1933, as amended.
Item 9.01 Financial Statements and Exhibits.
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Exhibit No.
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99.1
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Slide Presentation for Lazard Capital Markets 6
th
Annual Healthcare Conference on Tuesday, November 17, 2009
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly authorized.
MEDCO HEALTH SOLUTIONS, INC.
Date: November 17, 2009
By:
/s/ Richard J. Rubino
Richard J. Rubino
Senior Vice President, Finance and
Chief Financial Officer
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EXHIBIT INDEX
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Exhibit No.
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Description |
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99.1
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Slide Presentation for Lazard Capital Markets 6
th
Annual Healthcare Conference on Tuesday, November 17, 2009
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Advancing Pharmacy -
Reforming Healthcare
Lazard Capital Markets
6th Annual Healthcare Conference
November 17, 2009
David B. Snow, Jr.
Chairman and CEO
Richard J. Rubino
SVP, Finance and CFO
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Forward-Looking Statements
This presentation contains "forward-looking statements" as that term is defined in the Private
Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that
may cause results to differ materially from those set forth in the statements. No forward-looking
statement can be guaranteed, and actual results may differ materially from those projected. We
undertake no obligation to publicly update any forward-looking statement, whether as a result of
new information, future events or otherwise. The forward-looking statements are not historical
facts, but rather are based on current expectations, estimates, assumptions and projections
about the business and future financial results of the pharmacy benefit management ("PBM")
and specialty pharmacy industries, and other legal, regulatory and economic developments.
We use words such as "anticipates," "believes," "plans," "expects," "projects," "future," "intends,"
"may," "will," "should," "could," "estimates," "predicts," "potential," "continue," "guidance" and
similar expressions to identify these forward-looking statements. Medco's actual results could
differ materially from the results contemplated by these forward-looking statements due to a
number of factors.
Forward-looking statements in this presentation should be evaluated together with the risks and
uncertainties that affect our business, particularly those mentioned in the Risk Factors section
of the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other
documents filed from time to time with the Securities and Exchange Commission.
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Who is Medco
Ranked #45 on the Fortune 100* List
$51.3 Billion in Revenues for 2008
$44.6 Billion YTD Sept. 2009; 16.4% growth over YTD Sept. 2008
60+ Million Members
Largest Independent PBM Measured by Drug Spend
Largest Specialty Pharmacy
Largest Mail-Order Pharmacies in the World
Leader in Clinical Innovation
*2008 Rankings
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2005
2006*
2007*
2008
Strong Relative Earnings Growth
2005 2006* 2007* 2008E**
MHS 0.1705 0.1748 0.347 0.31
S&P 500 0.194 0.166 -0.188 -0.775
S&P 500 Healthcare Index 0.157 -0.022 0.095 0.099
GAAP EPS Y/Y Growth Rates
MHS vs. S&P 500 Indices GAAP EPS Growth Rates
2009E
GAAP EPS 0.21
MHS
21% - 22%
2009E
Source: Standard & Poor's
*Excludes first-quarter 2006 legal settlements charge; see reconciliation to GAAP financial tables in appendix
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What is Driving Our Growth
Strong Sales & Client Retention
Mail-Order Prescriptions
Generic Dispensing
Specialty Pharmacy
Medicare Business
Clinical Leadership - Improving Health Outcomes at
Lower Total Healthcare Cost
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New-Named &
Net-New Sales Performance
*As of third-quarter 2009 earnings call
$7.2B
Annualized new-named
sales
Net-new sales
>$10.0B
$5.4B
>$8.0B
2008
2009*
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2010 Sales Performance*
*As of third-quarter 2009 earnings call
Annualized new-named sales
$4.1B
2010 scheduled and early elective renewals expected to
be ~$15 billion
Client retention rate
99%
Net-new sales
>$4.0B
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Mail-Order Script Volume and
Growth Opportunity
Annualized new-named sales ($ in billions)
2005 2006 2007 2008 2009E 2010E
New Business 4 4.7 2.9
Mail-Order Volume 87 89 95 106 103 109
Mail-Order Prescription Volume
(in millions)
Annualized New-Named Sales
and Adjusted Mail-Order Penetration
2005 2006 2007 2008 2009E 2010E
New Business 3.2 3.7 1.7 7.2 10 4.1
2005 A 2006 2007E 2008 2009E
East
% Penetration Rate 0.32 0.1789 0.532 0.6451 0.089 0.25
32%
18%
53%
65%
9%
* Lower estimated 2009 mail-order volume as a result of economic factors
Adjusted mail-order penetration rate for new business
High retail volume and
low mail-order penetration
for new business;
significant opportunity for
future mail-order growth
Volume from mail-order
generics remains strong
25%
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2008 2009 2010 2011 2012 2013 2014 2015
Acute
Chronic/Complex 11.8 13.9 9 15.8 21.9 5.4 15.6 9.3
Generics Growth Opportunity
Risperdal(r)
Lamictal(r)
Fosamax(r)
Imitrex(r)
Prevacid(r)
Topamax(r)
Valtrex(r)
Adderall XR (r)
Effexor XR(r)
Flomax(r)
Aricept(r)
Cozaar(r)
Hyzaar(r)
Lipitor(r)
Actos(r)
Zyprexa(r)
Levaquin(r)
Plavix(r)
Seroquel(r)
Singulair(r)
Diovan(r)
Lexapro(r)
Lovenox(r)
Lidoderm(r)
Source: U.S. Drug spend estimates are based on IMS Health data for 2007 and 2008. Compounded amounts are prorated for mid-term expirations. Brand drug expirations
based on expected patent expiration dates current as of October 2009. Changes may occur due to litigation, patent challenges, etc.
