McKesson Corporation · NYSE:MCK
McKesson — Investor Day (June 2016)
118 slides from McKesson's investor day presentation, Jun 29, 2016
Slide 1: McKesson Corporation 2016 Investor Day
McKesson Corporation 2016 Investor Day June 29, 2016
Slide 2: 2016 Investor Day Agenda
2016 Investor Day Agenda Craig Mercer – Senior Vice President, Investor Relations John Hammergren – Chairman and Chief Executive Officer Pat Blake – Executive Vice President, Group President Technology Solutions James Beer – Executive Vice President, Chief Financial Officer Q&A: New Company Break Pa
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 4
Slide 5: Combination Creates Substantial Shareholder Value
Combination Creates Substantial Shareholder Value Enhances MTS’ market opportunity, capabilities and scale Targeting in excess of $150 million of annual synergies with potential to capture further opportunities McKesson to receive ~$1.25 billion in cash at close of transaction while retaining an ~70
Slide 6: McKesson's Executive Committee
McKesson’s Executive Committee Diverse and Experienced Leadership John H. Hammergren Chief Executive Officer, President & Chairman 20 years Paul Julian Pat Blake James Beer President EVP & Group President Chief Financial Officer 20 years EVP & Group President 3 years 20 years Kathy McElligott Bansi
Slide 7: McKesson At A Glance
McKesson At A Glance Delivering Better Health for More Than 180 Years 183 $190B $3.7B in operating year history of serving customers in revenues cash flow Delivering More than 1/3 68,ooo employees worldwide of all prescription 13,000 medicine in North America owned and banner pharmacies >99% Order a
Slide 8: Evolving Healthcare Environment
Evolving Healthcare Environment Generics Consolidation Specialty 8
Slide 9: Healthcare Industry – A Great Investment
Healthcare Industry – A Great Investment Changing demographics Unsustainable healthcare spend requires innovative approaches, new demands, improved outcomes Value-based care 9
Slide 10: Track Record Of Success
Track Record Of Success Leading Operational Customer- positions excellence first in key markets commitment is attitude infuses embraced by all entire company 10
Slide 11: Poised For Continued Growth
Poised For Continued Growth Right Assets Right Markets Right Culture Scale Specialty Supply Chain Retail Pharmacy Global Procurement Global Reach & Sourcing • Nimble, cost-effective organization Strong Financials • Robust cash flow generation • Strategic deployment of capital; balanced investment st
Slide 12: McKesson Technology Solutions and Announced New Company with Change Healthcare
McKesson Technology Solutions and Announced New Company with Change Healthcare Pat Blake Executive Vice President, Group President, Technology Solutions 12
Slide 13: Recent MTS Accomplishments
Recent MTS Accomplishments Expanded Adjusted Operating Profit Margin1 by 612 bps from FY13 to FY16 Generated 11% Delivered 12% of Total McKesson Adjusted Operating Profit Adjusted Operating Profit2 Growth in FY161 New 5-year, Innovative Partnership $139M DoD Contract with Blue Cross Blue Shield • Se
Slide 14: Evolving Through A Dynamic Market
Evolving Through A Dynamic Market Operational Expanding Scale and Excellence Customer Solutions • Expanded adjusted operating margin • Serving over 300 MCOs including 24 of from 12.6% to 18.7% over last three top 25 health plans; 4K hospitals; 630K years1 providers; and 50K pharmacies • Operating ma
Slide 15: Compelling Strategic Rationale
Compelling Strategic Rationale • Creates a new company positioned to address industry’s emerging and most pressing challenges • Experienced management team comprised of leaders from both McKesson and Change Healthcare • Significant value for customers by bringing together full suite of end-to-end pa
Slide 16: Healthcare Industry Trends Support Strategic Rationale For Combination
Healthcare Industry Trends Support Strategic Rationale For Combination Focus on Efficiency Increasing Complexity Shift to Value-Based Care • $360 billion spent on • Reimbursement and • By 2018, 50% of fee-for-service administrative services administration requirements Medicare payments to be tied to
Slide 17: Combined Company Positioned To Address Industry Challenges
