The paragraph is an introduction to McKesson's Fourth Quarter Fiscal 2025 Earnings Conference Call. The call features Jeni Dominguez, VP of Investor Relations, CEO Brian Tyler, and CFO Britt Vitalone. The discussion includes forward-looking statements and non-GAAP financial measures, with related information available on their website. Brian Tyler highlights the strong finish to fiscal 2025, with McKesson's full-year consolidated revenues growing by 16% to a record $359 billion, attributing this success to their employees' efforts and strategic advancements.

The paragraph highlights the strong financial performance and strategic initiatives of McKesson. The company achieved a 20% year-over-year growth in earnings per share, surpassing their long-term targets, and returned $3.5 billion to shareholders. Key accomplishments include strategic acquisitions in oncology, enhancing distribution capabilities with technological investments, and leveraging automation and AI to modernize operations. These efforts have strengthened McKesson's business platform, improved operational efficiencies, and enhanced customer service, reflecting the dedication and hard work of its employees.

The company highlights its strong performance in fiscal 2025 and outlines its focus for fiscal 2026, emphasizing its commitment to people and culture as fundamental to success. It prioritizes employee empowerment through training and skill development to foster innovation and efficiency in a rapidly changing healthcare environment. The strategy centers on Oncology and Biopharma Services as key growth pillars, with expansions in the U.S. Oncology Network increasing provider numbers and enhancing patient care accessibility.

The paragraph discusses the acquisition of a controlling interest in Core Ventures by an organization in collaboration with Florida Cancer Specialists and its integration into the U.S. Oncology Network by June 2025. Emphasizing the importance of community-based oncology, the paragraph highlights efforts to manage healthcare costs and improve access to cancer care, particularly in underserved areas, through value-based care programs. The U.S. Oncology Network leads in cost reduction and quality enhancement, with 70% of its physicians participating in the Enhancing Oncology Model. The network supports practices with necessary resources, resulting in significant cost savings for patients. Additionally, the organization plans to expand its capabilities into other medical specialties.

In April, McKesson acquired a controlling interest in PRISM Vision, enhancing its capabilities in ophthalmology and retina services as part of its community-based care expansion. The integration of this business is expected to foster growth and support more practices. Additionally, McKesson's Biopharma Services platform, specifically the Prescription Technology Solutions segment, experienced strong double-digit growth in adjusted operating profit due to high demand for access and affordability solutions, new business acquisitions, and an expanding digital provider network. The company significantly aided patients in saving over $10 billion on medications and prevented millions of prescriptions from being abandoned. During the busy fiscal fourth quarter, a record 3 million patients were supported in accessing medicines efficiently, with an increased use of technology like the CoverMyMeds virtual assistant to automate processes while maintaining customer satisfaction.

The article discusses McKesson's strategic focus on Oncology and Biopharma platforms, highlighting their continued growth potential. The company is prioritizing disciplined portfolio management by evaluating business alignment and reallocating capital to growth areas. Previously, McKesson has spun off Change Healthcare and divested European and Canadian retail businesses to unlock value. Now, they plan to separate the medical surgical segment into an independent company, enhancing strategic focus and capital deployment. This move aims to create two well-capitalized companies poised for strategic growth in their respective areas, ultimately unlocking significant value for McKesson and its shareholders.

The paragraph discusses the strong performance and future outlook of a medical and pharmaceutical distribution business. The medical surgical segment is expected to continue delivering significant value, and they are exploring new opportunities. The U.S. pharmaceutical segment achieved notable revenue and profit growth, driven by effective execution and strong market fundamentals. With expertise in specialty distribution, the business is well-positioned for growth. Their Canadian operations also experienced substantial growth, primarily due to the pharmaceutical distribution business. The medical surgical segment met expectations and implemented cost-saving measures for future sustainable growth. Despite a dynamic market with uncertainties, the business remains focused on serving its customers.

The paragraph discusses McKesson's strong financial performance and strategic advancements, highlighting its effective sourcing program and diversified portfolio. Despite regulatory challenges, McKesson delivered record revenue growth and significant earnings per share increase, credited to disciplined execution and team commitment. The company is focused on long-term strategic goals, including separating its medical surgical solutions segment into an independent company to enhance shareholder value and strategic focus. The overall sentiment is positive, aiming for continued momentum in fiscal 2026 and beyond.

