MCK - Earnings call transcript Q3 2019

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Operator

Good day, ladies and gentlemen, and welcome to today's McKesson Q3 Earnings Call. I'd like to remind everyone this call is being recorded. And at this time, I'll turn the floor over to Craig Mercer. Please go ahead, sir.

Craig Mercer

Thank you, Greg. to Fiscal welcome Earnings Third and Call. afternoon, the XXXX McKesson Quarter Good by Chairman incoming Hammergren, Tyler, joined President John I'm today Officer. Financial McKesson's Vitalone, Executive and Operating and Chief Britt McKesson's Chief and Officer and and CEO; McKesson's Vice President Brian CEO; will remarks. John provide opening will Brian a update. business provide results And financial quarter. for Britt will review the the After we will questions. Britt's open your comments, the call for p.m. the We after X:XX promptly end at call plan to hour X Eastern Time.

will involve course we forward-looking begin, securities listeners remind the McKesson. this of statements operations make Before uncertainties we meaning that during within of the of laws. call, the future These risks I the regarding results and federal forward-looking and statements

XXXX to further reconciliation text slide non-GAAP for these the foreign release information and announcing release addition today's operating regard and third quarter and reports we non-GAAP Exchange reviewing that items the statements presentation financial a versus useful filed the will profit We the the the refer of supplemental refer investors and press please for statements. forward-looking our of with discussion Please refer today. Please results and performance slide adjusted XXXX the to and and provide is flow earnings, presentation next fiscal discussed effects. and to measures currency refer GAAP of The note and XXXX our fiscal financial certain measures. results. for periodic In excluding - comparability such the supplemental forward-looking to operating non-GAAP to of margin press to the useful results in information exchange associated free performance measures company's believe with current the call, we annual results Securities period-over-period. fiscal risks reference adjusted financial cash a please company's on In with to will Commission, particular,

recently introduce our ahead Finally, Weiss Holly transition met Holly On to for years. Britt completed President call. the of a Investor to Relations. earnings like My like few I her, was with opportunity the Weiss. of appointed yet would those you. year-end Senior not Holly Hammergren. to over would be who And Vice with will last the is thank investment personal everyone that, to John note, John, well I And as work Brian community as here thank for and have

John Hammergren

Thanks, Craig.

for also And us my Relations. is you retirement the my call aware, he is as probably over our his want mentioned endeavors. I call team to as on investor year. XXth and I at service all in you're as welcome call community, today. this you roles, years marks in our and call. many Investor thank of you As the Craig, that best this Holly, your last our earnings various I earnings takes our it, your final of fiscal just to wish thank -- This our future of new earnings leader for invaluable you, my McKesson. with and as announced the And call end Head joining previously effect

Brian the No the care, personifies an nearly Brian company patient deep gifted for leader We honor a lead for great how has significant is both improve progress and for been a Chairman solid health efficiency privilege headwinds, are organization this than in some equipped despite future care to is strong financial unique leave and integral industry XX we've most shared a strong strategic And unwavering role company our an He He knowledge as and role and future. in ICARE that and the in one innovator, to customers' McKesson's play will It's to my globally, an a and and is the our McKesson is well for important, CEO commitment McKesson to principles. making with into effectiveness bright. U.S. with care. success. plays Together, created better as vision helping future as delivery. of years. continue Perhaps initiative. growth position. in health

In right fact, a has take made Throughout McKesson nearly me high my he communication priority. collaboration that as into the tenure is ago. helped McKesson, member create has know his of focused on years always teamwork, I placed a engagement employee the leader XX and them to consistently Brian team leadership a at future. first, he and enterprise

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here worked our great people. opportunity McKesson history, is humbled our truly to of innovation, you Chairman of all remain the of incredible April Change had of things at balance I the McKesson made with way. the employees, Ed Healthcare. I'll transition. and I'm want support your and I a continue fiscal make I'll by work friendship overall an mention also I for care. many the closely special the and the entire And Every together thank this your the these Over positive that years be accomplished most will as and and I we've in grateful together some for our cases. support for capacity, smooth health leave advisory to many the across a I X, I've day, culture, of after in friendships with year, will with place you a Brian and to organization, ensure important, rich a Board with to board and and forever along team McKesson years, impact for might

with always treated respect. You've us great

as but can. we possibly to tough we've fair as transparent asked questions, You've questions. be attempted And

the turn appreciate that, with I'll to over support. Brian. I And Brian? the call So

Brian Tyler

build to probably in as opportunity The across our employees capabilities, am culture, health providers and care He focus of confident and improve the corporate have ever mentioned, segments access Thank change know at he for our you, patients. running him leading in communities. To that all outcomes I've customers, and our strategy to companies past help I, congratulate recognize industry and well foundation pharmacies the and I of we importantly, by for care to his in our to his teams. succeed as John of choice global know had I'm success humbled team. allowed point addressing by His McKesson our the have impact that the and quality advancing John good this excited as time CEO. function. vision McKesson health as the privilege forward energizing, McKesson McKesson. for level continues tremendous truly undergo lead McKesson platform nearly many, and I'm been major long business biopharma, the as legacy. delivery and on well. leadership McKesson's want years few XX in a and has and health time, markets, every to to is the friends to of and upon John, afternoon, I accomplish. on achieve for established to our and he affordability, solid colleagues is be everyone. look I I I had our of the partner for lasting first, the

involved just and showed what's patient and our I We send culture, and both you right huge doing culture will strategic to be our of you first. you, provide of headquarter's through in congratulations, find supported Las call, is your growth innovate, we today's ways happiness big earnings to very for leadership I the accomplishments. health John. resilience to our our XX speed and us can on forward top empower financial To what for seen and and developing On the very that like. up better patients in Most even the and of the a leadership behalf believe a growth, efficiencies, crisis More thank course, look our announced we like culture initiatives that we to model you. McKesson a for of competitive our customers thank new is of teams in helped next McKesson's need time and wishes for cost company of Colinas. our succeed value operating mentioned to evolving everywhere. can years were move truly company last success thank ago, market, than employees, We within tremendous our and McKesson. by putting so all As today strategy John guide gaining and decision-making Fast momentum. XX,XXX by strength savings a big accelerate recently initiatives our are leaders to whatever of

You will be missed greatly.

