Q1 2024 McKesson Corp Earnings Call

Please standby.

Welcome to Mckesson's first quarter fiscal 'twenty 'twenty four earnings conference call. Please be advised that today's conference is being recorded at this time I would like to turn the call over to Rachel Rodriguez VP of Investor Relations. Please go ahead.

Uh huh.

Thank you operator, good afternoon, and welcome everyone to Mckesson's first quarter fiscal 2024 earnings call.

Today, I'm joined by Brian Tyler, Our Chief Executive Officer, and Britt could alone our Chief Financial Officer.

Brian will lead off followed by Britt and then we'll move to question and answer session.

Today's discussion will include forward looking statements such as forecasts about mckesson's operations and future results.

Please refer to the cautionary statements in today's earnings release and presentation slides available on our website at Investor Mckesson Dotcom.

And to the risk factors section of our most current recent annual and periodic SEC filings for additional information concerning risk factors that could cause our actual results to materially differ from those in our forward looking statements.

Information about non-GAAP financial measures that we'll discuss during this webcast, including a reconciliation of those measures to GAAP results can be found in today's earnings release and presentation slides.

Presentation slides also include a summary of our results for the quarter and updated guidance with that let me turn it over to Brian . Thank you Rachel and good afternoon, everybody. We appreciate you joining us on our call today.

Mckesson reported a strong fiscal first quarter, driven by really broad based momentum across the businesses, we delivered $74 $5 billion in total revenues and $7 27, and adjusted earnings per diluted share both exceeding our expectations.

<unk> in the quarter included a favorable timing impacts from a discrete tax item, but the thing we're most most.

Importantly focused on I'm pleased with is the strong operational performance of the underlying business, which gives us the confidence to raise our guidance range for fiscal 2024 adjusted earnings per diluted share from 26, 10 to $26 90 to an updated range of $26 55 to <unk>.

$7 35.

Before I review, our business performance in the quarter I want to provide an update on the utilization trends that we've been observing in the first quarter, we saw solid growth in prescription volumes and patient visits.

In U S oncology same store patient visits grew at a good pace, while we continued to expand the reach of the network.

The solid growth in prescription volume trends, particularly in weight loss or DLP, one drugs contributed to the strong revenue growth in the first quarter as we closely monitor the trends going forward, we are well positioned to deliver products and services to support the evolving needs of our customers and patients now let me move on to our business.

Review and I want to focus my remarks today on the progress we've made in executing on our company priorities and our differentiated market positions in key growth areas of oncology and Biopharma services I'll also discuss some of the key growth drivers for the quarter and as always Britt will provide additional details about our financial results.

So let's start with our priority of driving sustainable core growth in the first quarter. We saw strong performance in the pharmaceutical distribution business is reflected in the growth of the U S. Pharmaceutical segment, where revenue increased 18% and adjusted operating profit grew 14%.

When excluding the contribution from COVID-19 related items in the prior year.

We're pleased with the broad based momentum across all customer channels really including higher volumes from retail national accounts and good growth in our health systems segment.

We also have a long history of supporting and investing in the growth of community pharmacies in May we launched pinpoint community solutions, a new inventory management system powered by our proprietary supply of logics software. That's designed to help independent pharmacies improved cash flow increase inventory efficiency and maximize their operational.

Performance in June we were proud to host the annual ideas share conference nationwide community pharmacy event that brought together more than 2800 attendees through this form of discussion and education, we help pharmacist fostered deeper community connections strengthen their collective voice and discover ways to.

Innovate and thrive using mckesson products and services.

Support the sustainable growth of the core distribution businesses within U S. Pharmaceutical we're also investing in our infrastructure to enhance automation and improve efficiency.

In the past quarter, we opened a new distribution center dedicated to specialty pharmaceuticals.

This new facility incorporates the latest innovations in supply chain automation and technology and will allow us to better serve our customers with increased productivity.

In the medical surgical segment, we're dedicated to serving customers across alternate sites of care and we continue to look for opportunities for new partnerships in the past two years, we've partnered closely with the U S government on important public health initiatives and we're really quite proud of the relationships. We built at both the state and the federal level through these close.

<unk>.

Since then we've grown our state government business through participation in cooperative purchasing programs. We've also built a dedicated government solutions team staffed with experienced sales customer service sales administration and legal teams with a shared goal of supporting successful government procurement and providing best in class fulfillment and.

Service at every level of the government.

As we expand our customer relationships. We are also strategically managing relationships with manufacturers to ensure supply chain diversity, we serve a broad portfolio of national brand and private label medical surgical products, and we're enhancing our procurement tools and processes to better track domestic and international sourcing last year, our sourcing team traveled to.

