McKesson Corporation · NYSE:MCK
McKesson — Investor Day (June 2015)
137 slides from McKesson's investor day presentation, Jun 24, 2015
Slide 1: McKesson Corporation 2015 Investor Day
McKesson Corporation 2015 Investor Day June 24, 2015
Slide 2: 2015 Investor Day Agenda
2015 Investor Day Agenda Erin Lampert – Senior Vice President, Investor Relations John Hammergren – Chairman and Chief Executive Officer Paul Julian – Executive Vice President, Group President Distribution Solutions Mark Walchirk – President, U.S. Pharmaceutical Nick Loporcaro – President, McKesson
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 and Chief Executive Officer
Slide 5: McKesson's Shared Value System
McKesson’s Shared Value System Who We Are What We Do How We Do It
Slide 6: McKesson Distribution Solutions
McKesson Distribution Solutions Paul Julian Executive Vice President Group President Distribution Solutions
Slide 7: Distribution Solutions: Core Operations
Distribution Solutions: Core Operations North America Medical- International Global Pharmaceutical Surgical Pharmaceutical Procurement Distribution Distribution Distribution and Sourcing and Services and Services and Services Pharmaceutical Celesio Medical surgical Enterprise-wide distribution, phar
Slide 8: FY15 Milestones
FY15 Milestones Delivered Strong Results Across Distribution Solutions Continued Operating PSS iKnowMed 1 control to add ranked of integration new # Meeting or exceeding Celesio physicians Oncology EHR2 expectations Betterlife from Lloyds Expanded Pharmacy wins Health Mart from Store Design The Dece
Slide 9: Driving Operational Excellence Across Distribution Solutions In FY15
Driving Operational Excellence Across Distribution Solutions In FY15 99.98% ~20% Nearly order accuracy increase in lines processed $200M across North America in Six Sigma-related across U.S. Distribution and Services savings across Pharmaceutical North America ~43K International Distribution and ord
Slide 10: Distribution Solutions Summary
Distribution Solutions Summary Track record of strong financial performance across the segment Operational excellence is at the core of everything we do Strong value proposition across all customer segments Differentiated approach to working with manufacturing partners on a global scale Proven abili
Slide 11: Distribution Solutions Leadership Team
Distribution Solutions Leadership Team Paul C. Julian EVP, Group President Distribution Solutions (19 years) Brian Tyler Stanton McComb Saul Factor President President President North American Pharmaceutical McKesson Medical-Surgical Global Sourcing Distribution and Services (13 years) (9 years) (18
Slide 12: North America Pharmaceutical Distribution and Services
North America Pharmaceutical Distribution and Services Paul Julian Executive Vice President Group President Distribution Solutions
Slide 13: North America Pharmaceutical Distribution And Services Leadership Team
North America Pharmaceutical Distribution And Services Leadership Team Brian Tyler President North America Pharmaceutical Distribution and Services (18 years) Mark Walchirk Alain Champagne Nick Loporcaro Emilie Ray President President President President McKesson U.S. Pharmaceutical McKesson Canada
Slide 14: FY15 Milestones Across North America
FY15 Milestones Across North America U.S. Pharmaceutical McKesson Specialty Health • Added more than 500 Health Mart stores • Continued track record of new physician • ~40% year-over-year growth in OneStop Generics additions to US Oncology since acquisition • >$150M in Six Sigma-related savings • Ex
Slide 15: Pharmaceutical Industry Landscape
Pharmaceutical Industry Landscape Mid-Single Digit Compound Annual Growth from 2014-20191 Overall U.S. and Canadian Market Sales (USD Billion) % Change Pricing Steady trends and 500 14 organic 12 healthy 400 growth 10 pipeline 300 8 200 6 4 Demographics, 100 2 chronic disease 0 0 and coverage 2010 2
Slide 16: A Broad Value Proposition Across North America
A Broad Value Proposition Across North America Payers Pharmaceutical Regulatory Agencies/ Manufacturers Government Customers • Retail chains and independent pharmacies • Health systems and alternate care sites v • Community clinics Patient Retail Pharmacies Manufacturing Partners Health Systems • Pr
Slide 17: Focused On Customer Success
Focused On Customer Success Retail Health Systems Community Clinics Pharmaceutical distribution Supply chain expertise Oncology and multi-specialty services Specialty distribution distribution and services Brand and specialty Data analytics US Oncology Generic Consulting services GPOs Health Mart 34
Slide 18: Industry-Leading Capabilities For Manufacturers
Industry-Leading Capabilities For Manufacturers Scale and Reach Services ~50K customer locations spanning Supporting market channels pharmaceutical Flagship development generic procurement programs life cycle Strong footprint Multiple channels of banner Product commercialization and market access ph
Slide 19: Positioned For Growth In Specialty