You'll warmly and always remembered regarded. be

Now quarter. turning to the

For expectations. our earnings the of quarter, we of ahead of and diluted total third adjusted revenues per $XX billion which company $X.XX, achieved were share

our range the to $XX.XX $XX.XX result, earnings share a from to narrowing $XX.XX we are diluted As adjusted XXXX fiscal to $XX.XX. previous per of range

few impact our of our of on results of we solid Britt have early of QX reduced comments detail. our our $X.XX results. bankruptcy more the based indicators lower reflect will guide discuss quarter We guide in on top end A performance. the a the have raised customer to end fourth And the that business and

customers; another to Pharmaceutical through X%. our translates service that their pleased through us and sourcing for and Rite our course, guidance. for Rite had operating third U.S. of revenue model. patients of levels, contemplated segment growth relationship Aid in year-over-year in we their Specialty in partnership Last experiences our through distribution Our the efficient as and the our better see to month, quarter competitive industry-leading which Solutions we renewed deliver with Aid value and years, our XX had We're, pricing; continues

helps further sourcing their Rite following evaluation this of process. our validates extensive them levels scale competitive and service Aid's and to decision and succeed, All

proposals continue As our concerns reform, discussions collaborate the on and been it partners the of monitor shared around our opportunities the and to address and biopharma administration, customers quality. associations. we with with share policymakers And trade we've access perspective relates to and in to affordability, and administration

customers new reimbursement, our patient value-based care delivery. implements regularly from ability transition As volume that to the strategies our improve we administration to support and demonstrate

care to best our outcomes. are Network believe reflecting the Incentive The continue to both Merit-based value-based provide We, payments drive the sometimes example, referred care McKesson, physician Care the is partners. address that these US to patient models from as Oncology important value recent Payment As Oncology that improved to the at and System, received Model a and goals community-based we incremental to tools way MIPS,

various as continue will the changes are that to care considered, expect be community-based We reimbursement recognized. of value

we private quarter, team Board previously appointed Kettler, third for Now He a managed of the Europe. and McKesson McKesson McKesson Kevin turning priority Global to of Procurement label in responsible Chairman as of growing international McKesson's President the Management business, XX-year the is Europe. which a generics In veteran, Sourcing. Kevin Europe. was

years. Additionally, the strategy pharmaceutical experience Kevin pharmacy served in U.S. and in He the roles procurement, over leadership in brings Pharma marketing retail deep multiple Europe. to new corporate in role distribution, in

Seasonality some Let color in on performance quarter. an year-over-year and except growth and market countries, me all operating provide Europe's U.K., improved drove sequential in the performance. the

that cuts. face Europe last of back-office and We to partially footprint to operations challenges. year grow, reimbursement only mentioned and had mitigated does in store the Long for Term increase business Plan government our most continues our We're were took our The general of previously we U.K. guidance. initial perform actions the cuts recently it rationalize streamline in the evaluating XXXX than U.K. and While in by prior U.K. proposes. we the health levels planned historical were the and released greater care that fiscal funding in excess encouraged NHS modestly currently well

We plan, The of the the retail long-term we're pleased near-term of believe expect U.K. to premature return external stakeholders environment further the a it's this to we and the important profitability given generally return and team uncertainties see to to role the of making to While the particularly pharmacy Brexit. weak and operating growth, the committed growth. dynamics is environment, ensuring to remain changes with intended closely business. government business internal to evaluate working in

Medical-Surgical as expect the recent shift partners acquisition further ongoing from incremental this this our be continue to of to acquisition we synergies particularly flu incremental on to solutions an good year. value real and expanding MSD from for comparing our when of the performance integrate experience directly our increasing year strong growth, benefits comments continues for us, so cost against proposition sites reflecting more far season our quarter, from season care. our our lower market some unusually our the a pharmaceuticals. operations. Medical-Surgical normalized flu with story strong I'm pleased manufacturer related supports MSD acquisition to growth scale Now And last and ahead, especially business. we looking specialty objectives strategic This segment's

Finally, and Other, in Canada McKesson investment in growth our driven by generic Canada, the upside government address quarter, actions saw equity price discussed McKesson previously in in Change Technology all Solutions included Prescription mitigating Healthcare, actions. and organic to

suitable, continued During the the Change, expect quarter, lower business, we in we growth slightly we've the generic able strong April specifically to to impact were with government-imposed organic from first XXXX. its McKesson calendar pricing IPO extent are on Technology And to together half continue market in the regarding cuts mentioned X, Prescription Healthcare. McKesson as Canada conditions contribution progress before, offset our of went an adjusted into Solutions of equity that Change mitigating XXXX. And effect

Before provide to I each spend opioid minute these I Britt detail just discuss on performance it the more over litigation and turn wanted a to epidemic. of of to businesses, the to

As the take fiduciary of in and these to of The myriad activity, which schedule conclusion litigation, in part the by control expense to magnitude is therefore our timing determined not the seriously. difficult our is uncertain. litigation for remains in us underlying do of responsibility for it shareholders relates set and project. We cases our to cases

encouraged jurisdictions recent as We dismissing inappropriate by the associated decision means We finding all XX municipalities will options claims different the with evaluate in to of a societal lawsuit of litigation were the in Connecticut, progresses. recover continue to cost addiction. our be the costs to

many you, about as As are for and on devastating of many so McKesson. of lives deeply it's friends impact I, sure, concerned families including the epidemic, people, of the I'm ongoing having the

to passed SUPPORT production are as made previously opioid suspicious electronic provisions to orders. working quotas and the some on electronic Act opioid ARCOS teams year, our Congress Our provisions solutions. address paper. recommendations prescribing, in related prior well the as Last white authorization of Many data, mirror

and an advance distinguished treatment launched by is helping and addiction relevant opioid the will return of that Foundation when proud solutions to solutions he policy I'll with combat to the to also We over nation's I'm led experience. on for physician McKesson's epidemic crisis address Britt? the this Opioid to a that, to call public focus very and support and turn questions efforts Britt future. With will your finishes.

