PharMerica's (PMC) CEO Greg Weishar on Q2 2016 Results - Earnings Call Transcript

| About: PharMerica Corporation (PMC)

PharMerica Corp (NYSE:PMC)

Q2 2016 Results Earnings Conference Call

August 09, 2016, 10:00 AM ET

Executives

Berard Tomassetti – Senior Vice President & Chief Accounting Officer

Greg Weishar – Chief Executive Officer

David Froesel – Executive Vice President, Chief Financial Officer & Treasurer

Analysts

Stephan Stewart – Goldman Sachs

Charles Rhyee – Cowen

Jason Gurda – KeyBanc

Eric Percher – Barclays

A.J. Rice – UBS

Steven Valiquette – Bank of America

Robert Willoughby – Credit Suisse

Mike Petusky – Barrington Research

Operator

Good days, ladies and gentlemen. And thank you for standing by. Welcome to the PharMerica Corporation Second Quarter 2016 Earnings Conference Call. At this time all participant are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to introduce your host for today's presentation Mr. Berard Tomassetti, Senior Vice President and Chief Accounting Officer. Sir, please begin.

Berard Tomassetti

Good morning and thank you for joining us for the 2016 second quarter conference call. On the call with me today are Greg Weishar, Chief Executive Officer and David Froesel, Executive Vice President, Chief Financial Officer and Treasurer. Before beginning our remarks regarding the 2016 second quarter results, I would like to make a cautionary statement.

During the call today we will make forward-looking statements about our business prospects and financial expectations. We want to remind you that there are many risks and uncertainties that could cause our actual results to differ materially from our current expectations. In addition to the risks and uncertainties discussed in this morning's press release and in the comments made during this conference call, more detailed information upon additional risks and uncertainties may be found in our annual report on Form 10-K. Copies of our annual report on Form 10-K may be obtained from the SEC or by visiting the investor relations section of our website.

PharMerica assumes no obligation to update the matters discussed on this call. During this call we will be referring to non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with Generally Accepted Accounting Principles. The reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is available in our press release and in our quarterly report on Form 10-Q.

We have made available to you our press release and our quarterly report on Form 10-Q. In addition, this webcast will be on our website along with a transcript from this call.

And now at this time, I would like to turn the presentation over to Greg.

Greg Weishar

Thank you, Berard. And thank you all for attending. And we appreciate your interest in PharMerica and your participation in today's call. As you saw in this morning's earnings release, financial result for the second quarter met company's expectations.

The diversified pharmacy businesses, which include Amerita, specialty home infusion; Onco360, specialty oncology, and PharMerica HPM, hospital pharmacy management, these pharmacy service businesses continued to perform beyond expectations.

Collectively on a year-over-year basis they achieved revenue growth of 43% and the EBITDA growth rate significantly exceeded the growth in revenue. We continue to realize operating leverage in these companies as the heavy organizational investments are mainly in the past.

EBITDA margins are approaching mid single digits and we expect revenue to grow year-over-year in the range of 25% to 30%. We are confident that revenues for the diversified pharmacy businesses will exceed $700 million in 2017. And these businesses will play a major role in driving future revenue and EBITDA growth.

Regarding acquisitions, we recently completed the acquisition of Premier Rx. Premier Rx expands our institutional pharmacy presence in the St. Louis and Kansas City metro areas. We have a robust pipeline of opportunities and are confident we will acquire once again over $100 million revenues this year.

These acquisitions create sustainable shareholder value, particularly in the long-term care, especially home infusion businesses where we have meaningful synergies. As we have proven in the past, we will be financially disciplined pursuing these acquisitions.

The institutional pharmacy business experienced a slight decline in revenues on a sequential quarterly basis. This is associated with a decline in prescriptions dispensed. Despite this, we saw a slight up-tick in EBITDA on a sequential basis. This was primarily associated with the company's focus on cost controls and we continue to find value in direct and strategic purchasing.

So with that, I'll turn it over to Dave to briefly walk you through the financials.

David Froesel

Thank you, Greg. And good morning, everyone. Key points regarding PharMerica's 2016 second quarter financial performance versus the first quarter of 2016 as is follows. Revenues declined slightly in the second quarter of 2016, as compared to the first quarter of 2016.

The decline in revenues was associated with a decline in the number of prescriptions dispensed in the institutional pharmacy business. On a sequential basis approximately 400,000 or 5% pure prescriptions were dispensed.