The paragraph discusses McKesson's financial performance for the fourth quarter and full fiscal year 2025, highlighting strong earnings and revenue growth. Earnings per diluted share exceeded expectations, and consolidated revenue increased by 19% to $90.8 billion, driven by growth in the U.S. pharmaceutical segment. Gross profit rose by 2% due to growth in specialty distribution and prescription technology solutions, despite lower international contributions from divesting Canadian businesses. Operating expenses decreased by 10% due to cost optimization and divestitures. The company remains focused on future growth and alignment in its medical segment.

In the second half of fiscal 2025, strategic actions led to approximately $100 million in cost savings, particularly in the fourth quarter. Operating profit increased by 24% to $1.6 billion, supported by growth across all segments, a new strategic customer, and demand in the prescription technology segment. Interest expenses declined due to effective cash and portfolio management. The fourth-quarter effective tax rate dropped to 13% from 28% the previous year due to discrete tax benefits, while the full-year rate aligned with guidance. Earnings per diluted share rose by 64% to $10.12, fueled by a lower tax rate and strong operational growth. U.S. Pharmaceutical revenues increased by 21% to $83.2 billion, driven by higher prescription volumes and specialty product growth, including a significant 46% increase in GLP-1 medication revenues to $10.9 billion, though sequential GLP-1 revenue was flat.

The paragraph discusses significant increases in segment operating profits and revenues across various business areas, highlighting a 17% rise in segment operating profit to $1.1 billion due to higher retail national account volumes and onboarding a new strategic customer. The prescription technology solutions segment saw revenues rise 13% to $1.3 billion and operating profit rise 34% to $285 million, driven by increased prescription transactions and demand for access solutions. Despite being below average compared to past non-COVID illness seasons, the Medical Surgical solutions saw a slight 1% revenue increase to $2.9 billion due to higher specialty pharmaceutical volumes, with a 15% increase in operating profit, partly due to cost optimization initiatives. The paragraph concludes with a note to discuss international results next.

In the reported period, revenues decreased by 2% to $3.5 billion due to the divestiture of Canadian businesses, yet operating profit increased by 9% to $102 million due to higher pharmaceutical distribution volumes. Corporate expenses dropped by 15% to $165 million. Notably, past reserves for environmental issues were highlighted alongside increased interest income and lower opioid-related costs. The quarter concluded with $5.7 billion in cash and $10 billion in liquidity, producing $7.5 billion in free cash flow thanks to strong operations and timing shifts. This included $278 million in capital expenditures for distribution centers and technology. Additionally, $391 million was returned to shareholders through share repurchases and dividends. Full fiscal year 2025 results surpassed expectations, with further details available in the press release.

In fiscal 2025, revenues increased by 16% to $359.1 billion due to overall operational strength and onboarding a new strategic customer in the U.S. pharmaceutical segment. Operating profit rose by 15% to $5.6 billion, with notable growth in the U.S. pharmaceutical and prescription technology solution segment and the Canadian business. The profit included $101 million in net gains from McKesson Ventures, contrasting with a loss the previous year. Excluding these gains, operating profit grew by 12%, surpassing targets. Earnings per diluted share increased by 20% to $33.05. The company focused on cash flow generation and capital deployment, generating $5.2 billion in free cash flow and returning $3.5 billion to shareholders, primarily through share repurchases. Since fiscal 2020, over $18 billion has been returned to shareholders, reducing total shares outstanding by 34%. The company is confident in continuing this momentum into fiscal 2026.

The paragraph discusses the company's strong financial outlook and growth projections for fiscal 2026, emphasizing its capabilities across oncology and biopharma services, and its robust pharmaceutical distribution businesses. The company expects revenue growth of 11% to 15% and an increase in operating profit of 8% to 12%, with adjusted earnings per diluted share projected to rise by 11% to 14%. The U.S. pharmaceutical segment is anticipated to see a 12% to 16% rise in revenue and operating profit. A new strategic customer onboarded in fiscal 2025 is projected to bring in $46 billion in annual revenue. The company also notes strong growth in the GLP-1 medication category and the addition of approximately 160 providers to the U.S. Oncology Network in fiscal 2025, totaling 725 new providers over three years.

In fiscal 2026, McKesson expects growth in its oncology and specialty platforms, driven by the U.S. Oncology Network, Ontada, SCRI, and two recent acquisitions. The company completed the acquisition of PRISM Vision Holdings, holding an 80% interest, which is expected to boost adjusted EPS by $0.20 to $0.30. Additionally, McKesson plans to acquire a 70% interest in Core Ventures for $2.49 billion, projected to add $0.40 to $0.60 to adjusted EPS and increase the U.S. Oncology Network to 3,300 providers. The acquisition is expected to close in June 2025. These acquisitions will contribute 6% to 7% growth in the U.S. pharmaceutical segment's fiscal 2026 operating profit, with funding through $2 billion in permanent financing and cash, while maintaining investment-grade status.