More than 10 countries, representing our continued effort to expand our manufacturing relationships and diversify our geographic presence.

Let me move on to the next company priority.

And that is expanding our oncology and biopharma platforms.

In July .

We were excited to welcome the cancer care of Kansas to the U S oncology network growing the total number of providers in the network to over 2400.

The continued growth is a strong testament to the value proposition of the network.

And an example of how we continue to evolve and grow our portfolio of differentiated assets.

With over 20 years of oncology practice management experienced the network brings significant value beyond just drug purchase savings the practices in the network have access to substantial expertise in ample resources, including clinical and business services innovative technologies that support high quality patient care efficient drug management and revenue cycle.

<unk>.

As one of the largest organizations of its kind in the U S. Oncology network is dedicated to advancing cancer care and enabling better patient outcomes.

Since its initial participation in the oncology care model more than a 120000 patients have been enrolled in the program across the network participating practices delivered high quality care to patients while generating significant savings for Medicare.

Recently, we announced the network's participation in the enhancing oncology model, which includes representation from over 70% of the physicians in the network.

U S oncology network continues to lead at the forefront of value based care.

And Biopharma services the success of our innovative products and solutions is reflected in the growth. We delivered in the first quarter prescription technology solutions segment saw 17% revenue increase and 35% increase in adjusted operating profit.

We continue to receive positive feedback on our products, enabling us to further penetrate the market and expand our channel reach.

The solid prescription trends, particularly the commercial success of the late last one.

<unk> drugs as I mentioned earlier also led to higher demand for a prior authorization solutions and contributed to the strong performance in the quarter, we remain committed and focused on expanding the Biopharma services platform is one of our strategic growth pillars. We continue to strengthen the relationships with Biopharma companies, who are the primary sponsor of this business.

We're also creating comprehensive value proposition for each of the stakeholders in the continuum of care for <unk>.

Riders, our industry, leading technology platforms help them understand the patient's progression along their treatment journey and help the patients access their therapies faster.

Our electronic Payor connections, we support payers, who represent 94% of prescription volumes in the U S and offer real time decisions and simplified support between providers and health plans.

We're also connected to more than 50000 pharmacies, and we offer solutions like automatic coupon programs and central fill distribution, helping them improve operational efficiency and ultimately helping their patients lead healthier lives recently.

Recently, we were honored to receive the 2023 retail Excellence awards from Drugstore news recognizing the value of our retail solutions and what they bring to pharmacies.

As we continue to make significant progress in our company priorities I want to highlight our unwavering focus on our people and culture.

We at Mckesson and believe that having the best talent is essential and it's foundational to our culture and strategy as a company. We further defined our employee value proposition.

We call it the future of health starts with you to demonstrate our commitment to our employees and what makes mckesson the top employer focusing on care, meaning and belonging we strive to build a culture that supports the wellbeing and growth of each individual who works at Mckesson. We also offer employees the opportunity to formula interconnections and advocate for advancing the <unk>.

Company's culture through employee resource groups, we're pleased to see the <unk> membership grew by more than 70% in the past two years supported by increased employee participation. These resource groups are becoming an important channel to promote and strengthen our culture of inclusion and belonging in collaboration.

Our focus on people and culture is an important pillar of our company's priorities and it's also part of our broader initiatives focused on enacting positive and lasting impact.

Strive to deliver value to our customers and our communities not only is it a diversified healthcare services company, but also has an impact driven organization in June we published our FY 'twenty, two and FY2023 impact report that details our progress in advancing our strategy and driving meaningful outcomes to build a healthier tomorrow.

All future generations, we shared many great initiatives focused on making an impact through our four impact pillars, our people our partners our community and our planet.

I am very very proud of what the team has achieved and will continue to track measure and communicate our progress around these impact pillars.

Now.

Before I hand, it over to Brett let me pull everything together Mckesson delivered a strong first quarter, and we're making consistent and meaningful progress with our company priorities.

We're pleased with the growth and momentum across the business segments and the market fundamentals remain solid in support of the positive outlook. We've outlined for fiscal 2024 I want to sincerely. Thank all of the Mckesson employees, we refer to them as team Mckesson.

What we have achieved would not be possible without their dedication and the commitment of each and every one of them I'm tremendously proud to be a leader and grateful for your contributions to advancing our vision with that I'll hand, it over to you for additional insights.

Brian and I am pleased view this afternoon to discuss our fiscal first quarter results, which as you mentioned are tracking above the full year guidance that we provided in may.

Flex solid progress against our long term growth targets.

The strong start to the year and momentum across the business, we are raising both our top and bottom line guidance today.

