Mckesson Corporation · NYSE:MCK
Mckesson — Investor Day (December 2021)
83 slides from Mckesson's investor day presentation, Dec 8, 2021
Slide 1: Transforming to a Diversified Healthcare Services Company
Transforming to a Diversified Healthcare Services Company McKesson Investor Day
Slide 2: McKesson Corporation Investor Day
McKesson Corporation Investor Day Holly Weiss | SVP, Investor Relations and Corporate FP&A
Slide 3: Cautionary Statements
Cautionary Statements This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may be identified by their use of terminology such as “believes,” “expects,”
Slide 4: Basis of presentation
Basis of presentation • Baseline metrics exclude the impacts related to the following items: the U.S. government’s COVID-19 vaccine distribution; the kitting, storage, and distribution of ancillary supplies; COVID-19 tests and impairments for personal protective equipment and related products. Also
Slide 5: Transforming to a Diversified Healthcare Company
Transforming to a Diversified Healthcare Company Brian Tyler | CEO
Slide 6: McKesson Moments
“McKesson Moments” 6
Slide 7: The foundation of our company
The foundation of our company • Evolving and driving innovation • Addressing the changing needs of our customers, their patients and the broader healthcare industry
Slide 8: McKesson Investor Day Agenda
McKesson Investor Day Agenda Transforming to a Diversified Brian Tyler Chief Executive Officer Healthcare Company Britt Vitalone EVP & Chief Financial Officer FY22 Guidance and Baseline Kirk Kaminsky President, U.S. Pharmaceutical Developing our Oncology Susan Shiff President, Ontada Ecosystem Devel
Slide 9: Delivering on Multi-Year Strategic Initiative
Delivering on Multi-Year Strategic Initiative: Innovation Growth Long-term performance Balance sheet and capital structure
Slide 10: Our Company Priorities
Our Company Priorities Focus on Sustainable Streamline Expand People Core the Oncology and Growth Portfolio and Culture Biopharma Ecosystems
Slide 11: Focus on People and Culture
Focus on Sustainable Streamline Expand People Core the Oncology and Growth Portfolio and Culture Biopharma Ecosystems
Slide 12: Brian Tyler and leadership team
Kelvin Baggett Tracy Faber Nancy Flores Kevin Kettler Chief Impact Officer EVP & Chief Human EVP & Chief Information President, McKesson Resources Officer and Technology Officer International Brian Tyler Chief Executive Officer Kirk Kaminsky Stanton McComb Rebecca Nathan Mott President, President, M
Slide 13: Foundation for long-term growth
Foundation for long-term growth Purpose: Vision: Improve care in every setting – Advancing health one product, one partner, one outcomes for all. patient at a time. ICARE Values: Integrity/Inclusion Customer-first Accountability Respect Excellence 13 © 2021 McKesson Corporation. All rights reserved.