Combined Company Will Be Favorably Positioned To Address Critical And Complex Industry Challenges Integrated Reimbursement Network-Enabled Value Management Reduce Cost & • Comprehensive solutions to support Complexity • Integrated quality/risk analytics, clinical revenue performance, claims decision
Slide 18: Combination Creates A New Healthcare Technology Company
Combination Creates A New Healthcare Technology Company With Leading Capabilities McKesson Technology NewCo Solutions Focused on improving patient safety, reducing cost and Leading provider of software and analytics, network OVERVIEW variability of care, and better managing revenue streams solutions
Slide 19: Breadth Of Complementary Capabilities Creates Value For Customers
Breadth Of Complementary Capabilities Creates Opportunity To Deliver Significant Value To Customers McKesson Technology NewCo Solutions Providers Payers Consumers Capabilities to verify patient eligibility, Comprehensive solutions to address Digital tools to access personal health deliver clinically
Slide 20: New Company Summary
New Company Summary James Beer Executive Vice President, Chief Financial Officer 20
Slide 21: Transaction Summary
Transaction Summary • McKesson contributes all MTS businesses, except for RHP and EIS businesses. Businesses contributed: MHS, CCA (excluding RHP), BPS, Transaction Structure IWS • Change Healthcare contributes all businesses, except for its pharmacy switch and prescription routing business • Pro fo
Slide 22: Transaction Summary (continued)
Transaction Summary (continued) • Governance will be shared jointly between McKesson and Change Healthcare • CEO: Neil de Crescenzo, Change Healthcare’s current CEO • Chairman of the Board: John H. Hammergren, Chairman and CEO of McKesson Management and Governance • Board of directors (10): CEO; app
Slide 23: New Company Q&A
MCKESSON New Company Q&A
Slide 24: MSKESSON
MSKESSON
Slide 25: McKesson Distribution Solutions
McKesson Distribution Solutions Paul Julian Executive Vice President Group President Distribution Solutions 25
Slide 26: Distribution Solutions: Core Operations
Distribution Solutions: Core Operations North America International Medical-Surgical Global Pharmaceutical Pharmaceutical Distribution and Procurement Distribution and Distribution and Services and Sourcing Services Services Pharmaceutical Medical surgical Celesio Enterprise-wide distribution, suppl
Slide 27: Distribution Solutions Leadership Team
Distribution Solutions Leadership Team Paul C. Julian EVP, Group President Distribution Solutions 20 years Marc Owen Stanton McComb Mark Walchirk Chairman President President Celesio Management Board McKesson Medical-Surgical McKesson U.S. Pharmaceutical 14 years 13 years 15 years Alain Champagne Ni
Slide 28: FY16 Milestones
FY16 Milestones Strong Execution Across Distribution Solutions Deepened PSS Integration Significant Executing on Customer Growth in Global Completed Relationships North Procurement Exceeded Albertsons Business Case America Synergies and Specialty AHOLD Gesundleben Banner from German Businesses Expan
Slide 29: FY16 Achievements Across Distribution Solutions
FY16 Achievements Across Distribution Solutions North America International • Continued to expand our base in independent retail • Business exceeded expectations in FY16 on a constant and health systems in the U.S. currency basis • 21% year-over-year growth in OneStop • Industry position maintained
Slide 30: Driving Operational Excellence Across Distribution Solutions
Driving Operational Excellence Across Distribution Solutions ~9% 99.98% $220M+ Increase Order Accuracy in Lines Processed in Six Sigma-Related Across North America Across U.S. Savings Across Distribution and Services Pharmaceutical North America ~50K International Distribution and Orders Processed D
Slide 31: Driving Business Growth In Global Markets
Driving Business Growth In Global Markets Market Overview1 • Global pharmaceutical market will grow Overall North American Market approximately 6% CAGR 2015-2020 Global • Growing population of elderly and Sales (USD Billion) % Change chronically ill 700 14 • Innovative therapies to fight disease sta
Slide 32: Global Distribution Footprint