$11.8
$13.9
$9.0
$15.8
$21.9
$5.4
$15.6
$9.3
Aciphex(r)
Nexium(r)
Celebrex(r)
Abilify(r)
Cymbalta(r)
2008 2009 2010 2011 2012 2013 2014 2015
5.7 11.8 11.8 11.8 11.8 11.8 11.8 11.8
5.8 13.9 13.9 13.9 13.9 13.9 13.9
4.9 9 9 9 9 9
4.3 15.8 15.8 15.8 15.8
11.5 21.9 21.9 21.9
2.7 5.4 5.4
9.3 15.6
5.1
$5.7
$17.6
$30.7
$39.1
$62.1
$75.2
$87.2
$98.5
($ in Billions)
($ in Billions)
2010 Generic
Contribution of $0.25;
~64% in 2H'10
$102.7 Billion in Brand Drugs
Off-Patent from 2008-2015
Off-Patent Compounding Effect
(prorated)
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2006 2007 2008 2009E 2010E
Acute
Chronic/Complex 5437 6043 7974 9500 11000
Strong Specialty Pharmacy Growth
Accredo Net Revenues
$5.4
~$9.5
$8.0
$6.0
Accredo Operating Income
2006 2007 2008 2009E 2010E
189 210 281 355 450
$189
$281
~$355
$210
~19%
($ in billions)
($ in millions)
16%+
$450+
$11.0+
~26%
27%+
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Retiree Solutions - Casting a Broad Net
3Q09 Medicare PDP revenues up over 72% from
3Q08 to $269.6 million
Over 300% growth in total retiree lives for 2009;
majority are no risk, ASO contracts
Expanding health plan Medicare ASO footprint
increases retiree recapture capability and access to
new lives
Growth in health plan partner base
Testament to world-class Medicare service model
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Clinical Innovations -
Medco Therapeutic Resource Centers(r)
Medco Therapeutic Resource Centers(r) (TRCs)
Full-service platform, housing specialized pharmacists to deliver
superior clinical and financial outcomes for clients and members
Focuses on chronic and complex conditions accounting for 96 percent
of prescription and 75 percent of healthcare spending
Complements the retail acute-care model, which addresses less than 4
percent of overall drug spending
Milliman healthcare management consultants and actuaries reviewed
and validated the clinical content and the general processes used to
generate TRC performance metrics and outcomes
Driving Sales, Mail Penetration, and Generic Dispensing Rates
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Clinical Innovations -
Personalized Medicine
Pharmacogenomics ("Personalized Medicine")
Leveraging the TRC platform, Medco launched two pilots using genetic
tests to personalize with precision drug selection/delivery/dosing
Collaboration with The Mayo Clinic for Coumadin
Collaboration with LabCorp for Tamoxifen
Intervention at the point of care results in reduction of overall
healthcare costs
New Indiana automated dispensing facility includes a world-class
research center for personalized medicine
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International Initiatives
Acquired a majority stake in Netherlands-based Europa Apotheek Venlo, a
mail-order pharmacy serving Germany
Germany market had 2008 drug spend of $31 billion (Rx) and $6 billion (OTC)
Opportunity leverages Medco's core competencies
Partnered with Apoteket to create the first drug utilization review system in
Sweden
2008
2009
Entered into a joint venture with United Drug plc, a Pan-European healthcare
leader, to provide home-based pharmacy care services in the United
Kingdom for patients covered by the country's National Health Service (NHS)
U.K. is the third largest prescription drug market in Europe, with a population of over
60 million and drug spend over $23 billion
Homecare pharmacy services currently comprise ~$1.6 billion of the U.K.'s
prescription drug spending
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Strong Balance Sheet and Cash Flows
Nine Months Ended September 2009 Nine Months Ended September 2008
Cash and cash equivalents $2,020.3 MM $440.8 MM
Cash flow from operations $2,543.6 MM $797.2 MM
Capital expenditures $154.3 MM $156.5 MM
Total debt $4.2 B $4.6 B
Cash flow from operations expected to be ~$3.2 billion in 2009 - about two times our
record 2008 performance