Positioned For Growth In Specialty Specialty Drives >50% of North American Pharmaceutical Market Growth 2013-20181 Overall U.S. and Canadian Pharmaceutical Market • Multiple distribution channels • Leading position in community oncology Specialty • Leading positions in rheumatology, gastroenterology
Slide 20: Priorities Across North America Distribution And Services
Priorities Across North America Distribution And Services Achievements Priorities Well-positioned in growing Maximize global sourcing markets opportunity Deep customer relationships Expand value provided to and a differentiated approach existing and diverse customer to value creation base Proven exp
Slide 21: U.S. Pharmaceutical
U.S. Pharmaceutical Mark Walchirk President U.S. Pharmaceutical
Slide 22: U.S. Pharmaceutical Has A Broad Value Proposition
U.S. Pharmaceutical Has A Broad Value Proposition Payers Retail National Pharmacy Pharmaceutical Regulatory Agencies/ • Industry-leading service levels Manufacturers Government • Proprietary OneStop Generics program and NorthStar private label • Technology offerings, including RelayHealth and Supply
Slide 23: U.S. Pharmaceutical Market Overview
U.S. Pharmaceutical Market Overview Brand Growth Generic Growth 2.9% CAGR 7.2% CAGR 2015 to 20191 2015 to 20191 Specialty Medicines Generic Launches Expect >50% $85.1B of market growth in the North American of brand sales at risk from pharmaceutical market will be from Specialty medicines during 201
Slide 24: Our Generics Programs Continue To Drive Value For Customers
Our Generics Programs Continue To Drive Value For Customers OneStop Revenue OneStop proprietary generics program Expert product sourcing and deep relationships with Competitive FY10 FY12 FY13 FY14 FY15 FY11 pricing, choice 100+ and industry-leading service levels manufacturers >10 years Strong of le
Slide 25: McKesson: A Valuable Partner To Retail National Pharmacies
McKesson: A Valuable Partner To Retail National Pharmacies Strong track record of Rite Aid renewing and expanding our customer relationships Assumed Operationalized Broad responsibility for daily direct store sourcing delivery to service and 4,500+ offerings distribution stores cater to individual c
Slide 26: McKesson: A Valuable Partner To Independent Pharmacies
McKesson: A Valuable Partner To Independent Pharmacies Health Mart is the Largest Network of Independent Pharmacies in the U.S. Health Mart Store Count Health Mart Strategy 3,865 Access to Drive 3,281 Expand store 2,941 3,096 preferred patients revenue networks into store 2014 Pharmacy Innovator of
Slide 27: Better Health For McKesson's Independent Pharmacy Customers
Better Health For McKesson’s Independent Pharmacy Customers Heath Mart Customer Spotlight Offerings Results • Fully branded Health Mart • Grew prescriptions per day by >15% in a two-year period in a competitive • Purchases generics through OneStop environment Generics program • Integral part of the
Slide 28: McKesson: A Valuable Partner To Health Systems And Institutional Customers
McKesson: A Valuable Partner To Health Systems And Institutional Customers Solutions-led Federal approach Department of Veterans Affairs Department of Defense combining robust distribution capabilities with unique services and technologies • Data analytics IDNs Supply partnerships with the • Supply
Slide 29: Operational Excellence
Operational Excellence Efficiency Quality Productivity One third 99.98% Investing in of medicines in North technology America delivered daily order accuracy to increase productivity FY15 Highlights Focus Areas • New NRDC fully operational • Ongoing capital investment to maintain • ~20% increase in l
Slide 30: Our operational excellence is driven by our people, infrastructure and investments
Our operational excellence is driven by our people, infrastructure and investments North America
Slide 31: McKesson Specialty Health
McKesson Specialty Health Nick Loporcaro President McKesson Specialty Health
Slide 32: McKesson Specialty Health
McKesson Specialty Health Supporting Key Stakeholders to Drive Better Patient Outcomes Payers A Leading Position in the Community Channel Pharmaceutical Regulatory Agencies/ Manufacturers Government • The leader in community oncology • Leading position in rheumatology • Increasing scale in other spe
Slide 33: A Broad Footprint Across Multiple Specialties
McKesson Specialty Health A Broad Footprint Across Multiple Specialties Fast Facts1: • >3,000 oncologists • >4,500 other specialists • >400 payer relationships Practice Locations: • The US Oncology Network • Open Market Oncology • Other Specialties Scale Technology Breadth North America 1McKesson Sp
Slide 34: The US Oncology Network
The US Oncology Network Enabling High-Quality Clinical Care Largest Community-Based Network Services Oncology Network in the U.S.1 • Practice strategy planning • Innovative managed care contracting • >60,000 clinical trial patients • Clinical research • Clinical education • >50 FDA-approved drugs •
Slide 35: Specialty Health Payer Solutions
Specialty Health Payer Solutions Enabling Guidelines and Pathways at the Point of Care Value Pathways Clear Value Plus • Powered by direct collaboration with • Ability to interface with any EHR National Comprehensive Care • Engage physicians before treatment Network (NCCN) physicians decision is mad
