The paragraph introduces the McKesson third quarter fiscal 2024 earnings conference call and the speakers, Rachel Rodriguez, VP of Investor Relations, Brian Tyler, Chief Executive Officer, and Britt Vitalone, Chief Financial Officer. It mentions that the call will include forward-looking statements and provides cautionary information. Non-GAAP financial measures and updated guidance are also mentioned. Brian Tyler then discusses the company's solid fiscal third quarter results, including double-digit growth in total revenues and adjusted earnings per diluted share.

McKesson is raising and narrowing their guidance range for fiscal 2024 adjusted earnings per diluted share due to their strong financial performance and focus on execution. They are uniquely positioned to improve healthcare in various settings, including oncology and biopharma services. The company has made progress in advancing their strategy and priorities, including welcoming a new independent director and focusing on people and culture. McKesson's commitment to diversity and inclusion has been recognized by various organizations.

In the third quarter, McKesson saw good performance in their distribution businesses, with a 6% growth in adjusted operating profit in the U.S. pharmaceutical segment. They have invested in automation and technology to improve efficiency and productivity in their distribution centers. Prescription volume growth remains stable, with certain product categories like specialty pharmaceuticals and GLP-1 medications contributing to revenue growth. The medical-surgical segment also showed modest improvement in primary care visits.

The company's medical segment is facing challenges due to lower patient visit volumes compared to the previous year, but its Canadian business is performing well. The company is investing in modernizing its distribution centers in Canada. In the oncology and biopharma platforms, the company has expanded its U.S. Oncology Network to include two new practices in Tennessee, bringing its provider base to over 2,500 across 30 states. The network offers comprehensive solutions to support community-based oncology practices, including new artificial intelligence capabilities for revenue cycle management and clinical solutions.

The use of AI and machine learning has improved insurance coverage and reimbursement processes, allowing providers to focus more on patients. The prescription technology solution segment has seen strong growth, particularly in prior authorization solutions for GLP-1 medications. These solutions streamline the process and improve access for patients. The company serves biopharma companies and has a large network of pharmacies and providers, allowing for efficient communication and integration of services. The company has been preparing for the upcoming "blizzard season."

The paragraph discusses McKesson's fiscal fourth quarter, which is typically their busiest time of year due to customer annual verification activities. The company is on track to deliver another successful season and their products and solutions in oncology and biopharma services continue to see growth. The company is committed to delivering long-term sustainable growth and is confident in their assets and expertise. The healthcare market is ever-evolving, but McKesson is dedicated to finding new ways to drive positive impacts for their customers and patients. The company thanks their employees for their hard work and dedication.

The company exceeded expectations in the third quarter, demonstrating their ability to create sustainable value for shareholders. They recorded a provision for uncollected trade accounts receivable from Rite Aid, but this will not have a significant impact on their adjusted earnings per share. The company saw solid growth in the third quarter, driven by strong performance in the U.S. pharmaceutical and prescription technology solution segments. As a result, they have increased and narrowed their full year outlook for adjusted earnings per share. Revenues increased 15% to $80.9 billion, largely due to strong utilization trends and growth in the U.S.

In the third quarter, McKesson's pharmaceutical segment saw higher revenues from specialty products, retail national account customers, and GLP-1 medications, but lower revenues in the international segment due to divestitures. Gross profit and operating expenses increased, but operating profit decreased due to lower contributions from U.S. government COVID-19 programs and a non-recurring charge. Adjusting for these items, operating profit increased. Interest expense decreased due to effective management of loans.

In the third quarter, the effective tax rate for the company was 10.6%, with a decrease in diluted weighted average shares outstanding and an increase in earnings per diluted share. The U.S. pharmaceutical segment saw an 18% increase in revenues, driven by higher prescription volumes and increased contributions from specialty products, GLP-1 medications, and commercial COVID-19 vaccine distribution. However, the company does not expect significant contributions from commercial COVID-19 vaccine distribution in the fourth quarter.

In the third quarter, the company saw an increase in operating profit, driven by growth in the distribution of specialty products and the demand for access solutions in the prescription technology segment. Revenues also increased, thanks to higher prescription transaction volumes and sales to new customers. However, in the Medical-Surgical Solutions segment, revenues only saw a 2% increase due to lower contributions in the kitting, storage, and distribution of ancillary supplies for the U.S. government's COVID-19 vaccine program. Primary care patient visits and demand for commercialized COVID-19 vaccine distribution were also moderately higher. Overall, the company faced some challenges due to the ongoing pandemic, which affected operating profit compared to the previous year.