The paragraph discusses the company's updated financial projections and strategic growth plans for its different business segments. For fiscal 2025, the long-term adjusted operating profit growth target has increased to a range of 6% to 8%. The prescription technology solution segment is expected to see strong growth, with revenues rising by 4% to 8% and operating profits by 9% to 13%, driven by demand for their access and affordability solutions and expanding biopharma relationships. However, fiscal 2026 might experience slightly lower revenue growth due to slower third-party logistics volumes, which make up half of the segment's volume but only contribute around 5% to operating profit. Growth will also be fueled by demand for GLP-1 medications and increased investments in access solutions. The segment is confident in maintaining an 11% to 12% long-term operating profit growth. Meanwhile, the Medical Surgical Solution segment expects a 2% to 6% increase in revenues and operating profit in fiscal 2026.

The paragraph discusses a strategic decision by McKesson to separate its medical segment into an independent company. This is meant to enhance operational focus and unlock value for both the existing and new company, which will focus on medical surgical supply. The move aligns with McKesson's portfolio management approach and aims to optimize operational efficiency and shareholder value. The paragraph also notes variability in primary care market volumes due to illness season differences, and outlines ongoing efforts to accelerate business growth and cost optimization. McKesson's fiscal 2026 outlook assumes full ownership of the medical segment, with more details on the separation to come.

The paragraph outlines the company's financial projections and strategic actions for the international and corporate segments. In the international segment, they expect revenues to vary from a 2% decline to 2% growth, while operating profits could be flat or decline by up to 5%. This forecast considers growth in the Canadian distribution business but is offset by the sale of their Canada-based Rexall and Well.ca businesses by the end of fiscal 2025. The Norway operations will continue contributing to fiscal 2026, as it's the sole remaining European business, but they plan to exit and sell this business eventually. In the corporate segment, expenses are projected between $570 million and $630 million, with investments in modernizing technology and increasing automation through AI to enhance growth. The paragraph also mentions expected interest expenses of $255 million to $275 million and income from non-controlling interests between $215 million and $235 million, noting an increase due to financing impacts from acquiring a controlling interest in core ventures.

The paragraph outlines the financial guidance and strategy for the company's fiscal future. It highlights the impact of acquiring controlling interests in PRISM Vision Holdings and other core ventures and anticipates a full-year effective tax rate between 17% and 19%. The company expects free cash flow between $4.4 billion and $4.8 billion, with fluctuations due to quarterly timing. It plans to repurchase $2.5 billion in shares in fiscal 2026, aiming for weighted average diluted shares outstanding between 124 million and 125 million. The focus on portfolio management and disciplined capital deployment has more than doubled the return on invested capital to 26% by the end of fiscal 2025. The company remains committed to growth in oncology and biopharma solutions, reflecting its strong performance and strategic focus in fiscal 2025, and anticipates continued strength and stability into fiscal 2026.

The paragraph discusses the company's strong financial performance over the years, supported by its solid financial position and operational consistency, resulting in value for stakeholders. The speaker expresses gratitude to McKesson and its team for excellent fiscal 2025 results and is optimistic about continued success in 2026. In the Q&A session, Kevin Caliendo from UBS asks about potential risks related to Medicare Part B MFN impacting Average Selling Prices (ASPs) and its effect on the core distribution and specialty clinics businesses. Brian Tyler responds, stating that the situation is still speculative and unannounced, with potential legal challenges ahead. He emphasizes the effectiveness and cost-efficiency of community-based care.

The paragraph discusses the importance of fair compensation for community-based healthcare services, particularly in oncology, to ensure accessibility, affordability, and quality of care. It emphasizes that without fair compensation, patients might end up receiving care in more expensive settings. The conversation then shifts to a discussion involving Brian Tyler and Lisa Gill, where they reference past proposals by Trump regarding payment shifts and express a sense of déjà vu. They also discuss potential impacts of tariffs on both branded and generic pharmaceutical businesses and seek clarification on future guidance related to tariffs, particularly for fiscal '26, despite not having a medical supply business at that time.