Slide 14: Impact-driven organization
Impact-driven organization Diversity, Equity Community Investment Sustainability and Inclusion and McKesson Foundation and ESG $7M+ in funding over 40% expected reduction in the past year to support lighting electricity usage through employees and communities expanded LED sources 14 © 2021 McKesson
Slide 15: Sustainable Core
Focus on Sustainable Streamline Expand People Core the Oncology and Growth Portfolio and Culture Biopharma Ecosystems
Slide 16: Our strength in distribution
Our strength in distribution 40 million+ 99.9% 275,000+ prescription pharmaceutical SKUs of medical- deliveries order accuracy surgical supplies per year in North America One-third Market leader >50% of North America in U.S. medical- U.S. physicians prescription surgical served with medicines daily
Slide 17: Streamline the Portfolio
Focus on Sustainable Streamline Expand People Core the Oncology and Growth Portfolio and Culture Biopharma Ecosystems
Slide 18: Innovation and speed accelerate profit
Innovation and speed accelerate profit Centralization of Realigned operating Change Healthcare functional services structure: split-off • U.S. Pharmaceutical • Prescription Technology Solutions • Medical-Surgical Solutions • International Spend Smart program Intent to fully exit European region 18 ©
Slide 19: Expand Oncology and Biopharma Ecosystems
Focus on Sustainable Streamline Expand People Core the Oncology and Growth Portfolio and Culture Biopharma Ecosystems
Slide 20: Leveraging strengths to address healthcare challenges and drive growth
Leveraging strengths to address healthcare challenges and drive growth Oncology Biopharma 18 million patients are living with 13 million+ Americans skip or cancer today1 delay filling prescriptions due to financial considerations2 20 © 2021 McKesson Corporation. All rights reserved. See Supplemental
Slide 21: Key takeaways from today
Key takeaways from today Transforming to a diversified healthcare services company Executing on our strategy to deliver sustainable profit growth and cash flows Positioned to win in Oncology and Biopharma Services Focusing on shareholder value creation Investment thesis for McKesson is compelling 21
Slide 22: McKesson
M&KE SSON
Slide 23: FY22 Guidance and Baseline
FY22 Guidance and Baseline Britt Vitalone EVP & Chief Financial Officer 23
Slide 24: Raising FY22 Adjusted EPS outlook
Raising FY22 Adjusted EPS outlook $22.35 — $22.95 Previously $21.95 — $22.55 1 Central distributor of Expanded to include Full year FY22 adjusted EPS COVID-19 vaccines for booster distribution contribution ~$0.90 to $1.10 2 the U.S. government (from $0.50 to $0.70) 24 © 2021 McKesson Corporation. Al
Slide 25: McKesson's FY22 baseline for long-term target modeling
McKesson’s FY22 baseline for long-term target modeling FY22 Adjusted EPS Guidance $22.35 to $22.95 Items excluded from Baseline:1 COVID-19 vaccine distribution for U.S. government $0.90 to $1.10 Previously $0.50 to $0.70 Kitting, storage, and distribution of ancillary supplies for U.S. government $0
Slide 26: Developing our Oncology Ecosystem
Developing McKesson our Oncology Leadership Ecosystem Kirk Kaminsky President | U.S. Pharmaceutical 26
Slide 27: Oncology market is large and growing
Oncology market is large and growing 1.9M 18M 300+ Oncology drugs on the market in 2021 People in America will Patients living be diagnosed with with cancer today 2 cancer this year 1 >1/3 All new medicines are in oncology over next five years ~14% Oncology drug growth 5-year CAGR (2021 – 2026) 27 S
Slide 28: Cancer care is increasingly complex
Cancer care is increasingly complex Providers Biopharma Payers 28 © 2021 McKesson Corporation. All rights reserved. Patient
Slide 29: Differentiated portfolio built over time
Differentiated portfolio built over time Onmark GPO Community oncology The largest community Oncology-focused Internally developed Distributor Group Purchasing oncology network specialty pharmacy oncology technology of Specialty Organization and insights business Pharmaceuticals Radiation and Clinic
Slide 30: End-to-end offerings in sizable markets
End-to-end offerings in sizable markets $30B Market opportunity ~$25B Market opportunity Drug Distribution Practice Management Clinical Trial Services Real-World Data, Evidence & Provider Technology Unity/Onmark GPO Lower margin Higher margin #1 distributor Treat ~15% 4000+ 10M+ in Community Oncolog
Slide 31: Unparalleled reach in community care
Unparalleled reach in community care Growth of The US Oncology Network 2014 2021 Number ~1,300 2000+ of Providers Total Sites 350 500+ of Care Number 17 25 of States And we continue to expand our The US Oncology Network Onmark practice locations practice locations provider footprint 31 © 2021 McKess
Slide 32: Scaled connectivity advantage
Scaled connectivity advantage Creates differentiated value across stakeholders Provider Provider Technology Network Evidence & Insights Providers | Biopharma | Payer 32 © 2021 McKesson Corporation. All rights reserved.
