McKesson Corporation · NYSE:MCK
McKesson — Investor Day (June 2018)
80 slides from McKesson's investor day presentation, Jun 28, 2018
Slide 1: McKesson Corporation 2018 Investor Day
McKesson Corporation 2018 Investor Day June 28, 2018
Slide 2: 2018 Investor Day Agenda
2018 Investor Day Agenda Craig Mercer – Senior Vice President, Investor Relations John Hammergren – Chairman, President and Chief Executive Officer Bansi Nagji – Executive Vice President, Corporate Strategy and Business Development Britt Vitalone – Executive Vice President and Chief Financial Office
Slide 3: Forward-Looking Statements
Forward-Looking Statements Some of the information in this presentation is not historical in nature and may constitute forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements may be identified by the
Slide 4: Welcome
Welcome John Hammergren Chairman, President and Chief Executive Officer
Slide 5: McKesson's Executive Committee And Leadership Team
McKesson’s Executive Committee And Leadership Team Diverse and Experienced Leadership John H. Hammergren Chairman, President & Chief Executive Officer 22 years Jorge Figueredo Kathy McElligott Bansi Nagji Lori Schechter Britt Vitalone EVP, Corporate Human EVP, Chief Information Officer & EVP, Corpor
Slide 6: McKesson At A Glance
McKesson At A Glance Putting the Patient at the Center of What We Do $208B $3.8B 275,000+ FY18 FY18 free SKUs of brand & revenues cash flow1 private label medical- More than 73,000 patients surgical 16,000 supplies owned and banner supported in 1,600 Unique pharmacies clinical trials2 value creation
Slide 7: Global Healthcare Markets Are Growing
Global Healthcare Markets Are Growing Specialty Market Growth Number of Population Geography Revenue Growth (5-year CAGR)1 Pharmacies 65+5 (5-year CAGR)1 United States 5% 10% ~59K2 48M Europe 3% 7% >90K3 70M Canada 4% 8% ~11K4 6M 1IQVIATM Market Prognosis, March and May 2018; IQVIA Institute. Market
Slide 8: Medication Adherence Represents A Significant Barrier To Healthcare
Medication Adherence Represents A Significant Barrier To Healthcare For Every 100 Prescriptions Written… 100 50 - 70 48 - 66 25 - 30 15 - 20 prescriptions filled at the picked up from taken refilled as written pharmacy the pharmacy properly prescribed National Association of Chain Drug Stores, Pharm
Slide 9: McKesson Continues To Evolve
McKesson Continues To Evolve From… To… Wholesale distribution and Differentiated channel access technology company across multiple platforms Pharmacy as a dispensing site Low cost, high-quality care setting Manufacturers as suppliers Valued partner and customer Product- and provider-centric Patient-
Slide 10: Multi-Year Strategic Growth Initiative
Multi-Year Strategic Growth Initiative Manufacturer Specialty Role of Retail Value Proposition Pharmaceuticals Pharmacy Supported By Data and Analytics Capabilities Optimized, Efficient Operating Structure 10
Slide 11: Our Work Is About Helping Our Customers Improve Patients' Lives
Our Work Is About Helping Our Customers Improve Patients’ Lives Providers Pharmacies Manufacturers Patients Payers 11
Slide 12: Growth Areas
Growth Areas Bansi Nagji EVP, Corporate Strategy and Business Development
Slide 13: We Have Prioritized The Following Growth Areas
We Have Prioritized The Following Growth Areas INPUTS Focus Areas Global Trends Manufacturer Specialty Role of Retail Customer Needs Value Pharmaceuticals Pharmacy Proposition Industry Dynamics Broaden and Capture and Grow our position deepen our accelerate more in future retail manufacturer profita
Slide 14: Manufacturer Value Proposition
Patient-Centered Care: Manufacturer Value Proposition The average cost to develop, gain marketing approval and post-approval R&D for a new drug is approximately $2.9B1 1Tufts Center for the Study of Drug Development Assessment of Cost to Develop and Win Marketing Approval for a New Drug, Mar 2016
Slide 15: Specialty Pharmaceuticals
Patient-Centered Care: Specialty Pharmaceuticals Robust growth potential of 7% to 10% 5-year CAGR through 20221 1IQVIATM Market Prognosis, Sept 2017, IQVIA Institute Oct 2017. Specialty revenue growth is based on U.S., Canada and Europe (France, Germany, Italy and U.K.) Note: IQVIATM expressly reser
Slide 16: Role Of Retail Pharmacy
Patient-Centered Care: Role Of Retail Pharmacy Healthcare represented almost 18% of U.S. GDP in 2016 and is anticipated to grow1 1Centers for Medicare & Medicaid Services historical national health expenditure data
Slide 17: Data and Analytics
Patient-Centered Care: Data and Analytics The healthcare industry is challenged by vast increases in data, but the promise of increasingly preventative healthcare is now within reach.1 1Content based on Forbes article dated September 18, 2017.