Global Distribution Footprint North America Europe • Best-in-class distribution network for • Supply pharmacies and hospitals across pharmaceuticals and medical-surgical supplies Western Europe • Ongoing investments in established distribution • Continued investment in distribution centers network a
Slide 33: Showcasing Innovation And Expansion In Retail
Showcasing Innovation And Expansion In Retail A Global Footprint Expanding Services 13,000+ owned and banner pharmacies globally • Payer access and programs for independent pharmacies • United States: More than 4,600 Health Mart stores • Patient adherence and claims management • Canada: More than 2,
Slide 34: Spotlight: Rexall Health To Expand Pharmacy Solutions In Canada
Spotlight: Rexall Health To Expand Pharmacy Solutions In Canada • New channel, new view of innovative pharmacy care • Strong talent pool and expanding knowledge to strengthen capabilities and service across segments • Independent customers remain confident in McKesson’s commitment and value proposit
Slide 35: Expand Independent Banners Presence
Expand Independent Banners Presence Unique Integrated Service Offering Helps Drive Above-market Banner Growth Increased National Footprint Our Distinctive Competitive Advantage: Better Business Health for Independent Pharmacies Grew Store Count ~200 Expanding + + Enhancing Leveraging + Increasing Pr
Slide 36: Global Procurement And Sourcing
Global Procurement And Sourcing McKesson Global Procurement & Sourcing • Enterprise-wide sourcing and procurement • Several key agreements closed and worldwide responsibility overseen by experienced partnerships established leaders • Expect synergies of $275-$325 million by end • Excellent progress
Slide 37: Spotlight: McKesson And Walmart Sourcing Agreement
Spotlight: McKesson And Walmart Sourcing Agreement McKesson and Walmart to jointly source generic pharmaceuticals, driving efficiencies and adding scale and value for both companies Natural next step for Expanded distribution two companies with more agreement than 20-year history of working together
Slide 38: Global Private Label Offerings
Global Private Label Offerings Strategic Value And Expertise Provides Opportunities Across the Portfolio Increase private label OTC penetration OTC in new and existing geographies and categories Medical Advance opportunities in global medical- Supplies surgical supplies based on U.S. scale Manage op
Slide 39: Driving Innovation And Partnering With Manufacturers
Driving Innovation And Partnering With Manufacturers Delivering Value Services >100K Data and Supporting Pharmaceutical Customer Locations Analytics Spanning Market Channels Development Life Cycle Proprietary Generics • Product commercialization and Private Label Programs • Consulting and data analy
Slide 40: Leading The Transformation To Value-Based Reimbursement
Leading The Transformation To Value-Based Reimbursement (VBR) 15 new VBR agreements in FY16 Market leading tools and capabilities that position us as best-in-class Proven results and thought leadership 40
Slide 41: U.S. Specialty Market Grew 15% In 2015
U.S. Specialty Market Grew 15% In 2015 Continued Growth Expected Through 20201 U.S. and Europe Pharmaceutical Markets Demographics Innovative and Increase Products coming to market, Specialty in Chronic with largest share Diseases coming from oncology Focus on data Spending on and analytics Specialt
Slide 42: Market Dynamics Driving North American Specialty Growth
Market Dynamics And Investments Driving McKesson’s North American Specialty Growth Strategic Focus in Specialty Distribution Multiple distribution channels: Comprehensive Portfolio of Offerings open market; limited; exclusive Leader in Community Oncology Differentiated Physician Offerings US Oncolog
Slide 43: Delivering Better Health
Delivering Better Health Operational Expanding Scale and Excellence Customer Solutions • Executing on cost alignment plan • Expanding retail pharmacy footprint and business process initiatives and services • Partnering with manufacturers to • Enhancing capabilities to support deliver value and to dr
Slide 44: U.S. Pharmaceutical
U.S. Pharmaceutical Mark Walchirk President U.S. Pharmaceutical
Slide 45: U.S. Pharmaceutical
