Uniphar plc (UPR) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I am Emma, your operator. Welcome, and thank you for joining Uniphar 2021 Interim Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Brian O'Shaughnessy, Group Director of Corporate Development. Please go ahead.

Good morning, and welcome to Uniphar plc's half year results presentation, which covers the period 1 January 2021 to 30 June 2021. I am Brian O'Shaughnessy, Group Director of Corporate Development at Uniphar plc. Presenting our results today is Gerard Rabbette, our CEO; Tim Dolphin, our CFO; and Pad Dempsey, our CCO. Before we begin, I would like to remind everyone that you can access the presentation either on our website, www.uniphar.com, under Investor Relations or via the link sent to you when you registered for the conference call. The results presentation will last approximately 20 minutes and will be followed by Q&A. Please note that half year results presentation may contain certain forward-looking statements, beliefs or opinions which are based on current expectations and projections about future events. Actual results may differ materially from those expressed or implied in such forward-looking statements. I would now like to hand you over to our CEO, Gerard Rabbette.

Thanks, Brian. We're starting on Slide 4, which provides an overview of the group. Uniphar operates across 3 divisions, serving over 200 of the world's leading pharma and medtech manufacturers. We serve over 160 countries worldwide, and I'm pleased to say our workforce is now over 3,200 colleagues who are active across Ireland, the U.K., Benelux, the Nordics, Germany, Switzerland and the U.S. Our business performed strongly in H1, with group gross profit growth of 31%, of which 11% was organic. If you move to Slide 5, we discuss our highlights. H1 was a period of strong growth in development where we once again demonstrated the strength of our business model with the ability of our mortality teams to deliver growth in the most challenging of circumstances. EBITDA for the period came in at EUR 41 million, earnings per share increased by 43%, return on capital employed was 18%, free cash flow 53.5, and we finished the period with leverage of 0.5. We've also continued to build on our excellent track record of value-accretive M&A completing 2 deals post period end. CoRRect Medical complements our organic entry into the German and Swiss medtech market and accelerates our capabilities to provide high-value services on a pan-European basis. BESTMSLs broadens our service offering to our pharma partners and will help us to extend our relationships further or current and prospective global clients. We've also fully integrated our 2020 acquisitions with identified synergies delivered. During the period, we've enhanced our robust capital structure by adding 2 new international banking partners, RBC and HSBC, to our banking syndicate. On Slide 6, we outlined the continued progress we're making with our sustainability initiatives. Sustainability has always been at the very core of who we are. As a business, we are rooted in the communities we serve and our sustainability policy is centered around our strong core values. Our people represent our first pillar of sustainability and our newly appointed Chief People Officer has commenced a number of people-focused initiatives, including an employee listening exercise related to the Future of Work, which will help us shape how the group operates in a post-pandemic world. A key focus for the group is to continue to build on our sustainability and governance pillars, and we're delighted with our progress, particularly the delivery of border dependence in line with U.K. code. We're also delighted to welcome [ McDonald ] as our first group Chief Technology Officer, a role that is totally focused on delivering a world-class digital strategy, providing best-in-class business solutions and innovation for our partners. Uniphar, as always, is a focal point of the communities we serve supporting over 40 local charity partners. Our flagship event, Relay for Hope was a huge success last year. And in 2021, this group on initiative will raise over EUR 300,000 for our chosen partners. We will now -- I will now bring you through each division in a bit more detail. Turning to Slide 8. Commercial & Clinical. This division provides sales, marketing and distribution solutions to both pharma and medtech manufacturers. This business is specialty focused. In pharma, we're insight driven, and we leverage our unique multichannel account manager solution for our clients. In medtech, we delivered an integrated agency model, managing the entire sales, marketing and distribution value chain on behalf of our partners. Europe, as you know, is a very fragmented marketplace and poses considerable challenges for specialty manufacturers who wish to enter, and we remain committed to building out our pan-European platform to offer our clients a one-stop shop for Europe. So this division is growing strongly, with revenue for the period to come in at EUR 158 million, with gross profit increasing by 28% to EUR 54 million. Revenue split 71% medtech, 29% pharma, with 60% of the gross profit that we generated from outside of Ireland. On Slide 9, Product Access. We're building a global capability to source and supply medicines, which are unlicensed or in short supply and to manage the lease of specialty medicines to specific patients on behalf of manufacturers. We see this as a huge opportunity because of the growth of specialty and the challenges government face informing these high-priced treatments. This division serves over 160 countries worldwide. We now have the platform we need to become a global leader in this high-growth market niche. Revenue for this division was EUR 86 million, with a 32% increase in gross profit. Revenue split 50% exclusive, 50% on demand, and we worked on more than 50 exclusive patient programs to date. We believe that our digital platforms create a compelling value proposition for our partners, and we're forecasting continued strong gross profit growth for this division. So on Slide 10, we talk about the great market position we have in supply chain. We are the market leader in the 2-player market, servicing over 2,000 hospitals and retail pharmacies. This strong market position is supported by a network of over 373 owned and franchise pharmacies. Revenue for this division was EUR 721 million, with gross profit come in at EUR 61 million, delivering gross profit growth of 34%, as we continue to grow share and outperform the market. This division gives a significant benefit to the wider group capabilities through its high-tech distribution facilities and scalable digital infrastructure, its longstanding manufacturer relationships, its highly skilled people, deep insights into a health care ecosystem and a strong ability to generate cash for reinvestment. I'll now hand over to Tim to provide you with some more color on our financial performance.