I'll first start with a review of our first quarter results and provide an overview of our fiscal 2024 outlook, including our updated adjusted earnings per diluted share range. My comments today will refer to our fiscal 2024 adjusted results unless I state otherwise.

We start with a review of our consolidated results.

Holidayed revenues increased 11% to $74 5 billion, which was led by growth in the U S. Pharmaceutical segment, resulting from increased prescription volumes, including higher volumes from retail national account customers specialty products and weight loss through <unk>, one drugs and they were partially offset by lower revenues in the international.

Segment, resulting from completed divestitures within our European business during fiscal 2023.

When excluding the impact of our European business operations, including completed divestitures revenues increased 16%.

Gross profit was $2 $9 billion for the quarter, a decrease of 2% when excluding the impact of our European business operations and completed divestitures gross profit increased 7% in the first quarter, primarily a result of growth in the U S pharmaceutical and prescription technology solutions segments.

Operating expenses decreased 4% in the quarter when excluding the impact of our European business operations, including completed divestitures operating expenses increased 8% year over year.

Operating expenses during the quarter included integration costs related to our acquisition of Rx savings solutions in a joint venture with Sarah Cannon Research Institute, both of which were completed in the second half of fiscal 2023.

First quarter operating profit increased 3% to $1 2 billion.

Primarily driven by growth in our North American businesses.

We offset by the completed divestitures of our European business operations, which are within our international segment.

When excluding the impact of COVID-19 related items in fiscal 2023.

Losses associated with Mckesson venture equity investments in fiscal 2023, and 2020 for operating profit increased 9% in the quarter.

We're pleased with the strong operating results, which were above the long range growth targets, we're delivering durable operating performance and sustained momentum and we're executing against our strategies.

Moving below the line interest expense was $42 million a year over year decrease driven by transactions within our long term debt portfolio, which I'll discuss later in my remarks.

The effective tax rate was eight 4% driven by the recognition of a net discrete tax benefit of $147 million in the first quarter of fiscal 2024 related to the repatriation of certain intellectual property between wholly owned legal entities that were based in different tax jurisdictions.

As a reminder, the timing of discrete tax items is difficult to predict and therefore, we do not provide quarterly effective tax rate guidance.

Effective tax rate guidance for the full year remains unchanged.

First quarter diluted weighted average shares outstanding was $136 $6 million $136 6 million, a decrease of 6% year over year.

Adding it all up first quarter earnings per diluted share of $7 27.

It presents an increase of 25% over the prior year when excluding COVID-19 related items in the first quarter of fiscal 2023 and losses within our Mckesson ventures portfolio in fiscal 2023 and 2024.

First quarter earnings per diluted share was up 33% over the prior year.

Turning to our first quarter segment results, which can be found on slide seven through 11, and I will start with U S pharmaceutical.

Revenue and operating profit results in the quarter exceeded our expectations first quarter revenues were $67 2 billion, an increase of 18% year over year.

Revenue growth reflected increased prescription transaction volumes, including higher volumes from retail national account customers specialty products and <unk> one drugs.

These increases were partially offset by branded to generic conversions.

The growth of the weight loss with <unk> drug category provided a revenue tailwind in the quarter, we generally recognized lower margin rates for the distribution of <unk> one drugs.

The growth of these products similar to other new brand launches led to increased demand for our access and affordability, we support programs such as our prior authorization services, which are offered within our <unk> segment.

The first quarter also marked further progress against our oncology growth strategy, we're pleased with the growth across across all of our oncology assets we.

We saw growth in the U S oncology network supported by the strength of our GPO capabilities and as Brian mentioned recently, we added cancer center of Kansas to the U S oncology network expanding the total number of providers in our network to over 2400.

During the quarter, we delivered solid performance and contribution from the U S oncology network.

First quarter fiscal 2024, total patient visits with 19% above the prior year and on a same practice basis U S. Oncology patient visits grew approximately 7% above the prior year.

The joint venture with Sarah Cannon Research Institute is progressing well as we support the expansion and the advancement of clinical trials and clinical trial research and we continue to invest in and progress our data and insights business on Tata. These.

These oncology assets and capabilities are important pieces to the long term development of the segment. We're excited about the growth and the continued progress that we're seeing.

First quarter U S pharmaceutical operating profit increased 8% to $771 million driven by growth in the distribution of specialty products to providers and health systems and increased contributions from our generics programs, which included new product launches within the quarter.

When excluding the impact of COVID-19 vaccine distribution in the first quarter of fiscal 2023.

The U S. Pharmaceutical segment delivered operating profit growth of 14% year over year ahead segment's long term growth target.

U S pharmaceutical operating profit growth reflects increased prescription volumes in the breadth of capabilities that we provide.

Solid generic volumes in sourcing contributions.