Slide 36: McKesson Specialty Health Payer Solutions
McKesson Specialty Health Payer Solutions Providing Solutions for High-Quality, Low-Cost Care Innovent Oncology Episodes of Care Oncology Care Model Collaboration with payers Single, upfront payment Proposed payment model to help patients for each episode pilot that includes financial understand and
Slide 37: Specialty Manufacturer Value Chain
Specialty Manufacturer Value Chain Supporting Unique Needs of Specialty Drugs Large to niche Development Specialized populations handling Limited distribution Detailed inventory and dispensing control Physician Patient Outcomes education support tracking North America
Slide 38: Specialty Health Manufacturer Solutions
Specialty Health Manufacturer Solutions Supporting Unique Needs of Specialty Manufacturers Value-Added Services Offered Solutions • Efficient clinical trials US Oncology Research • Prescriber outreach and education Clinical Trial Management Systems • Patient counseling and assistance My Care Plus pr
Slide 39: Positioned For Success With Biosimilars
Positioned For Success With Biosimilars Supporting Biosimilar Launches Through a Comprehensive Platform Biosimilar Considerations Multichannel Access Presence via network and • Time to develop and product group purchasing commercialization organizations • Ability to substitute • Physician views on q
Slide 40: McKesson Specialty Health
McKesson Specialty Health Partnering with Key Stakeholders to Deliver Better Health Pharmaceutical Manufacturers Payers Improving Optimizing Complete product life-cycle support Payer contracting Payers Pharmaceutical Manufacturers Regulatory Agencies/ Government Physicians Retail v Patient Health En
Slide 41: McKesson Canada
McKesson Canada Alain Champagne President McKesson Canada
Slide 42: McKesson Canada: A Strong Value Proposition
McKesson Canada: A Strong Value Proposition Payers A Unique Portfolio of Business Assets Pharmaceutical Regulatory Agencies/ • Well-positioned for profitable growth Manufacturers Government • Strategically aligned to enable strong customer partnerships and quality patient care Taking Advantage of Sc
Slide 43: Driving Business Growth In A Dynamic Market
Driving Business Growth In A Dynamic Market Market Overview $24B of Canadian retail CAD Pharmacy Rx purchases1 67% pharmacy prescriptions are generics3 Pharmacy Rx Canadian pharmaceutical 88% purchases via retail pharmacy2 market continues to evolve 56% 67% - Gx Shift in Generics trend increasingly
Slide 44: McKesson Canada Offers A Broad Market Reach
McKesson Canada Offers A Broad Market Reach Independent Distributor Specialty Pharmacy Pharmacy Banners >1,900 banners 15 7 Specialty servicing nearly pharmacies 40% 85+ Distribution of Canadian Infusion centers independent clinics pharmacies Connecting the Canadian healthcare environment • Integrat
Slide 45: Partnering With Independent Pharmacies To Improve Store Revenues And Performance
Partnering With Independent Pharmacies To Improve Store Revenues And Performance Medicine Shoppe Increased Canada National Footprint >1,900 stores Better Business Health for Independent Pharmacies FY15 10% increase in SKUs from FY14 to FY15 12% + + >1,700 stores More More More Private FY14 Scripts O
Slide 46: Expanding Comprehensive Specialty And Distribution Capabilities
Expanding Comprehensive Specialty And Distribution Capabilities For Patients And Payers 89K Infusions Annually Medical conditions addressed: Hodgkin's Disease, Metastatic Colorectal Cancer, Ankylosing Spondylitis, Crohn’s Disease, Psoriasis, Ulcerative Colitis and Rheumatoid Arthritis Strong manufac
Slide 47: Growing Sivem Portfolio To Meet Market Needs
Growing Sivem Portfolio To Meet Market Needs Leveraging McKesson Global Sourcing Platform Launched national Supply quality and expansion certainty Benefiting from McKesson’s global sourcing reach 20 growth % in molecules available Collaboration with NorthStar across Canada during FY15 North America
Slide 48: Unmatched National Reach Driving Performance
Unmatched National Reach Driving Performance Driving Operational Excellence Extensive network enables next-day service or better to 95% of Canadian population Distribution Centers Specialty Pharmacies Infusion Clinics Retail Pharmacy Banners North America
Slide 49: Positioned for Growth
Positioned for Growth Leveraging Our Core Competencies Drive Volume Grow Grow Banner and Margin in Specialty Business Distribution • Leverage North America and • Further enhance capabilities to • Integrate new banners global sourcing support specialty commercialization and growth • Strengthen indepe
Slide 50: McKesson Medical-Surgical
McKesson Medical-Surgical Stanton McComb President McKesson Medical-Surgical
Slide 51: Medical-Surgical Results And Market Overview
Medical-Surgical Results And Market Overview Medical-Surgical Revenue Market Trends • Favorable demographic trends Sales (USD Billion) • Continual rise in U.S. $5.6 $5.9 healthcare spending • Consolidation of customers $3.6 and suppliers $3.1 • Growth expected in lab and home care markets • Healthca