Slide 33: Ontada Powers McKesson Oncology Solutions
Ontada Powers McKesson Oncology Leadership Solutions Susan Shiff President | Ontada 33
Slide 34: Essential evidence-driven research and care
Essential evidence-driven research and care A business focused on Generate oncology Support community Deliver real-world insights at the oncology providers evidence that oncology real-world intersection of with precise cancer accelerates data and evidence, technology and care insights that biopharma
Slide 35: Better patient care through technology
Better patient care through technology Suite of software enables providers to effectively manage their practices and deliver better patient care + Practice InsightsSM + iKnowMedSM + My Care PlusSM Dashboards to inform Electronic Health Patient Portal and optimize practice Record (EHR) performance +
Slide 36: Transforming cancer care in the real world
Transforming cancer care in the real world 80+ Oncology indications including rare cancers Rich EHR data 130+ 40 Oncology U.S. States 200+ practices Clinical and reimbursement data elements tracked Proprietary Technology and Data Platform 36 © 2021 McKesson Corporation. All rights reserved.
Slide 37: Our unmatched ecosystem allows us to conduct complex studies
Our unmatched ecosystem Answering today’s allows us to conduct most complex real- complex studies world questions • Long-term safety of an approved targeted cancer drug in the community setting • Long-term adherence and Evidence, Research, Key Opinion Leaders compliance with therapy and Data on the
Slide 38: MYLUNG Consortium: Competitive differentiation
MYLUNG Consortium : Competitive differentiation TM Unique, collaborative real-world research consortium to improve lung cancer care Biopharma Providers Partners Patient Advocacy Partners Provider Oncology Technology Data Insights 38 © 2021 McKesson Corporation. All rights reserved.
Slide 39: We improve the lives of cancer patients
We improve the lives of cancer patients 39 © 2021 McKesson Corporation. All rights reserved.
Slide 40: Biosimilar Adoption: Competitive Differentiation
Biosimilar Adoption: Competitive Differentiation Driving value in crowded therapeutic spaces Providers Biopharma Enhanced value Improved adoption for proposition partnering biosimilars Patients Payers Lowered out-of- Average ~30% pocket expenses greater savings on ASP 1 40 © 2021 McKesson Corporatio
Slide 41: Value-based Care: Competitive Differentiation
Value-based Care: Competitive Differentiation Leaders in the Oncology Care Model (OCM) Providers Biopharma Care management Demonstrated potential and shared savings to run outcome studies payments and create impact Patients Payers Enhanced patient ~$400M in outcomes savings against the baseline for
Slide 42: Oncology is a Key Growth Driver
Oncology is a Key Growth Driver Long track record of value creation in Oncology space Large and growing market with significant unmet needs Strong portfolio of assets providing differentiated value proposition across key stakeholder groups Community provider footprint and proprietary technology asse
Slide 43: Developing our Biopharma Services Ecosystem
Developing our Biopharma Services Ecosystem Nathan Mott President | Prescription Technology Solutions
Slide 44: Reduced complexity drives better outcomes
Reduced complexity drives better outcomes $6B $15B Access 27% of Rx abandonment due to access challenges 1 Biopharma services market Affordability $1B opportunity $5B of out-of-pocket savings for patients each year Adherence $8B 19% of patients are more adherent via Rx decision support 44 © 2021 McK
Slide 45: Unmatched Biopharma Services assets
Unmatched Biopharma Services assets Prescription Technology Solutions (RxTS) 2006 2017 2018 2020 Pharmacy claims switch Automated Patient assistance Automated hub and automated copay insurer authorization programs services and aligned programs process for drug coverage assets 45 © 2021 McKesson Corp
Slide 46: Scaled connectivity advantage
Scaled connectivity advantage Providers Payers ~750K providers Connect to integrated with ~80% of national 75% of EHRs and regional payers Pharmacies Biopharma 650+ brands served across ~50K pharmacies 94%+ therapeutic areas 19B+ transactions annually Patients 46 © 2021 McKesson Corporation. All rig
Slide 47: Access Improvement
Access Improvement A one-stop electronic prior authorization solution Providers Payers 35% faster Up to 30% improvement coverage operational efficiency determinations Biopharma Pharmacies Access to 80% of 14% increase in prescribers in brand paid claims from in- therapy class workflow connection ~20
Slide 48: Affordability Improvement
Affordability Improvement Benefit check, copay discounts, cash alternatives, and patient assistance programs Providers Payers Benefit data enriched 18M benefit with copay and cash checks per discount information month Pharmacies Biopharma Optimized Captured 39M scripts patient savings in FY21 that w
Slide 49: Data drives innovation
Data drives innovation Connectivity and automation drive value Access Affordability Advance outcomes Adherence 49 © 2021 McKesson Corporation. All rights reserved.