Slide 18: Operating Model and Segment Overview
Operating Model and Segment Overview Britt Vitalone EVP, Chief Financial Officer
Slide 19: Multi-Year Strategic Growth Initiative
Multi-Year Strategic Growth Initiative Growth Opportunity Prioritization Market and Portfolio and Execution Analysis Operating Structure Evaluation 19
Slide 20: Improving Patient Care Delivery
Improving Patient Care Delivery Focus on Drive Superior the Patient Execution Innovate to Deliver Advance Enhanced Value 20
Slide 21: Cost Initiatives Aligned To Our Operating Structure
Cost Initiatives Aligned To Our Operating Structure Information Human Indirect Finance Technology Resources Spend Future operating structure will align with and help to fund growth initiatives 21
Slide 22: We Revised Segment Reporting Beginning FY19
We Revised Segment Reporting Beginning FY19 Delivers Increased Clarity and Transparency U.S. Pharmaceutical European Medical-Surgical and Specialty Pharmaceutical Other Solutions Solutions Solutions McKesson Canada, U.S. Pharmaceutical Wholesale and retail Non-acute MRxTS and and Specialty Health ph
Slide 23: U.S. Pharmaceutical and Specialty Health
U.S. Pharmaceutical and Specialty Health Nick Loporcaro President, U.S. Pharmaceutical and Specialty Health
Slide 24: U.S. Pharmaceutical And Specialty Health
U.S. Pharmaceutical And Specialty Health Improving Patient Care Delivery Focus on the Patient Drive Superior Execution • Grew Health Mart to >4,900 stores • 99.98% order accuracy • Enhanced offering and platform serves patients • Leading sourcing capabilities through through the continuum of care Cl
Slide 25: Industry Landscape
Industry Landscape The U.S. Healthcare Industry Continues to be Dynamic and Growing Oncology-related 5% products make up Total Market Sales CAGR more than 1/3 Independent 2017 to 20221 of late-phase specialty drug pipeline2 pharmacy count stable over past decade at Biosimilar Launches Generic Launch
Slide 26: Leading With Our Core Offerings Across Multiple Channels
Leading With Our Core Offerings Across Multiple Channels Improved our Broadened our Extended our Enhanced solutions Supply Chain Value Prop to Retail Pharmacy for Community- Infrastructure Health Systems Footprint Based Specialists • Opened state-of-the-art • Enhanced analytics • Expanded our Health
Slide 27: Driving Competitive Advantage In Growing Markets
Driving Competitive Advantage In Growing Markets Manufacturer Helping manufacturers through the full commercialization and Value Proposition supply chain life cycle Supporting the access to specialty products and Specialty vitality of providers through practice management, Pharmaceuticals supply cha
Slide 28: Focusing On Our Manufacturer Value Proposition
Focusing On Our Manufacturer Value Proposition Case Study: McKesson Commercialization Partnership With AstraZeneca Strong Partnership and History of Success April 2011 December 2014 November 2017 Caprelsa® Lynparza® Calquence® Launched AstraZeneca’s Exclusive access at launch AstraZeneca’s largest f
Slide 29: Strategic Moves To Connect Patients To Therapies Faster And More Efficiently
Strategic Moves To Connect Patients To Therapies Faster And More Efficiently ExpressCoverage™ RxCrossroads Acquisition A collaborative new solution leveraging Combining the scale and reliability of McKesson with the expertise of McKesson’s hub services the flexible and tailored offerings of RxCrossr
Slide 30: Well Positioned As A Leader In Specialty Therapies
Well Positioned As A Leader In Specialty Therapies Infusion Solutions Data & Analytics Clinical Trials Technology Solutions Distribution Practice Management Value-Based Care Offerings Hub Services Specialty Pharmacy 30
Slide 31: Innovative Solutions And Partnerships To Lead The Future Of Retail
Innovative Solutions And Partnerships To Lead The Future Of Retail Leveraging insights… Enhancing strength, stability and support… …to independent pharmacies through a market-leading partnership …throughout the organization, as we pursue our commitment to innovative and market- leading retail models
Slide 32: U.S. Pharmaceutical And Specialty Health