However, revenue growth in a diversified pharmacy businesses offset the majority of the decline in institutional pharmacy revenues. In addition, our gross profit margin increased slightly from 15.6% in the first quarter of 2016 to 15.7% in the second quarter of 2016.

The increase in gross profit margins was primarily associated with the company's continuing efforts to lower cost of purchasing pharmaceuticals, which more then offset lower gross profit margins associated with the diversified pharmacy businesses which yield higher gross profit dollars per prescription dispensed, but lower growth profit margins.

Furthermore, SG&A expenses declined from $57 million in the first quarter of 2016 to $55.7 million in the second quarter of 2016 or a decrease of $1.3 million. The decrease in SG&A expenses was associated with the sequential improvement in bad debt expense. Moreover, our adjusted EBITDA margin improved 30 basis points from 5.8% to 6.1% or from $30.3 million in the first quarter of 2016 to $31.8 million in the second quarter of 2016.

The sequential improvement in EBITDA dollars and margin percentage was attributable to the growth in the diversified pharmacy businesses.

And last, PharMerica finished the first quarter of 2016 with approximately – finished the second quarter of 2016 with approximately $63 million of future cash tax benefits, primarily associated with the future deductibility of goodwill associated with acquisitions and federal and state NOL carryforwards.

Thank you. And now I will turn the call back over to Greg for some final remarks.

Greg Weishar

Thank you, Dave. We indicated in the press release we are affirming guidance. However, the institutional pharmacy business continues to face headwinds driven by macro events in the post-acute healthcare segment.

While we remain confident, we will see organic dead growth in the second half. We do anticipate we will fall short of original estimates. We are working hard to offset this short fall. We will continue to focus on reducing operating cost better than plan performance from the diversified pharmacy businesses and through acquisitions.

Finally, we will continue to aggressively address core institutional pharmacy sales opportunities. We are confident that the strategies we are pursuing will provide a pathway to sustainable growth.

As I mentioned earlier, diversified businesses are experiencing double-digit revenue and EBITDA growth and we expect this robust growth will in the next several years bounce up the company's business mix between diversified specialty pharmacy, core institutional pharmacy.

We will buttress the slower growth core institutional pharmacy business with ongoing acquisitions as we remain confident the market fundamentals will improve going forward. And we will execute acquisitions over the next several years that drive market share and the diversified pharmacy businesses as well.

So in summary, we have achieved our financial goals for the first half of the year and we remain optimistic about the company’s' prospect.

So with that, I'll turn it over back to our operator for Q&A. Howard?

Question-and-Answer Session

Operator

[Operator Instructions] Our first question or comment comes from the line of Stephan Stewart from Goldman Sachs. Your line is open.

Stephan Stewart

Great. Good morning, guys. Thanks for the questions. Just wondering what you are seeing on generic pricing trends in the quarter. And on M&A, where is the focus, I know you guys have you know, been sort of mix across OTC on institutional and you know, the growth businesses. But how are you thinking about the components of potential M&A in the back half of the year?

David Froesel

Hi, Stephan. This is Dave. I'll take the first part of your question. What we're seeing on generic drug pricing trends is slight single digit deflation, and with respect to you know, cost of us buying generics across various avenues through our wholesale and on a direct basis.

Stephan Stewart

Got it. And on the M&A focus in the back half?

Greg Weishar

Yes, let me talk about that. The M&A piece, we are focused on bolt-on acquisitions in the existing markets with regards to institutional and home infusion businesses. And we're also focused on new markets where we have a couple of places where we'd like to fill in.

Most of our acquisitions on the institutional side are bolt-ons, which give us significant synergies, as we consolidate our operations, bring our purchasing synergies to the table and our favorable Part D rates to the table.

Similar to the home infusion business, we see the home infusion business is – we have synergies on existing markets. However, we're probably a little more focused on the home infusion side of – and expanding geographically again in those markets.

As far as the core specialty or for instance oncology business or Hep C specialty business those kind of core traditional or specialty businesses we continue to look at that segment, but this juncture in our kind of [indiscernible] side lines, see where those businesses end up and continue to grow our oncology businesses as we are doing.

Stephan Stewart

Great. Thanks for the questions.

Operator

Thank you. Our next question or comment comes from the line of Charles Rhyee from Cowen. Your line is open.