Thanks, Gerard. I would now like to take you through the financial highlights for H1 2021. I am pleased to say that the group has delivered a strong performance during the period, with gross profit growth across all 3 divisions. At an overall group level, we generated a gross profit of EUR 134.3 million, up 30.9% on H1 2020. The group delivered strong organic gross profit growth of 11.2%, which was complemented by inorganic growth from 2020 acquisitions, driving the strong reported gross profit growth of 30.9%. Our gross margin percentage has increased from 11.8% to 13.9%, reflecting our continued growth into higher margin opportunities. EBITDA has increased by 36.2% to EUR 41.1 million compared to EUR 30.2 million in H1 2020. This has resulted in a very strong return on capital employed of 17.6%. Adjusted earnings per share increased by 42% on H1 2020 on a like-for-like basis up to EUR 0.071. This was driven by strong operating profit of EUR 28.3 million. Moving on then to have a look at gross profit. Gross profit and gross margin percentage are the key financial metrics we use to track profitability at a divisional level. Commercial & Clinical delivered an excellent return for the period, outperforming our medium-term guidance again. Its strong cash conversion ability and long-term relationships provides the financial profile to enable the company to confidently continue to reinvest in this high margin division. Our organic gross profit growth of 23.7% outperformed guidance of mid-single-digit growth, reflecting the strength of our business, the deep expertise of our team and the diversity across our service offerings. This division contributed 40% of the group's gross profit for the period. Product Access, where we guide double-digit organic gross profit growth, also delivered a good return for the period, with reported growth of 31.6% and strong organic growth of 14.7%. Our investments in [Audio Gap] as well as our Commercial & Clinical investments in the U.S. are developing a unique high value proposition for our clients, which we are confident will deliver double-digit organic growth in this division. Product Access represents 15% of group gross profit. The gross margins have increased during the period to 23.3%, up from 16.2% due to the discontinuation of a high-revenue, low-margin contract. Supply Chain & Retail once again delivered a robust performance, given the impact COVID-19 had on retail pharmacies during the period, with reported growth of 33.8%. The growth in gross margin to 8.4% from 6.9% in H1 2020 reflects continued positive margin trajectory boosted by Hickey's acquisition. This division also has strong recurring revenues plus a stable and robust gross profit profile. Organic growth for this division at 1% is a strong performance in the context of reduced footfall in retail pharmacies as a result of COVID-19 restrictions. But it is important to note that we once again outperformed the market in terms of volume. This division represented 45% of group gross profit for the period. In terms of margin, each division performed in line with expectations during the period. Commercial & Clinical delivered 33.9%, Product Access delivered 23.3% and Supply Chain & Retail 8.4%. We expect the overall group gross margin to continue to increase. Just moving on to the next slide to have a look at net debt. At a high level, we finished the period with a net bank debt position of EUR 30.3 million, driven by opening net debt of EUR 34.4 million, strong EBITDA of EUR 41.1 million, offset by working capital investments of EUR 7.2 million. CapEx of EUR 7.7 million includes strategic CapEx of EUR 1.5 million relating to our investment in our regional facility outlined in previous results, which is now fully operational. Other items of EUR 23.1 million includes exceptional cost interest, lease payment, tax and dividends. We generated EUR 28.6 million of free cash flow, which equates to a 69.6% free cash flow conversion ratio. Normalized free cash flow conversion ratio was 63.3%, which I'll cover in detail in the next slide. Free cash flow. Our medium-term guidance for free cash flow conversion is 60% to 70%. We are pleased to continue to achieve free cash flow conversion within our guided range, reporting free cash flow conversion ratio of 69.6% for the period with normalized free cash flow conversion being 63.3% for the period. Net timing adjustment of circa EUR 2.7 million, primarily related to the unwind specific one-off credit terms and the cautions in relation to Brexit uncertainty outlined during the FY 2020 results. Then just having a look at liquidity on the next slide. From a liquidity perspective, the group is in an excellent position, finishing the period with a 0.5x leverage with a banking covenant of 3.2x. The group has a strong capital structure in place with significant cash resources available. At the end of June 2021, it had a net bank debt position of EUR 30.3 million, made up of EUR 72.4 million of cash and cash equivalents and EUR 102.7 million of bank debt. The group has access to ample financing to support growth via our banking facilities, with access to EUR 240 million via committed and uncommitted facilities, excluding overdraft. Our banking facilities have been further strengthened through the addition of 2 new international banking partners, HSBC and RBC. This expanded syndicate will continue to support our organic and inorganic growth in the years to come. Our capital structure is well positioned to support the execution of our strategy of doubling our 2018 pro forma EBITDA of EUR 46 million within 5 years from the date of IPO. I'll hand you over now to Padraic, our Chief Commercial Officer.