U.S. Pharmaceutical And Specialty Health Improving Patient Care Delivery Focus on Drive Superior the Patient Execution Innovate to Deliver Enhanced Advance Value 32
Slide 33: Question and Answer
MCKESSON Question and Answer
Slide 34: MSKESSON
MSKESSON
Slide 35: McKesson Europe
McKesson Europe Brian Tyler Chairman of the Management Board McKesson Europe
Slide 36: McKesson Europe
McKesson Europe Improving Patient Care Delivery Focus on the Patient Drive Superior Execution • Expanding beyond retail to provide customers • Scaling central fill capabilities with an omnichannel experience and a broader • Operational rigor through Six Sigma mindset range of services • 99.89% inven
Slide 37: European Pharmaceutical Industry Landscape
European Pharmaceutical Industry Landscape EU Pharmaceutical Market Forecast1 Sales (USD Billion) Stable, Growing Market $300 Increasing Generics and Biosimilars $250 Penetration $200 Demographics, Chronic Disease and $150 New Therapies $100 $50 $0 2014 2012 2013 2015 2016 2017 2018 2019 2020 2021 2
Slide 38: The McKesson Europe Journey
The McKesson Europe Journey Leverage Foundational Consumer Manufacturer Scale Investments Channels Value Proposition Coordinated ERP Live, Broader Traditional & Online Retail Europe-wide Value Procurement Roll-Out Underway Proposition, Including Specialty Clinics Patient Access NRDC (France) Diabete
Slide 39: Driving Competitive Advantage In Challenging Markets
Driving Competitive Advantage In Challenging Markets Reimbursement environment required re-shaping of business • FY18 restructuring and store rationalization U.K. Retail substantially complete Environment • Central fill live and scaling • Digital investments • Expanding footprint in specialty and ho
Slide 40: Innovation Platforms
Innovation Platforms Retail of Online Hospital Prescription Digital Homecare the Future Doctor Solutions Assembly Channel Solutions Project to Innovation driving Unique value Automated Harmonize M&A investment in define the connected care proposition to assembly system and expand U.K. to complement
Slide 41: European Pharmacy Network (EPN)
European Pharmacy Network (EPN) Strong Network of Owned, Franchise and Independent Pharmacies Owned Franchise Independent Pharmacies Partner Pharmacies Consistent European brand Common store appearance Lloyds’ concept elements customized for pharmacies A differentiated New technology and product foc
Slide 42: EPN Channel Drives Momentum In Private Label
EPN Channel Drives Momentum In Private Label Private Label Revenue1 Global Initiatives • NorthStar expanding in the U.K. • Medical-surgical product launches in Europe +120% European Initiatives • Expand range of standardized central products in OTC, first aid, medical devices and hygiene for all mar
Slide 43: Opportunities For Growth In Retail
Opportunities For Growth In Retail Common eCommerce Platforms Online Doctor Specialty Clinics Diabetes and Wound-care Shops Clinical Homecare Hospital Outpatient Pharmacy 43
Slide 44: Optimizing Retail Pharmacy For The Future
Optimizing Retail Pharmacy For The Future • Pharmacies re-designed as Healthcare Centre • Provides an alternative model of care to patients who require infusion and injectable specialty medicines • New services are led by an experienced nursing and pharmacy teams • NHS trusts driving patients closer
Slide 45: McKesson Europe
McKesson Europe Improving Patient Care Delivery Focus on Drive Superior the Patient Execution Innovate Deliver Enhanced to Advance Value 45
Slide 46: McKesson Medical-Surgical
McKesson Medical-Surgical Stanton McComb President, McKesson Medical-Surgical
Slide 47: McKesson Medical-Surgical
McKesson Medical-Surgical Improving Patient Care Delivery Focus on the Patient Drive Superior Execution • Supporting shift to alternate sites of care • Supporting customers by providing patient home delivery services to providers • Consumerism among patients driving demand for convenience • Lowering
Slide 48: Non-Acute Market Dynamics
Non-Acute Market Dynamics Favorable Demographic and Market Trends Shifting Sites of Care Consumerism • By 2020, 64% of all surgeries will be • 48% of patients research costs before performed outside the hospital1 seeing a healthcare provider3 • Alternate site job growth is expected to • 71% of provi