Britt Vitalone

my Thank and and quarter guidance. you, Brian, results will good afternoon. third Today, comments focus solely on XXXX our fiscal

for guidance fourth We provide will results May. when XXXX we in quarter report fiscal

earlier, with which quarter fiscal discussed ahead were Brian our As our results, 'XX expectations. third we are of pleased

make operating program. to optimization growth on progress good strategic continue initiatives, cost We and our very model

$XX.XX 'XX adjusted result to diluted of to $XX.XX a earnings of $XX.XX we range As diluted in fiscal narrowing to performance, 'XX outlook are per $XX.XX this our per fiscal the share share. previous from

quarter right third results. jump into Let's our

to Medical-Surgical compared primarily offset corporate by Pharmaceutical prior count share business, profit expenses. driven our and our $X.XX from lower rate, contribution a higher growth of flat year, Third lower tax U.S. and EPS was business in higher quarter the was by adjusted which

and well as as minute the new approximately to adjustment of Let included tax rate relates Tax of million me take quarter that discrete tax the Act related tax to the prior $XX XXXX to discuss year. rate the as I'll benefits lower tax reflect compared XX%. to tax a higher fiscal third Jobs adjusted of the remind rate federal of catch-up to our the you XX.X% XXXX Cuts of in it cumulative

Solutions of positively segment the quarter XXXX. fiscal sale to intercompany fiscal McKesson's related the former tax in of rate XXXX third our by addition, software was impacted adjusted Technology In

details turn single-digit and third growth. versus acquisitions. now period, be on earnings, Pharmaceutical to our revenue X% let's growth the which revenues adjusted the Now consolidated consolidated Consolidated We third for XX. our the can low Solutions segment quarter of the Specialty increased driven U.S. by primarily anticipate found Slide in and percent prior quarter

Medical-Surgical X% adjusted acquisitions. by driven gross Pharmaceutical mainly growth Specialty segments, was including quarter and profit Solutions up and in Third year-over-year, U.S. our

due partially expenses cost the segment management. and Opioid were offset our state York an of reversal to ongoing operating adjusted bankruptcy X% Pharmaceutical of up in charges Specialty of quarter the Stewardship related by and accrual to related Third U.S. Solutions Shopko year-over-year acquisitions, to the New Act and

take me Let a the to more on moment detail bankruptcy reversal provide New the of and the customer accrual. York

accounts impact fourth reported This would correlate represents receivable filed with who We recently First, the in we bankruptcy. to to related believe for to $X.XX charges, $XX pretax this principally quarter. related all substantially the an amount this approximate million to exposure customer. Shopko,

While terms payment ensure payment, earnings with the the pursue worked we Shopko provide we products We'll took full for were charges on our to closely and progress on is we there an recorded ability believe next our risk update to secure delivered, during call. paid manage continue therefore we services our and payment steps in to and we'll and quarter. to

quarter's detailed call, at legislation estimated of our reported Stewardship being the York annual while thus McKesson in our unconstitutional our In I District to Act as Second, was mid-December, last the ruled and accrual New the York both Judge GAAP for and on an in court portion unenforceable. in time, New adjusted that account results assessment. challenged Opioid

reported charges of As a totaling McKesson all this result million. ruling, approximately reversed previously $XX

We filed will appeal earlier to this continue an this track matter month. following

segment, favorable in offset was corporate. expenses the our U.S. in opioid-related Solutions New the it than from litigation for charge of in recorded benefited reversal and Pharmaceutical we While more Specialty ruling York higher by

we of and opioid-related million. recorded year-to-date $XX operating million $XX For expense quarter, third adjusted the net

$XXX exceed million. that For to fiscal opioid-related XXXX, will continue costs we anticipate

And adjusted Adjusted for the year-over-year. quarter, the in low quarter, of discrete year. operations Turning million our X% driven XX.X% benefits of business. the the $XXX was prior million the from prior anticipate by decline adjusted $XX mix rate flat in decrease quarter digit mainly our from a of resulting Interest expense the operations single to from to tax million $XX We compared was our back year. planning for and will now from income initiatives tax income was tax consolidated of results.

Income For as non-controlling tax interest account items latest for to our XXXX full rate assumption we regarding to as XX%. guidance decrease approximately year, attributable million mix assumptions takes a X% compared in fiscal the not prior is well the the that expect to onetime into This of reoccur. adjusted to other quarter, year. XX% income $XX was do our

Our quarter totaled third prior million, adjusted net share, consolidated flat $X.XX income from results. operations per diluted with is continuing to year. our Wrapping $XXX earnings adjusted $X.XX in which of up compared the

Our shares million, X% third weighted were quarter decrease XXX of diluted average a year-over-year.