Charles Rhyee

Yes. Hey, thanks for taking the questions. First, forgive if I missed this at the beginning, but Dave, you're planning to retiring here, can you talk about sort of your thought process, so why now, I know you got pulled out of retirement the first time around here, but can you talk about the decision here to step down? Thanks.

David Froesel

Sure, Charles. Well, basically 64 and I am going to be 65 early next year. So I thought that as approaching or guess in the winter of my life now is probably as good as time as I need to start enjoying myself and I've never really had any hobbies, so I am planning on taking up some hobbies and just enjoying life.

Charles Rhyee

So it sounds great. I mean, maybe you can reflect an – obviously you were at Omnicare before this. Can you talk about it you know, what you see at PharMerica today versus what you saw when you got here? Maybe you kind of talk about sort of the progress that you think the company has made so far?

David Froesel

Well, what I would say is, I came out of retirement when Greg gave me a call on Friday morning, and after having spent a very short time period with PharMerica, what I saw quickly was a tremendous opportunity for the company and for myself, and I think for PharMerica it has done a lot of things from a positive standpoint over the past three years and plus, some of the more important ones were that PharMerica in my opinion has the best customer facing technology out in the market place, which I think over the long haul will prove to be very beneficial for the customer – the company in terms of retaining existing accounts and obtaining new accounts.

I think the operations, meaning, running the pharmacies and all that things very, very important stuff, I see tremendous improvements in that area. And I think from a customer satisfaction standpoint, our service levels are probably better than they ever have been and we continually you know, to tweak that.

And I also think from a strategy standpoint I applaud the company in terms of this diversified business strategy. And I do believe the company is on the right path there and I think over the next several years or so you'll see that the diversified business revenues and profits will make up a greater percentage of the company's overall you know, revenue and EBITDA base.

And that’s been done in a fairly short time period, because if you recall the really diversified business that was acquired was back in December of 2012, which was a Amerita, specialty home infusion, that business continues to run very, very well.

And as you know the company made an entree in December of '13 into oncology with Onco360 and that business is just like a rocket-chip. And third but not last, the hospital pharmacy business continues to improve and it was expanded late last year with the acquisition of Luker.

So I think there is a lot of those positive things are going on. I've continue to be impressed with the executive management team at PharMerica and all its employees. And I think that the company has a without a doubt a great, great future.

And I think several more years down the road the company will look much different then it is today. And I think as a result of that I see shareholder benefiting from the execution by the employees and strategy developed by Greg and Berard.

Charles Rhyee

Great. That’s helpful for perspective. Maybe as you see and Greg maybe you can answer, I mean, I dint hear you, I know you guys reaffirmed sort of – some metrics in terms of guidance, I don’t recall if you affirmed also your M&A target of $100 million in annualized revenue is that still, obviously going on track there?

Greg Weishar

Yes. We were still on track with $100 million. Again, we think we're well positioned to do that, no need to address there.

Charles Rhyee

And then lastly, you know, you talked about, obviously we had a goal for a certain amount of organic dead growth this year, you are saying that we were going to be a little bit short of that.

Can you talk about what's happening then in the longer term market itself? Obviously we're having the reimbursement challenges year in year out, and more broadly can you talk about what you are seeing? And I'll stop there. Thanks.

Greg Weishar

Well, we're seeing a lot of transactions occur in the long-term care space. And so the value base pricing elements are creating people to bring opportunities with certain acquirers and certain folks are changing the way they look at the business.

So some of the sales opportunities that we thought we were going to land have not materialized, but what we're seeing is as a result of all this transaction behavior and the change in reimbursement landscape, what we're seeing is that folks are sitting tight, they are not willing to focus on changing their pharmacy operations.

We're also seeing the transactions some times we lose business or sometimes we don’t get business because it’s transacted to another party who already has their relationship with pharmacy. And that goes both ways, but net-net, from a new sales perspective it’s putting pressure on us there.

Charles Rhyee

Great. Thank you.

Operator

Thank you. Our next question or comment comes from the line of Jason Gurda from KeyBanc. Your line is open.

Jason Gurda

Hey. Thanks, guys for taking the question. First I want to say congratulations Dave and good luck with the retirement.

David Froesel

Thank you.

Jason Gurda

Separately, Greg if you – so it sounds like on what's going on in the long-term care market, you saying its having a more of an affect on your ability to get new business than it is necessarily hitting your existing business, because I wondered if there is maybe – if you are seeing like lower lengths to stay in your Medicare Part A or anything like that?