U.S. Pharmaceutical Committed to Delivering Better Health Operational Excellence Expanding Scale and Customer Solutions Driving Innovation Investing for Growth 45
Slide 46: Industry Landscape
Industry Landscape Healthcare Continues to be a Dynamic and Growing Industry 10,000 4.4 Billion New Medicare Beneficiaries Enrolled Every Day1 Prescriptions Dispensed in 20152 Generic Launches $87 Billion 6.7% 2016 to 2020 Brand CAGR 4 of brand sales at risk from 2016 to 20203 9.3% 2016 to 2020 Gene
Slide 47: Leading Portfolio Of Services And Products
Leading Portfolio Of Services And Products Strong Core Business with a Broad Value Proposition National Retail Health Systems Independent & Small Pharmacy Chain Pharmacy • Efficient and flexible • Proprietary generics and • Health Mart distribution network private label programs • Proprietary generi
Slide 48: Driving Value For National Retail Pharmacies
Driving Value For National Retail Pharmacies Recent Partnerships Continue to Prove the Value of Our Model Quality and Selectively Service that Target Exceed Customer New Growth Expectations Renew and Retain Key Customized Solutions to Meet Customers Customer Needs Expanding Differentiated Customer V
Slide 49: Broad Offerings For Health Systems
Broad Offerings For Health Systems Delivering Customizable, Scalable Solutions to Our Customers Federal Solutions-Led Approach Department of Veterans Affairs Department of Defense • Data and technology solutions • Supply chain and inventory management expertise Health Systems Strategic partnerships
Slide 50: Leveling The Playing Field For Independents
Leveling The Playing Field For Independents Health Mart is the Largest Network of Independent Pharmacies in the U.S. Focused Strategy Health Mart Store Count 4,610 Access to preferred networks 3,865 3,096 3,281 Drive patients into store Expand store revenue FY13 FY14 FY15 FY16 50
Slide 51: Strategic Partner To Manufacturers
Strategic Partner To Manufacturers Enabling High-Quality, Reliable Business Operations Broad Value- Growth Service Channel Added Access Services Serve a large and Deliver industry- Drive increased Provide solutions growing customer leading supply chain penetration through and capabilities that base
Slide 52: Our Generics Programs Continue To Drive Value
Our Generics Programs Continue To Drive Value OneStop Proprietary Generics Program >10 Years of Leadership in NorthStar Expert Product Sourcing and Private Label Deep Relationships with Strong 100+ Compliance +21% and Growth Manufacturers Competitive Pricing, OneStop Choice and Growth Industry-Leadi
Slide 53: Continue To Make Investments In Our Established Distribution Network
Continue To Make Investments In Our Established Distribution Network NRDC Model Technology National Re-Distribution Increases automation Center operational and productivity since FY13 Ongoing Investment Maintaining state-of-the-art distribution network Investments Drive Operational Excellence 53
Slide 54: Our People
Our People United Around Our Commitment to Better Health 54
Slide 55: Positioned For Continued Success
Positioned For Continued Success Operational Expanding Scale and Excellence Customer Solutions • Industry-leading service levels • Expanded Health Mart franchise, services and solutions • Efficient, high-accuracy financial transaction processing • Solutions-led approach combining distribution with u
Slide 56: McKesson Specialty Health
McKesson Specialty Health Nick Loporcaro President McKesson Specialty Health
Slide 57: McKesson Specialty Health
McKesson Specialty Health Uniquely Servicing Stakeholder Needs Operational Excellence Expanding Scale and Customer Solutions Driving Innovation Investing for Growth 57
Slide 58: U.S. Specialty Health Market
U.S. Specialty Health Market Poised for Continued Growth Specialty Driving More Than 1/3 Evolving Needs of Providers, Payers and of All New Growth Through 20201 Manufacturers • Rapid growth across U.S. Specialty Pharmaceutical Late Stage R&D Pipeline specialties, including oncology Market Spend 2015
Slide 59: Thriving in an Increasingly Complex Market
McKesson Specialty Health Thriving in an Increasingly Complex Market Mid-teen Year-over-Year Expanding Revenue Growth in FY16 Footprint Across Specialties Clinical • >3,400 Oncologists More Than 750K Research Prescriptions Nearly 1,500 • >5,000 Other Phase 1 to Phase 4 Dispensed Clinical Trials to D
