Q2 2025 Earnings Summary
- Significant Growth in Oncology Platform Attracting Providers and Driving Expansion: McKesson has been acquiring oncologists and enhancing its oncology platform, which is attracting providers due to the platform and capabilities that help them practice better, more efficiently, and see more patients. This includes benefits like EMR integration with 2,700 providers and expanded access to clinical trials through partnerships like Sarah Cannon, positioning McKesson to capitalize on the greatest opportunity to help community cancer care be more quality and lower cost.
- Participation in Value-Based Care Models in Oncology Leading to Significant Savings: McKesson has supported value-based care models, participated in government programs, and providers within USAN drove a tremendous amount of savings. With providers like Florida Cancer participating in value-based care initiatives, McKesson is ready to support more providers in this shift, aligning with the industry's move towards value-based care.
- Rapid Growth in Access Solutions Driven by GLP-1s: McKesson's Access Solutions have been growing the fastest due to the GLP-1 component. Approximately 70% of revenue within Access comes from prior authorizations, and 55%-65% of prior authorizations are GLP-1s, indicating strong growth potential in this segment. Additionally, affordability programs have had nice growth, working closely with manufacturers on discounting or voucher programs.
- Heavy reliance on GLP-1 drugs for growth in the Access solutions segment may pose a risk if demand changes.
- Investments in data and analytics are creating a 2% headwind to MedSurg EBIT growth, potentially affecting profitability.
- McKesson's decision not to own U.S. pharmacies or enter hospital distribution may limit growth opportunities compared to competitors expanding in these areas.
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Consolidated Revenue Growth | Q2 2025 (YoY) | 13% to 15% | 21% YoY (from 77,215To 93,651) | Beat |
Operating Profit Growth (Consolidated) | Q2 2025 (YoY) | 10% to 15% | -39% YoY (from 951To 578) | Missed |
U.S. Pharmaceutical Segment Revenue Growth | Q2 2025 (YoY) | 13% to 16% | 23% YoY (from 69,766To 85,726) | Beat |
International Segment Revenue Growth | Q2 2025 (YoY) | 4% to 8% | 7% YoY (from 3,475To 3,709) | Met |
Prescription Technology Solutions (RxTS) Revenue | Q2 2025 (YoY) | 14% to 18% | 11% YoY (from 1,140To 1,265) | Missed |
Medical-Surgical Solutions Revenue Growth | Q2 2025 (YoY) | 3% to 7% | 4% YoY (from 2,834To 2,948) | Met |
-
Impact of IRA on Oncology
Q: How will IRA affect oncology drug pricing?
A: Management acknowledged that the impact of the IRA on Part B oncology drugs is uncertain but could affect drug pricing and margins. They are engaging with stakeholders, educating on the issues, and closely monitoring developments, though it's too early to predict outcomes.
-
M&A Plans and Capital Deployment
Q: Will more capital be allocated to M&A?
A: McKesson plans to continue share repurchases but emphasizes growing the company through strategic acquisitions like Florida Cancer Specialists. They focus on opportunities that fit their strategic pillars and offer the right financial returns, aiming to create the most shareholder value.
-
Oncology Business Growth
Q: What drives growth in oncology business?
A: The lion's share of the oncology business is from distribution, but growth is fueled by adding new providers and expanding clinical trial capabilities, resulting in a 20% increase in accruals. The overall oncology market has grown beyond the previous estimate of $55 billion, and McKesson continues to invest due to the strong drug pipeline and innovation.
-
Impact of GLP-1s on Margins
Q: How do GLP-1s affect margins and reimbursement?
A: GLP-1 products are a headwind to margins on distribution due to high inventory costs and logistics requirements. McKesson provides services on the prior authorization side, which offsets some margin pressure. They work to ensure fair value for services provided and manage customer needs across segments.
-
Florida Cancer Specialists Acquisition
Q: Where does EPS accretion from FCS come from?
