McKesson Aktie

Good morning, everyone. Welcome to the Morgan Stanley Global Healthcare Conference. I'm Erin Wright, health care services analyst at Morgan Stanley. And we are happy to have McKesson with us today. But for more important disclosures, please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. Hopefully, all memorized that by now. So thank you so much for joining us. We have Chief Executive Officer, Brian Tyler, as well as the new or not so new anymore, been 3 months, Chief Financial Officer, Kenny Cheung, with us today. Very happy to have you. I think, Brian, you wanted to say a few remarks at the beginning.

Well, I just want to thank you for hosting us this morning. We appreciate the opportunity to share a little bit about the McKesson strategy and recent performance, and we thank you all for being here early on a Monday morning. I appreciate your interest in McKesson.

Great. So let's start out with the most recent quarter in earnings print and guide. So more recently, I guess, raised your '27 EPS by $0.40. You raised your AOI guidance by 1%. I guess to start off, is there anything that you want to highlight from the more recent print or clarify based on, kind of, the feedback you got? And since then, you also announced an acquisition of PMG. We'll get more into that later on, but just kind of give a high level in terms of the rationale behind the deal.

Sure. I can start with the quarter, and I'll turn it over to BT on PMG. Overall, for the quarter, for Q1, we are pleased with our business performance. We have momentum across the board. As you think about our 4 reportable segments, 3 of the 4 were double-digit growth across North American Pharmaceutical, oncology and multi-specialty and our RxTS business. As you think -- and you're correct, we did raise for the full year given our strong performance in Q1 and our confidence for the rest of the year. The $0.40 raise brings our full year EPS to $44.20 to $45, which translates to a growth of roughly 13% to 15%. And if you normalize for 2 things, the Norway exit as well as our gain on sale in USON last year in this quarter in Q2, that is a 15% to 17% increase year-on-year. And that is, call it, in line, slightly above our long-term target of EPS growth of 13% to 16%.

So Erin, overall, we're extremely pleased. And I'll turn it over to BT on PMG. Just one overarching comment. When we think about M&A or just general assets within our portfolio, it's important that we're strategic about it, disciplined about it as well, where the assets, the platforms are interoperable and are complementary to each other across distribution, practice management, data and analytics, clinical trial services and the likes. And PMG does fit that mold nicely.

If you just step back a little bit, 7 years ago, we set a strategy for the enterprise that was focused on a few pillars. One was people and culture, and we think PMG is a great cultural fit with super talented people. So we're excited about that. It was to strengthen North American distribution, and it was to modernize or continue to modernize our portfolio through disciplined capital allocation and then to focus on 2 growth areas oncology and biopharma services, where we felt like we had differentiated assets.

We had end markets that had good growth that we could foresee into the future. And so over the last years, we've been executing on that strategy. We think Precision for Medicine fits both the focus on oncology through their clinical assets, which complement SCRI, Ontada, the USON network and help extend our reach into clinical research with a particular focus on oncology. And then on the commercial side of their business, it supports our biopharma strategy, adding us depth in things like market access and payer insights and consulting that we think we can then leverage to have a more complete commercial solution for payers. So we're really, really pleased with just the people, the talent and the strategic fit.

Okay. Great. I'll get back to PMG in a second. So -- but in the most recent quarter, we got some investor questions on this just in terms of quarterly cadence, how you're mapping it out for the year. But you tweaked North America Pharmaceutical AOI guidance a little bit higher or towards the high end of the prior range, but you did maintain that oncology and multispecialty segment in RxTS guidance. Was there anything to keep in mind when we think about that quarterly cadence? Any areas of conservatism like why the momentum wouldn't continue kind of?

Yes. I probably wouldn't use the word conservatism. I would use the word confident. We're extremely confident around the momentum in our business given the fact it's broad-based. And you are correct. We did increase the guidance tied to North America Pharmaceuticals. So you may remember, our original guide was 5.5% to 9.5% AOP growth for the year. And given the momentum we're seeing across the business from a customer standpoint, a product standpoint, we're seeing good growth from health system with Specialty. And for us, that gives us the confidence to raise. That was the $0.40, give or take.

Now your question was around O&M and RxTS, how do we feel about those 2 businesses as well. For O&M, oncology and multi-specialty, we're off to a great start of the year. On a reported basis, our top line was 33% growth and our AOP was roughly 41% growth. If you back out the Core Ventures acquisition that was done last year, by the way, we lapped that in Q1, it's roughly a 15% growth for oncology and multi-specialty. That is right at the midpoint of our full year guide of 13.5% to 17.5%. So that feels we're on a good track there. Momentum is there as well. And we're really seeing a few folds of growth.