Operating discipline and the continued momentum from our oncology platform.

Prescription utilization trends.

Our products continue to receive positive feedback and recognition.

Ignition for the value that they delivered to our partners.

An example of this is cover my meds electronic prior authorization solutions historically, the prior authorization process was a tedious and time consuming task for providers.

The technology solutions that Mckesson task, we automate this process, providing a faster and easier way to review complete and track prior authorization requests.

Cover my meds, delivering value and returns for our partners by increasing connectivity between pharmacies providers payers and Biopharma manufacturers through next generation access affordability and adherence solutions that are automated and integrated into provider workflows.

First quarter results exemplify the success of our broad range of technology programs and support services.

The medical surgical solutions, our first quarter performance was in line with our expectations are core business demonstrated revenue and operating profit growth Rev.

Revenues were $2.6 billion in the quarter, an increase of 1% year over year in operating profit was $235 million a decrease in 12%.

First quarter results were impacted by anticipated lower contributions and the kidding storage and distribution of ancillary supplies for the U S. Government's COVID-19 vaccine program.

And lower illness season testing, including flew in COVID-19 test when compared to the prior year.

As a reminder, the first quarter of fiscal 2023 saw an extension of the 2022 illness season, driving higher levels of illness testing and related products.

But excluding the impact of COVID-19 related items from the first quarter of fiscal 2023.

The segment delivered operating profit growth of 7% driven by growth in the extended in primary care businesses <unk>.

Partially offset by a non-recurring expense of $12 million.

Within the primary care market, we saw growth in lab solutions equipment, and specialty pharmaceuticals, and the extended care market growth was led by sales to new customers, which included increased volumes of nutritional supplements.

We are pleased with the continued solid results, which are in line with our expectations are leadership position combined with the operating execution positions us for continued growth across the ultimate sites of care.

Let me address our international results revenues in the first quarter with $3 $5 billion, a decrease of 47% year over year in operating profit was $90 million a decrease of 35%.

On an FX adjusted basis first quarter revenues were $3.7 billion, a decrease of 44% in operating profit was $95 million a decrease of 31%.

First quarter results reflect the year over year effects from the combined divestitures within our European businesses. So.

Let me wrap up our segment review corporate expenses for $149 million and a quarter an increase of 3% year over year is.

As a reminder, in the first quarter of fiscal 2000 twenty-three corporate expenses included the receipt of a payment relating to a prior tax receivable agreement and our previous joint venture with change healthcare.

During the quarter, we had losses of $7 million four per share related to equity investments within the Mckesson ventures portfolio.

Compared to losses, approximately $22 million or 11 per share in the first quarter of fiscal 2023.

As a reminder, the Mckesson ventures portfolio holds equity investments in several growth stage digital health and services companies were pleased with the insights and results that we've obtained through this portfolio.

The impacts honor consolidated financials can be influenced by the performance of each individual investment quarter to quarter and as a result, the cousins investments may result in gains or losses, the timing and magnitude of which can vary for each investment.

Turning now to our cash position balance sheet and capital deployment on slide 12.

We ended the quarter with $2.6 billion in cash and cash equivalents, we made $124 million of capital expenditures, which includes investments in new and existing distribution centers.

As well as investments in technology data and analytics to support our growth priorities.

For the first quarter, we had negative free cash flow of $1.2 billion in as a reminder, our cash position or working capital metrics and the resulting cash flows can each be impacted by timing, which includes the day of the week that a quarter enzon and therefore can vary from quarter to quarter.

We returned $770 million of cash to shareholders, which included $696 million of share repurchases and $74 million and dividend payments.

During the quarter, we successfully completed a public offerings $1 billion of notes with five and tenure tenors.

Currently we retired approximately $900 million of notes that were due March of 2024. These.

These transactions reduced our interest expense and a further support our strong credit profile as evidenced by a recent credit rating upgrades.

Our board of directors approved two actions in July 1st a 15% increase to our quarterly dividend to 62 cents per share.

And second the board approved an additional $6 billion a share repurchase authorization, bringing the total remaining share repurchase authorization to approximately $9 billion.

These actions demonstrate the confidence that the board of directors and management have in the execution of our street strategic priorities.

Now, let me discuss our updated outlook the guidance on providing today relates to fiscal 2024 as.

As a reminder, we do not provide forward looking guidance on a gap basis. The following metrics are provided on and adjusted non-GAAP basis.

Discuss the key items, beginning with additional details of our consolidated guidance and a full list of our assumptions can be found on slides 13 through 17, and our slept supplemental slide presentation.

As we talked about already today, we are encouraged by the strong performance in the first quarter of fiscal 2024 and as a result, we're increasing our earnings per diluted share outlook to a new range of $26 55.