$XXX we million approximately to for share for weighted and diluted average During shares of the repurchases, the quarter, year. completed expect million XXX we continue

to York partially in generic discussed Opioid conversions. to The segment losses, bankruptcy to Act. the let the was I'll state previously and related including due Pharmaceutical and me acquisitions, of charges results, offset previously X% Slides XX. through $XXX Next, now which and the announced business growth strong review our by X%, by growth, driven offset be start oncology-related adjusted operating specialty disclosed Stewardship partially charge on growth And customer Revenues Specialty related reversal profit earlier for in of by branded the New customer a and can pharmaceuticals were $XX.X the billion losses with up to found our to down Solutions. segment quarter XX for and market U.S. million quarter, customer

Stewardship operating of of Excluding profit quarter. basis growth points. year-over-year points, segment York bankruptcy-related basis Opioid rate adjusted related operating the to we New XXX in for the adjusted was would margin seen a reversal XX decrease charge charge customer impact of and have Segment the the Act, the

quarter, our compensation line third the in For expectations. was with brand

rate contracts less impacted to compensation historical taken January, nature. And as assumption, Additionally, is XXXX are we price confident in experience. based of increases price our in in to our in price actions be on a primarily fixed you our remind when brand our by percentage mid-single-digit a full would be inflation that U.S. manufacturer result, in range. to pharmaceutical branded brand our brand compared continue the I fiscal year the

'XX, year quarter operating prior from full profit to For mid-single-digit our decline expectations, anticipate fiscal by we driven a our percentage represents This an operational third low adjusted improvement performance. in segment. for now the

Revenues adjusted the X%, down from now Solutions. reduction to Next, 'XX. I'll operating strong stores movements. driven the revenues a operating $X.X an by disclosed We the was in full quarter, by profit of review U.K. performance previously million. million billion were FX by European FX up or revenue operating will XX% outside the profit Segment negatively pharmacies to year environment were $XX for partially rate basis, adjusted owned currency closure Pharmaceutical the following On for U.K., in approximately basis, X%, million. fiscal retail anticipate compared impacted $XXX challenging down On segment divestiture XXX be adjusted was of flat down and XX% to the an adjusted offset $XX

reflecting in U.K. on year, The than rate impact segment and year-over-year Europe performed the our conditions driven constant a by basis decrease and growth our rest points. adjusted the reimbursement previously of XX sequential margin a business, was points XX on While basis, currency largely market was additional basis. basis announced operating retail well, a of prior of the business the cuts lower

half the profit what operating in similar was adjusted first expect to XXXX of the half continue to year. second decline to reported the for year-over-year fiscal We contribution,

and to [Specialties] now market $X acquisition Revenues up driven Medical-Surgical or Specialty XX%, growth. the Moving by solid Distributors Solutions. the MSD billion quarter, for (sic) were Medical

adjusted on contribution margin MSD and of Excluding FX basis, increase basis up be to revenues points. expense an our points, FX full XX% We growth in was anticipate for We will $XXX On previously from X% up MRxTS, the Other up flat XX review business was operating that up adjusted million. Change operational performance, now billion mid- partially impact the up adjusted the stronger-than-projected Closing offset the in our or XXX Healthcare quarter Solutions the an were X%. anticipate basis, Healthcare. million, provided with end business. MRxTS. profit to Revenues X%. acquisition, million operating market of quarter, contribution by grow across improved segment. by year-over-year. by the now $XXX fiscal rate driven were of goods revenues the disclosed from adjusted profit basis MSD for an million, range Revenues movements. year our was Prescription $XXX leverage. at adjusted for was The the with by growth. segment segment from the negatively Finishing in impacted our the 'XX driven of our acquisition, revenue Canadian anticipate government by On adjusted previously now profit operating million segment by Segment of the rate Other. driven cost profit growth initiatives was review year-over-year, will X%, for the currency primarily that businesses $XX profit We $X was driven high were that will adjusted Technology income operating operating $XXX digits business adjusted operating high be segment percentage Adjusted from to operating mid-single single-digit quarter. equity Change solid

market new internal continues expectations. we enhance As focused subject conditions, half to the to of first calendar is we and company our continue a to pleased the in to with with deliver expect operating line the realization, remain systems on to And which business, make investments synergy expand IPO. performance technologies,

Due we a corporate higher-than-anticipated of currency adjusted in percentage year-over-year. expenses, primarily driven increase XX% Next, constant McKesson single-digit high expenses. expect now corporate opioid-related to expenses, year-over-year, opioid-related expenses million recorded increase $XXX to adjusted by an by in

updated share per up of wrapped outlook. $XX.XX we that fiscal now Now results, XXXX. let per diluted me for share to XXXX discuss adjusted $XX.XX We our earnings diluted our fiscal expect

business. stronger-than-anticipated our on outperformance negative developments following: litigation in in $X.XX our and Solutions and bankruptcy Pharmaceutical discussed, foreign Medical-Surgical favorable our of the includes share. I have impact diluted segment; segment, reflects Opioid U.S. movements growth the an partially a up ruling opioid-related higher performance the outlook York These MRxTS customer which will exchange Act; Stewardship rate continued within currency Specialty New updated and are Our updated underlying previously assumption positive to expenses that per by offset the

execute capital to outstanding positioned X receivables, fourth days in sales I'll flow, days on found inventory be XX metrics working payables XX and decreased X well in decreased continue quarter. are We The Slide days. cash review to our to And our day to sales which now days. XX. days $X.X in cash I'd prior the our resulting days Days you balance quarter We may day and can the days. XX including be close remind capital ended that cash X impacted of that a working the decreased the with year given to of timing, metrics outstanding week flow by billion. quarter. a the marks of

For X the $XXX paid fiscal the paid for common in year, $X.X months approximately million million and McKesson in $XXX of billion repurchased stock first acquisitions, dividends.

