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    Mckesson Corp (MCK)

    Q1 2025 Earnings Summary

    Reported on Jan 10, 2025 (After Market Close)
    Pre-Earnings Price$617.51Last close (Aug 7, 2024)
    Post-Earnings Price$573.58Open (Aug 8, 2024)
    Price Change
    $-43.93(-7.11%)

    What went well

    • Expected operating profit growth in the U.S. Pharmaceutical segment driven by specialty and oncology business, anticipated to reach 8% to 10% for the full year.
    • Sequential growth in GLP-1 medication distribution exceeding expectations, positively impacting gross profit. ,
    • Strong performance and strategic positioning of ClarusONE in generic sourcing, providing competitive low costs and supply availability, supporting future growth.

    What went wrong

    • Prescription Technology Solutions segment experienced lower-than-expected results, leading to a downward revision in guidance due to product launch delays and slower demand for access solutions. , ,
    • Medical-Surgical Solutions segment delivered results below expectations, with operating profit decreasing 15% due to lower volumes in the primary care channel and decreased demand for COVID-related products, prompting cost-cutting initiatives. ,
    • Lower revenues from branded pharmaceuticals like HUMIRA are impacting the U.S. Pharmaceutical segment due to formulary changes favoring biosimilars, affecting revenue guidance. ,

    Q&A Summary

    1. RxTS Guidance Adjustment
      Q: Why did you lower RxTS guidance?
      A: We faced unexpected shifts in the mix of services within our access portfolio in the RxTS segment, with delays in product launches affecting both 3PL and access programs like prior authorizations. This resulted in a slower start to the year, so we moderately lowered full-year guidance by about 1% at the midpoint.

    2. GLP-1 Growth Impact
      Q: How did GLP-1s affect your performance and margins?
      A: GLP-1 utilization remained stable and growing, with sequential growth higher than anticipated in the first quarter. This contributed positively to gross profit but also presented margin mix challenges due to higher growth in GLP-1 distribution transactions.

    3. HUMIRA Biosimilar Impact
      Q: How did the shift from HUMIRA to biosimilars affect revenue?
      A: A customer formulary change shifted from branded HUMIRA to a biosimilar, reducing our revenue outlook. This is the primary reason for the lower contribution from branded pharmaceuticals in our U.S. Pharma segment guidance.

    4. MedSurg Segment Challenges
      Q: What's affecting MedSurg performance and what actions are you taking?
      A: There's significantly less demand for COVID-related products like test kits, leading to softness in our Medical-Surgical business. We're responding by aligning our go-to-market strategies, organizational structure, and cost efficiencies to drive significant benefits starting in the second half of the year.

    5. U.S. Pharma Growth Drivers
      Q: How will U.S. Pharma achieve 8-10% growth guidance?
      A: We expect continued growth in specialty and oncology, strong generics performance, and robust customer relationships to drive 8-10% growth for the full year, unchanged from prior guidance.

    6. ClarusONE Performance
      Q: How does ClarusONE impact your business amid market changes?
      A: ClarusONE continues to perform well, positioning us for competitive low-cost generics and strong supply availability. Its strength contributes to our noncontrolling interest guidance and supports us as the market evolves with biosimilars and oncology products.

    7. Oncology Expansion Strategy
      Q: What's your strategy for expanding the oncology business?
      A: We've grown the U.S. Oncology Network to over 600 sites, 31 states, and 2,600 providers. We plan to continue expanding through acquisitions and managed agreements, integrating our oncology assets under coordinated leadership to accelerate growth.

    8. Gross Profit Variance
      Q: Did HUMIRA's shift impact your gross profit expectations?
      A: Gross profit was generally in line with expectations. The higher-than-anticipated sequential growth in GLP-1 distribution transactions contributed positively to gross profit, offsetting any impact from the HUMIRA shift.

    9. RxTS Margin Dynamics
      Q: Why is RxTS operating profit decline less than revenue decrease?
      A: Over 50% of RxTS revenue comes from 3PL services, contributing less than 10% to operating profit. Higher-margin programs in access, affordability, and adherence solutions will drive improvement in the second half, so operating profit decline is less than the revenue change.

    10. GLP-1 Supply and Economics
      Q: Can you improve margins as GLP-1 supply constraints ease?
      A: We've seen improvements in GLP-1 supply recently. We're in ongoing discussions with manufacturers to ensure fair value for our services and to explore opportunities in core distribution and additional services through our Technology Solutions business.

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