In the third quarter, McKesson's operating profit decreased by 16%, mainly due to lower contributions from the kitting, storage, and distribution of ancillary supplies for the U.S. government's COVID-19 vaccine program and a softer illness season. However, excluding the impact of COVID-19 related items, the segment still saw a 7% growth in operating profit. International revenues also decreased by 18%, primarily due to divestitures in McKesson's European business. Corporate expenses decreased by 5%, excluding the impact of the early termination of the tax receivable agreement in fiscal 2023 and gains and losses within the McKesson Ventures portfolio. The company ended the quarter with $2 billion in cash and cash equivalents.

In the third quarter, the company had free cash flow of $100 billion and $2.9 billion for the last 12 months. This was affected by the Right-Aid bankruptcy and a provision for bad debts. The company made investments in distribution centers, technology, data, and analytics, and returned $2.6 billion to shareholders. The company also provided an updated fiscal 2024 outlook for its segments, with anticipated increases in U.S. pharmaceutical revenues and operating profit, excluding the impact of COVID-19 vaccine distribution. The updated outlook takes into account the strong performance in the third quarter and continued growth in specialty distribution.

The company expects revenue growth to continue, but at a slower rate due to lower margin GLP-1 medications. The generics program is performing well and the oncology platform has expanded. In the Prescription Technology Solution segment, revenue and operating profit are expected to increase due to strong performance and higher transaction volumes. The Medical-Surgical Solutions segment is expected to have flat to moderate revenue growth and a decrease in operating profit, but an increase when excluding COVID-19 related items. The updated outlook takes into account third quarter results, which show a slight improvement in primary care traffic.

The company expects a decline in revenues and operating profit in the International segment due to divestitures. Expenses in the corporate segment are expected to be between $615 and $655 million, with increased technology spending. Interest expense is estimated to be $220 to $230 million, and income from non-controlling interests to be between $155 and $165 million. The effective tax rate is expected to remain at 18% to 19%, with no quarterly guidance provided. Free cash flow is expected to be $3.2 to $3.6 billion, and the company plans to repurchase $3 to $3.5 billion in shares. The earnings per diluted share outlook for fiscal 2024 has been increased and narrowed to a range of $27.25 to $27.65, with a projected 2% decline to 1% growth in operating profit compared to the previous year.

The article discusses the expected increase in operating profit for the company in fiscal 2023, excluding certain items. These items include a related to COVID-19 programs and tests, a tax receivable agreement, and gains and losses from equity investments. The company also shares initial thoughts on fiscal 2025, expecting continued growth in the U.S. pharmaceutical and Medical-Surgical Solution segments, as well as in prescription technology solutions. The company remains confident in their long-term targets for growth in the core distribution business and oncology platform. As a leader in the alternate site market, the company is well positioned to capture opportunities in this growing market.

The Prescription Technology Solution segment is expected to perform above target due to organic growth and expansion in biopharma services. The International segment will continue to grow in Canada, while divestitures in Europe are ongoing. Investments will be made in product development, distribution, and data and analytics, particularly in artificial intelligence. This is seen as a way to improve customer experience and supply chain operations. Overall, the business is expected to maintain its strength and stability.

McKesson is pleased with their strong fiscal 2024 performance and remains optimistic about the future. They are well positioned to continue delivering strong results as they execute their strategic and financial framework. They have a Q&A session with Charles Rhyee from TD Cowen, who asks about the mix between reauthorizations and new prior-offs in the RxTS segment. McKesson is pleased with the solutions in this segment and the growth they have seen, driven by new brand launches and high-cost drugs that require prior authorization. The GLP-1s were a strong contributor in the current quarter, and how the programs evolve will depend on payer decisions.

The speaker is discussing the success of the blizzard season and the team's hard work. They are confident that the season will end as expected. The next question is about specialty growth, and the speaker explains that they have seen organic growth and gained share in multi-specialty practices. They have also been able to attract new members to their network and have added new practices and geographies. This is due to their strong practice management and investments in technology.