Greg Weishar

Well, we do see that. We're seeing a reduction to some degree in the length to say, which by the way not only manifest itself and less revenue for Part A patient for us, but it also manifest itself in the days that are active back to bed days per month is going down because as the number of patients move in move out there is always day or two between. So we're seeing that the productivity of those beds is gone down for their operators, as well as for us, on a prescription basis.

I think the big thing for us right now is we're seeing just a tremendous amount of transactional behavior and that – there is a lot of folks getting out of the business. However, couple that with folks being extraordinarily high values on the bed side.

So I think the focus on a lot – focus of the market is really more about the revenue side than the cost. And to the extent that they are somewhat happy or opportunities or somewhat happy with the operating parameters around, the competition, the cost side is plus important to them if they are focused on the revenue, because of all the changes that are occurring in the post acute segment which I am sure you are well aware.

Jason Gurda

And as you think about these changes that are going on big picture wise, is it - your sense that this is probably a temporary market phase maybe for the next year or so, but obviously at some point still back to focusing on cost and drug purchasing cost?

Greg Weishar

Well, I think the – this is all as a degree, it’s not a black or white situation. But I can't just – I can imagine that going forward the rate of – the transactional behavior will diminish over time just as a result of – the market will go empty itself of that behavior. But I think the challenge is the industry is going to face, they are going to be with them for a bit. I think these are short term challenges.

So I think ultimately the focus on cost will return. I think ultimately that’s – we're already seeing opportunities on the acquisition side, as a result of some of these dynamics. So I think we'll see continued consolidation in the long term care space, I think we're going to see continued consolidation in pharmacy, services space as well.

Jason Gurda

Okay. And then lastly, just wanted to touch base on Onco360, if you could remind me, we knew our schedule to acquire the remaining part of that business, and whether it’s too soon to have an idea of how much that will cost. And then lastly just do you have any operating update on how things are going there?

Greg Weishar

Well, first of all from an operational perspective, we are really static, that’s probably the right word to say. The progress they made, we anticipated that this business would do very well and it has and it continues to do better.

We will own 80% of the company sometime in December, the first week of December or so. We're close on the remaining 80% of that. The amount that we will pay for that is not something I want to discuss. But it’s not a meaningful hit to our balance sheet. And then two years later, the remaining 20% will be ours.

Jason Gurda

Okay. Thank you very much.

Operator

Thank you. Our next question or comment comes from the line of Eric Percher from Barclays. Your line is open.

Eric Percher

Thank you. Dave, could you speak to the level of strategic drug pricing in the quarter and any commentary on overall pricing on brand or generics?

David Froesel

Sure. As you probably know, our cash flow from operations in the first quarter of 2016 was very robust. And based on our 10-Q that we filed this morning, we actually had negative cash flow from operations and that was primarily all driven by our spending on strategic purchasing associated with brand drugs in terms of lot of the pharmaceutical companies as you know they raised their prices in January, then they come back second time usually in the middle of the year.

And what we're seeing still when you compare year-over-year, we're seeing brand drug inflation, I would say in the high single digits to around 10% and on the generic side, as I mentioned earlier, we're seeing slight to moderate deflation in the single digits.

Eric Percher

Excellent. That’s helpful. And then Dave obviously you had a large contribution here, I guess the question for Greg, as you think about priorities for this year so well going forward, what is your view over the board in terms of how important today regulatory understanding and M&A understanding, what will you prioritize?

Greg Weishar

Well, first of all you know, I think Dave got a unique understanding of the business through PharMerica which was exceedingly helpful to me and all the other, help the company grow up a lot because of his deep and broad knowledge of the business. I think it would be wonderful if we could replace our CFO with one like him.

But I think what we'll do is we'll look at all the opportunities available to us in terms of who the CFO candidates are, which we have large list already. And we will make the decision based on the fact of M&A as a chief part [ph] of our strategy going forward. And certainly we want somebody with that background.

So we'll just wait and see the candidate that we have available to us. I think it’s pretty important that we find someone as well that that has some fundamental understanding of the pharmaceutical services business because it is a unique business that requires a bit of experience.

Eric Percher

Thank you for the commentary.

Operator

Thank you. Our next question or comment comes from the line of A.J. Rice from UBS. Your line is open.