Slide 50: Biopharma Services is a key growth driver
Biopharma Services is a key growth driver Large and growing market with significant unmet needs Unmatched portfolio of assets providing differentiated value proposition across key stakeholder groups Connectivity into pharmacies, providers, and our automated hub services position us to win in high-gr
Slide 51: Driving Sustainable Growth and Superior Shareholder Value
Driving Sustainable Growth and Superior Shareholder Value Britt Vitalone EVP & Chief Financial Officer 51
Slide 52: Shareholder value creation framework
Shareholder value creation framework Organic • Revenue growth at or above market in all segments growth • Disciplined tactics driving margin efficiency + Operating • Increasingly innovative and efficient investments in areas leverage that drive better care and higher growth and margins + Capital • F
Slide 53: Successful execution of our framework
Successful execution of our framework Adjusted Operating Profit Adjusted EPS Capital Management +5% +11% – Cumulative 14% Free Cash Flow 4 Free Cash Flow Returned to Shareholders5 $15B 50% 1 1 CAGR CAGR 2 FY19 FY223 FY19 2 FY22 3 FY19 FY22 53 © 2021 McKesson Corporation. All rights reserved. See Sup
Slide 54: Strong baseline operating performance
Strong baseline operating performance Baseline Adjusted Operating Profit (in $M) FY19 to Durable core FY22F 1 2 FY19 FY22F • Efficient distribution platforms CAGR 3 at scale U.S. Pharmaceutical $2,477 $2,700 to $2,800 4% Transformative Prescription ecosystems $429 $570 to $600 11% Technology Solutio
Slide 55: Multiple new growth vectors
Multiple new growth vectors + + + = Sizeable Significant Differentiated Building Substantial untapped opportunity assets and new long-term oncology & across new capabilities businesses growth biopharma transaction flows potential opportunities and use cases 55 © 2021 McKesson Corporation. All rights
Slide 56: Sizable oncology opportunity
Sizable oncology opportunity ~$55B 1 TAM • Scaled connectivity advantage Community Practice Oncology Management and • Delivering real-world evidence & insights therapies Biopharma Services ~$30B ~$25B • Accelerating biopharma research • Lowering the cost of care Oncology therapies long-term growth C
Slide 57: Vast and broad Biopharma Services opportunity
Vast and broad Biopharma Services opportunity ~$15B 1 TAM • Unparalleled scale across diverse networks • Delivering patient affordability and Access & increased adherence Adherence Affordability ~$8B ~$7B • Enhancing connectivity across digital channels Biopharma Services • Leading to improved patie
Slide 58: Driving expense leverage across the enterprise
Driving expense leverage across the enterprise Operating Expense Operating Leverage Leverage 1 Tactics ~400bps • Spend Smart/Buy Smart • Strategic sourcing and supply initiatives • Centers of excellence 70% • Digital capabilities 66% • Strategic investments in growth FY19 FY22 58 © 2021 McKesson Cor
Slide 59: Disciplined capital allocation framework
Disciplined capital allocation framework Growth Return capital Maintain a strong investments to shareholders balance sheet Strategy-led investment Grow dividend as earnings Investment-grade balance sheet and free cash expand Strategic acquisitions Ample liquidity accelerate growth imperatives Share
Slide 60: Focused capital allocation approach
Focused capital allocation approach $4.2B $3.4B $3.2B $2.3B M&A Dividends CapEx Debt Reduction (net) Repurchases FY19 FY20 FY21 FY22F % of Free Cash Flow Returned to Shareholders1 56% 58% 27% 62% Healthy mix of Investing in Increased cash 50% of FCF returned Share base reduction capital allocation o
Slide 61: Strong Free Cash Flow provides financial flexibility