Slide 49: Leader Across Alternate Site Markets
Leader Across Alternate Site Markets Home Health Physician Agencies Office Emergency Infusion Medical Services Clinics Long-Term Hospice Care Home Medical Ambulatory Equipment Surgery Centers Laboratories Urgent Care Health Systems Market Leader for the Ambulatory and Post-Acute Care Continuum 49
Slide 50: Specialized To Meet Customer Needs
Specialized To Meet Customer Needs Tenured Sales Team GPO Capabilities Portfolio Specialized Support Customer Compelling Value Distribution Scale & Reach Proposition & Programs “The non-acute side is a different ballgame. There’s a reason I want a non-acute specialist – like McKesson – handling my b
Slide 51: Expanded Offerings To Support Customers
Expanded Offerings To Support Customers Rx Growth Private Label Lab >$1B in sales >5,000 products Expanding footprint and leadership Selling vaccines and injectables Recently introduced flu test kit Exclusive distribution for directly to providers Global sourcing capabilities with physician and comm
Slide 52: Focusing On Our Manufacturer Value Proposition
Focusing On Our Manufacturer Value Proposition Case Study: McKesson Exclusive Partnership with Sysmex 77% of patients First CLIA-waived Available exclusively prefer to receive lab hematology analyzer through McKesson services at their Provides complete blood physician’s office1 count analysis on sit
Slide 53: Expanding Specialty Footprint And Manufacturer Value Proposition
Expanding Specialty Footprint And Manufacturer Value Proposition MSD Acquisition Complements Growth Initiative Patients Providers Manufacturers Enable more providers to deliver Enhance McKesson’s role and Create opportunities for infusion services to patients in the offering to providers operating i
Slide 54: McKesson Medical-Surgical
McKesson Medical-Surgical Improving Patient Care Delivery Focus on Drive Superior the Patient Execution Innovate Deliver Enhanced to Advance Value 54
Slide 55: Financial Update
Financial Update Britt Vitalone EVP, Chief Financial Officer
Slide 56: Improving Patient Care Delivery
Improving Patient Care Delivery More Than 185 Years of Driving Innovation and Growth Attractive Healthcare Well-Positioned Assets & Markets Businesses • Macro demographics support continued growth • Differentiated global sourcing strategy with of healthcare an established private label platform • Pa
Slide 57: FY18 Financial Highlights
FY18 Financial Highlights Solid Performance Complemented by Meaningful Capital Deployment Total Revenues Free Cash Flow1 $208.4B $3.8B Adjusted Earnings Total Capital Deployed $12.62 $5.4B per diluted share2 1Reflects non-GAAP measure defined as net cash provided by operating activities less propert
Slide 58: Executing Our Multi-Year Strategic Growth Initiative
Executing Our Multi-Year Strategic Growth Initiative • Sustainable growth supported by key strategy areas Organic – Manufacturer Value Proposition – Specialty Pharmaceuticals Growth – Role of Retail Pharmacy – Data and Analytics • Free cash flow delivered through: Free Cash Flow – Operational excell
Slide 59: U.S. Pharmaceutical And Specialty Solutions
U.S. Pharmaceutical And Specialty Solutions $162.6B FY19 Outlook FY18 Revenue Low- to mid-single digit revenue growth $2.6B Flat to down mid-single digit FY18 Adjusted Op Profit1 adjusted operating profit growth Full line distribution Manufacturer services Specialty distribution Practice management
Slide 60: European Pharmaceutical Solutions
European Pharmaceutical Solutions $27.3B FY19 Outlook FY18 Revenue Flat to mid-single digit revenue growth $340M Flat to mid-single digit adjusted FY18 Adjusted Op Profit1 operating profit growth Full line distribution Owned retail Private label Banner retail Hospital solutions Digital channel Home
Slide 61: Medical-Surgical Solutions
Medical-Surgical Solutions $6.6B FY19 Outlook FY18 Revenue Low-double digit revenue growth Mid- to high-single digit adjusted $544M operating profit growth FY18 Adjusted Op Profit1 >275K products Manufacturer services Practice management Private label Home medical equipment Physician office Lab and
Slide 62: Other
