McKesson's Strategic Investments and Growth in Oncology
2023-08-01
McKesson, Sarah Cannon, and U.S. Oncology Research Network held a joint venture call meeting to discuss their collaboration in improving cancer patient care and expediting the commercialization of new oncolytic drugs. During the meeting, it was revealed that McKesson would have a majority ownership in the joint venture.
One of the key highlights of the meeting was the significant growth in prescription volume across the business during the first quarter, with a 7% year-over-year increase. This growth reflects the company's strong sales performance and the growing demand for their products in the market.
The meeting also shed light on the company's progress and focus within its oncology ecosystem. McKesson recently completed a transaction that brought together two major research institutes, U.S. Oncology Research and Sarah Cannon Research Institute, in a joint venture. This collaboration aims to improve patient access to clinical trials in the community setting, ultimately advancing the next generation of cancer care.
In addition to the joint venture, McKesson acquired Genospace, a leading innovator in precision medicine and clinical trial matching. This strategic acquisition enhances the company's oncology data and analytics capabilities, enabling them to provide better solutions to their provider partners within the joint venture. This move underscores McKesson's commitment to leveraging data and technology to drive advancements in cancer treatment.
Furthermore, McKesson's data and insights business, Ontada, formed a strategic alliance with BeiGene. This alliance seeks to accelerate the development of real-world evidence, enhance community education, and improve patient access to oncology medicines. By partnering with BeiGene, McKesson is positioning itself to tap into the growing importance of real-world evidence in drug development and patient care.
Overall, McKesson's focus on the oncology ecosystem is a strategic move to drive growth in the U.S. pharmaceutical segment. With its leading market position in community oncology distribution, the company is well-positioned to capitalize on the increasing demand for innovative cancer treatments. By investing in research, data analytics, and strategic partnerships, McKesson is establishing itself as a key player in advancing cancer care and improving patient outcomes.
The market outlook for McKesson appears positive, with prescription volume growth of 7% in the first quarter. Although July experienced the lowest prescription volume transactions in the first six months, the second quarter saw an average increase of 4.5% compared to the previous year. The company's guidance remains within range, and they are still seeing transactions within their guidance. The primary care business is experiencing growth, attributed to factors such as the presence of flu in the marketplace and expansion into alternate site markets. Overall, the market outlook for McKesson seems optimistic.
During the meeting, the key drivers of the business were discussed, including overall market trends and expectations, differentiated capabilities in community distribution (particularly in oncology), robust value propositions for community providers and hospital partners, investments in specialty distribution (including in Ontada), and the focus on biosimilars.
McKesson's plans for product and service expansion include supporting various categories such as pharmaceuticals, lab supplies, commodity medical supplies, and a large mature private brand program. They also have a focus on the medical care segment and plan to follow the patient. The company is involved in the distribution of vaccines and ancillary supply kits, with expectations of a decline in volumes for the centralized program and a shift back to a distributor model. Additionally, they have an initiative related to access, adherence, and affordability in the biopharma segment.
The meeting highlighted two important key performance indicators (KPIs): prescription volume growth and the guidance for med-surg solutions. Prescription volume growth saw a 7% increase in the first quarter, followed by a 4.5% increase in the second quarter. This KPI reflects the company's sales performance and market demand for their products. The guidance for med-surg solutions indicated a modest decline in Adjusted Operating Profit but projected 11% to 15% growth excluding COVID-related items. These KPIs are crucial for assessing the company's financial performance and market outlook.
Looking ahead, McKesson's outlook for the quarter and year is positive. They have reported strong financial performance and are raising their guidance for adjusted earnings per diluted share. The company is pleased with their core distribution businesses and believes they have shown resilience in navigating the macro environment. They have also made progress in their company priorities and have established a strong position in oncology and biopharma services.
Throughout the meeting, McKesson emphasized their strategic initiatives and progress in building differentiated capabilities in community distribution, particularly in oncology. The growth of their oncology pipeline was highlighted as a strength that supports their overall growth. The company has made investments in the oncology space, including in Ontada, which has become an important part of their assets and capabilities. They have formed a strategic alliance with BeiGene and plan to continue investing in the oncology sector. McKesson also emphasized their strong value propositions for community providers and hospital partners. Overall, they feel well-positioned to continue focusing on oncology and making strategic investments for future growth.
The call meeting included participants such as Rachel Rodriguez (Vice President, Investor Relations), Brian Tyler (Chief Executive Officer), Britt Vitalone (Chief Financial Officer), and several analysts from Nephron Research, Bank of America Merrill Lynch, J.P. Morgan, Barclays, Cowen and Company, UBS, Deutsche Bank, Jefferies, Credit Suisse, Evercore ISI, and Morgan Stanley. This diverse group of participants brought a wealth of expertise and insights to the call, making it a valuable source of information for investors and analysts alike.
McKesson's commitment to attracting and retaining talent, promoting employee well-being, and fostering diversity and inclusion in the workplace was also highlighted during the meeting. They have implemented a wellness program called "Your Day, Your Way" to support employees' mental, physical, and emotional well-being. The company prioritizes diversity, with nearly half of their board of directors being women and/or people of color. They aim to drive sustainable growth in their pharmaceutical and medical distribution business, with a focus on expanding reach and delivering unique value propositions to customers. McKesson has a long-standing relationship with CVS Health and recently extended their agreement to distribute pharmaceuticals. The company also holds market-leading positions in primary care and extended care markets in the medical-surgical segment. They continue to expand their services to other areas.