Slide 52: McKesson Medical-Surgical
McKesson Medical-Surgical Strong Customer Value Proposition through Service and Platform Payers Sales and Service Pharmaceutical Regulatory Agencies/ • >1,400 field sales reps Manufacturers Government • Serving >225,000 customers Sourcing Expertise • National presence across specialties v • Medical
Slide 53: Leader Across Alternate Site Markets
Leader Across Alternate Site Markets #1 Market Share Market #1 Share Surgery Home Care Physician Surgery Centers Home #1 Long-term Long Term Offices Centers Care Care Care 6K Customers 12K Customers 200,000 6,000 12,000 18,000 Customers Customers Customers Customers Customers Serving the Ambulatory
Slide 54: Unrivaled Platform Is A Catalyst For Growth
Unrivaled Platform Is A Catalyst For Growth Better costs and service Greater competitive position, gross profit and commissions Alignment Preferred across supplier platforms growth Medical-Surgical
Slide 55: Leveraging Private Label Offerings
Leveraging Private Label Offerings Meeting Customer Needs Through a Broad Portfolio of Products Creating better business Benefiting from market health for customers leadership and scale Continued growth of high quality product portfolio Harmonized Manufacturer 3,000+ partnerships private label produ
Slide 56: PSS Meeting Or Exceeding Expectations On All Fronts
PSS Meeting Or Exceeding Expectations On All Fronts Year 1 and 2 Accomplishments Year 3 Focus • Established leadership teams and • Complete transition to single technology retained >1,400 sales reps platform and distribution network • Met or exceeded all synergy goals • Complete harmonization of all
Slide 57: Case Study: Customer Benefits
Case Study: Customer Benefits Serving the Alternate Site Needs of Large and Diverse Ecosystems Medical-Surgical Products Health System Customer Needs and Services • Medical supplies • Pharmaceuticals Multi-Specialty Laboratory Primary Care Practice • Medicare Part B billing services • GPO support pr
Slide 58: Driving Excellence Through Customer Partnerships
Driving Excellence Through Customer Partnerships Medical-Surgical
Slide 59: North America and Medical-Surgical Distribution and Services Q&A
North America and Medical-Surgical Distribution and Services Q&A
Slide 60: International Pharmaceutical Distribution and Services
International Pharmaceutical Distribution and Services Paul Julian Executive Vice President Group President Distribution Solutions
Slide 61: Celesio: Extending Our Reach
Celesio: Extending Our Reach Strengthening our ability to Empowering more meet the increasingly global than 6,500 owned needs of the pharmaceutical and banner supply chain pharmacies Providing partners Diversified revenue significant potential streams across the for higher efficiency world creating
Slide 62: Global Procurement And Sourcing
Global Procurement And Sourcing North America and Europe Represent >55% of Global Drug Spend by 20181 Overview Global footprint of combined distribution & pharmacy operations • Established London-based Global Procurement & Sourcing office in January 2015 • Enterprise-wide sourcing and procurement re
Slide 63: Synergy Target $275M − $325M
Synergy Target Creating value $275M − $325M globally in transaction synergies for our partners, customers by the end of FY19 and shareholders Centralizes Allows for Creates overall view aggregation of data and analytics platform of sourcing across for organization-wide McKesson in one area private l
Slide 64: Global Private Label Offerings
Global Private Label Offerings Aggregation of Worldwide Private Label Spend Drives Opportunities Across the Portfolio OTC Medical Supplies Generics Increase private label Advance opportunities in Manage opportunities in OTC penetration in new global medical-surgical U.S. and Canada and and existing
Slide 65: Translating Expertise For The European Market
Translating Expertise For The European Market Creating Value for Manufacturers • Supply chain economics and safety Manufacturer • Forecasting and data visibility services • Value-added services • Efficient distribution network Supply chain • A culture of process improvement excellence • Preferred ge
Slide 66: Better Health For Retail And Banner Pharmacies
Better Health For Retail And Banner Pharmacies A Global Footprint 12,000+ owned and banner pharmacies globally • More than 3,800 Health Mart stores • Nearly 40% of independent pharmacy market in Canada with more than 1,900 banner stores • 6,500 owned and banner pharmacies across Europe International
Slide 67: Celesio Observations
Celesio Observations Post Operating Control: Business Priorities and Progress International
Slide 68: Celesio
Celesio Marc Owen Chairman Celesio Management Board
Slide 69: Celesio Core Operations
Celesio Core Operations Highlights Extensive network across 13 countries in Europe Leader in pharmaceutical distribution Strong retail presence with over 6,500 owned and banner pharmacies Population of nearly 350 million in the markets we serve1 1U.S. Census Bureau International Database (2015) Inte