$X of expect at now million expectations. in billion cash, to we for This primarily $XXX in use McKesson million net the repay $XXX billion. quarter, free free between cash our of at driven internal result maturity, operations. from during flow of end had 'XX, long-term season. remind I'd holiday of approximately our generated by inventory build low $XXX fiscal negative borrowings million capital experience In range, outstanding flow previous and quarter, quarter-end. million, approximately internal a in $XXX you fiscal third $X million. in After in the During investments, our used the investments we an McKesson that with substantially cash short-term typically line upcoming flow debt issued $X.X billion was with in debt, deducting which $XXX be McKesson capital will cash and the

X annual X our cash with final our of operating billion In more fiscal addition, of more $X fourth flow, quarter in years. X/X quarter, we typically than than generated in the generate past our

conviction we've $X.X payable yesterday, the returned which also in billion the the Directors on on demonstrates remaining repurchase the which investments have Board And reflecting investment our finally, We returns and support management growth. our our going focus Directors that dividend internal and share quarterly business our long-term our shares total forward will repurchases fiscal the in share in our to that confidence that while have than April. XXXX, of of we to have more billion attractive team Board making of a shareholders, authorization, shareholders providing of our $X.X opportunity. acquisitions an be company approved to dividends, and our shareholders to and also Year-to-date $X.XX are

now operating update of minute model take on structure. our a Let and optimization me the you to cost

efficiency month, which model will deploying relationship professional transformation. this on earlier simplify operating expanded that services expanded announced leading-edge while will accelerate redesign, and delivering global we As has firm savings. This its partnership improved with announced standardize fiscal cost to McKesson's anticipated operating finance and process expected pretax processes, Genpact, relationship of McKesson technologies focused to program will delivered the structure in gross substantially The combination million, by finance XXXX. drive initiatives of $XXX the X/X to with end are previously other the $XXX be is contribute million up of savings to effectiveness, which and annual

that results expect commitment with that results savings execution. our will non-anticipated gradually pleased We closing, these Despite a against performance and majority savings to are the our the third to bottom over operational our quarter of a exceeded time our progress In fiscal increase priorities. of expectations, our customer demonstrating line. charge, will we the these and flow very strategic

and confident $XX.XX a to focus we momentum quarter to third we solid adjusted business strong of look third finish diluted 'XX. per on quarter on fiscal share. now earnings XXXX of our remain fiscal in our share the per anticipate Following We to as performance, $XX.XX build

nearly incredible to very Lastly, outstanding his the have worked I'd tremendous leading leader. thank leadership. to John fortunate John for We're a like XX job done has years. for company with an also

today. press I'll turn going that we're he positioned, the Brian. John's We're hands forward to I the now well in Instructions] the With As [Operator the with call over for page and made Brian, strong I'd very echo to questions. believe in your release we comments turn that, operator

Operator

Thank from Muken. Evercore And you, have ISI, sir. Ross [Operator Instructions] we

Ross Muken

John, afternoon, working the Good guys a been years. over pleasure with you it’s again and congrats,

came a digest haven't antikickback. know but ton had time after number was things prepare, HHS you of that and I a So obviously kind around and rebates of of there out hours from probably to

guess, potentially, short this least how with force in feel to a high is of of the I about at forward you push we some like and hard that level, the the government they're you in is it the goes context just into in a heard thinking I guess, looks proposals business, something the in place. economics that this And sort But disruptive how know are at I push to piece? earlier of one term the least so can strongly, on the at recruit trying you going year.

Brian Tyler

as It's the into I question. for that across a didn't thought might I the screen Hey, Ross. Thanks conference here. question. walked we e-mail flash my Brian. room I see get

model and harbor First, how on that let that say the me not if we our and wholesaler the in safe about support access, supply cost. we're works, And economics and directly predicated enhance think programs we quality chain question. the

Our and value to that really come economics provide the services manufacturer the around of from revolve we fair the them.

over chain value services the and And on our We that engaged service in based in efficient view. for today. believe that run fair our paid that's conversations to we and evolutions and reinforced they, continue that continue that to the a we've we years, have that market been distribution industry, provide, various through be and supply highly we the

believe that to the be continue We that, case. will

sophisticated do in prices we on a administer And chain pretty combinations of at-scale we very So well. also are billion businesses scale our our that we do of just manufacturers might comment terms performance, pharmaceutical-related literally have logistics, with their lots transactions, between you millions we pharmacy just behalf And -- pharmacies. the it price and at and over as strong operation Britt a hospitals credit of directly of in a manufacturers financial technology in I heard And we of or item talk and not connecting XX great sophisticated that supply terms about today, of accuracy. but millions contract counter. customer manufacturers today, pharmacy company it at year,

people we we the out. our shift has service that believe the what we pharmaceutical supply clearly, So implications of continue conversations will through partners But in on back as a you with to chain. other focus in -- to manufacturer very I just deliver come continue engage important and

for paid over years. has be evolved to that that continue the We service

continue expect provide. be to But continue to that we evolve. for would we will net-net, it the the services appropriately expect paid We we'll

Ross Muken

some flat or maybe like maybe with see in in feel your even line that feel expectations, the better eventually we're And of to sort sort in that, a each least unusual color. touch that at underlying Do the helpful super should trends happened even of the maybe in just all of that's the evidence what like of, relative the you starting And from years? that like to some of I of to something touch in sort that these again, No, segments, aside relative of jump-off your for maybe Shopko, or that cases worst came pieces places. a that like this this hiccups some be is now, growth and bottoming out aside leave quarter, -- from hopefully of sort the businesses certainly are is come in -- better.