Thanks, Tim. We'll move straight on to Slide 18 with a brief reminder of our divisional objectives. We remain focused on the expansion of our European platform within the Commercial & Clinical division. Driving differentiation through patient centricity in our Product Access division and adding value to our pharmacy customers across Ireland with the growth of our symbol groups in Supply Chain & Retail. Following strong M&A in 2020, we were delighted to add 2 new acquisitions to the Uniphar Group in the first half of 2021. The CoRRect Medical deal closed in July and continues our approach of staying focused on specific therapeutic areas. With a strong interventional cardiology customer base, we've accelerated our ability to offer medtech clients a fully integrated sales, marketing and distribution route into Germany and Switzerland. BESTMSLs completed a month later. The strategic rationale of this acquisition was to allow us to recruit and build medical science liaison teams for our clients with specialty portfolios. The role of an MSL has increased significantly in recent years. BESTMSLs have been active in the U.S. market for over 15 years and have an experienced management team and fantastic client base working with companies such as AbbVie and BMS. Aligned with our strategy, BESTMSLs have worked hard to build their digital capabilities and already have an established multichannel-enabled MSL offering in place. Now for a brief update on Commercial & Clinical. As Gerard highlighted earlier, we had a strong start to 2021 in this division. The performance can be attributed to 2 key factors. Firstly, a return of elective procedures closer to pre-COVID levels in all markets served. Secondly, the need for additional critical care products to meet pandemic requirements have seen some significant orders being delivered so far this year. Although delighted with the organic growth delivery year-to-date, divisional performance is predicted to return to a more normalized level for the second half of 2021. Key focus has now shifted to the integration of CoRRect Medical and BESTMSLs to maximize all cross-selling opportunities for 2022. We have planned several client launches into Germany for quarter 4 of this year, where we have already started to invest in additional sales resources. Alignment of key clients across several geographies has helped us to deliver organic growth in our Commercial & Clinical division. We are very focused on ensuring every client understands our full capabilities with sales, marketing and distribution expertise now in 15 countries. From a Product Access perspective, we continue to target double-digit growth. With another strong performance of 15% organic growth in the first half of 2021, we have now positioned ourselves as a significant player in this growing market. Having been awarded over 15 new exclusive access programs in 2020, 2021 has been about successful implementation. The quality of our program delivery has been recognized by our clients, and we are now seeing a significant step-up in the size of the opportunities we are working on with both existing and new clients. The acquisitions of Innerstrength and RRD have enhanced our expanded access offering and form an important part of the value-added solutions we can now bring to larger pharma clients. Working with top 10 pharma has been a strategic focus of the division. We were delighted to be awarded our first international program with a top 10 company this year. Having built a strong reputation in therapeutic areas such as oncology, neurology, HIV and gene therapy, we have gained additional experience in areas such as CAR T-cell therapy and transplant throughout 2021. Within Product Access, we continue to see strong cross-selling opportunities throughout the group with several new opportunities coming through our U.S. acquisitions, Diligent Health and BESTMSLs. Finally, Supply Chain & Retail have had a very positive start to 2021. In addition to increasing volumes, continued growth of market share and the integration of Hickey's pharmacy chain, the team has managed to grow our symbol group membership to 373 stores. The continued investments made in our people, digital platforms and distribution facilities have enabled this performance and highlights Uniphar's position as the domestic leader in the Irish market. COVID has highlighted the importance of supply chains around the globe. We see the potential for many opportunities arising in our Supply Chain & Retail division over the next number of years. We will continue to look at innovative ways to add value to both our pharmacy partners and pharmaceutical clients for further growth. I'll now hand you back over to Gerard.

