McKesson reported a strong first quarter, with $74.5 billion in total revenues and $7.27 in adjusted earnings per diluted share. Rachel Rodriguez, VP of Investor Relations, welcomed everyone to the call and introduced Brian Tyler, Chief Executive Officer, and Britt Vitalone, Chief Financial Officer. Brian Tyler then led off the call, followed by Britt, and then the call moved to a question-and-answer session. The call included forward-looking statements and non-GAAP financial measures. There was a favorable timing impact from a discrete tax item.

In the first quarter, McKesson saw strong performance in its pharmaceutical distribution business, reflected in 18% revenue growth and 14% adjusted operating profit growth in its U.S. Pharmaceutical segment. This growth was driven by higher volumes from retail national accounts and health systems, as well as good growth in the weight loss and GLP-1 drug categories. McKesson is confident in this performance and has raised its guidance range for fiscal 2024 adjusted earnings per diluted share.

McKesson has a long history of investing in and supporting community pharmacies, and recently launched a new inventory management system and hosted an event to help pharmacists innovate. The company is also investing in infrastructure to improve automation and efficiency, and has partnered with the U.S. government on public health initiatives.

The company has built a dedicated government solutions team with experienced sales, customer service, sales administration, and legal teams to support procurement and provide best-in-class service. Sourcing teams have traveled to multiple countries to expand manufacturing relationships and diversify the geographic presence. The U.S. Oncology Network has grown to over 2,400 providers, offering drug purchase savings and clinical and business services, innovative technologies, efficient drug management, and revenue cycle optimization. The network has enrolled over 120,000 patients in the program.

The U.S. Oncology Network is leading the way in value-based care and has seen significant growth in biopharma services, particularly in the Prescription Technology Solutions segment. They have strong relationships with biopharma companies and offer technology platforms for providers, payers, and pharmacies to help with patient treatment and access to therapies. They also offer solutions to improve operational efficiency and help patients lead healthier lives.

McKesson recently received the 2023 Retail Excellence Awards from Drug Store News, recognizing the value of their retail solutions. They have a strong focus on their people and culture, offering employees the opportunity to form connections and join employee resource groups, which have seen a 70% increase in membership in the past two years. McKesson also published their FY2022 and FY2023 impact report, which detailed their progress in advancing their strategy and driving meaningful outcomes to build a healthier future. Their initiatives are focused on their four impact pillars: their people, partners, community, and planet.

Brian McKesson, the leader of Team McKesson, is proud of the team's accomplishments and progress in their company priorities. The first quarter of fiscal 2024 has shown strong growth and momentum, leading to an increase in top and bottom line guidance. Consolidated revenues increased 11% to $74.5 billion, largely thanks to increased prescription volumes from retail national account customers, specialty products, and weight loss or GLP-1 drugs. Britt Vitalone will provide further insights on the fiscal first quarter results and the updated adjusted earnings per diluted share range.

McKesson Corporation reported a revenue increase of 16% when excluding the impact of its European business operations, including completed divestitures. Gross profit decreased 2%, but when excluding the impact of the European business operations, it increased 7%. Operating expenses decreased 4% overall, but increased 8% when excluding the impact of the European business operations. Operating profit increased 3%, but when excluding COVID-19-related items and losses associated with McKesson Venture equity investments, it increased 9%. Interest expense decreased year-over-year, due to transactions within the company's long-term debt portfolio.

In the first quarter of fiscal 2024, the effective tax rate was 8.4%, with a net discrete tax benefit of $147 million. This resulted in diluted weighted average shares outstanding of $136.6 million and earnings per diluted share of $7.27, a 25% increase from the prior year. U.S. Pharmaceutical's revenue increased 18%, driven by increased prescription transaction volumes, specialty products, and GLP-1 drugs, partially offset by branded to generic conversions. The growth of GLP-1 drugs and other new brand launches led to increased demand for access and affordability support programs. The quarter also saw progress with the oncology growth strategy.

In the first quarter of fiscal 2024, the U.S. Oncology Network saw growth, with total patient visits being 19% higher than the prior year. The joint venture with Sarah Cannon Research Institute is progressing well, and the data and insights business Ontada is being invested in and progressed. The U.S. Pharmaceutical segment saw an 8% increase in operating profit, and when excluding the impact of COVID-19 vaccine distribution, the operating profit grew 14%. This growth was due to increased prescription volumes, generic contributions, operating discipline, and the continued momentum from the oncology platform.

McKesson reported increased first quarter revenues of $1.2 billion and operating profit of $223 million due to increased prescription volumes. Their technology solutions, such as CoverMyMeds, automate the prior authorization process and increase connectivity between pharmacies, providers, payers, and biopharma manufacturers. Medical Surgical Solutions reported revenues of $2.6 billion and operating profit of $235 million, a 1% and 12% year-over-year increase, respectively.

In the first quarter of fiscal 2023, the segment delivered operating profit growth of 7% excluding the impact of COVID-19 related items, driven by growth in the extended primary care businesses and increased volumes of nutritional supplements. International results for the first quarter saw a decrease of 47% in revenues and 35% in operating profit. Corporate expenses increased by 3% year-over-year due to a payment from a prior tax receivable agreement.