Strong Free Cash Flow provides financial flexibility Free Cash Flow Free Cash Flow Leverage 1 2 Conversion 1 2.8X $3.9 $3.9 142% 140% $3.7 2.5X $3.5 130% 2.3X 107% 1.6X FY19 FY22 FY19 FY22 FY19 FY22 • Solid operating performance • Cash flow discipline drives • Strong balance sheet • Working capital
Slide 62: Transforming and focusing the portfolio
Transforming and focusing the portfolio Select portfolio actions • Acquisition of Medical Specialties (FY19) • Tax free exit of Change Healthcare (FY20) • Sell certain European businesses to the PHOENIX Group (July 2021) • Sell retail and distribution businesses in the U.K. to Aurelius (November 202
Slide 63: Stable and growing dividend
Stable and growing dividend 22% FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 Dividends Paid1 Adj. EPS2 63 © 2021 McKesson Corporation. All rights reserved. See Supplemental Information for footnotes, definitions, and further non-GAAP information.
Slide 64: Share repurchase guiding principles
Share repurchase guiding principles • Share repurchases are used to return cash to our shareholders in the absence of acceptable strategy-led growth investment opportunities • Our intent is to be in the market each quarter, guided by the following principles: 1 At maximum, we expect to limit share r
Slide 65: Consistent share repurchase program
Consistent share repurchase program 202M 24% shares in shares 4/1/18 outstanding 152.7M shares 9/30/21 WEIGHTED AVERAGE COMPOUND ANNUAL REPURCHASED 1 REPURCHASE PRICE RETURN ~$6B $148.24 ~11% 65 © 2021 McKesson Corporation. All rights reserved. See Supplemental Information for footnotes, definitions
Slide 66: Shareholder value creation framework
Shareholder value creation framework Organic • Revenue growth at or above market in all segments growth • Disciplined tactics driving margin efficiency + Operating • Increasingly innovative and efficient investments in areas leverage that drive better care and higher growth and margins + Capital • F
Slide 67: Long-term financial framework
Long-term financial framework Organic Operating Capital Growth Leverage Allocation + + 6% to 8% contribution ~6% contribution 12% – 14% Baseline Adjusted EPS Growth Target 67 © 2021 McKesson Corporation. All rights reserved.
Slide 68: Key takeaways from today
Key takeaways from today Transforming to a diversified healthcare services company Executing on our strategy to deliver sustainable profit growth and cash flows Positioned to win in Oncology and Biopharma Services Focusing on shareholder value creation Investment thesis for McKesson is compelling 68
Slide 69: Supplemental Information
PROG $ ets a Information >) MCKESSON
Slide 70: Glossary
Glossary Acronym Defined Term Acronym Defined Term ASP Average selling price GPO Group purchasing organization B Billion M Million BPS Basis points M&A Mergers and acquisitions CAGR Compound annual growth rate MW Megawatt CapEx Capital expenditures OCM Oncology Care Model DEI Diversity, equity, and
Slide 71: Fiscal 2022 Outlook
Fiscal 2022 Outlook Metric Fiscal 2022 Outlook Fiscal 2021 Actual Adjusted Earnings per Diluted Share $22.35 to $22.95 $17.21 Previously $21.95 to $22.55 Revenues 8% to 11% growth 3% growth Adjusted Operating Profit 20% to 23% growth 1% growth Previously 18% to 22% growth Adjusted Corporate Expenses
Slide 72: Fiscal 2022 Outlook
Fiscal 2022 Outlook Prescription Medical-Surgical U.S. Pharmaceutical Technology International Solutions Solutions 1% decline to 4% FY22 Revenue: 8% to 11% growth 31% to 37% growth 8% to 14% growth growth FY22 Adjusted Segment Operating Profit: Reported 8% to 10% growth 23% to 29% growth 35% to 45%
Slide 73: Footnotes