Thanks, Padraic. We're now on Slide 24. So as we look forward, our business is in a strong growth trajectory, and we will continue to invest to execute on the significant market opportunities we see. Capital allocation has and remains a key focus for the group, and we adopt a very disciplined balanced investment approach. We will invest in organic and inorganic opportunities across each of our 3 divisions, which supports our strategic initiatives by providing a return on capital employed at or above our hurdle rate. Our medium-term guidance remains unchanged. Double-digit organic gross profit growth for Product Access, mid-single digit for Commercial & Clinical and low single digit for Supply Chain. We remain confident that we will deliver in excess of 60% free cash flow, generate return on capital employed between 12% and 15% or above, while keeping normalized leverage low. On Slide 26, we outlined our investment case. As we see it, we are a well-diversified health care -- quality health care services business positioned to win in growth markets. There's no doubt that we have a compelling market opportunity driven by the increased demand across the globe for specialty products and growing trends by pharma and medtech manufacturers to outsource to specialist providers with well-invested and proven infrastructure. In response to this, we designed and built an integrated model, providing an end-to-end solutions across the value chain and throughout the product life cycle. The platform for growth is in the place. We believe we have a distinct competitive edge to our high-tech distribution facilities, our deep relationships with global manufacturers, our high-scalable tech, our high-scalable people and our strong M&A track record. We have a strong balance sheet, with great ability to generate cash and a highly experienced industry team. In summary, we're confident that we have the strategy, the market opportunity, the platform, the competitive edge and the team in place to deliver on our strong growth plan and to deliver on the commitments we made at IPO just 2 years ago. Thanks for listening.

[Operator Instructions] The first question today comes from the line of Allan Smylie with Davy.

I have 2 questions just to kick off. The first one for Commercial & Clinical. It's great to see the expansion of the platform into the German market this half. And I'd just be interested on what your current thinking is with respect to moving into the other large European markets where you don't have a presence and whether you'd like to do that organically or through M&A if possible? And secondly, on the Product Access division, in particular, exclusive access, it's great to see further program wins again this half, but it looks like the run rate is mostly slower than last year. So if you could give some color around that? I'd also be interested in what, if any, business development synergies you're seeing and the RRD acquisition is fully vetted in?

I think, Allan, I think we were good forward now to drive our organic acquisitions through both organic and inorganic acquisitions. Our growth is across pharma and medtech, and we want to keep doing that. So obviously, the bigger markets have a bigger opportunity. So we need to be open to bigger transactions. But as you see, we've been able to build out our European footprint without deploying too much capital. But ultimately, we need to be open to -- if a big opportunity comes on to be ready to do it. Pad, do you want to talk about Product Access?

From a Product Access perspective, Allan, I suppose, on the exclusive wins, you're right, we -- we've recorded 5 in the first half of this year, which is slightly behind last year. However, we have focused this year on working with larger pharma clients and working on bigger programs. It was a kind of a strategic focus for us. So when you're looking to work with the larger pharma, the sales process is a little bit longer. There's more hoops to kind of really jump through. So we've been doing that. We were delighted to win, I mentioned in the presentation, kind of our first international program with the top 10 pharma this year. And that's been very exciting. So we remain focused on the process now of trying to work with the large top 10 pharma guys, because I think that will drive future pipelines. With regards to cross-selling opportunities, we're seeing a lot of that in the business, both through new acquisitions. We've seen a number of leads come our way from Diligent Health, from RRD and even with the BESTMSLs acquisition because of the role they're playing with medical affairs, we've identified a number of opportunities. So I think from a group perspective, we're seeing a significant number of cross-selling opportunities. And actually, one of our most recent liver transplant -- I'm sorry, kidney transplant programs has actually come from one of our U.S. acquisitions. So we've been quite excited about that.