To $27.35.

As a result of this we know anticipate earnings per diluted share to increase 13% to 16% when excluding certain items.

As a reminder of what the <unk> certain items include <unk>.

Net gains and losses associated with Mckesson venture's equity investments in fiscal 2023 and 2024.

65 cent benefit related to the early termination of the tax receivable agreement would change healthcare in fiscal 2023.

And $1.90 related to COVID-19 related items in our U S pharmaceutical and medical surgical segments in fiscal 2023.

And we anticipate the impact of COVID-19 related items to be immaterial to fiscal 2024.

We anticipate operating profit will be flat to 4% decline compared to the prior year.

When excluding certain items, we anticipate operating profits increased by 6% to 10% year over year.

Let me discuss the outlook for our segments.

Record distribution business within the U S. Pharmaceutical segment continues to demonstrate its strong value proposition to our customers.

We anticipate further growth and specialty distributions, including are differentiated plasmin biologics business, where our customers can access an expansive portfolio of plasma derived products biologics oncology treatments and other specialty drugs.

Competitive prices from a single source.

During the first quarter, we experienced revenue tailwind from higher volumes related to weight loss of G. L. P. One drugs are full year outlook assumes that volumes related to G. L. P. One drugs will remain elevated compared to the prior year and may vary quarter to quarter.

We anticipate this class of drugs will continue to be a revenue tailwind for U S. Pharmaceutical as we support our customers through our distribution services.

I discussed earlier these drugs have a lower distribution margin right profile.

For the full year, we know anticipate U S pharmaceutical revenues to increase 13% to 15% an operating profit increased 3% to 5% year over year.

Excluding the impact of COVID-19 vaccine distribution in fiscal 2023.

We anticipate operating profit increased 8% to 11%.

Full year performance includes continued investment in our oncology platform and increased technology span to support the growth of the segment.

And the prescription technology solutions segment, we anticipate revenue growth of 7% to 13% an operating profit growth of 15% to 19%, which reflects increased utilization and new brand prescription transaction volumes, including the G. L. P. One drugs and strong demand for the access adherence and affordability Prague.

Alex and programs that we offer.

We anticipate that we may continue to see quarter to quarter variability in this segment driven.

Driven by transaction volumes, the pace and trajectory of new product drug launches in the annual verification programs that we provide for our customers that occur in our fiscal fourth quarter.

And the medical surgical solutions segment, you anticipate revenues to be approximately a 1% decline to 3% growth in operating profit to decrease 5% to 11%.

For the full year, we anticipate volumes of COVID-19 test to continue to decline compared to fiscal 2023, and the impact from COVID-19 related items will remain immaterial to fiscal 2024 results.

Excluding the impact of COVID-19 related items from fiscal 2023 results.

We anticipate operating profit increase 11% to 15% year over year.

And finally in the International segment, we anticipate revenues to declined by 30% to 34% in operating profit to declined by 23% to 29%. This.

This year over year decrease includes the loss of operating profit contribution from European businesses and transactions that we closed during fiscal 2023.

I previously discussed we intend to deploy capital to share repurchases to offset the dilution, resulting from European divestitures.

The corporate segment, we anticipate expenses to be in the range of $580 million to $640 million, which includes losses associated with Mckesson venture equity investments recorded in the first quarter as well as elevated technology span to support the growth of our businesses.

Now moving below the line.

As a result of the debt transactions that I discussed earlier in my remarks, we anticipate lower interest expense and the range of $205 million to $225 million.

Let me now turn to cash flow and capital deployment.

We anticipate free cash flow of approximately three seven to $4 $1 billion net of property acquisitions and capitalized software expense.

Our outlook incorporates plans repurchase approximately $3.5 billion of shares.

As a result of the share repurchase activity, we estimate weighted average diluted shares outstanding to be in the range of approximately $133 million to $134 million.

Our portfolio continues to generate strong free cash flow you remain committed to operating profit growth and efficient capital deployment and are 24% return on invested capital illustrates our focus on shareholder value creation.

In summary are strong start to fiscal 2024, and the outlook for the remainder of the year results in an increase to adjusted earnings per diluted share to a new range of $26 55 to $2007.35.

Excluding the impact of certain items and the contribution from our European operations.

We anticipate earnings per diluted share growth of 16% to 20% in fiscal 2024.

Our outlook further demonstrates the shareholder value creation framework that we've discussed previously we continue to be focused on sustainable growth and efficient deployment of capital.

Pleased with a strong start to the fiscal year or 50000 team Mckesson associates continued to deliver exceptional performance, our first quarter financial performance reflects their dedication as well as the strength of our portfolio.