Slide 60: Award-Winning Operational Excellence
Award-Winning Operational Excellence Delivering Exceptional Service Every Day Reimbursement, Access, Distribution Operations1 and Co-Pay Programs • >22,000 lines processed per day • Certified by Benchmark Portal as a Center of Excellence • >6,400 shipments processed per day • Ranked Top 10 Call Cent
Slide 61: Manufacturer Solutions
Manufacturer Solutions Supporting Manufacturers Across Product Life Cycle Connecting Manufacturers Clinical Pre-Launch / Growth Maturity Development Launch to Stakeholders 1 2 Patient 3 1 • Clinical Trial Research / Site Management • Clinical Trial Logistics Manufacturer • Prescriber and Pharmacy Ou
Slide 62: Immuno-Oncology
Immuno-Oncology Advancing the Fourth Pillar in Cancer Therapy Clinical Development Clinical Education Clinical Management • >30 immuno-oncology trials • >50 initiatives reaching • Provided tailored clinical to-date >1,600 practice personnel management services • Nearly 500 patients enrolled • >40 li
Slide 63: Biosimilars
Biosimilars Strong Position and Early Experience Driving Success Early Success in annual originator sales exposed • Pivotal Clinical Trials >$35B to biosimilar • Key Opinion Leaders competition by 20201 • Robust Provider Education Campaign Market uptake will depend on regulatory, • Patient Assistanc
Slide 64: End-To-End Oncology Solutions
End-To-End Oncology Solutions Integrating Care at the Community Level Expanding the Oncology Ecosystem OncologyRx Care Advantage In-Office Dispensing Network 64
Slide 65: Payer Partnerships And Solutions
Payer Partnerships And Solutions Leading the Charge to Value-based Care Value-based Care Solutions Leveraged by Our Practices Value PathwaysTM Powered Clear Value PlusSM CareLyticsTM by NCCN1 Cost-effective clinical Clinical decision support Practice and population pathways with tool enabling manage
Slide 66: Deep Expertise Across Specialty Portfolio
Deep Expertise Across Specialty Portfolio Operational Expanding Scale and Excellence Customer Solutions • Leveraging new technologies to • Aligning our organization to key further optimize distribution and stakeholder needs patient support services • Further expanding on the full suite • Transformin
Slide 67: McKesson Medical-Surgical
McKesson Medical-Surgical Stanton McComb President McKesson Medical-Surgical
Slide 68: McKesson Medical-Surgical
McKesson Medical-Surgical Driving Value for Customers Operational Excellence Expanding Scale and Customer Solutions Driving Innovation Investing for Growth 68
Slide 69: Driving Business Growth In A Dynamic Market
Driving Business Growth In A Dynamic Market Shift to lower cost, Home Care Products non-acute care settings 5.5% Consumerism2 Large and growing market growth5 non-acute market1 • 74% of consumers with $3K+ deductible >$20B solicit pricing information • 6 of top 10 attributes By 2018, 50% of for prim
Slide 70: Leader Across Alternate Site Markets
Leader Across Alternate Site Markets Home Health Physician Office Agencies Rehabilitation Emergency Room Facilities Hospice Long-Term Care Durable Medical Ambulatory Equipment Surgery Centers Lab Testing Urgent Care Market Leader for the Ambulatory and Post-Acute Care Continuum 70
Slide 71: Excellence In Operations
Excellence In Operations Leading Supply Chain Capabilities Drive Customer Satisfaction Leadership across McKesson Delivery Model • 52% more private fleet customers the value chain • Optimized over 38 million miles Quality in Operations Patient Home Delivery Defect rate continues to improve to More t
Slide 72: Expanding Scale And Customer Solutions
Expanding Scale And Customer Solutions Integration has Established Scalable Platform and Offering Manufacturer Integration Complete Partnerships Exceeded PSS business case Strong growth for preferred suppliers McKesson Brand Leading Sales Channel Broad, cost-effective offering 1,500+ tenured sales r
Slide 73: Innovation Through Digital Sales And Marketing