Slide 70: Celesio Country Leadership
Celesio Country Leadership Marc Owen Chairman Celesio Management Board 13 years (McKesson) Andre Blümel Andreas Windischbauer Cormac Tobin Managing Director Managing Director Managing Director Germany Austria/Brazil/Portugal UK/Ireland (28 years) (22 years) (9 years) Leonardo Ferrandino Hubert Olivi
Slide 71: Celesio Has A Broad Value Proposition
Celesio Has A Broad Value Proposition Payers Pharmaceutical Regulatory Agencies/ Manufacturers Government Independent and Chain Pharmacies • Distribution services • Pharmacist training • Pharmacy, IT and back-office solutions v • Private label Patient Manufacturer Services Retail Pharmacies Health •
Slide 72: European Pharmaceutical Industry Landscape
European Pharmaceutical Industry Landscape Overall European Market Sales (USD Billion) % Change 250 6% Stable Increasing growing generics 200 4% market penetration 150 2% 100 0% Demographics, 50 -2% chronic disease and new 0 -4% medicines 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Internation
Slide 73: Country Snapshot: United Kingdom
Country Snapshot: United Kingdom Public and Private Payers, Providers Population Hospital Industry2 64 Million1 24% Private Hospitals 76% National Health Service Hospitals Healthcare Providers Healthcare Spend >1,300 hospitals3 >14,000 pharmacies4 9.3% of GDP 5 1U.S. Census Bureau International Data
Slide 74: Celesio Snapshot: United Kingdom
Celesio Snapshot: United Kingdom Wholesale and Retail • Market Dynamics National distribution presence >14,000 • Wholesale margin: Tied to pharmacies served manufacturer contracts • 2nd largest retailer • Retail pharmacy margin: Dispensing fee plus payment for additional clinical services • Pharmaci
Slide 75: Country Snapshot: Germany
Country Snapshot: Germany Public and Private Payers, Providers Population Hospital Industry2 81 Million1 40% 30% Private, Not-for-Profit Public 30% Healthcare Providers Private for-Profit Healthcare Spend >1,500 hospitals3 >20,000 pharmacies4 11.3% of GDP 5 1U.S. Census Bureau International Database
Slide 76: Celesio Snapshot: Germany
Celesio Snapshot: Germany Wholesale and Retail • Market Dynamics National distribution presence >6,200 • Wholesale margin: Fixed on pharmacies served reimbursable drugs • Retail third-party pharmacy ownership prohibited; 1 pharmacist allowed to own 1 main pharmacy and up to 3 additional affiliates i
Slide 77: Country Snapshot: Norway
Country Snapshot: Norway Population Public and Private Payers, Providers 5 Million1 Hospital Industry2 6% Private For-Profit 3% Private, 91% Not-for-Profit Public Healthcare Providers Healthcare Spend >85 hospitals3 ~800 pharmacies4 9.3% of GDP 5 1U.S. Census Bureau International Database (2015) 2Eu
Slide 78: Celesio Snapshot: Norway
Celesio Snapshot: Norway Wholesale and Retail • Market Dynamics Self-distribution to pharmacies ~300 • Wholesale margin: Tied to pharmacies served manufacturer contracts • One of the leading retailers • Retail pharmacy margin: Fixed by government for prescription drugs • Generic substitution allowed
Slide 79: Celesio: Foundation of Success
Celesio: Foundation of Success Grow Customer Operational Global Sourcing European Our People Relationships Success Pharmacy Network (EPN) International
Slide 80: Grow Customer Relationships
Grow Customer Relationships Business EPN Intelligence Expanding Health Supply Chain Breadth of Technology Focus Excellence Services Patient Manufacturer Scale Scale International
Slide 81: Operational Success
Operational Success Investment in IT Platform Country-Level Data Customers Market Suppliers Data Multi-year investment in ERP implementation will align systems with McKesson and help drive global procurement and distribution efficiencies International
Slide 82: Operational Excellence Driving Business Improvement
Operational Excellence Driving Business Improvement Operational Excellence Statistics • Inventory accuracy 99.91% • Delivery addresses served +19% • Lines per hour +2.1% • First Six Sigma pilots initiated Six Sigma drives efficiency of the business, which benefits patients, pharmacies and Celesio In
Slide 83: Global Sourcing
Global Sourcing Initiative to Centralize Procurement Continues; Coordinating with London Office International
Slide 84: Broad Retail Footprint Across Europe
Broad Retail Footprint Across Europe Belgium Ireland Norway France Italy Sweden Germany Netherlands United Kingdom International Note: Brocacef is a joint venture where Celesio has an equity interest of 45%
Slide 85: European Pharmacy Network
European Pharmacy Network Improves Celesio’s Owned and Co-op Pharmacies Cooperations and Owned Pharmacies Franchise Partner Independents Consistent European Common store Lloyds’ concept brand appearance elements customized for pharmacies A differentiated New technology and pharmacy concept product f
Slide 86: EPN: Expanding Our Broad Retail Footprint
EPN: Expanding Our Broad Retail Footprint A strong Innovative Economies Leader network health services and of scale in service, quality and of owned, franchise and pharmacy management innovation cooperation pharmacies International