Two are expansive oncology and biopharma platforms were supporting customers and patients by advancing health outcomes for all.

Delivery faster time to therapy for patients were accelerating the discovery development and manufacturing of the therapies, our services and solutions are at the forefront of improving patient outcomes and assuring more patients have access to quality care with our strong underlying momentum from the first quarter of fiscal 2024.

Mind focus on our growth strategies, we remain confident that will continue to deliver long term sustainable growth and value creation for our shareholders.

Let me turn it back over to the operator for your questions.

Thank you.

I would like to signal with questions. Please press star one on your telephone Touchtone telephone excuse me. If you are joining us today using a speakerphone. Please make sure Gimme function is turned off to allow the signal.

Again, that's star one if you'd like to ask questions.

And our first question will come from Lisa.

J P Morgan.

Go ahead.

Mmm.

Thanks, very much and good afternoon. Thank you for all the details I just wanted to go back and get better understand a few things <unk>. So <unk> you gave us a lot of data when I think about the increase in the revenue from nine to 11 to 13 to 15 can you talk about specifically how much is coming from T. L. P. One and then I <unk>.

Stand that between co payments and other things.

Gross profit is last on G. L. P. One, but how do I think about some of the other areas that potentially can offset that we're hearing stabilization in.

Generic pricing right now he talked about growth and specialty which I also think it's generally lower margin, but you know somebody the other areas and you've talked about procurement opportunities. So I guess, what I can't understand two things one when we think about G. L. P. One can take about the contribution to the revenue side and then secondly, how do we try to bite.

<unk> some of these things on the margins high. So we can have an idea of how to think about really modeling the market going forward.

Well, thanks, Lisa for the questions. There is a lot to unpack there let me see if I can try to answer some of those questions for you as.

As we talked about the revenue growth was very broad based across the company, but in particular within U S pharma.

Certainly we're benefiting from stronger utilization trends overall and that does include G. L. P. One and as I mentioned, they do provide a tailwind just generally speaking of utilization trends continued to be solid growth and improvement.

We're certainly as I mentioned it from the margin right profile G. L. P. One have a lower distribution marginally profile.

But also as I mentioned, the breadth of the portfolio that we have we also offer affordability and access solutions within our technology segment and all those programs like prior authorization have been very well received or providing a lot of value to our customers and so there's a there's a secondary component to the services that we provide on behalf.

Half of those drugs. So just generally speaking I think that the utilization environment has been continued to be solid.

Pricing environment continues to be competitive, but stable are generic programs continue to perform quite well, particularly are sourcing programs and we're benefiting from just broad based performance across all of the channels that we provide services too.

Next question please.

We will take our next question from.

Michael.

[noise] of America. Please go ahead.

Good afternoon, and thanks, so much for taking the question, maybe if I could spend a little time on our S. T. S. Last year is almost like a discovery year in terms with the moving pieces that we saw over the course of the year. This year really coming out of the gate strong in terms of.

Profit growth and I know you mentioned some of the prior authorizations given the noise of moving pieces, we'd had him prioritizations broadly against the backdrop of G. O P wants to other areas.

Is that the biggest driver of growth that you see in the Orange T S business and how should we think about.

I guess lumpiness or lack thereof that we could see over the course of this year relative to the fact that last year was a little bit more volatile than I think we would all expected.

Thanks, Mike all all all start.

And talk about our <unk> business, a little bit we've talked in the past about the importance of mixed in this business that the different financial profiles of the three P. L business, which had good growth in the quarter versus the more technologically oriented solutions that we have into that mix will always be important and.

Did introduce some fluctuations.

[noise] fluctuations quarter to quarter over over our prior fiscal year I would say in general though this this business is going to benefit from the utilization trends that that Brit talked about and specifically as prescription volumes go up as the need for prior authorization.

Services go up it.

That's health for our business and we're going to we're going to win by learning more of these manufacturer relationships extending our relationships.

And the places where we have them today is pets more penetration if you will we're going to.

Benefit from those kinds of volume related things over time now as new.

New drugs launched as they go through their life cycles, there can be some variation in to the demands and needs of the services, we offer and that's just a natural part of the business.

Maybe just one other thing that I would add as we continued to develop this this segment one of the things that we're doing is continued to add capabilities and programs within it. So as time goes on we're offering more services, which is certainly taking advantage of utilization trends, we added Rx saving solutions last year. So another capable.

Ability with a whole another set of of.

Of economics available to us and our and our customers. So I think you are seeing is the investments that we're making within the segment and the additional programs and capabilities that we're adding and certainly the added the acquisition of our savings solutions is just adding to the growth that we're seeing on a year over year basis. We also continue to.