Innovation Through Digital Sales And Marketing Three Keys to Success ~250% growth in sales from Digital email campaigns; key metrics Marketing exceed industry benchmarks1 Online tools promoting McKesson Merchandising Brand and our preferred vendors Tailored e-commerce solutions for E-Commerce online
Slide 74: Investing To Drive Growth In Priority Segments
Investing To Drive Growth In Priority Segments Laboratory Health Systems • Lab tests guide more than 70% • Increasing physician employment of medical decisions1 • Coordinating care across continuum • Shift in testing from central lab to point-of-care • Developing supplier portfolio • Developing medi
Slide 75: Extending Capabilities In Medical-Surgical
Extending Capabilities In Medical-Surgical Operational Expanding Scale and Excellence Customer Solutions • Use automation to further optimize • Leverage scalable platform and channel supply chain for preferred suppliers • Reduce cost-to-serve • Grow private label offering Driving Investing Innovatio
Slide 76: Celesio
Celesio Marc Owen Chairman Celesio Management Board
Slide 77: Celesio Core Operations
Celesio Core Operations Highlights • Extensive network across 13 countries in Europe • Leader in pharmaceutical distribution • Strong retail presence with more than 6,500 owned, managed and banner pharmacies • Relatively fragmented industries • Population of nearly 350 million in the markets we serv
Slide 78: Celesio Senior Management
Celesio Senior Management Marc Owen Chairman Celesio Management Board 14 years Tilo Köster Brian Tyler Alain Vachon Chief Legal / Compliance Officer Chief Operating Officer Chief Financial Officer 24 years 19 years 27 years 78
Slide 79: Celesio
Celesio Broad Value Proposition across Europe Operational Excellence Expanding Scale and Customer Solutions Driving Innovation Investing for Growth 79
Slide 80: European Pharmaceutical Industry Landscape
European Pharmaceutical Industry Landscape Overall European Market Sales (USD Billion) 250 200 Stable, Growing Market 150 100 Increasing Generics Penetration 50 Demographics, Chronic Disease 0 and New Therapies 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: IMS Health Market Prognosis Sum
Slide 81: Operational Excellence Driving Business Improvement
Operational Excellence Driving Business Improvement Operational Excellence • Inventory accuracy 99.92% • >1% increase in automation rate • NRDC model introduced in France • Targeting >3% improvement in supply chain cost per unit • Six Sigma projects ongoing and new projects initiated 81
Slide 82: Global Procurement And Sourcing
Global Procurement And Sourcing Continue to Coordinate with London Office to Drive Efficiencies 82
Slide 83: Investment In IT Platform Driving Future Operational Success
Investment In IT Platform Driving Future Operational Success Country-Level Data Customers Multi-year investment in ERP implementation will align systems with McKesson and help drive global procurement and distribution efficiencies Market Suppliers Data 83
Slide 84: Broad Retail Footprint Across Europe
Broad Retail Footprint Across Europe IRELAND NORWAY UNITED KINGDOM SWEDEN BELGIUM FRANCE NETHERLANDS GERMANY ITALY Note: Brocacef is a joint venture where Celesio has an equity interest of 45%. 84
Slide 85: European Pharmacy Network
European Pharmacy Network Strong Network of Owned, Franchise and Co-Op Pharmacies Cooperations and Owned Pharmacies Franchise Partner Independents • Consistent European brand • Common store appearance • Lloyds’ concept elements • A differentiated pharmacy • New technology and customized for pharmaci
Slide 86: EPN: Expertise And Services Drive Success
EPN: Expertise And Services Drive Success Performance of Converted Pharmacies Validates Concept Expert Category Marketing Management Global Knowledge Management Services Services Sourcing and Procurement 86
Slide 87: Investing In Innovation
Investing In Innovation Patient Online Hospital Prescription Homecare Support Doctor Solutions Assembly Solutions Services Innovation driving Unique value proposition Automated assembly Tailored patient support M&A investment in UK connected care for to hospitals and system (integrated to a programs
Slide 88: M&A Activity Is A Future Growth Driver