One is just existing volume -- we're seeing good foot traffic into our USON and PRISM networks. We're also seeing just overall healthy utilization in terms of prescription drugs in Specialty. The other good news is we're seeing good business growth as well, new business growth, too. On the RxTS side, just to remind everybody, we saw roughly 9% top line growth in Q1 and 13% growth in AOP. That 13% is right in the middle of our full year guide of 11% to 15%. Overall, we're seeing broad-based growth across our access to affordability programs. We're also seeing good momentum around our GLP program as well. Every year, we bring in new programs, new brands to our platform.

For example, the GLP-1 Medicare Bridge Program is off to a good start. Now it is early innings, though. It started roughly July 1. So we're 2 months into it, and we're seeing good volume through there right now. But more importantly, operationally, we're ready as well. If you think about some of the key metrics we're looking at, for example, roughly, call it, 95% of the time when a PA hits our network, 30% -- 30 minutes, we have the determination. So overall, we are ready, and it's early innings, and we'll update as we progress.

Okay. We may have some follow-ups there. But any -- since I have to ask the obligatory question on contract renewals, any sort of update on that front, particularly with your CVS relationship? How would you characterize that relationship today? And then just anything else to keep in mind in terms of some of those bigger contracts?

Sure. Look, we're very pleased to have been aligned and partnered with CVS for over 20 years. And they're a big growing organization. We've been a big growing organization. And so we like to think through constant dialogue, we're helping strengthen their business. And certainly, through their scale and volume, they continue to strengthen ours. So it's been a great relationship. We're super pleased to be affiliated and aligned with them. We extended our contract about 5 years ago. It extends June '27. I'm not going to get into a lot of details around contract negotiations for obvious reasons.

But we're very pleased with the partnership. We think we bring them a lot of value, and they understand the value that we have helped create over the 20 years plus of the relationship. I would remind everyone that this is just a normal part of the business. Every year, about 1/3 of our contracts come up, and we're engaged in renewal discussions. We operate those discussions at the cadence that our customers want them. Sometimes we might early renew because they would see value in that. Sometimes we go through a process that can come down to the last months of the contract. So -- but 1/3 every year is pretty normal, and we've got a pretty good track record of renewing.

Okay. Great. And then let's switch back to PMG, Precision Medicine Group. And you've mentioned some of the unique aspects of this business, very focused on oncology, late-stage CROs like with a very niche kind of handholding type of experience but also that commercial arm as well. And how does that fit into kind of what you're doing at Sarah Cannon and Ontada -- but also, can you talk a little bit more about just the financials as well? We didn't get that much in terms of financial disclosure on the asset, but growth.

We did just sign the deal. And we are going through the regulatory filings and things of that nature. I'll let Kenny comment on that. But maybe just from why are we excited? Why this asset? And what does it bring to us? And I think to put that in good context, you got to remember how we've really gone about building our oncology business. So we started in distribution. We had a lot of specialty customers. We then expanded to offer GPO services. Then we expanded into our MSO, U.S. oncology. And after we began to then scale that, we've added -- we've roughly doubled the providers in the last 8 to 10 years. We now have 3,400 providers. So we've got great scale in the network.

Then we invested in a data analytics and insight business called Ontada. We did a joint venture with Sarah Cannon, which then got us into site management and in and around clinical trials. So Sarah Cannon, for example, in 2025 of the 52 oncology drugs that made it to market for adult oncology, we were part of that managing that trial for 43 of them. But as you think about piecing those together, we just see the assets in PMG as a very next natural extension. A lot of oncology trials fail because we can't enroll enough patients fast enough to get them to the finish line. Well, we think a big unlock for that is availing the community practice of oncology where most of those patients who could be -- find a trial don't because they don't live near an academic medical center.

Using the assets of PMG in alignment with and integrated into the things we're already doing at Sarah Cannon, we think will allow us to develop a very strong value proposition for biopharma companies developing these oncology drugs. And we think that the combination of those assets is actually quite unique and a big unlock for us. As we then grow that and continue to scale that and get penetration, we get more data that we can bring into Ontada, things like bioclinical markers, things that we hadn't prior had at the scale that we could now have it. And then you referenced their late-stage focus and some of our early-stage focus, and we see that as a great opportunity to kind of cross-pollinate those businesses.