Make investments entered a segment and that the timing of those investments isn't always linear.

Next question please.

And next will be called.

Well with bird.

Please go ahead.

Hey, Thanks, very much congrats on a nice report so during the quarter the health of one of your known customers all leave the name out.

Was very much in debate and I'm just larger bigger picture here curious if you could talk about in general when you see possible challenges at an account what kind of protections do you put in place whether it be just in time inventories collection practices.

Things of that sort and also if a formal restructuring work to occur.

Such as a chapter 11, what protections do you have then in terms of things like critical vendor status or other other items just.

A lot of debate from the from the Investor base in terms of what actually happens if a if a larger account has.

More pronounced challenges thank you very much.

Eric Thanks for the question and I appreciate where you're coming from on this for probably obvious reasons, we don't get into the the hell through the economics or or the situation of our customers. We do stay very close to our customers were always trying to find ways to help them to grow and trying to.

Additional services and capabilities for them so.

Feel good about.

Customer contacts that we have in our our ability to understand their strategies and their growth what they're trying to do from a growth perspective.

And I think the broad base set of customers that we have across each of our segments of fuel.

Comfortable with how we manage our relationships.

On that I really can't get into the specifics of our contracts that we have with each customer.

Hopefully you can understand that.

Next question please.

And next will be Kevin Kelly under with you B S. Please go ahead.

Hi, Thanks for taking my question.

I guess on the G. L. P. One so I have to ask just because it's obviously such a big driver, but do you think that your share of the market chorus.

Corresponds to your typical share within a within a category or a drug meaning is have you been able to secure more supply or do you have any means is your distribution channels such that you have a a greater per cent share of that market than you might normally for whatever reason, whether it's contractually or just.

Just the way you are mixer setup.

I would I would.

I would think that our mix would be fairly representative of our business mix overall I probably have are appropriate share in health systems are appropriate Sharon independents are appropriate share in large retail national accounts.

This there have been points in time or where supply is has been less than demand. We've worked closely with all of our vendors to make sure we get our representative and fair share in that we can coordinate with them and communicate effectively with our customers, but overall I would say we would have the mix you would expect so I would say that it's a it's a fair question.

As we talked about G LP mornings did provide a revenue tailwind for our distribution business, but I would just remind you that the growth and the segment was very broad based it was across specialty products. It was across our generics business and it was really across each of the segments outside of G LP ones and that reflects the.

Utilization trends. It also reflects the services and capabilities that we have that we provide to our broad customer base. So certainly G. L. P ones are topical and have provided a tailwind, but the business is performing quite well across really all categories and our customer base.

Okay. Thank you and please.

And next will be Eric.

Please go ahead.

Thank you.

Ask a R. S. T. S question that is somewhat G. L. P. One related which is as you see products goes from Titan manage to more open access how does <unk> offering change and have you seen success moving from.

Early restricted access assistance to adherence or other offerings.

Well the I mean, the the nature of what we offer to support a drug is often different at different points in its life cycle. I mean, what you might want at launch will be a lot different than what you are at maturity and and can depend on how other competitors come into the class, we'd like to try to think about supporting the products over or.

The course of their lifetime, obviously, they're pair an employer decisions around how they want to treat certain classes of drugs can dictate the services that we might offer and these drugs are relatively new to market.

Speaking as an employer I can tell ya employers out there thinking about how they want to handle them, that's going to be different but.

For each of the employers.

But generally it's it's positive momentum for the business.

Next question please.

Operator next question please.

And next will be a J rights with credit Suisse. Please go ahead.

Okay.

Hey, James How're you on the line.

Please yes, sorry, everybody I just.

I wanted to delve a little bit into the oncology ecosystem, I think Sarah Canada and on top of our stolen and investment mode is that meaningfully different from quarter to quarter. As you look lay out this year's numbers and is it meaningfully different than the investment level from last year, and obviously as you're putting this in place your.

Expecting it to have a benefit on its own but I wondered if you could comment on the sort of flywheel benefit to the rest of the businesses from making this pushing oncology that you expect to realize.

Hey, Jay Thanks for the question, let me try to answer that for you I'll start and Brian can add on you know we have been investing principally in our Anton a business, where we're developing data and insights and I would say that on a year to year basis. The the overall investment is probably not very too.

Much on a year to year basis, now quarter to quarter, you know that can certainly very and and but on a year to year basis. Our investment has been pretty pretty constant. It is Sarah cannon research is really in the integration face and it talked about some of the integration costs for both of the <unk> and the acquisition of our savings solution, but the investment.

That we principally been making it and to develop our own TADA business on an annual basis has been pretty pretty constant year over year quarter to quarter at Woodbury.

That question please.