The speaker discusses their broad ecosystem which includes Ontada and SCRI. They believe this value proposition is what has led to the growth of their U.S. Oncology Network. Another speaker adds that they are seeing growth in specialty products and providers, as well as GLP-1 medication. They also address rumors about their Canadian business, stating that they have a strong and impactful healthcare services business there, including distribution, retail pharmacies, online brands, infusion clinics, and biopharma manufacturer services.

The company is a major player in the Canadian health care landscape and has been performing well. They have made investments to continue their growth trajectory and are committed to their current strategy. The company also has strong strategic sourcing capabilities in both Canada and the U.S. which benefit their customers and drive increased distribution volume. In terms of operating expenses, the company strives to gain leverage on their gross profit and typically has slower growth in operating expenses compared to gross profit. However, there may be quarterly variability due to investments being made in distribution capabilities, data and analytics, and artificial intelligence.

Britt Vitalone, speaking on behalf of the company, answered a question about the generic pricing front and opportunities in the market. He mentioned their successful partnership with ClarusONE and their focus on driving low cost positions for customers while maintaining high availability of supply. He also noted that their generics business continues to grow and they are pleased with the sourcing spread they are able to generate. The market has been competitive but stable, and their disciplined approach has proven successful. The next question was about the potential impact of Rite-Aid on their fiscal 2025 plans, but Vitalone did not provide any specific assumptions as the situation is still uncertain.

Brian Tyler, CEO of Rite-Aid, was asked about the impact of Rite-Aid on the company's financial results. He stated that Rite-Aid will not have a significant impact on their fiscal 2024 results and they will provide more information on their fiscal 2025 assumptions in the coming months. The reduction in free cash flow for the rest of the year is partially due to the Rite-Aid bankruptcy, but not the full impact. The company's share repurchase activity is slightly lower due to both the Rite-Aid impact and other factors.

The company is discussing their principles for deploying capital, which include buying back shares and considering the stock's intrinsic value. They plan to continue being disciplined in their approach. The strong growth in U.S. pharmaceuticals is attributed to GLP-1s and the impact of COVID vaccines, but the margin may be affected by a one-time non-recurring charge and the offset of last year's government program.

The company has seen strong performance in their pharma segment, with continued utilization in the marketplace, growth in specialty and oncology, and a revenue impact from GLP-1s. They have increased their long-term growth target for the segment from 4-6% to 5-7% due to this performance, and believe this range is still appropriate for the future. They will provide more insight into this target in their full year assumptions.

The speaker is pleased with the momentum in the segment and the next question comes from Daniel Grosslight from Citi. Grosslight asks about the possibility of renegotiating GLP-1 contracts to increase margin. Brian Tyler responds by stating that they always strive for fair value and offer additional services to support the growth of their business. The next question comes from Elizabeth Anderson from Evercore ISI, who asks about their investments in longer term drivers of pharma growth, such as oncology and biopharma services. The speaker is asked to elaborate on their strategies and opportunities in these areas.

The speaker, Brian Tyler, discusses how the company has been disciplined in making organic investments and reinvesting in the business. They prioritize investing in growth pillars, such as oncology, and are also focused on utilizing technology, such as AI and machine learning, to improve patient and provider experiences and drive efficiencies. The company is committed to investing in areas that align with their strategy and provide good financial returns.

Rachel Rodriguez introduces the next question from George Hill of Deutsche Bank. Hill asks for clarification on Britt's statement about GLP-1s being an EBIT headwind, and then asks Brian about the growth opportunities in the U.S. oncology business. Brian explains that they are open to acquiring practices, adding providers, or Greenfield expansion. Britt clarifies that GLP-1s have a lower margin rate and have been a headwind for operating profit. The operator announces that there is time for one more question.

During a question and answer session, an analyst from Wells Fargo asked about the growth of the prescription technology segment of GLP-1s and what other categories may drive growth. The CEO and CFO of McKesson responded by saying that while growth may slow and be more variable, they still expect growth and have increased their operating profit guide for the segment. They also mentioned that prior authorizations and other access and affordability solutions are seeing good growth. Overall, they are pleased with the company's progress in advancing their strategy and mission.

The speaker expresses confidence in the company's ability to continue growing sustainably and acknowledges the contributions of all employees. They thank everyone for joining the call and look forward to sharing more updates in the next quarter. The call ends with the operator thanking everyone for joining.

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