The next question comes from the line of Charles Weston with RBC.

So just a follow-on really from those. In terms of the integration of the acquisition, how is it that you incentivize the teams to start delivering those sales synergies early. You talked about them really across the business. So what is it you put in place to drive that? Second question is, in the report you mentioned that the synergies delivered from the acquired pharmacies has been better than expected. How does this happen? And does it increase your appetite for more pharmacy acquisitions? Thirdly, is there some sort of critical mass of medical device network that allows you to be Pan-European, you've obviously got a number of countries that you can offer now. Are you having discussions with pharma -- with medtech companies about selling across launching product, literally across all the territories that you operate in? And lastly, please, on your M&A pipeline, you talked about managing an active pipeline of opportunities. Can you provide any more color about where they might be focused and their potential size?

Thanks, Charles. So the M&A question is probably the easiest question to answer, Charles. Obviously, we have a very strong track record of M&A -- value-accretive M&A. I think we've really strong skill set within the business today, so we focus on very strongly. So we're determined to grow each of our 3 divisions, both organically and inorganically. So I think what we are seeing, Charles, in these assets -- health care assets are becoming more and more expensive. But ultimately, that means we have to work harder to get good deals done, but we're seeing huge opportunity right across the 3 divisions in M&A pipeline. But we are, as you know, have extremely prudent patients and we take our time on this, and we have a great track record. So we just want to keep doing that and make sure that we do that in a very disciplined way, Charles. But we are open to a transformation acquisition if it comes along. There are a couple of things out there at the moment, Charles, but basically, nothing at an advanced stage. But we have a very strong pipeline. Brian is still working very, very hard and we're working with the team. So we do that in a very collaborative way. Probably from an M&A perspective, what we try to do is hook up with people, with like-minded people who we can work with. And ultimately, we see it as a partnership. So we buy these businesses and then we try to scale them. We try to support the management to grow the business. And ultimately, we're both working with the target management to grow the business. So by the time as [indiscernible] goes, these business are very well established within our -- within the group as a part of the Uniphar family. That form has worked very well for us, and that's really important for us going forward, Charles. And then probably from the Supply Chain & Retail assets, we're only into buying quality, Charles. So we're totally focused on buying quality assets in that space. So there is -- it's not [ on limited ] opportunity. But ultimately, we were fantastic in Supply Chain & Retail business now and we can plug and play a lot of these assets and create very attractive returns for ourselves. So that's how we want to continue to do that. Padraic, on the M&A, the medtech?

Yes. On the cross-selling synergies, I suppose, the first piece, Charles, this is relatively self-fulfilling in many ways. So one of the great things is that when we present as a group and we're fortunate enough to win areas -- business in areas such as structural heart, although we launched that first in the Benelux, when we then launched it into the Nordics, the team in the Nordics get the benefit of that. So the team worked very closely because actually, if we present as one and the new technology we're able to bring to the market actually contributes to the financial performance of their businesses. So that's a really important part of the process for us, and probably the structural heart is the best example of that where we've gone from Benelux, down into the Nordics and we hope to move into new markets with it very quickly as well. So that synergy and that financial benefit is important. It's similar in the Diligent world and we hope in the BESTMSLs world. In the sense that if you're working on an early access program for a pharmaceutical client, the benefit, therefore, is they need additional services to be able to commercialize those brands. So the likes of [indiscernible], et cetera, and Diligent gets the benefit of clients coming into their service offering. So that's a really important part of what we do. On the critical mass in Europe, what has been very important to us from a client perspective as we look at the markets that are particularly important to them. So again, when you look now at our offering, we wanted to be able to provide the Benelux, the Nordics, Germany, the U.K., that kind of Northern European launch plan is very important. You are right. As we've expanded out there, we're getting more questions to say, "Now, could you look at other markets?" So there, we begin to assess. But what's very important in our offering is that we can talk to our clients about where they should launch first and where it will be most effective from their launch. So a lot of the emerging medtech clients really appreciate that guidance on where to go. The larger pharma clients are probably less concerned in the sense that they're in the bigger markets anyway. So what they're really comfortable with is that we're able to cover off the Benelux, Nordics, et cetera, Ireland, some of the smaller markets for them. So it's trying to get that balance. But the launch plan into Europe, we've really covered the key markets that they want to be at from a very early stage.