Other $11.8B FY19 Outlook FY18 Revenue Low-single digit revenue growth Flat adjusted operating profit; $928M includes gross headwind of FY18 Adjusted Op Profit1 ~$100M to $120M related to the Canadian generic pricing reductions McKesson Canada • Full line distribution • Owned retail (Rexall) • Banne
Slide 63: Change Healthcare
Change Healthcare Evaluating timing Synergy FY19 Outlook: realization and execution for Adjusted equity earnings tax-efficient on track growth in the low- to mid-single digits McKesson Strong and exit scaled technology businesses 63
Slide 64: Our Operating And Free Cash Flows Have Steadily Increased Over Time
Our Operating And Free Cash Flows Have Steadily Increased Over Time 7-Year Moving Average ($ Billions) Free Cash Flow $4.0 Operating Cash Flow FY12 – FY18 $3.0 Free Cash Flow 48% $2.0 Driven by: Working capital efficiencies $1.0 Operating performance Efficient capital investment $0.0 FY12 FY13 FY14
Slide 65: Disciplined Capital Allocation Strategy
Disciplined Capital Allocation Strategy Fiscal 2018 Free Cash Flow: $3.8B Investments in Growth: $3.5B Shareholder Returns: $1.9B Acquisitions $2.9B Share Buybacks $1.7B Capital Expenditures $0.6B Dividends $0.3B Maintaining Strong Credit Rating and Financial Flexibility Reduction in Long-term Debt:
Slide 66: Platform Is In Place To Deliver Sustainable Growth
Platform Is In Place To Deliver Sustainable Growth Revenue Growth Margin Focus Operating Cost Leverage Profit Growth Stable Cash Flow & Financial Flexibility 66
Slide 67: Fiscal 2019 Adjusted Earnings Outlook
Fiscal 2019 Adjusted Earnings Outlook Full-Year Reaffirming outlook of Adjusted Earnings per diluted share of $13.00 to $13.80 Outlook Quarterly Continue to expect the first half quarterly EPS progression to be similar to Fiscal 2018 and second half Progression will have a stronger relative EPS cont
Slide 68: Improving Patient Care Delivery
Improving Patient Care Delivery Attractive Driving Operational Healthcare Markets Efficiency and Leverage Well-Positioned Creating and Delivering Assets & Businesses Shareholder Value 68
Slide 69: Question and Answer
MCKESSON Question and Answer
Slide 70: MSKESSON
MSKESSON
Slide 71: We Expect Fiscal 2019 Adjusted Earnings Per Diluted Share Of $13.00 To $13.80
We Expect Fiscal 2019 Adjusted Earnings Per Diluted Share Of $13.00 To $13.80 The Fiscal 2019 outlook is based on the following key assumptions and is also subject to the Risk Factors outlined in our press release on May 24, 2018: • McKesson to deliver mid-single digit percent revenue growth and dow
Slide 72: MSKESSON
MSKESSON
Slide 73: GAAP To Non-GAAP Reconciliation: Fiscal 2018
GAAP To Non-GAAP Reconciliation: Fiscal 2018 Note: Please see footnote information on following slide 73
Slide 74: GAAP To Non-GAAP Reconciliation: Fiscal 2017
GAAP To Non-GAAP Reconciliation: Fiscal 2017 74
Slide 75: GAAP To Non-GAAP Reconciliation: Fiscal 2018 And Fiscal 2017
GAAP To Non-GAAP Reconciliation: Fiscal 2018 And Fiscal 2017 Note: Please see footnote information on following slide 75
Slide 76: GAAP To Non-GAAP Reconciliation: Fiscal 2018 And Fiscal 2017 (continued)
GAAP To Non-GAAP Reconciliation: Fiscal 2018 And Fiscal 2017 (continued) 76
Slide 77: GAAP To Non-GAAP Reconciliation: Historical Supplemental Information
GAAP To Non-GAAP Reconciliation: Historical Supplemental Information For Fiscal 2018, Fiscal 2017 And Fiscal 2016 McKESSON CORPORATION RECONCILIATION OF GAAP SEGMENT FINANCIAL RESULTS TO ADJUSTED EARNINGS (NON-GAAP) SUPPLEMENTAL FOR FISCAL 2016 - 2018 (unaudited) (in millions) Year Ended March 31, 2
Slide 78: GAAP To Non-GAAP Reconciliation: Historical Supplemental Information (continued)
GAAP To Non-GAAP Reconciliation: Historical Supplemental Information For Fiscal 2018, Fiscal 2017 And Fiscal 2016 (continued) (1) Other primarily includes the results of our McKesson Canada, McKesson Prescription Technology Solutions and Enterprise Information Solutions ("EIS") businesses in 2018. O
Slide 79: Supplemental Non-GAAP Financial Information
Supplemental Non-GAAP Financial Information 79
Slide 80: Supplemental Non-GAAP Financial Information (continued)
Supplemental Non-GAAP Financial Information (continued) 80