McKesson (MCK) Wells Fargo 21st Annual Healthcare Conference summary

Strategic direction and recent performance

• Focused on people, culture, and talent, with growth in North American supply chain, oncology, and biopharma services as core pillars.

• Recent $2.25B acquisition of Precision Medicine Group (PMG) aligns with oncology and biopharma strategies, adding CRO capabilities and expanding into payer strategies and market access.

• PMG's CRO focus on oncology, rare disease, immunology, and cell/gene therapy complements existing assets and global reach.

• M&A approach emphasizes strategic fit, financial discipline, and capital allocation rigor, with ongoing commitment to shareholder returns and robust balance sheet.

• AI investments target supply chain optimization, employee experience, customer engagement, and innovation acceleration.

Financial performance and outlook

• Q1 saw 19% earnings growth in North America pharma, driven by broad-based product and channel growth, new product launches, and supply chain productivity.

• Full-year guidance anticipates lower growth in the back half due to planned investments in automation and technology.

• Oncology and multi-specialty segment delivered 33% revenue and 41% AOP growth in Q1, with organic AOP up 15%; drivers include volume growth, new business wins, and disciplined M&A.

• Prescription Technology Solutions (PTS) achieved 9% revenue and 13% AOP growth in Q1, with GLP-1 programs contributing but non-GLP-1 therapies also growing.

• Med-Surg Q1 revenue up 4%, AOP down 20% due to one-time admin costs; pipeline, margin initiatives, and cost controls expected to drive 0%-4% AOP growth for the year.

Industry dynamics and operational updates

• Customer renewals are ongoing, with about a third of business up for renewal annually; focus is on deepening partnerships and expanding service offerings.

• Generic drug environment remains competitive but stable, with supply chain scale and sourcing efficiency as key strengths; generics are less material to overall results than in the past.

• IRA-related revenue headwinds have not significantly impacted operating income due to fee-for-service contracts; ongoing manufacturer discussions expected to manage future IRA waves.

• Biosimilars present a positive long-term opportunity, especially in Part B channels, with optimism for continued growth.

• Progress continues on the separation and rebranding of a business unit, with TSAs winding down, capital structure in place, and IPO/share exit targeted for the back half of next year.