M&A Activity Is A Future Growth Driver Announced Acquisitions Potential Opportunities • Further Consolidation group • Channel Expansion • Geographic Expansion Note: Belmedis, Bupa Home Healthcare and Sainsbury’s acquisitions have not yet closed and are subject to regulatory approvals. 88
Slide 89: Strong Platform For Growth
Strong Platform For Growth Operational Expanding Scale and Excellence Customer Solutions • Driving forward existing projects and • Expanding retail pharmacy footprint initiating Six Sigma pilots and services across Europe with EPN initiative • Focus on distribution network • Enhancing capabilities t
Slide 90: McKesson Distribution Solutions Q&A
McKesson Distribution Solutions Q&A 90
Slide 91: MSKESSON
MSKESSON
Slide 92: Financial Update
Financial Update James Beer Executive Vice President, Chief Financial Officer
Slide 93: Agenda
Agenda Drivers Of Value Creation Segment Financial Reviews – Distribution Solutions – Technology Solutions Operating Cash Flow Capital Deployment Priorities FY17 Outlook 93
Slide 94: McKesson Drives Sustained Value Creation
McKesson Drives Sustained Value Creation Attractive Healthcare Well-positioned Market Businesses Public policy agenda supports Market-leading positions greater access and improved efficiency Global footprint and sourcing scale Favorable demographics in North Retail pharmacy networks America and Euro
Slide 95: Distribution Solutions
Distribution Solutions Scaled and Diversified Portfolio with Multiple Profit Levers 95
Slide 96: Distribution Solutions: FY16 Performance
Distribution Solutions: FY16 Performance 9% Year-over-Year Constant $4B+ Announced in Strategic Currency Revenue Growth Acquisitions 21% • Expanded Retail Pharmacy Footprint to >13K Stores • Deepened Customer Relationships Growth in • Significantly Grew OneStop in FY16 North America Specialty Busine
Slide 97: Distribution Solutions: FY17 Revenue Outlook
Distribution Solutions: FY17 Revenue Outlook North America International Medical-Surgical Distribution Pharmaceutical Pharmaceutical Distribution and Solutions Distribution and Distribution and Services Services Services Revenue growth Expect to deliver Expected to deliver Revenues are expected to i
Slide 98: Distribution Solutions: FY17 Financial Drivers
Distribution Solutions: FY17 Financial Drivers Global Sourcing Expertise and Innovative Sourcing Programs Operational Focus on Scaled Excellence and Higher-Growth Leadership Innovation Businesses Positions Across Diversified Acquisition Steady Margins Portfolio of Accretion and Expected Despite Gene
Slide 99: Technology Solutions
Technology Solutions Diversified Portfolio with Improved Margin and Recurring Profit Streams 99
Slide 100: Technology Solutions: FY16 Performance
Technology Solutions: FY16 Performance 288 Basis Point Expansion ~80% of FY16 in Adjusted Operating Margin1 Despite EHR Challenges Operating Profit from Well-positioned Sources of Operating Profit Steady Revenue Payer, Connectivity Growth and Imaging Across Non-EHR Businesses Businesses2 Healthy Ope
Slide 101: Technology Solutions: FY17 Financial Drivers
Technology Solutions: FY17 Financial Drivers Executing Against Newly Scaled Leadership Positions to Meet Market Needs Optimized Portfolio Focus on Higher-growth Areas and Payer, Relay Pharmacy, Imaging Driving Long-term Margin Expansion and Revenue Cycle Management Solutions are Positioned to Drive
Slide 102: Annual Operating Cash Flows And Net Income Expanded Over Time
Annual Operating Cash Flows And Net Income Expanded Over Time ($ Billions) Operating Cash Flow $4.0 Operating Cash Flow Net Income $3.5 Adjusted Net Income 1 FY15 – FY16 $3.0 18% $2.5 $2.0 FY16 – FY172 15% $1.5 $1.0 1 Reflects Adjusted Net Income information calculated on an Adjusted Earnings (Non-G
Slide 103: Investing Today To Drive Long-Term Growth
Investing Today To Drive Long-Term Growth A Portfolio Approach to Capital Deployment FY16 Milestones1 $677M $4+B $1.5B 17% $1.6B in Internal in Acquisitions in Cash Increase in in Long-term Investments Announced Returned to Quarterly Debt Shareholders via Dividend Repayments Share Buybacks >$25 Bill
Slide 104: FY17 Capital Deployment Priorities
FY17 Capital Deployment Priorities Continuing Our Portfolio Approach to Capital Deployment • Commit $700 to $800 million to internal investment • Execute on FY16 announced acquisitions • Evaluate additional M&A opportunities • Assume WASO at 228M • Pay dividend • Maintain investment-grade rating; ma