I don't want to hog the call, but just one, I guess, follow-up on that. When you moved into Germany sort of first organically and then for acquisition, you talked really within just a few weeks almost about launching new products into those territories, leveraging your existing relationships. I think you've highlighted a couple of other midterm targets. If my geography is not wrong, it looks like -- is that Austria and France, because we assume the same sort of thing, i.e., there's a sort of a pent-up demand within your existing network of clients that would enable you to quickly launch new products into those regions if you had the capacity to do so.

Yes, Charles, with the emerging clients, absolutely. I think they're absolutely seeing the benefit from working with ourselves across several markets. It really simplifies their route into Europe, obviously. So we do get a lot of questions about other markets that we could help with. And usually what does happen then is the team will go directly to Brian and corporate development and really start to identify who those companies that we could acquire, where they are. And the therapeutic focus is really important to us. Because we don't step outside of our therapeutic focus, it means that we can add real value. So again, going into these markets, we would only go into these markets if we had a very strong knowledge of the therapeutic area. What we find is a lot of those health care professionals, those key opinion leaders are talking regularly. So we have good access into new markets. But yes, there are definitely clients who are asking us about other markets at the moment.

The next question comes from the line of Max Herrmann with Stifel.

Three, if I may. Firstly, just on the comments about the -- in commercial and clinical on the elective and then returning to normal. I wanted to try and get an idea of just in the first half, what sort of level they were relative to what you would say was pre-COVID? And then -- and understand whether you expect there to be sort of a catch-up or a backlog kind of catch up in the business at any time? Maybe that's the first question. Second on -- again on Commercial & Clinical, which obviously had a very strong first half. In terms of the organic growth outlook there, mid-single digits in the midterm, I wonder given your scale in the business in Europe and the opportunity to grow throughout Europe, whether that's maybe a target you could regularly exceed given the growth opportunities there? And then finally, just on the tax. Just trying to understand the phasing, I think you've mentioned the tax rate was high in the first half and how the balance, if there is any seasonality in the U.S. businesses you've acquired between the first half and the second half, just to understand the phasing of the higher tax rate in the first half?

Thanks, Max. So just on the guidance, though, I think mid-single digits, we believe is achievable, but what's very important for us is as we grow, we continue to invest in our business development, in our project management scale, so that we can make sure that that's achievable, maintainable in the long term. I think if you try to fast track that progress, Max, sometimes, I don't think it's good business. So we wouldn't be changing our guidance with regards to -- despite the opportunities we see and with regards to our organic growth within Commercial & Clinical. Tim, you might take the tax point, please?

Yes, Max. It's very positive our U.S. growth, a -- and the mix and the impact of that has on the tax rate [indiscernible] that the company is expanding there. We don't see any seasonality though in the U.S. acquisition. While there's a small amount, it wouldn't be enough to impact on the tax rate. So we would forecast that our year-end -- our full year tax rate should come in effectively in the region of between 18% and 19%. So I wouldn't see any impact of -- on a seasonality perspective, as you say.

Padraic?

Yes. Max, from the elective returning -- procedures returning, we estimate and we feel that they're back to about 80% of pre-COVID levels across all of our markets. So obviously, there's variance in either markets. In terms of a backlog, because of our scale, we would be absolutely kind of ready to deal with that if more patients came through. I think the challenge in seeing that happening is that the hospitals, because our products are obviously hospital-led and that's where we focused on the specialty, trying to see how many more patients they could get through the system is the challenge at the moment. So we're looking at that, obviously. But I think everyone in our industry will be very comfortable if it got back up to the 100%. In terms of the backlog, I think that's just going to play out over a longer period, unfortunately, for patients. So we are ready to deal with it, but the hospitals themselves now have a big challenge in terms of how they're going to treat these patients.