A.J. Rice

Thanks. Hello, everybody. And Dave best wishes as you move on to figuring better things. Just a couple of questions if I could ask, I know every quarter we talk about the headwinds to revenue that the conversion of branded to generic creates on the revenue base and institutional pharmacy in particular

Last quarter, you guys highlighted a number of drugs that we're converting, particularly well that California was going to begin to dispense on the generic side. Was that headwind more significant this quarter than it has been in other recent quarters?

David Froesel

Well, great question A.J. And just to summarize, going a little bit back in history and then I'll talk about the current situation. As you probably know, there were some fairly large brand to generic conversions that took place in the second half of 2015, notably Abilify, Namenda, Exelon, Zyvox and Copaxone.

And what we saw in a number of cases, even though the brand to generic conversion, generic drug was available, a lot of the TDPs that we have contracts with continued to approve dispensing the branded drugs even though the generic drug was available.

And what we saw going into 2016 and continuing is that the TDP number of them have now moved away from approving for dispensing the branded drug and have now moved over to the generic drug even though that some of these generic drugs went generic in the second half of last year.

California was identical to that. California was primarily dispensing the branded drug and this year moved away from that and is proving dispensing more of the generic drugs. And the only significant drug – new generic drug that we have in '16 so far is Crestor.

So that trend continues and - but when you look at 2017, A.J., there are some other brand to generic conversions such as Advair, Vytorin [indiscernible]. But a lot of those drugs are not big drugs for us.

A.J. Rice

Okay. I noticed in the release when you're talking about cash flow, you mentioned the higher payables and specialty businesses being a positive for you. Is that just the disburse or the diversified business is growing and it naturally has or is it something more than that going on there, that you highlight?

David Froesel

It's simply that the diversified businesses are growing at a very fast pace. Most notably, the oncology business or Onco360 is growing at a torrid pace. And as you well know, when you have businesses growing that quick, there is a continuing appetite for more working capital in terms of higher balances associated with receivables and inventory, partially offset by payables.

A.J. Rice

Okay. And then last quarter, I think you had an unusual situation where bad debt expense was actually a negative for you or it seemed like it was paused. What is happening there this quarter any update?

David Froesel

No, I think what you're referring to in the fourth quarter of 2015 we actually had negative bad debt expense. And that was driven primarily due to a settlement with a customer that owed us a fairly large amount.

In the first quarter of this year, our bad debt expense was $3.2 million and as we mentioned in the call on our prepared remarks this morning, our bad debt expense came down. And in the second quarter, A.J., it was $700,000.

From a modeling or planning standpoint, for the most part, our bad debt expense will probably fall in the $1 million to $2 million area from a quarter-to-quarter perspective.

A.J. Rice

Okay. And then just last question. You mentioned in some of the comments you're making, but any update on the hospital pharmacy effort and what you're seeing there?

David Froesel

Well, what we're doing there is organizing ourselves around the new acquisition and we're looking for opportunities where we can highlight as I indicated earlier, some of our technologies that we've been developing on a long-term care side. I would say it's too preliminary to see progress. But from an earnings standpoint, from a growth standpoint, we're doing fine.

A.J. Rice

Okay. All right, thanks a lot.

Operator

Thank you. Our next question or comment comes from the line of Steven Valiquette from Bank of America. Your line is open.

Steven Valiquette

Thanks. Good morning, Greg and Dave. So Dave, let me wish you the best in your second retirement as well. I'm definitely jealous of anyone who retires in general. I can definitely say that. So just a couple of questions from me. So I think first, given some of those competitive landscape variables you described for LTC pharmacy.

I guess, I'm curious now that with Omnicare now being owned by obviously, a larger company in the pharmaceutical services sector are you seeing any change in behavior from your largest competitor that may be changing some dynamics for you this year or is that not really a factor in some of the things you were describing?

David Froesel

Not material changes in Omni's behavior. It's really not driven by that at all, what I was discussing was more the macro aspects of the long-term post-acute market. I think if you look at Omni versus us, we lose some business with them. They win some business from us.

Net-net, it really isn't that material year in and year out, with the exception maybe now and then there would be a large account. And we did lose a reasonably large account that was disclosed in couple of quarters ago.

But the Kindred is as an example as well. Outside of those types of situations, which are few and far between, we're kind of even in the market. But I think really what we're seeing here is that, there is just a reluctance to be – there is only so much bandwidth that we see within regards - with regards to our clients and the prospects.

And they are more focused really on how are they going to address value-based pricing, how are they going to address the demands for shorter lengths to stay. And how are they going to address the financial challenges that they have.