Yes. If you think about it, for us, we're excited because now long story short, we can be part of -- we can add more value to our biopharma partners from innovation/clinical trials to commercialization to, at the end of the day, access to patients right, affordable access to patients, especially in the community setting. From a financial standpoint, as BT said, we just signed the deal, we are in the process of the regulatory approval framework, if you will.

And with that said, this deal is accretive from a strategy standpoint, as BT just mentioned, as well as from a financial standpoint too. We'll share more financial impact as we get closer to the closing date of the asset. Two things I'll say. As we think about this asset, strategy-wise, it's on strategy, as BT said, I won't repeat what he said. Financially, it's also accretive, as I said earlier. As you think about the ways we use to evaluate assets, we factor in cost of capital. We look at the risk profile of the asset, and we parlay that and marry that up with the near-term and long-term value for our shareholders.

Overall, this asset checks all the boxes. And the last but not least, given the fact that we have a strong balance sheet, IG rated and the fact that we have ample cash and liquidity, we have the luxury to do both, invest in our business organically and inorganically and also reward our shareholders. As we said on the earnings call last quarter, this year, we plan to redeploy our capital against share repo of $5 billion of $2.5 billion was completed in Q1. And also in July, we raised our dividend by 15%, which is commensurate with our long-term algorithm for EPS growth.

And since you're talking about capital deployment, I'll switch to this question then and ties into PMG. But you've suggested in the past that an FCS type of transaction or size of transaction is probably less likely. There's just frankly not that many MSO deals to do like that or at least of that size. Should we interpret PMG as evidence of that next phase of strategy that may lean towards acquiring these types of capabilities in sort of that CRO category where there is a long tail in a very fragmented market and could just be even a larger presence than what you're doing with PMG today?

Yes. I mean, look, scaling our USON network or MSO was an important part of our strategy over the last few years, and we're super pleased to be able to integrate FCS into the U.S. Oncology network and give us the leading scale at 3,400 providers. We think there's continued growth in that network, building off the states and the practices we're already in, recruiting new oncologists to join those practices. Kenny mentioned the solid same-store patient traffic that we're seeing.

And there are an active funnel of additional practices that we think fit our model, meaning they want to practice oncology in a way that's consistent with the way U.S. Oncology manages itself as a network. There are not more FCS scale out there, but we think we can continue to add active practices to grow it. But the key is for us that now that we have this leading scale, how do we continue to find ways to leverage that scale through doing things like acquiring a PMG, bringing CRO capabilities, integrating them with site management and unlocking access to clinical trials in the community.

We think that's got a long growth runway for the foreseeable future. And that's what we're really excited about is leveraging off prior investments, GPO, Ontada, SCRI, USON to attach an asset that we think has tremendous complementarities and makes those things in themselves stronger as well as making PMG stronger.

Yes. Okay. And then so let's dig into the MSO assets as well. So oncology, obviously, you're talking about that being a key growth driver, a key platform for you. You've really built that out nicely with a lot of other ancillary services as well. But I guess, can you talk about the underlying growth of that MSO asset on an organic basis? And you can highlight kind of U.S. oncology or the broader MSO business, but how sustainable is that growth in light of what we could see in terms of reimbursement evolving across that state?

Yes, I can start. As you think about oncology and multi-specialty, you mentioned MSO, that's where that falls under. We're seeing really good momentum in that business. And as I mentioned in Q1, the operating profit growth was 41%. And if you back out the Core Ventures piece of it, which is M&A last year, fully lapped in Q1, it was roughly 15%. That 15%, it's a good proxy for organic growth in that business. That's point number one. Point number two is if you think about the composition of O&M from a revenue contribution standpoint, the majority of the business is actually distribution and GPO. That is the majority, the lion's share of that business, where we provide distribution services to providers and allow them to do, obviously, the treatment side of the house.

We provide surety of supplies, safety, reliable service as well, and we get a fair fee for our service as well, right? That's a really important point. And the second piece I would say is that on the MSO piece, the benefit expands beyond just financials, right? Obviously, when you join the USON network to your point or our PRISM network, you get the full basket of service, obviously, distribution, GPO, but you also get, call it, practice management, you get revenue cycle billing help as well. You get some back office help as well. So it's a full suite of service that we provide. to our provider and physician. In terms of your last questions around kind of the reimbursement side, et cetera, I think I'll say 3 things, right?