Slide 87: Shared Values
Shared Values International
Slide 88: International Pharmaceutical Distribution and Services Q&A
International Pharmaceutical Distribution and Services Q&A
Slide 89: McKesson
MSKESSON
Slide 90: McKesson Technology Solutions
McKesson Technology Solutions Pat Blake Executive Vice President Group President Technology Solutions
Slide 91: Strong Value Proposition As The Industry Looks Beyond EHR Adoption
Strong Value Proposition As The Industry Looks Beyond EHR Adoption Payers Connecting the Healthcare Economy Pharmaceutical Regulatory Agencies/ • 300 payers Manufacturers Government • 4,000 hospitals; 630,000 providers and clinicians • 50,000 pharmacies Focusing Ahead to Manage Shift to Value v • Pa
Slide 92: Technology Solutions Leadership
Technology Solutions Leadership Pat Blake EVP, Group President Technology Solutions (19 years) Jeff Felton Pat Leonard Rod O’Reilly President President President Connected Care and Analytics Business Performance Services McKesson Health Solutions (15 years) (20 years) (12 years) Erkan Akyuz Jim Pesc
Slide 93: Our Customers Continue To Undergo Significant Change
Our Customers Continue To Undergo Significant Change Shifting Volume Cost Containment Consolidation Performance Consumerism Payers Providers Pharmacies Diversifying and evolving Scaling and integrating to Redefining roles in care to enable value-based adapt in the shifting delivery and consumer reim
Slide 94: Key Payer Needs For Enabling Value-Based Reimbursement
Key Payer Needs For Enabling Value-Based Reimbursement Develop and manage high-performing provider networks Automate contract and reimbursement management Manage complexity of supporting FFS and Ensure clinically value-based models appropriate medical utilization Technology Solutions
Slide 95: Empowering Payers With Automation And Intelligence
Empowering Payers With Automation And Intelligence Financial Management Network Management Payment integrity solutions, bundled Design, manage and optimize networks for payment automation and claims analytics high performance across the full spectrum reduce administrative cost of reimbursement model
Slide 96: Aligning Payment And Delivery Of The Most Appropriate Services
Aligning Payment And Delivery Of The Most Appropriate Services InterQual Clinical Criteria Continued Innovation Evidence‐based clinical intelligence for • InterQual Mobile optimizing care management decisions and • Industry’s first admissions criteria with managing medical costs co-morbidities • Cri
Slide 97: Key Provider Needs For Revenue Management And Clinical Connectivity
Key Provider Needs For Revenue Management And Clinical Connectivity Manage claims and reimbursement process Facilitate patient pay and reduce bad debt Comprehensive revenue cycle services Enable interoperability and data aggregation Technology Solutions
Slide 98: Helping Providers Navigate Reimbursement And Maximize Performance
Helping Providers Navigate Reimbursement And Maximize Performance RelayHealth Financial Business Performance Services Cloud-based revenue cycle solutions Comprehensive revenue cycle and streamline health system operations and physician services improve business accelerate payment velocity performanc
Slide 99: Connecting Providers In Expanding Enterprises And Across The Care Continuum
Connecting Providers In Expanding Enterprises And Across The Care Continuum RelayHealth Clinical Medical Imaging Cloud-based solutions enable connectivity, Diagnostic imaging, workflow and data aggregation, care coordination and vendor-neutral solutions support patient engagement enterprise imaging
Slide 100: Key Market Needs In The Rx Ecosystem
Key Market Needs In The Rx Ecosystem Optimize prescription claims reimbursement Access members for clinical management Achieve regulatory compliance Automate co-pay assistance and prior authorization Technology Solutions
Slide 101: Enabling Rx Connectivity And Value-Added Solutions With RelayHealth Pharmacy
Enabling Rx Connectivity And Value-Added Solutions With RelayHealth Pharmacy Pharmacy Network Optimization and Clinical Services Nation’s largest pharmacy network connects pharmacies, pharmaceutical Value-added solutions for authorization, manufacturers, prescribers and payers claims editing, Star R
Slide 102: Leading The Industry Towards A Vision Of Person-Centered Interoperability
Leading The Industry Towards A Vision Of Person-Centered Interoperability Members represent 70% of the acute care EHR market and 24% of the ambulatory care EHR market >60 provider sites live across 15 states A not-for-profit trade association of Expected to enable at least 5,000 sites health IT comp
Slide 103: Providing The Information Fabric To Enable Better Business And Better Health
Providing The Information Fabric To Enable Better Business And Better Health Connecting Focusing Ahead Expanding the Healthcare to Manage the Margin Economy Shift to Value Technology Solutions
Slide 104: Financial Update
Financial Update James Beer Executive Vice President, Chief Financial Officer