Brian Tyler

across some the as few Well, generic we We were we of over had past did a of good feel the development it's of we is certainly quarter. had our months comfortable for many come discipline businesses. in good it in and And see the performance operational with inflation provides underpinning we we've stabilization. some line the always pleased months, and over was That businesses we've the that in the to on brand to. resonate the are us. And market see talked that but competitive as past our expected beginning sense the models focus where with confident, historically. It's think reaching do competitive, operating the we point

operational So quarter the I about real feel say quarter up. business think that I -- the would good the put I

Ross Muken

Brian. much, so Thanks

Brian Tyler

you, Ross. Thank

Operator

Company. we Rhyee And moving on, Cowen Charles with have and

James Auh

looks talk improve Hi. and Charles. margins you maybe It expansion that had This about confidence profit by Can gives what the evidenced XX James year-over-year. your performed more like Auh guidance? to is margin for segment expected, points operating revised improved basis least drove the than at and you business what better just MedSurg we the outlook, as

Brian Tyler

the for segments profit ahead We well pretty where had our across pretty Thanks James. we or we business. expected were Most business. And performance performed solid with it of of characterize would on performed I gross really medical them line. on pleased the to. the question, as

it and from in year, we is to year's benefit would normal obviously I think making, a part good season. as where the feel than, of a and operating tailwind just upside from And we track. on flu. really in strong we're good progress expect we it say, normalized continues of be them flu an a this We're expenses, the more think in to progress I saw acquisition, environment MSD season, last from in acquisition. more about We're continuing And little execution. typical where integration is the we MSD we're the

the up a look solid performance P&L. I So pretty at really and medical business and down feel just the

John Hammergren

just terms And underpin excluding I in the mentioned mentioned X% acquisition, well might at remarks, which grew of is growth performing about as MSD I year-over-year. my that Brian in integration,

really business. solid that So really business for across that's our within the ongoing growth

Brian's really that MSD, excluding segment. comments solid about performance of think I underpins X%, So it the

James Auh

sense the Okay. any into maybe any of Great. in visibility And also cuts? can the U.K.? talk Do reimbursement you get incremental environment about you

John Hammergren

expect I've as we past mentioned comments, headwind. reimbursement Well, level of some in always

the in an years this prior If the their clearly NHS the for access challenged of week, provision to but few including quality even announced a year other reinforce just there which for yesterday think some health plan the out -- health the reimbursement important community say. plan, is around care community having view business. the maybe highlighted elected that them GPs, in morning, not NHS cost, positive XX-year NHS or professionals, of addressing them. of and this continues provision abnormally the pharmacy-specific the digesting community probably a in community have have addressing of just we the do, they in role to also that cost lot plan through challenges funding of this importance X-year like some typically the took headwinds, would cuts, would recent the pharmacy called most just incremental of into pharmacy declare experience. does landscape think plan, and with the NHS. tune was think U.K. we -- fact, as to of of NHS landscape, that I that. the gone want high health We're ever on a and victory current which they've We Obviously, not as and given still That's would reimbursement which XX-year we've the about we significant to a experienced to But And plan through and front, the that. I push I third of -- in mild that This the in with would come were England's

retail really communities of it's pharmacy matter a part of to we a Now in evolve in and be more how to the delivery model continue health the care integrated England.

James Auh

Great. Thank you.

John Hammergren

you. Thank

Operator

JPMorgan Moving have we Gill. on, from Lisa

Lisa Gill

call want from Thanks calls earnings on your hope with enjoy the I family. best. today very the time only all the sincerely be on much. beginning. you very I afternoon. wish you you John, XX the one may I with that to Good been has

though, talked was that you anything of the made expectations. indication there a where ahead QX. you internal miss truly My comments. question as made know. for of So Because you will about you Brian, couple a be, early good you, comment the you feeling QX of QX? I from stand being forward Was also that would about pulled One, the

And just Because the Street end does kind come the of anything, it there's at the the understand to if was midpoint. parts? where we I about as any towards was that moving in want is revised look lower new guidance, on there fourth So of forward? if quarter, then pulled think I secondly, the #X, if

Brian Tyler

thank Yes, of make then and couple color. be a Lisa. let may add you, Britt I'll remarks some

across characterize our good performance. QX, pull any I I Just it think was of with I of solid or forward, as business think I regards core performance and the it unique as many of solid operating there feeling to just pretty believe in businesses. the don't

Britt Vitalone

And Lisa, with would what said. I I to maybe that everything agree add that, Brian

that more a is I As although about of will and branded at on comfortable one in And remarks we is we we We talked through part fixed believe our of mentioned XX% things and continue obviously is feel compensation bit inflation. our talked performance price my briefly we've branded, nature had now And about mid-single-digit about that that QX think less really variable, there in the still in strong contingent we've around that again, JPMorgan. very range. QX.

Lisa Gill

you. That’s helpful. Thank

Operator

Moving Nephron with on, have Percher Eric we Research.

Eric Percher

Thank you. to Congrats thanks to and many Craig. John

For opioids. Britt, the question Brian on and

And of to given some I in. a plays role McKesson the the think that interested, part of your and McKesson that in Britt, I'd distributor where future? $XXX expense, responsibility hold? to number. lot Is for -- a will that hear Brian, stage or you've then, we're the significant legal maybe early distributor that's relative there part a a or inflow? perspective and be should million has solutions responsibility going first of be of some is, the ever taken Or that on is that foreseeable limitations work,

Brian Tyler

chains of well written complicated know, pharmacies. DEA-licensed DEA it's first And various -- overall of the the part take the are lots as the I roles. care actors those to mean, with supply I'll Eric. And playing quantity fulfill by the the question, physicians. you as it incredibly health different even controls opioid, in relates on DEA-licensed marketplace. opioids itself They based to we of scripts products particularly your get

point. like of that in has would -- a say we disproportionate the to would so have physical on attention role a been that wholesalers this placed feel chain, And supply we we while I amount