One is, and I think this is more of a safe harbor is we don't own the physician or the providers. We don't own the clinic as well. We provide choice, but the choice is retained by the provider, right? That's just really important. The second piece is that as you think about our business, it's a resilient business model. And again, distribution right now is the backbone of the oncology and multi-specialty. And we're off to a great start. And right now, as I mentioned, the exit rate of our business right now was really strong in Q2, and we're 2 weeks away from quarter to close. And right now, momentum is still there as well. So overall, we feel good about the space.

I think you were referencing the IRA Part B drugs, which were announced in 2026 that will not take effect until 2028. And we don't know what that MFN price will be relative to pricing in the market today. So it's a little bit hard to try to quantify what these few drugs impact could be. We step back though, from a little bit more macro level and look at it and say, we know the community is the lowest cost location to provide health care services today, good oncology care today. It's dramatically lower than the hospital setting.

So any public policy that would incentivize care to leave the community setting to go somewhere else is going to work very counter to the overall goal of this country to reduce health care costs. And we think that's pretty widely recognized by our regulators and our legislators. And in fact, they've given us a blueprint of a model to achieve what they're trying to achieve through this IRA Part B in a way that does not impact physician -- potentially impact physician incomes at all.

And that's the GLOBE model where you effectuate the price by a direct rebate from the manufacturer to CMS. And so we think that's a very workable and productive solution that allows the government to achieve its goals of reducing their spend on drug pricing, but insulating the community-based providers from any economic harm.

So you feel like you can navigate this as...

We think there's a working model that's out there that's already been endorsed and developed. Now that's -- we will advocate as we always do on behalf of the community practitioners, whether it's pharmacies or oncologists or anyone else based in the community because that's going to be an important part of solving the macro health care challenges in this country.

Okay. And then you mentioned PRISM on the MSO side and that platform now has -- I guess, now includes more than 200 providers across 97 locations. You've obviously expanded some of that. Can you talk a little bit more about that opportunity, where that can go over time and then where else you might consider expanding from a specialty standpoint?

I mean, in my mind, it's a little bit of a similar playbook to what we've done in oncology. It's just we're a little bit closer to the starting blocks, and we had a 15-year head start in oncology. But we really think the same model is kind of applicable. The reason we were attracted to retina and ophthalmology was because we see -- we see heavy intensity of physician-administered drugs. We see a good innovation pipeline. We see a complicated practice where scale can help the practitioners be more efficient, improve the operations of their practice, get more patients that we can then ultimately leverage that data off of.

And so we started our retina journey by realizing we had a lot of scale and just our specialty distribution to retina clinics. And then we acquired some assets and launched a GPO specific to retina. So this story is probably sounding a little familiar to how we built oncology. And then we went for the platform, the MSO platform. And now it's about finding the practices that want to practice retina and ophthalmology consistent with the way we do in PRISM. And growing that over time.

So growing, again, same-store visits, getting more throughput for our physicians, attracting ophthalmologists to join the locations we already operate in and then finding new practice platforms in new states that have the relevant scale and want to practice ophthalmology the way is consistent with how we do. So we're really excited about it. We look at the pipeline of drug innovation in ophthalmology, and we think that there's going to be a similar playbook to be run here.

Okay. I want to switch gears to the North America Pharma segment. Again, the AOI growth was pretty solid at 19% in the most recent quarter, supported by some of this timing of new branded or branded to generic launches. I guess, -- how does that flow through? Why doesn't that flow through kind of for the remainder or balance of the year? How do we kind of normalize for those contributions as we think about kind of the quarterly progression? Can you talk a little bit about that?

Sure. Yes. No, absolutely good question. Let's talk a bit more deeper on North America Pharmaceutical. As you know, that's roughly, call it, top line, 80%, 85% of our top line from a profit standpoint, over 50%. Q1, we saw really healthy leverage across the P&L. Top line was 5% growth. We saw leverage down to GP as well as operating profit and 10% growth on a year-on-year standpoint. It wasn't just one single thing that drove the successful quarter for us and the momentum that we're seeing. It was broad-based from a customer channel standpoint, as I mentioned earlier, specialty growth, for example, in the health care system. We continue to see healthy and stable growth on prescription utilization as well.

And I think you mentioned there was some timing, I think, around the new product launch side with brands as well as the branded generic conversion as well. Maybe you can talk more about that because that one, in particular, does cause some variability for our business, if you will, right? So let me kind of think through some of the variables. Branded generic and LOEs as well as just overall new brands coming to the pipe, that is a consistent part of our business. With that said, though, there are -- each product launch is unique, if you will. It's unique. And you think about from a brand side, customer mix, channel mix think about adoption as well, think about the -- on the supply side, supply readiness.