Generally, it's more about how are they positioning themselves in the market. It's not about - let's make sure that we cut cost as much as we can because, let's face it, we do operate in a very competitive market.

Steven Valiquette

Okay. Got it. Okay, and then just quickly on the retirement, just to follow on that a little bit. I think some investors may be wondering a little bit about the timing sensitive sort of happening mid-year, there is no successor in place.

I think some investors are kind of paying us saying it could be better orchestrated in the circumstances as it is voluntary. I guess, is there anything to say in relation to that to maybe put some investor concerns to rest, just about the kind of the mid-year timing of the retirement?

Greg Weishar

Let me address that. If you look back, Dave signed up for three years and his contract came due August 1st. And I tried to get David to hang in a little longer. But I think if you look back over the years, it is really clearly a situation where Dave needs to focus on some other things in his life and I respect that. So I mean, this was always planned that he would leave after three years and that's what we've done here.

Steven Valiquette

Okay. I think the comments are definitely helpful. So, okay, great. Thanks.

Operator

Thank you. Our next question or comment comes from the line of Robert Willoughby from Credit Suisse. Your line is open.

Robert Willoughby

Thank you. Greg or Dave, just a comment on the payables number, if I'm looking at you guys on trailing 12 month basis, you got the wrong kind of leverage, I guess to that accounts payable days outstanding metrics. So I'm wondering just on the greater size, you're losing some leverage, that I think you said it's mostly mix issues is that it?

And then just secondarily on the inventory balances as they've grown how much of that is in-support of the revenue trends that you're seeing and how much might be opportunistic where you will be speculating on some inflationary metrics?

David Froesel

Well, the first part of your question, I guess the answer to that simply is mixed. And we do a fair amount of strategic drug purchasing, primarily in the second quarter and then we come back a little lighter in the third quarter and then much heavier in the fourth quarter.

But it's a significant use of our cash, which we feel is being deployed in the right way to take advantage of some of the brand drug price inflation that we still see out in the marketplace.

Robert Willoughby

Okay. Thank you.

Operator

Thank you. [Operator Instructions] Our next question or comment comes from line of Mike Petusky from Barrington Research. Your line is open.

Mike Petusky

Good morning. I have few questions. So Greg, I just want to ask that - delve back one more time into this organic dead growth issue. So you said, I think that you're going to see organic dead growth in the second half, but not as great as you hoped. But the revenue guidance for the year remains the same.

I guess what I'm trying to get my arms around is kind of the magnitude of impact or does this impact more '17 as you move forward or can you just talk about that if you can?

Greg Weishar

I think what we're trying to do is prepare ourselves so that we're running on where we are, where need to be given that there is going to be some shortfall coming into '17. So that's why I indicated that we're going to look to offset some of that shortfall with acquisitions going into '17. So that's how we're looking to support '17.

As far as '16 goes, we maintain guidance. And so it is what it is. And we're comfortable that we can hit guidance. But you are quite correct given the fact that some of the dead growth we had was particularly in the fourth quarter, which doesn't materially impact the year, nevertheless, comes in at December, it provides the buttress for having growth in '17. So that's kind of where we're struggling right now.

Mike Petusky

And would you be willing to give some sense of how far along on the M&A goals that this year you guys are, I mean what percentage of that $100 million or so?

Greg Weishar

Well, we're not – we're not – we are roughly at 25% of our goal. But we still have a number of transactions that we anticipate closing.

Mike Petusky

Okay. So in pipeline?

Greg Weishar

Yes, the pipeline is good. And we're comfortable that we're going to hit at least on $100 million. And I think as much as we would like to try to get these done earlier, it just seems like as far as we try, it seems to evolve up in the fourth quarter. And so we're anticipating, we're going to probably get a couple done in September or so. And then couple more in the fourth quarter.

Mike Petusky

And normally I hear that generic utilization figured, did you give that, and I just missed it or can you give that?

Greg Weishar

Yes, I think we are at 86.3% was in our press release, the generic dispensing rate, which was an increase of 30 basis points over '15. But it's slightly increased versus Q1.

Mike Petusky

Okay. Great, that’s all I've got. Thank you.

Operator

Thank you. Showing no additional audio questions, I'd like to turn the conference back over to management for any closing remarks.

Greg Weishar

Thank you, Howard. We have no other remarks. Thank you, again, for your interest in our company and taking time to join our call.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.

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