In the first quarter of fiscal 2023, McKesson Ventures had losses of $22 million or $0.11 per share. At the end of the quarter, they had $2.6 billion in cash and cash equivalents and had negative free cash flow of $1.2 billion. They returned $770 million of cash to shareholders, including $696 million of share repurchases and $74 million in dividend payments. They also completed a public offering for $1 billion of notes and retired $900 million of notes that were due in March 2024. The Board of Directors approved two actions in July.

The Board of Directors and management have confidence in the execution of their strategic priorities, and as a result, they have increased their quarterly dividend to $0.62 per share and approved an additional $6 billion of share repurchase authorization. The guidance for fiscal 2024 includes a new earnings per diluted share range of $26.55 to $27.35, which excludes certain items such as net gains and losses associated with McKesson Ventures equity investments, a $0.65 benefit related to the early termination of the tax receivable agreement with Change Healthcare, and $1.90 related to COVID-19-related items in the U.S. Pharmaceutical and Medical Surgical segments. Operating profit is expected to be flat to 4% declined compared to the prior year, and 6% to 10% increased when excluding certain items. The outlook for the U.S. core distribution business is expected to be flat to 3% declined.

U.S. Pharmaceutical segment is expected to experience a revenue tailwind from higher volumes related to weight loss or GLP-1 drugs and is anticipated to have a 13-15% revenue growth and 3-5% operating profit growth. The Prescription Technology Solutions segment is expected to experience 7-13% revenue growth and 15-19% operating profit growth due to increased utilization and new brand prescription transaction volumes, as well as strong demand for access adherence and affordability products and programs.

McKesson Corporation anticipates a 1-3% growth in the Medical Surgical Solutions segment, a 30-34% decline in the International segment, and Corporate segment expenses in the range of $580-640 million. The company also expects free cash flow of $3.7-4.1 billion and a share repurchase of $3.5 billion, resulting in a weighted average diluted shares outstanding of 133-134 million.

McKesson is pleased with their strong start to the fiscal year, with their 50,000 team members delivering exceptional performance. Their first quarter financial performance reflects their dedication and the strength of their portfolio. They remain committed to operating profit growth and efficient capital deployment, and their 24% return on invested capital illustrates their focus on shareholder value creation. They anticipate earnings per diluted share growth of 16% to 20% in fiscal 2024 and are confident they will continue to deliver long-term sustainable growth and value creation for their shareholders. They are also focused on accelerating the discovery, development and manufacturing of new therapies, and their services and solutions are at the forefront of improving patient outcomes and ensuring more patients have access to quality care, such as with their GLP-1 products.

Britt Vitalone answers Lisa's questions about the revenue growth from GLP-1s and how it affects the company's margins. He explains that the utilization trends of GLP-1s have been providing a tailwind, but that they have a lower distribution margin rate profile. He also mentions that the company's technology segment offers affordability and access solutions, such as prior authorization programs, which have been well received and provide value to customers.

In the RxTS business, the mix of 3PL business and technologically-oriented solutions is important, and utilization trends have been beneficial. Last year was more volatile due to fluctuations in prior authorization services, but the business is expected to benefit from increased prescription volumes and the need for prior authorization services.

The company is investing in the segment and adding capabilities and programs to take advantage of utilization trends. They have added Rx Savings Solutions, which has provided them with another set of economics. They also have protections in place, such as just-in-time inventories and collection practices, in case of any challenges at an account.

Brian Tyler does not comment on the specifics of contracts with customers, but states that he feels good about the customer contacts and their ability to understand their strategies and growth. He also believes that their mix of customers is representative of their overall business mix.

RxTS offers different services depending on the life cycle of a drug, from launch to maturity. Services can also change depending on competitors in the class. The company strives to provide support for products over their lifetime, offering services such as restricted access assistance, adherence and other offerings.

Britt Vitalone discusses the investments that have been made in the oncology ecosystem, such as in the Ontada business, which have been relatively consistent year-to-year. He also mentions that quarter-to-quarter, the investment levels can vary, and that Sarah Cannon Research is in the integration phase, with some associated costs.

Britt Vitalone explains that the company's generics program is a combination of its sourcing activities and sell-side discipline, which has resulted in good results. The company has also benefited from new generic launches, and is able to provide competitive pricing and a stable supply despite occasional shortages.

Britt Vitalone provided insight into patient visit metrics, which showed 19% year-over-year growth in total patient visits and 7% on a same-practice basis. This reflects the acquisitions and new practices that have been added over the past year. George Hill asked for more detail on McKesson's exposure to oncology, such as the practices, drugs, and GPO, but Vitalone only provided information on patient visits.

Brian Tyler explains that the company's offerings constitute an ecosystem of solutions, consisting of practice management, iKnowMed EMR, GPO services, revenue cycle management, Ontada data analytics, and the distribution business. He believes this expansive value proposition has led to the growth of the network. When asked about the impact of 340B on the Prescription Technology business, Tyler states that it is not a particular driver of that business.

McKesson reported strong first quarter results and is confident in its differentiated market position and ability to create long-term shareholder value. The impact of 340B on McKesson's pharmaceutical distribution business was discussed, and the company believes that their guidance reflects the changes in the 340B regulations and commercial actions. The call ended with the reminder that everyone should have a great evening.

This summary was generated with AI and may contain some inaccuracies.