MCKESSON CORP Q2 FY2025 earnings call

• People and Culture: Employees celebrated Wellness Day, and McKesson was named one of the best places to work for disability inclusion for the ninth consecutive year.
• Sustainable Growth in Core Distribution: Successfully onboarded a new strategic partner in the US Pharmaceutical segment. Launched InspiroGene by McKesson to support cell and gene therapy commercialization.
• Oncology and Biopharma Services: Continued growth of the US Oncology Network, including acquisition of Core Ventures and addition of new provider groups. Biopharma Services has technology-driven solutions for improving access to prescription drugs, like prior authorization and affordability programs with significant patient savings.
• Modernizing and Accelerating the Enterprise: Launched companywide initiatives to modernize cloud services, leverage AI/automation, and drive operational efficiencies. Announced sale of Rexall and Well.ca in Canada.

US Pharmaceutical: Revenues were $85.7 billion, an increase of 23%. Operating profit increased 11% to $902 million. Prescription Technology Solutions: Revenues were $1.3 billion, an increase of 11%. Segment operating profit increased 4% to $218 million. Medical Surgical Solutions: Revenues increased 4% to $2.9 billion. Second quarter operating profit decreased 4% to $243 million. International: Revenues were $3.7 billion, an increase of 7%. Operating profit was $100 million, an increase of 12%. Corporate: Expenses are anticipated to be in the range of $510 million to $560 million.

• Raised and narrowed fiscal 2025 adjusted earnings per diluted share guidance to $32.40 to $33.00.
• US Pharmaceutical segment anticipates revenues increase 16%-19% and operating profit increase 9%-11%, with a new strategic partner contributing ~$31B in incremental revenue.
• Prescription Technology Solutions anticipates revenues increase 8%-12% and operating profit increase 11%-15%.
• Medical Surgical Solutions anticipates revenues increase 1%-5% and operating profit at low end of initial guidance.
• International segment anticipates revenues increase 5%-9% and operating profit increase 16%-20%.
• Anticipates free cash flow of $4.8B-$5.2B and updated share repurchases to ~$3.2B.

• Healthcare policy changes due to elections and potential impacts on healthcare policies.
• Market volatility affecting segments like Prescription Technology Solutions and Medical Surgical Solutions.
• Regulatory challenges related to acquisitions and divestitures.
• Biosimilar volume fluctuations impacting revenue.

Q: Discuss key drivers of US Pharmaceutical growth and utilization trends.

A: Britt Vitalone mentioned consistent pharmaceutical utilization trends, growth in GLP-1 medications, new strategic partner onboarding, and growth in the oncology platform.

Q: Volatility in RxTS and Medical segments. Impact on modeling.

A: Britt Vitalone noted quarter-to-quarter variability due to factors like utilization trends, new product launches, payer requirements, and 3PL delays, but AOP not materially impacted.

Q: Med Surg segment profitability bridge. Long-term prospects.

A: Britt Vitalone discussed modest improvement in second quarter, $100M savings in second half, and Brian Tyler emphasized long-term positioning against secular trends.

Q: US Oncology growth and acquisition strategy.

A: Brian Tyler explained growth through various methods like anchor sites, market assessment, and leveraging best practices across network.

Q: Biosimilars impact and future dynamics.

A: Britt Vitalone noted biosimilars provide clinical choice and better value, with opportunities in part B and oncology/specialty areas.

Q: InspiroGene business and clinical trial leverage.

A: Brian Tyler discussed InspiroGene's role in supporting cell and gene therapy commercialization and leveraging oncology assets.

Q: Med Surg product mix and differentiation.

A: Brian Tyler mentioned growing private label, customer choice between national brands and private label, and investment in private brand growth.

Q: Sara Cannon participation in clinical trials.

A: Brian Tyler and Britt Vitalone noted increased participation in clinical trials, with ~20% increase since joint venture.

Q: ClarusONE strength and contract timing.

A: Britt Vitalone discussed ClarusONE's organic growth, focus on cost, supply, and service levels for generics.

Q: Med Surg utilization normalization and cost savings.

A: Britt Vitalone discussed illness season variability and $100M savings in second half, with confidence in second half performance.

Q: RxTS ramp dynamics and guidance risk weighting.

A: Brian Tyler mentioned visibility into contracts, seasonal pickup in second half, and confidence in second half performance.