Slide 105: Agenda
Agenda Drivers Of Value Creation Segment Financial Review Distribution Solutions Technology Solutions Financial Flexibility And Capital Deployment Track Record Of Financial Performance Financial Update
Slide 106: McKesson Drives Sustained Value Creation
McKesson Drives Sustained Value Creation Attractive Healthcare Market • Public policy agenda supports greater access and improved efficiency • Demographics drive long-term demand in North America and Europe Experienced and tenured management team with a steady track record of delivering results Well
Slide 107: Distribution Solutions
Distribution Solutions Scaled and Diversified Portfolio with a Focus on High-Growth Areas and Margin Expansion Financial Update
Slide 108: Distribution Solutions: Organic Revenue Growth, Bolstered By Acquisitions
Distribution Solutions: Organic Revenue Growth, Bolstered By Acquisitions… ($ Billions) CAGR 9% $176 $104 FY09 FY10 FY11 FY12 FY13 FY14 FY15 Financial Update
Slide 109: Driving Sustained Adjusted Operating Profit Growth
…Driving Sustained Adjusted Operating Profit Growth ($ Billions) $4.2 $1.7 FY09 FY10 FY11 FY12 FY13 FY14 FY15 Reflects non-GAAP information calculated on an Adjusted Earnings basis. A reconciliation to GAAP is available in the appendix to this presentation Financial Update and on the Company’s websi
Slide 110: Driving Long-Term Adjusted Operating Margin
Driving Long-Term Adjusted Operating Margin Making Investing in investments Innovating our people to drive future growth to address customer and supplier needs Leveraging Managing a scaled and working capital Driving diversified and operating continuous process and business portfolio cash flows prod
Slide 111: Distribution Solutions FY16 Outlook
Distribution Solutions FY16 Outlook North America Medical- International Distribution Pharmaceutical Surgical Pharmaceutical Solutions Distribution Distribution Distribution and Services and Services and Services Revenue expected to Revenue will Revenue to remain Revenue to grow in increase by a mid
Slide 112: FY16 Distribution Solutions Financial Drivers
FY16 Distribution Solutions Financial Drivers • Differentiated global sourcing expertise and programs • Contribution from acquisition synergy case • Scaled leadership positions across a broad portfolio of products and services • Growth in gross profit from both generic and branded drugs, reflecting
Slide 113: Technology Solutions
Technology Solutions Diversified Portfolio With Improved Margin and Recurring Profit Streams Financial Update
Slide 114: McKesson Technology Solutions: Sources of Operating Profit
McKesson Technology Solutions Sources of Operating Profit More predictable transaction and >65% subscription-based revenue streams have grown to drive a majority Transaction and of segment operating profits subscription-based Financial Update Reflects Technology Solutions Adjusted Operating Profit f
Slide 115: Technology Solutions Financial Drivers
Technology Solutions Financial Drivers Increasing demand Scaled leadership for technology driven by industry and regulatory dynamics, positions for the future particularly around connectivity solutions Our Relay connectivity, Expense management and payer, imaging and portfolio optimization revenue c
Slide 116: Expanding Adjusted Operating Margin
Expanding Adjusted Operating Margin Driven by Portfolio Optimization and Expense Management Adjusted Operating Margin Growth Margin Drivers 15.8% 12.6% • Optimizing portfolio • Investing in higher growth areas • Managing operating expenses FY13 FY15 Financial Update
Slide 117: Financial Flexibility And Capital Deployment
Financial Flexibility And Capital Deployment Strong Cash Flow and a Portfolio Approach to Capital Allocation Lead to Value Creation Financial Update
Slide 118: Our Operating Cash Flows Have Steadily Increased
Our Operating Cash Flows Have Steadily Increased OCF ($ Billions) 7-Year Moving Average $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 FY09 FY10 FY11 FY12 FY13 FY14 FY15 Financial Update
Slide 119: Historical Portfolio Approach To Capital Deployment
We Remain Committed To Our Historical Portfolio Approach To Capital Deployment… FY09–FY15 ($ Billions) Internal Capital Spending $6.5 $2.9 Share Repurchases Dividends $1.2 Nearly $24 Billion of Capital Deployed from FY09–FY15 $13.2 Acquisitions Financial Update
Slide 120: Maintaining Investment Grade Ratings As We Delever in FY16
…And Maintaining Investment Grade Ratings As We Delever in FY16 Retail Pharmacy Technology Investing in Infrastructure Addressing $1.5B in the Business Supply Chain Debt Maturities Optimization During FY16 Historical Approach to Capital Deployment Unchanged Considering Value Creating M&A Financial U
Slide 121: Capital Deployment Priorities
Capital Deployment Priorities • Planning ahead for upcoming debt maturities • Continuing our portfolio approach to capital deployment – Internal capital investments – Flexibility to pursue M&A opportunities – Dividend payments – WASO assumption of 236M • Put option available to Celesio’s non-control
Slide 122: How Does It All Add Up?