The paragraph discusses the company's approach to managing the tariff landscape, particularly in the pharmaceutical, generic, and medical surgical sectors. It explains that they source from brands and have pricing and reimbursement mechanisms in place. They highlight the diversification of their supply chain and their flexibility in sourcing, allowing adaptation to tariffs and pricing changes. The company reassures that they are well-positioned with no over-reliance on any single country and do not anticipate any material impact on their fiscal 2026 guidance due to current tariff situations. Pricing flexibility is noted as an advantage to maintain competitive value.

The paragraph discusses McKesson's focus on strategic capital deployment, emphasizing alignment with their strategy and financial discipline. Brian Tyler explains that the urgency to invest in U.S. pharma and biopharma services, particularly in MSOs and building McKesson's platform, remains consistent despite challenges in finding financially viable valuations in the past. The goal is to engage in conversations and invest prudently to ensure growth and shareholder value creation.

The paragraph discusses a strategic approach to capital deployment, emphasizing consistency with past practices centered around strategy and high-return opportunities. Britt Vitalone highlights past divestments, like Change Healthcare and European businesses, to align better with their strategy and focus on differentiated assets. The conversation shifts to a question from Eric Percher about pharma growth guidance. He inquires whether the growth forecast considers a strong macro environment or new opportunities. Brian Tyler acknowledges confidence in their value propositions and strategic customer onboarding, suggesting customer success will drive further growth.

The paragraph discusses a company's strong performance in the healthcare sector, particularly in oncology, despite a complex external environment. Britt Vitalone highlights the company's success in increasing long-term growth guidance for its segment from an initial 4%-6% to the current 6%-8%. This growth is attributed to stable prescription utilization and strategic capital deployment, particularly in oncology and other specialties. The company expects continued growth, reinforced by recent acquisitions that should contribute substantially to next year's targets. They anticipate operating efficiently and achieving growth within their revised guidance range. The paragraph concludes with Jeni Dominguez asking for the next question, which comes from Stephen Baxter of Wells Fargo, regarding the current quarter's P&L.

The paragraph discusses a financial analysis of a company's performance, focusing on the significant year-over-year decline in SG&A expenses and slower gross profit growth in the recent quarter. Britt Vitalone attributes these changes to the divestiture of the company's Canadian business, including the Rexall and Well.ca brands, which affected the year-over-year comparisons. Additionally, the international segment's divestitures impact the gross profit mix. Despite these factors, the company is pleased with the operating leverage and adjusted operating profit performance. The conversation then shifts to a question from Daniel Grosslight regarding expectations for GLP-1 access programs and their influence on growth in RxTS. He points out both potential challenges and opportunities, such as tighter prior authorization terms and expanded cash pay programs by Lilly and Novo. Brian Tyler responds by highlighting the company's role in providing prior authorization and access solutions.

The paragraph discusses the impact of prior authorizations and payer decisions on the growth of certain medical products. As more patients become eligible, growth is expected, although cash pay, which the speaker's company doesn't benefit from, remains small. Payer policies and employer decisions to cover weight loss are influential. Britt Vitalone expresses confidence in the growth and momentum of GLP-1 products heading into fiscal year 2026. Eric Coldwell asks about revenue growth and forecasts, particularly noting that the slowdown mainly affects the 3PL sector, which typically constitutes half of their revenue. Brian Tyler acknowledges good year-over-year growth in 3PL, despite a slower rate.

The paragraph discusses the growth expectations for a company's 3PL business in fiscal year 2025, noting that while the growth rate is solid, it is expected to be slower than the previous year. The variability in revenue is due to the timing of programs and product launches. Elizabeth Anderson from Evercore ISI asks about the impact of changing reimbursement models on independent pharmacies. Brian Tyler responds that while there hasn't been a significant shift in behavior, the company is monitoring these changes. Their customers primarily seek assistance in attracting patients and improving operational efficiency, which is provided through their Health Mart program.

The paragraph summarizes a discussion from a call with McKesson executives, focusing on cash flow guidance and financial performance. Britt Vitalone addresses a question about a decrease in free cash flow guidance, explaining that despite some timing issues and minor non-operational expenses at the end of fiscal 2025, the cash flow remains strong at $4.4 billion to $4.8 billion. Brian Tyler concludes by expressing gratitude for the team's efforts and emphasizes McKesson's commitment to sustainable growth and attractive shareholder returns.

The paragraph highlights the company's commitment to excellence and the care for customers and colleagues, which contribute to positive results. The speaker expresses optimism for future achievements and thanks everyone for attending the conference call, which is now concluded.

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