Inventory levels managed further downward from $1.5 billion as of June 2009 to
~$1.3 billion as of September 2009
Represents an inventory decrease from June 2008 of almost $750 million - a
reduction of over one-third
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Continued Financial Strength
in a Weak Economy
2010 Guidance(1) 2010 % Growth over 2009 2009 Guidance(1) 2009 % Growth over 2008
GAAP Diluted EPS $3.05-$3.15 17%-22% $2.58-$2.60 21%-22%
Diluted EPS,
excluding the amortization of intangibles related to 2003 spin-off(2) $3.28-$3.38 16%-21% $2.80-$2.82 20%-21%
1 As of third-quarter 2009 earnings call
2 See earnings per share guidance reconciliation in appendix
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Medco's Role in Healthcare Reform
Facts:
When you manage drugs better, you manage
the whole healthcare system better
For prescription drugs, healthcare is wired today
Chronic and complex diseases are responsible for 96% of
drug costs and 75% of medical expenses in the U.S.
For 88% of chronic and complex diseases, drugs are the first
choice for medical intervention (131 out of 149)
Instability of a chronic or complex patient is most often
tied to deviations from accepted clinical protocol or
non-compliance
Deviations from protocol and non-compliance cost the system
billions of dollars annually
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National Healthcare Reform Agenda
Provide benefits for the
uninsured
Support health information
technology initiatives
Promote the use of generics
Senator Obama sponsored
Personalized Medicine Act
Provide a pathway for
biogenerics/biosimilars
Opportunity
for Medco
Obama Administration
Healthcare Objectives
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Brand and Generic Trend
*MAT denotes moving annual total; MAT 08/09 represents the 12 months ending in July 2009.
Source: IMS Health, National Prescription Audit Plans, National Sales Perspective, September 2009.
Includes re-stated historical data effective with January 2009 update to IMS databases.
Brand Name
Generic
Total Prescriptions Dispensed (%)
2004 52 48
2005 48 52
2006 44 56
2007 40 60
2008 36 64
MAT 2008/2009 34 66
Drug Mix Trend (%)
2004 88 12
2005 87 13
2006 86 14
2007 86 14
2008 86 14
MAT 2008/2009 85 15
Drug Spend Mix Trend (%)
Total Expenditures on Prescription Drugs (%)
*
*
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Reconciliation Tables
Medco Health Solutions, Inc.
Selected Information (Unaudited)
Full Years Ended Full Years Ended
Earnings Per Share Reconciliation December 29,
2007 December 30, 2006
GAAP diluted earnings per share $1.63 $1.04
Adjustment for the 2006 legal settlements charge1 - $0.17
Diluted earnings per share, excluding the legal charge $1.63 $1.21
Diluted earnings per share growth over prior year 35% 17%
1) This represents the pre-tax legal settlements charge of $162.6 million recorded in the first quarter of 2006.
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Reconciliation Tables
Full Year Ended
December 27, 2008 Estimated
Full Year Ended December 26, 2009 Estimated
Full Year Ended December 26, 2009 Estimated Full Year Ended December 25, 2010 Estimated Full Year Ended December 25, 2010
Earnings Per Share Guidance
Reconciliation Actual Low End High End Low End High End
GAAP diluted earnings per share $2.13 $2.58 $2.60 $3.05 $3.15
Adjustment for the amortization of
intangible assets(1) 0.20 0.22 0.22 0.23 0.23
Diluted earnings per share,
excluding intangible amortization $2.33 $2.80 $2.82 $3.28 $3.38
GAAP diluted earnings per share growth
over prior year 21% 22% 17% 22%
Diluted earnings per share growth
over prior year, excluding intangible
amortization 20% 21% 16% 21%
Medco Health Solutions, Inc.
Selected Information (Unaudited)
1) This adjustment represents the per share effect of the intangible amortization from the 2003 spin-off, when Medco became a publicly
traded company.
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