Britt Vitalone

costs. Eric, best I'll the of second our take again, your on is year. right in question. we opioid guidance excess we've now our million be -- updated that litigation it'll the for $XXX Again, And it on view

will lot the increase to really us we very that difficult Decisions make those play predict think us various These things. each of cases. And costs will continued the over be year. the longer of projecting different challenging I will over of could each depend milestones forward, the It going difficult. be the on this cases, to It about situations of how how what to judge term. think cost is I have for forward the on for a it's will certain as balance in visibility think have cost in the judge the out. will going schedule

And go is we've we now given as least our those this for on at you update best to year. for forward. continue we'll So projection what costs you

Brian Tyler

stewards And very that we said, it's legal you of And take responsibility to that this represent we continue serious and our very commitment are, is difficult to good this predict as to updated Britt keep the we that where will we and we But how invested the will defense, and things point, evolve. to these where it's in us At important do invest as we the best defense. way. be in when think you a capital very the that us, have get in in unfolds. lawyers process

Eric Percher

Thank you.

Operator

And next, Tanquilut we have Brian with Jefferies.

Brian Tanquilut

Good afternoon, guys.

the Just to a any your add expectations And are question the on what that can services what additional services mean, your thoughts on provide you additional around -- then them? are you to CVS contract? that services on current yes, I ability the can provide that retain contract. you that

Brian Tyler

be that Brian. in service can with have CVS. the found industry. think long-standing and we been standards relationship levels We've And I'll a highest Thanks, long with partners. to start time their we the that business we

and relationship. the and So them value expect we've fully the over had will we appreciate with relationship years, that we continue we that would

I certainly times, track these. look currently we other acquisition-related the them we've the CVS a for We think do from are strongly with their loss And associates the renewal on good many occasional the their record in there's respects feel track like of you and relationships around the strong, of renewing behalf. discussions We industry, work extension And agreement. pretty think activity. that that than is of maintaining at said well record these renewing our if very McKesson, and

And discussions. into enter so these we

expectation renew We full to have every it.

CVS as about business, the U.S. Now the certainly we true. and often Pharma that talk is for customer big

our well. of with other in relationships the some and have also parts as company We RelayHealth them

that optimistic it's comprehensive relationship. So and overall, continue will we pretty we're broad a relationship big that

Brian Tanquilut

you. Thank

Operator

have with America. we Cherny of Michael Next Bank

Michael Cherny

a earlier view rule. terms the Great. on and said, not the know in you today. Thanks as addressed much for rebate it's so I HHS I'm this. expecting, color of the

this a of into the when the conversation get some sure of, we've is whether talk explore that customers think pricing back on about time? opportunities services, to question else you that opportunity the past? Just if and try there throwing they're situation asking historically haven't the the the paradigms pitch to a the going to back front. things, create but and CoverMyMeds company pursue areas trying some with out appropriate around it's on what like incremental as pretty you past, pricing that play they strategic M&A these other Are compensation, over this could me asked with creating the understand you goes how whole over has terms this making to new and of services an and for I them going in uncertainty for been in your to passed others active

Brian Tyler

Yes, for great. you that Thank question.

think have And And payers, it's solutions relationships As I care, multiple businesses, employers, and in health we're upstream, retail PBMs, -- connected really wholesalers, about that pretty pretty fortunate we think pharmacies, of those about constituents. addressing McKesson system. interconnected across issue an fundamentally like I whether this. it's it's when downstream. I mean, a

is other our one RelayHealth, we lot with is downstream, of complement narrowly that's focused how constituent of well. for and whether McKesson capabilities have, just like And fully So we evolves. the But some of those think and opportunities. dialogues these I about on to try calls good to talk a piece. when manufacturers, the the meet not which unique discussions, have customers upstream CoverMyMeds of McKesson on including into contingent, with capabilities we or get It's would the course, it of on we and we one those certainly partners, to strengths there this breadth we bring have that let capability reach dialogues potential but as some tend think we great have with we

Michael Cherny

Thanks.

Operator

Larsen. have from Leerink, David next we And

David Larsen

'XX? results on can And you talk new as market guidance reflected relates then it for talk rates Congrats bit fiscal environment bit Rite a Thanks to renewal? Hi. about maybe little this a sell-side generic in the good pricing? those the quarter's quarter. Can about renewal little the you a Aid or the lot. Are

John Hammergren

David, start, I'll jump thanks for then Brian that and in. question. I'll

longer were both about of there's talked time. period obviously we strategic renewing of renegotiating for We Rite pleased we've a think or that very As us. opportunities for Aid before, with

As was we've also within renewed this said, our guidance.

there you gave with the we Aid. will today the renewal with be includes -- guidance Rite So that

David Larsen

it Is quarter? this the Is it the in quarter? quarter, reflected fully in

John Hammergren

results, our numbers, yes. Fully reflected in our in

David Larsen

of Okay, your how without peers or... deflation? specific? great. And that then touch seeing. seeing to deflation well just what said what is you're can you be may they're getting rates as that Is high mid-single on generic is to single-digit trending too Like expectations relative One

John Hammergren

generics. Yes, more the as mentioned, I Brian on around of seeing at buy-side. the we we're the don't more specific environment as to or give deflation. normalized generic it's rates ranges a well look But important stable as sell-side Again, think both

that more And we then work the us we expect the years. for several we're pleased of we we quite to We think but more stable well and many continue stable it's normal environment continue, in environment it closely very opportunity been think is very at the performing with with we're seeing is to is it are manufacturers. than to has sell-side, as the still competitive historical ago. marketplace, On ClarusONE. the that providing entity that a quarters the we've environment. seeing very And on And that terms ranges, and buy-side buy-side, that, a seen then performance a have

a pleased environment, competitive that one. but we're we're environment with So stable the very in. It's more a

David Larsen

Thanks. appreciate I it.