On the BX to GX, sorry, on the brand to generic side, there could be a lot of variables as well. Think about the molecule itself, number of entrants on the generic side, adoption, price strategy launch, brand marketing launch. So there's an array of things that could impact variability for the business. And the good news is that our team does track this on a granular level, and that has been reflected in our forecast and our guidance for the year. As we learn more, obviously, we'll reflect that into our guide. But overall, even though there's variability, the underlying fundamentals of our business are durable and sustainable as we think about the full year guide.

And then in terms of the back half of the year about the flow-through that we saw in Q1, as we mentioned on the earnings call, we do expect, given the fact that we're seeing strong momentum in the business, at McKesson, we're all about delivering value for our shareholders today and building for tomorrow. So for the back half of the year, we are expecting a step-up on investments around business growth, automation and technology, and these will render accretive returns for our business, not necessarily this fiscal year, but for many periods in the forward.

Okay. Another policy question for you. What's your exposure to 340B? And how should we think about your position in this market amid some of the, I guess, broader uncertainty there and shifts that we're seeing and they seem to be a little bit more aggressive with that. I guess, have you noticed any changes in terms of where volume is flowing through and reimbursement thereon? Or -- how do you think about the evolving policy backdrop there?

Well, we do serve contract pharmacies, health systems, biopharma manufacturers, all participants in the 340B segment. It's -- look, Erin, you know this has been a pretty active area of discussion really for my entire tenure. So the last 7 or 8 years, and we've seen a lot of proposals and models and things kind of come and go, either dying in the courts or being retracted and then coming back. Today, there's a small handful of various proposals out there. Most of them are still in the comment period or the evaluation period.

So we really haven't seen any changes in customer behaviors or volume flows or any of those types of things. I couldn't point to any specific data that would back that up. But when I think about it in general, though, I think about the scale and the breadth of the capabilities that we have to help our customers manage inventory, manage their reimbursement settings, just the broad capabilities of McKesson. Whenever we talk about policy and policy shifts, I just have confidence that we have the assets and the scale and the solutions that will help our customers, our biopharma partners navigate these changes in a constructive way.

Okay. And then can we dig into a little bit of the RxTS business? You mentioned a little bit on GLP-1s and how should we think about lumpiness across that business? Can you break out kind of the different drivers of the different components how important kind of everything from the third-party logistics to kind of the -- the core technology assets within that?

Yes, yes. So the RxTS business, again, grew double digit in Q1. The full year guide is 11% to 15% AOP growth. So we're right on pace in terms of our Q1 performance. In terms of some of the dynamics driving the growth for us, obviously, GLP-1 has been a topic for a lot of folks, obviously, in this room as well. And we're seeing momentum in GLP-1 right now. I think one interesting fact is that with orals being -- again, early innings on orals, However, we're seeing or for the most part being, I would use the words, additive accretive versus cannibalize the injectable side of the house for the most part.

So we're seeing that piece. That's great. I think the other thing that I want to say to impress upon is the fact that GLP-1 is growing nicely for our business. it is only roughly 11% of our revenue contribution. The non-GLP part of our business is also growing in a meaningful way for us. So for us, we continue to see growth across both affordability and access across the board. And as I mentioned earlier, every day, every month, every week, we bring in new programs and new brands as well to our platform, and that's been going really well. So you're -- on the core side of the house, we're growing and then we're also expanding with new wins as well.

I mean the strength of this business is really the networks. I mean we've got over 50,000 pharmacies. We've got over 1 million providers, and they're on our technology platform, which is levered into their workflow. That is a pretty big differentiator for us. And that's why 650 brands choose to collaborate with CoverMyMeds or RxTS. But it's that network, it's that trust. It's that ability to transact at scale with high, high accuracy that we think and it gives us the right to win and continue to win in this space.

And within RxTS, how should we think about the competitive positioning in the broader access market and particularly relative to the vertically integrated kind of PBMs and payers and manufacture direct-to-patient type of models that could disintermediate third-party solutions? How do you fit into all that?

I mean I look at the networks I just talked about. I look about the track record, the history. I look about the 650 brands. I look at the growth that we've had in that business for the last 5 to 8 years. And it gives me great confidence that the market is signaling to us there's real value in what we do and that there will continue to be real value in what we do. As it relates to -- I think you said direct-to-consumer or direct-to-patient programs, I think about that in a couple of ways. Let's separate GLP-1s because I think GLP-1s has clearly demonstrated there is a pretty big cash marketplace out there.