A: The accretion from the FCS acquisition is primarily from distribution and drug-related activities. Over time, McKesson expects to leverage capabilities and scale to drive efficiencies and cost benefits to customers. Financing costs are included in the accretion estimates.
-
Medical Surgical Segment Outlook
Q: Confidence in long-term growth despite softness?
A: Management maintains confidence in the long-term growth rate of the medical supply business, despite current softness and increased competitiveness. They have a strong history of growth and are making intentional investments in automation and data capabilities to optimize costs.
-
CoverMyMeds Growth
Q: What's driving growth in CoverMyMeds?
A: The provider network has grown to 750,000 providers, driven by their leading position in electronic prior authorizations and the range of services offered. McKesson believes their connectivity and scale give them a competitive advantage.
-
Growth Outlook and Guidance
Q: Level of visibility into second-half earnings?
A: Management expressed high confidence in the back half of the year, with strong visibility into earnings. They have conducted normal operating reviews and expect a strong second half based on current performance and business unit feedback.
-
Cell and Gene Therapy Opportunities
Q: How is McKesson positioned in cell and gene therapy?
A: McKesson leverages its oncology capabilities to service a range of needs in cell and gene therapy, depending on each drug's requirements. They are positioned to provide logistics, specialty pharmacy, and distribution services, adapting to complex commercialization processes.
-
Health Mart and Independent Pharmacies
Q: What's the status of independent pharmacies?
A: Health Mart continues to be a resilient group of independent pharmacies. McKesson supports them by providing sourcing, distribution, and reimbursement opportunities through Health Mart Atlas, helping them manage challenges in reimbursement.
-
Rx Savings Solutions Acquisition
Q: Update on Rx Savings Solutions acquisition?
A: The acquisition has performed well over the last few years, offering price transparency services to employers and employees. It's a smaller part of McKesson's business but aligns with their strategy to add capabilities valued by biopharma customers.
-
Provider Turnover in Acquisitions
Q: Is there provider turnover after acquisitions?
A: Provider turnover has been immaterial after acquisitions. Providers are often attracted to McKesson's platform for its capabilities in practice management, clinical trials, and cost efficiencies.
-
Competitive Environment in Prior Auth
Q: Any changes in electronic prior auth competition?
A: McKesson continues to see growth in their network and believes they have the best position due to their connectivity and range of services. They are monitoring developments like AI but feel well-positioned due to their scale and capabilities.
-
Medical Surgical Product Exposure
Q: Any specific product exposure concerns?
A: There are no specific product exposures to highlight, except for possible supplier disruptions. Service levels have improved, and McKesson manages through disruptions with a diversified supplier base.
-
Shift to Value-Based Care
Q: How is McKesson supporting value-based care?
A: McKesson has participated in government programs supporting value-based care in oncology and has seen significant savings from these initiatives. They support providers who choose to participate and will continue to back such models.
-
Online Pharmacy Considerations
Q: Will McKesson own virtual pharmacies?
A: McKesson has decided not to own retail pharmacies in the U.S., believing their customers run pharmacies better. They focus on supporting retail pharmacies through sourcing and distribution, not direct ownership.
-
Impact of COVID Vaccines
Q: Was Q2 the peak for COVID vaccines in P&L?
A: COVID vaccines are not a material driver for the pharma distribution segment, and management is not particularly focused on them in this context.
-
Customer Compliance with GLP-1 Growth
Q: Are customers struggling with purchasing compliance due to GLP-1s?
A: The growth of GLP-1 products can affect compliance requirements for generic purchasing among customers. McKesson works with customers to address any pressures and discuss impacts as needed.
-
RxTS Product Roadmap
Q: Is McKesson building or buying in RxTS?
A: McKesson evaluates whether to build or buy based on the capability needed. They build adjacent solutions when possible but may acquire solutions that offer new capabilities valued by biopharma customers.
-
Change Healthcare Cyber Attack
Q: Did the cyber attack lead to new opportunities?
A: McKesson's goal was to help customers through the issue and smooth the transition. They did not pursue it as an opportunity for competitive gain.