Right. Could I have just a quick follow-up on the Commercial & Clinical. In terms of -- I know you mentioned you had 2 contracts. I think that you had already won from your existing client base ahead of your acquisition of CoRRect Medical. I wonder whether you -- what your experience has been with other partners that you already had through the Uniphar business now that you've got CoRRect Medical in place?

Yes, it's been -- I'm sorry. Yes, sorry, Max, it's Padraic here. Yes, look, it's been very positive. There has been -- again, from the interventional kind of cardiology perspective, the team have worked really hard to really communicate our strategic plan to our clients. So our clients are aware that we're on this expansion. So a number of the key targets that we had in place have declared an interest in working with us in Germany now. Obviously, what's really important to them is that they meet the new team, and they want to make sure that the new team in CoRRect Medical is as strong as the teams we had in place within our SISK business, our EPS business and our AngioCare business. So we're very confident when they see and really get to know those teams that they will be keen to work with us in the German market. So we're very confident of the predictions we have for agency launches into Germany, a lot of bold has gone into it in advance of the acquisition. So I think the numbers that we're talking about are realistic for the end of this year.

Right. And the other way around, are there any CoRRect Medical clients that may want a broader than a German sort of Swiss commercialization? Is there opportunities to expand beyond the German market for those clients?

Yes. Again, I suppose the interesting thing from a CoRRect Medical perspective is that they work with a lot of kind of smaller emerging medtech. So again, one of the things that appealed to CoRRect to sell their business to Uniphar was that actually, they felt that having companies in those core areas and across Europe was going to be seen as a real benefit to the CoRRect Medical group. So they are very confident that a number of their clients will look to work with our group in new territories. And actually, they feel there's a number of clients that they're currently talking to across the U.S. who will be very excited about the concept of this pan-European offering.

[Operator Instructions] The next question comes from the line of Alistair Campbell with Liberum.

I had another question on Commercial & Clinical, obviously, a really strong first half. And just looking at the mix there, pharma performed particularly well. Now you called out COVID as a benefit given the shift towards digital communications in the pharma industry. So I'm kind of just trying to get what's your sense that pharma might begin to revert back towards more of a face-to-face environment. It may that happen in a meaningful way? Or actually, do you think this is a sticky change in their business model and actually something where you'll continue to thrive? And then -- and maybe just a sort of a boring modeling question, just on Product Access. Can I just make sure I've got the scale of the revenue impact for your discontinued contract there. Obviously, no profit impact, but just to make sure I've got the sales number correction in the right ballpark?

Alistair, so great question. I wish we all had a crystal ball to answer that correctly. But what we would say is pharma changes very slowly. I've been in this business a long time, and it doesn't change as quickly as other industries like. I certainly think COVID has definitely changed it for a period. For the [indiscernible], we don't know. But ultimately, we're positioned to benefit either way. So I think like everything, it will be a hybrid go-forwards, Alistair. But I don't believe pharma are going to fundamentally change how they do business because of COVID. I think it will gradually ease back, but it will change to some extent but not fundamentally though. This is a -- again, it's a great question, Alistair, and it's -- but that's how I would see it. We would differ with regard to your view within our own business. Padraic?

Yes. No, I'd agree with Gerard on this. I think the pharma model, it will definitely change, but it's going to be slower than people think. And the other piece I would say is that in the area that we focus on, on specialty products, that face-to-face interaction is critical because we're bringing kind of a lot of new technology to the market. We're not building huge teams anymore. These are very specific. That's why we acquired BESTMSLs. So we do see that technology will play a big part in enhancing communication, but the face-to-face piece will still be very important for many of the products that we look to commercialize in the future.

So I'll take a point on the contract in Product Access in H1 2020, there's about EUR 30 million of revenue there. In H1 2021, that would have been 0. But it's important to point out that there's been roughly no impact on the gross profit.

The next question comes from the line of Amy Walker with Peel Hunt.

I have 2 left, please, I'll ask them individually. The first one was the sort of bigger picture market question team. McKesson's decision to sell its activities in Ireland and some of the other European territories to the Phoenix Group. Do you see that as a comment on Europe as a market versus the U.S. and the relative attractiveness of those 2 geographies? Or should we see it more as a failure on McKesson's part to execute effectively in Europe? And do you think Phoenix Group would be a tougher competitor than McKesson was for you? That's the first question. I'll ask the second one afterwards.