Operator

Next Stanley. question with Ricky Goldwasser comes Morgan from

Ricky Goldwasser

and time. forward good Hi, enjoy of looking you with John both the and you. and Brian and to Holly, working evening best your And wishing Craig I'm all

will you that be the question might only get fiscal focus to to you on in said fiscal starting going year I 'XX. of this most the But that other you. year congratulate call, I a earlier for on starting do When questions we're know next to about So than 'XX. be going Monday, week, note think Craig, it -- you you're

consider, help that already which year? obviously about to headwinds that we factors factor about, as next I us if So factor should should and -- think you this that year. be any you think any consider other Rite we are we that Aid should just tailwind about we mean, just think next But talked in we other CVS you can there likely is -- how about

Craig Mercer

congratulate Maybe Ricky. question, another call, the you for Thanks Yes. can something. me on

Ricky Goldwasser

long that have going hope a I you tenure ahead.

Craig Mercer

that. for Thanks

we Opioid lot growth certainly about our we State think New that with of talked as we're feel and our and And performed then but Stewardship revenue quarter. I in good we quarter, acquisition very Act, talked very Specialty that business. charge had about strongly we about, would good have bit view U.S. growth as the our QX. as well So Solutions little Technology quarter. we've forward. both -- as outlined pleased well only McKesson Prescription the business, we the a business, performance medical the and as were charge growth about as move again, we and of our certainly, also. business very go a providing there's customer Outside into of talked Brian and about, We Pharmaceutical we York new from We as had medical good from and the MSD, in seeing things had reversal the I we business, we customer in in and business the product rest the talked And the quite that of momentum not

there's feel really growth as underneath that business so And that we in well. strong

areas feel the of So I well. few as that there and is quarter. in point momentum in business have areas right close of performing quite would out a will the as we into good we be to Those certainly we're fourth the quarter about you now. are We going a that our third the that number position

Ricky Goldwasser

Okay.

nothing 'XX. So in

may -- another here. would ask than year. anticipate faster the this is appreciate into we me let market health be we'll changing care you So obviously, heading The and question and

your area is going So top of or look the as on? as are be the of Brian, There's you think look going the your relationship Or maybe your ahead, you a most do like think matter you're There opioids. that what as of your year of -- perspective, fact, you X one things. kind the at, business, you to of priorities? first CEO from a time with to manufacturers, areas different spend the obviously, that the number where is

be? kind priorities from perspective, like of your things So that what will the are key your really

Brian Tyler

that is, industry. we is clouds. in at certainly the time And often, businesses dynamic we bring at question. for of Thank of at related, the I teams. of focus biopharma And whether the behalf and in look these I when behalf ways have, And that Yes. capabilities It unique in ours and a like think look breadth these the we've they're at got software, I pharmaceutical of the customers. look the the of together the I assets I matter on in capabilities, supply differentiated unbelievably can channels, on and chain, look think change you calls, McKesson creates great our fact set in assets the partners, I channels whether this on reach the positioning or they're provider a opportunities for companies tremendously and community-based transaction Medical-Surgical broad talented

me really the to think opportunity it, the part that's of that's lies ahead. exciting I and real that

out so be to every upstream, with And partners the and our spending time, where teams day. partners downstream in I'll and dedicated on that's are my delivering value those our with that

Ricky Goldwasser

again. Thank congrats, And you.

Brian Tyler

Thank you, Ricky.

Brian Tyler

question? last One

Operator

All right.

final we have the Jones. from question Sachs, Robert So Goldman

Robert Jones

are would sneaking morning. wholesaler HSS a Great. or services channel? Brian, to channel. hospitals the into the I currently of in of other Obviously, Craig. set back towards maybe what best similar being your discussed channels from aren't on the this pricing world, Thanks core little one the news there that which Wish for I for peers a seems us seems me this dynamic the services pushing Could going changing you this. us part leverage allow just John. the elaborate maybe net leveraged are specifically provide in that a pricing be to current this and It’s kind play you bit retail you just that pleasure. guess, something that idea that been for heard very obviously you a to in just of kind are, level to wholesaler, and

Brian Tyler

pharmaceutical this transactions, mature, here we is reputation to our fact good feel around see financial is we're in the those. scale do of in do with think we I reality - really various that's with constituents that today comments, how respond evolve business at capabilities out. I high mentioned performance things been think to developed, laid my McKesson, I the and and proposal at I about going the how What about various incredible when established parts the transactions for accuracy,

good we we solutions, how various the in I markets to be is. to of kind so as evolution position will respond, think, provide will segments respond, a are And whatever able looked that do how

Robert Jones

you very much. Thank

Brian Tyler

that left him review missed. of thank just to across the for with Thanks, our continues value everything about customers the you, to in and for and the financial first one me John I look of with patient rest thank we fiscal updating line impression us. thank the know with for months' against events hand few time of your and forward. going XXXX I outlook the our I'm the closing, and investor plan, the He'll our to today. we to of of with to terrific back he Craig. one fiscal customers the and want to McKesson I'll forward Robert. you for partners us engaging I putting and for our execute excited dedication in employees ahead greatly time call of And McKesson. time. want the community those the to upcoming career certainly left be community. teams Craig? you all acknowledge on XXXX you has our a our last last In like on I'd call now to in his ICARE I opportunities thank he's accomplishment all look of Craig their do. time, forward

Craig Mercer

to February quarter our at we in Partners look early Thursday, Global results fourth Conference Xth you, we XX, in will Annual New York, Brian. May. Healthcare releasing On and forward present Leerink Thank earnings

McKesson (MCK) 31 Jan 192019 Q3 Earnings call transcript