Next will be Daniel gross like with city. Please go ahead.

Hi, Thanks for taking my question I'm Gonna go back to the generics environment. You've mentioned this a few times as a tailwind if you're like a third party data it seems to point to a much more benign generic pricing environment.

So I'm just curious what in your view is driving this better pricing environment. How are you managing potential shortages that have gotten some press recently and then for the remainder of the year, how should we think about the generics environment and that impact on on your provides guidance.

Yeah. Thanks for the question, Here's what I would say in terms of our our generics program. It is a combination of the sourcing activities that we have which.

Really reflects the relationships that we have across hundreds of manufacturing partners.

And it reflects the discipline that we have on the sell side and the combination of that has led to.

Really good results now we've also had some new brand or I should say, some new generic launches and we certainly participate in those new generic launches as well and we had a few in the quarter that we benefited from so the combination of our sourcing operations.

Stability that we're seeing in a competitive marketplace has provided us the ability to create spread at the same time as providing competitive pricing for our customers with a stable supply you mentioned shortages.

We have seen shortages for as long as I've been with the company.

From time time, they will they will spike up like we had with some of the cold and flu products or the illness season products last year. We generally speaking I would think that I would say that the what we're seeing now from the supply perspective is more in line with what we've seen historically every now and then you'll have a product that.

That will be more challenged but the broad base of partners that we have in our sourcing program allows us to manage through that quite well.

And the performance that we're seeing in the first quarter, which is continued momentum from last year. That's that's included in the guidance that we have for the full year.

Next question please.

[noise]. Please go ahead.

[noise] February guys, <unk> I want to come back to oncology as well I'll talk about some college. He said visits from 19% in total Saint door was up seven I'll assume drug pricing was positive. So we're talking like 20 per cent growth in you us oncology order I guess could you give us a little bit more detailed mckesson's kind of exposure to one calls you kind of like the practice.

Versus the drugs versus the P. P O.

That type of growth profile kind of in line with what we're seeing in all segments of the mckesson's oncology exposure. Thank you.

Hi, George Thanks for the question, let me, let me be clear on what I provided I provided some insight into patient visits metrics and I thought that would be insightful, we had 19% increase year over year in total patient visits and 7% on the same practice basis, not that would be an insightful on it.

It also reflects the some of the acquisitions that we've done or or some of the new practices that we've added over the last year. So again.

Numbers that I provided you are patient visit metrics only and I didn't indicated anything else. Besides that Brian if you want to comment on the other.

On the other side I would just say, we often refer to this as an ecosystem because we think about the very broad and diverse set of solutions that we offer here and it's not just the practice management.

Item Ed EMR, It's GPO services, it's the revenue cycle management services.

Contributions are those systems to managing the clinical practice of oncology effectively with complimented that in recent years with an tartar the data antolik insight business in our joint venture with Sarah Cannon and I think.

And there's the distribution business I think when you put those all all together that's why we call. It an ecosystem because we think in many ways. They self reinforce and you've seen in the last several years pretty good growth in the in the network.

I think that's in part to that expansive value proposition and attractiveness, we represent to these practices as a partner to help them both provide.

The best patient care possible and and to manage their business as well as they can.

And we have time for one more question. The last question. Please.

Certainly that question will come from me Elizabeth Anderson.

Si.

Hi, guys. Thanks, so much rather question I know it doesn't impact me from a reimbursement perspective, but I was wondering if you could speak to <unk>.

340, b and the and the impact on potentially on your P. T. S business is that something that you know sort of helps is it does it have a volume fluctuation part in it or is it just something that as we kind of get fewer of these 340 be prescriptions potentially as the market changes you know that could have a modest impact, but it's unlikely to to really.

It will be a real driver that thank you.

[noise]. So I think you asked at 340 be relative to our prescription technology business and I would say I would characterize refer to be is not a particular driver of that business.

Just flat out I'd say that impacts of 340, b with much more PNR resident pharmaceutical distribution business and obviously, we've talked a lot over the past quarters about evolutions in 340, b, whether those be regulatory or commercial actions and reactions in our best view of all that is reflected in the guidance.

That Britain I have provided by this afternoon.

Okay well. Thank you everybody. Thank you for joining the call appreciate the thoughtful questions and your interest in Mckesson. Thank you Cynthia for facilitating the call just wrap up by saying you know mckesson's delivered strong first quarter results are our financial strength is really a testament to the signal.

<unk> progress we've made in advancing the cast into the diversified healthcare services company, we're confident in our differentiated market position in our ability to execute and continue to create long term shareholder value. Thanks again for joining us I hope you all have a terrific evening.

Thank you for joining today's conference call you may now disconnect and have a great day.

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