Great question, Amy. I think Europe is a much tougher market than the U.S. So when the guys came across the pumps to invest in Europe, I don't think they fully understood the dynamics. Obviously, we know it really well. And it's -- we are in Europe, but ultimately, every jurisdiction is different. So that's a real challenge. Now we see that as an opportunity for ourselves. Maybe I don't think it's necessarily a poor reflection on McKesson and that they have opportunity to deploy the capital better in the U.S. than they have in Europe. So that's their -- that's what they can do well. But I wouldn't see a negative on the McKesson's team right here. I think it's more to do with the challenge and complexity of the European market. From our perspective, Phoenix, we know Phoenix very well, a private company, Amy. We have competed with them now for a long time. I wouldn't -- I think we could still outperform and do well in new competitive landscape. We're much more -- we would see in the new world, we've invested heavily in infrastructure, and we've got great relationships with our people. So I think I'll be confident that we will continue to outperform, Amy.

That's good to hear, Gerard. And then my second question was really just sort of following on from the comments that Max and Alistair touched on already. But perhaps just to ask it a little bit more broadly even. What, if any, lingering impact, positive or negative, are you seeing now? Or do you anticipate will come from the shakeup that the pandemic has given to the markets that you operate in, in general? Maybe just restricting ourselves for the sort of short to medium term, so for here for the rest of 2021 into 2022? Obviously, we touched already on hospital utilization as an impact for C&C and digital engagements in PA. But just if there are any other things we should be bearing in mind beyond those 2 factors?

Amy, we're very well diversified. So we've reshaped Uniphar in the last couple of years, we've basically tried to ensure that we have a robust business that's maintainable and we can take on whatever threats or opportunities that come along. So we're pretty confident that as we drive along, we're in good shape. The only probably thing we flag it basically certainly in the specialty space, in products, these expanded access programs face-to-face conversations are very important. So we managed to tie through that the last 1.5 years without having any major impact, but we will be keen and the team will be keen not to reengage with people on a face-to-face basis for these kind of fundamental problems, do each face time to get over the line. Padraic?

Yes. Amy, I think the other piece aligned to that is when you're working with all companies now, pharmaceutical, medtech, the reality is there are a lot of companies are quite inward focused at the moment, returning to work, how they get their workforces back, what do they need to do. So I suppose the thing that we're really tracking, there's a lot of business development opportunities, but decisions are being made a little bit slower than we're used to. So what we're really looking to see is to make sure if we can keep those decision-making processes into the end of this year? Do they fall into the start of next year? But I think that's the only other thing that -- as Gerard said, one is, it's a face to face. And the second is that from an outsourcing perspective, they have a few decisions to make themselves in the next number of months. So our team are working really hard to try to accelerate any decision-making process by the end of the year. So that's the one thing we are tracking and monitoring.

Just as a quick follow-up to that. It sounds like you don't have a great deal of control over that process though. I mean I guess it's your customers are inward focused and they've got a time line that they're working to. That sort of is what it is. So do I decide from that, you were sort of a bit hostage to fortune and slightly nervous about the rate of business development, particularly in PA perhaps over the next 6 months?

No, we wouldn't be, which means -- no, we wouldn't be. But I think if we have face-to-face, we can fast track forward quicker, Amy. So it wouldn't make us -- as we look out to our business, it's pretty much -- we have a very clear visibility of where we're going to be for the next 12 to 18 months. But ultimately, Amy, we're always trying to do things faster, do things quicker like it just -- the lack of face-to-face definitely close Europe, Amy. [ We do not know about that but certainly for new programs, ] Amy. Padraic?

Yes. And I think those -- Amy, those -- these programs are so important. So we're not concerned on the basis that these decisions will take very long. As I said, we've met -- we've got into new areas like transplant, CAR T-cell therapy. So the companies need to make these decisions. There's patients that, that they want to serve. So I think that's the piece. It's just obviously accelerating as quick as we can. But we're very confident that the programs that we have lined up will fall through because actually, we're self-specialist now. Some of these products are really important from both the physician and patient perspective that they get access to them. So that's probably the piece that we've a lot of comfort in is that we know the programs that are in our pipeline are critical for patients as well.

At this time, there are no further questions. I hand back to Ger Rabbette, CEO, for closing comments.

Just thanks so much for dialing in H1. So we see at the H2, and thanks for listening.

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.