How Does It All Add Up? Steady Track Record of Strong Results Financial Update
Slide 123: We Have A Track Record Of Steady Revenue Growth
We Have A Track Record Of Steady Revenue Growth… ($ Billions) CAGR $179 9% $106 FY09 FY10 FY11 FY12 FY13 FY14 FY15 Financial Update
Slide 124: Higher Adjusted EPS Growth
…That We Have Leveraged Into Higher Adjusted EPS Growth FY16 Guidance: $12.20–$12.70 CAGR 17% $11.11 $8.60 $6.35 $6.45 $4.27 $4.70 $5.19 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 Reflects non-GAAP information calculated on an Adjusted Earnings basis. A reconciliation to GAAP is available in the append
Slide 125: Drivers Of FY16 Earnings Outlook
Drivers Of FY16 Earnings Outlook • Furthering our global scale and sourcing capabilities with Celesio • Continuing to grow our generics business • Benefiting from generic and branded drug economics, including generic drug launches • Executing on Celesio and PSS synergies • Growing our U.S. and Canad
Slide 126: Driving Adjusted EPS Performance
Driving Adjusted EPS Performance FY16 Adjusted EPS Guidance of $12.20–$12.70 Opportunities Considerations Favorable industry demographics Currency exposure Synergy case execution – Celesio Nature of generic launches and PSS Regulatory environment Procurement scale Pharmaceutical reimbursement Expand
Slide 127: In Business For Better Health
In Business For Better Health Pharmaceutical Distribution Specialty Medical-Surgical Supplies Technology Retail Global Reach Financial Update
Slide 128: Wrap-Up Q&A And Summary
MCKESSON Wrap-Up Q&A And Summary
Slide 129: McKesson
MSKESSON
Slide 130: We Expect Fiscal 2016 Adjusted Earnings Per Diluted Share Of $12.20 - $12.70
We Expect Fiscal 2016 Adjusted Earnings Per Diluted Share Of $12.20 - $12.70 The Fiscal 2016 outlook is based on the following key assumptions and is also subject to the Risk Factors outlined below: • Distribution Solutions revenue growth is expected to increase by mid-single digits driven by market
Slide 131: McKesson
MSKESSON
Slide 132: Reconciliation of GAAP Operating Results to Adjusted Earnings (Non-GAAP)
RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS (NON-GAAP) FOR FISCAL 2015 - 2009 (unaudited) (in millions, except per share amounts) Year Ended March 31, 2015 Amortization Acquisition Claim and of Acquisition- Expenses and Litigation Adjusted As Reported Related Related Reserve LIFO-R
Slide 133: Reconciliation of GAAP Operating Results to Adjusted Earnings (Non-GAAP)
RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS (NON-GAAP) FOR FISCAL 2015 - 2009 (unaudited) (in millions, except per share amounts) Year Ended March 31, 2013 Amortization Acquisition Claim and of Acquisition- Expenses and Litigation Adjusted As Reported Related Related Reserve LIFO-R
Slide 134: Reconciliation of GAAP Operating Results to Adjusted Earnings (Non-GAAP)
RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS (NON-GAAP) FOR FISCAL 2015 - 2009 (unaudited) (in millions, except per share amounts) Year Ended March 31, 2011 Amortization Acquisition Claim and of Acquisition- Expenses and Litigation Adjusted As Reported Related Related Reserve LIFO-R
Slide 135: Reconciliation of GAAP Operating Results to Adjusted Earnings (Non-GAAP)
RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS (NON-GAAP) FOR FISCAL 2015 - 2009 (unaudited) (in millions, except per share amounts) Year Ended March 31, 2009 Amortization Acquisition Claim and of Acquisition- Expenses and Litigation Adjusted As Reported Related Related Reserve LIFO-R
Slide 136: Reconciliation of GAAP Segment Financial Results to Adjusted Earnings (Non-GAAP)
RECONCILIATION OF GAAP SEGMENT FINANCIAL RESULTS TO ADJUSTED EARNINGS (NON-GAAP) FOR FISCAL 2015 - 2009 (unaudited) (in millions) Year Ended March 31, 2015 Year Ended March 31, 2014 Year Ended March 31, 2013 Year Ended March 31, 2012 Corporate & Corporate & Corporate & Corporate & Distribution Techn
Slide 137: Reconciliation of GAAP Segment Financial Results to Adjusted Earnings (Non-GAAP)
RECONCILIATION OF GAAP SEGMENT FINANCIAL RESULTS TO ADJUSTED EARNINGS (NON-GAAP) FOR FISCAL 2015 - 2009 (unaudited) (in millions) Year Ended March 31, 2011 Year Ended March 31, 2010 Year Ended March 31, 2009 Corporate & Corporate & Corporate & Distribution Technology Interest Distribution Technology