Slide 105: Drivers Of FY17 Earnings Outlook
Drivers Of FY17 Earnings Outlook • Furthering our global scale and sourcing capabilities • Continuing to grow our generics business and expand customer relationships • Executing on acquisition synergies and capturing acquisition accretion • Driving organic growth across our diversified businesses in
Slide 106: Delivering Financial Performance
Delivering Financial Performance Updated FY17 Earnings Outlook of $13.43 to $13.931 Opportunities Considerations • Favorable industry demographics • Branded and generic pricing trends • Procurement scale • Revenue mix • Expanding customer relationships • Nature of generic launches • Growth in specia
Slide 107: Delivering Better Financial Health
Delivering Better Financial Health Operational Expanding Scale and Excellence Customer Solutions • Continued investments in supply-chain • Expanding retail pharmacy footprint automation and services • Global scale and best practices • Enhancing capabilities to support specialty commercialization • O
Slide 108: Wrap-Up Q&A and Summary
MCKESSON Wrap-Up Q&A and Summary
Slide 109: MSKESSON
MSKESSON
Slide 110: FY17 Outlook: $13.43 To $13.93 Per Diluted Share
We Expect $13.43 To $13.931 Per Diluted Share In FY17, Which Excludes Approximately 12 To 15 Cents In Expected Charges From Adjusted Earnings Related To The Cost Alignment Plan The Fiscal 2017 outlook is based on the following key assumptions and is also subject to the Risk Factors outlined below: •
Slide 111: FY17 Outlook Assumptions (continued)
We Expect $13.43 To $13.931 Per Diluted Share In FY17, Which Excludes Approximately 12 To 15 Cents In Expected Charges From Adjusted Earnings Related To The Cost Alignment Plan (continued) The Fiscal 2017 outlook is based on the following key assumptions and is also subject to the Risk Factors outli
Slide 112: MSKESSON
MSKESSON
Slide 113: Reconciliation of GAAP Operating Results to Adjusted Earnings FY2016
McKESSON CORPORATION RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS (NON-GAAP) FOR FISCAL 2016 - 2010 (unaudited) (in millions, except per share amounts) Year Ended March 31, 2016 Amortization Acquisition Claim and of Acquisition- Expenses and Litigation Adjusted As Reported Related R
Slide 114: Reconciliation of GAAP Operating Results to Adjusted Earnings FY2014
McKESSON CORPORATION RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS (NON-GAAP) FOR FISCAL 2016 - 2010 (unaudited) (in millions, except per share amounts) Year Ended March 31, 2014 Amortization Acquisition Claim and of Acquisition- Expenses and Litigation Adjusted As Reported Related R
Slide 115: Reconciliation of GAAP Operating Results to Adjusted Earnings FY2012
McKESSON CORPORATION RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS (NON-GAAP) FOR FISCAL 2016 - 2010 (unaudited) (in millions, except per share amounts) Year Ended March 31, 2012 Amortization Acquisition Claim and of Acquisition- Expenses and Litigation Adjusted As Reported Related R
Slide 116: Reconciliation of GAAP Operating Results to Adjusted Earnings FY2010
McKESSON CORPORATION RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS (NON-GAAP) FOR FISCAL 2016 - 2010 (unaudited) (in millions, except per share amounts) Year Ended March 31, 2010 Amortization Acquisition Claim and of Acquisition- Expenses and Litigation Adjusted As Reported Related R
Slide 117: Reconciliation of GAAP Segment Results to Adjusted Earnings by Adjustment Type
McKESSON CORPORATION RECONCILIATION OF GAAP SEGMENT FINANCIAL RESULTS TO ADJUSTED EARNINGS (NON-GAAP) - BY ADJUSTMENT TYPE FOR FISCAL 2016 - 20010 (unaudited) (in millions) Year Ended March 31, 2016 Year Ended March 31, 2015 Year Ended March 31, 2014 Year Ended March 31, 2013 Distribution Technology
Slide 118: Supplemental Non-GAAP Financial Information by Segment
McKESSON CORPORATION SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION REVENUES, OPERATING PROFIT AND OPERATING PROFIT MARGIN BY SEGMENT FOR FISCAL 2016 (unaudited) (in millions, except per share amounts) Year Ended March 31, 2016 Adjusted As Reported Earnings Cost Alignment Sale of Baseline (a) (b) (GAAP