Footnotes These notes refer to the financial metrics and/or defined terms presented on: Slide 20 – Leveraging strengths to address healthcare challenges and drive growth 1. Cancer patient statistics from American Cancer Society and National Cancer Institute. 2. Statistic from HealthDay. Slide 24 – R
Slide 74: Footnotes
Footnotes Slide 54 – Strong baseline operating performance 1. Fiscal 2019 baseline metrics exclude the impacts related to the following items: impact from the separation of Change Healthcare, which was completed in the fourth quarter of Fiscal 2020, and gains or losses associated with McKesson Ventu
Slide 75: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Full Year Fiscal 2021, 2020, and 2019 $ in millions FY 2021 FY 2020 FY 2019 GAAP CASH FLOW CATEGORIES Net cash provided by operating activities $ 4,542 $ 4,374 $ 4,036 Net cash used in investing activities (415) (579) (1,381) Net cash used in financing activities (1,6
Slide 76: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Full Year Fiscal 2021, 2020, and 2019 $ in millions 2021 2020 2019 Net income (loss) (GAAP) $ (4,340) $ 1,120 $ 255 Depreciation (GAAP) 321 321 317 Amortization (GAAP) 566 601 632 Interest expense (GAAP) 217 249 264 Income tax expense (benefit) (GAAP) (695) 18 356 EBI
Slide 77: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Full Year Fiscal 2021, 2020, and 2019 $ in millions 2021 2020 2019 Income from continuing operations (GAAP) $ (4,339) $ 1,126 $ 254 Net income attributable to noncontrolling interests (GAAP) (199) (220) (221) Income from continuing operations attributable to McKesson
Slide 78: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Full Year Fiscal 2021, 2020, and 2019 $ in millions 2021 2020 2019 Gross profit (GAAP) $ 12,148 $ 12,023 $ 11,754 Pre-tax adjustments (d): Transaction-related expenses and adjustments — 1 1 LIFO inventory-related adjustments (38) (252) (210) Gains from antitrust legal
Slide 79: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Full Year Fiscal 2021, 2020, and 2019 $ in millions 2021 2020 2019 Equity earnings and charges from investment in Change Healthcare Joint Venture (GAAP) $ — $ (1,108) $ (194) Pre-tax adjustments (d): Amortization of acquisition-related intangibles — 267 304 Transactio
Slide 80: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Full Year Fiscal 2021 and 2019 $ in millions Year Ended March 31, 2021 Year Ended March 31, 2019 As reported As adjusted As reported As adjusted (GAAP) Adjustments (a) (Non-GAAP) (GAAP) Adjustments (a) (Non-GAAP) OPERATING PROFIT (LOSS) U.S. Pharmaceutical $ 2,763 $ (
Slide 81: Supplemental Non-GAAP Financial Information
Supplemental Non-GAAP Financial Information McKESSON CORPORATION SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION In an effort to provide investors with additional information regarding the Company's financial results as determined by generally accepted accounting principles ("GAAP"), McKesson Corporatio
Slide 82: Supplemental Non-GAAP Financial Information
Supplemental Non-GAAP Financial Information SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION (continued) • EBITDA (Non-GAAP): We define EBITDA (Non-GAAP) as GAAP net income (loss) before interest expense, income taxes, depreciation, and amortization. • Adjusted EBITDA (Non-GAAP): We define Adjusted EBITD
Slide 83: Supplemental Non-GAAP Financial Information
Supplemental Non-GAAP Financial Information SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION (continued) Other adjustments - The Company evaluates the nature and significance of transactions qualitatively and quantitatively on an individual basis and may include them in the determination of our adjusted