It looks to us based on the growth we continue to see in our access business for GLP-1s that these are incremental scripts that this has brought new patients to the market that otherwise wouldn't have been there. And so we are and will explore how we support the cash market through the technologies that we have, but it's not taking away from the business at this point. If you think about the rest of the market, the non-GLP market, I mean, if you have coverage today, you're going to use that coverage to access your meds. If you don't have coverage today, you probably aren't buying that drug. So if you are using a [ DPP ] program, you are probably also net new to the marketplace. So we don't see the non-GLP -- the GLP-1, we see as an opportunity, the non-GLP-1, we think of more as not really impacting our business.

Okay. I want to ask a question on MedSurg. I know that's a pending spin, but what trends have you been seeing across the business recently? What is behind the 0% to 4% kind of operating profit guidance for the year?

Yes, I can start. So for the last quarter, our top line was 4% growth, which is one of the highest we've seen in the recent periods. Our AOP was down roughly 20% year-on-year, and that was driven by twofold. One is more product mix. The other one was we had a onetime admin cost from a year-over-year comp standpoint, which burdened obviously this year, but also there was last year onetimers as well, and we don't expect that to continue. That is the reason why we guided 0% to 4% in Q1.

I think the question behind your question is what is the glide path, if you will, right, between Q1 and the rest of the year? What are the actions that management is thinking through and working through. And the good news is it's not one thing. It's quite a few things we're working through right now. So top line, obviously, we have a robust pipeline on the top line side of the house. The second piece is on the GP side, sorry, gross profit side, we have GP initiatives. We have initiatives to drive private label penetration as well, mix as well. So those are the few levers on the GP side.

And then on supply chain and SG&A, the team has done a nice job looking at productivity actions to drive leverage in the P&L. So those are the 3, I would say, levers to go from our Q1 number to the glide path of 0% to 4%. Now you didn't mention trends. Obviously, illness season does cause variability within our business quarter-to-quarter, period-to-period. And right now, we're not in illness season yet. We are ramping up as we speak. Illness season becomes more pervasive towards the end of the calendar year. However, based on early reads so far, even though it's early innings, it's a little bit softer than expected. As we learn more, we'll definitely update as well as part of our next earnings call in November.

And maybe just to remind everybody, we have stated that our goal is to exit IPO in the second half of 2027, assuming market conditions are right and all of that stuff. And I think the team has made great progress on marching towards that goal. We took on an investment from Apollo that valued the business at $13 billion. They have a minority stake. We set up the capital structure for the business. So that's been done. We just launched its name. We have TSAs operating well. In fact, we're starting the phase where we're starting to roll off of some TSAs. So operationally, I think the team is doing a great job of preparing us to execute the ultimate strategy.

Okay. And then 2 last questions, I'll stick in together. One is just more housekeeping. How is tariffs flowing through in terms of that business? And how are you treating that? And then second, bigger picture, your business has -- I mean you've done a great job in terms of successfully steering this business towards some of these higher growth, higher-margin segments such as oncology, such as RxTS, really building out that platform. Are there other areas once Wellverse is separated that you would further optimize or see some sort of bigger structural change across your base business?

I can start. So on the tariff side, just remind everybody with Wellverse, [indiscernible] -- we don't manufacture anything, right? Most of the products that we buy are in the U.S. for the U.S. So we don't have much exposure on the tariff side. It's something we continue to evaluate, but it's not material in terms of the exposure to our business. In terms of capital allocation, et cetera, and with Wellverse, I think there's an overarching comment. We believe the spirit of this deal is this transaction is it makes both sides better, RemainCo and NewCo as well.

As you think about for RemainCo, McKesson, it allows us to further deploy further focus on higher margin, higher growth platforms for our business. It ties back to capital allocation around oncology, multi-specialty and biopharma services. So for us, the capital allocation does not change. We'll invest in our business, both organic and inorganic, reward our shareholders and obviously maintain our investment-grade balance sheet. This deal is meant to unlock value for both sides, the Wellverse side as well as McKesson, and we feel very good about that.

Okay. All right. Thank you so much.

Thank you, Erin.

Thanks, Erin everybody.

Thank you all.

Good morning, everyone. Thank you for being here. We appreciate your support and interest in McKesson. We're excited to share a little bit about our strategy and recent performance, and it's great to be on the stage for the first time with Kenny, who will share a little bit about our financial discipline and the way we think about growth and investment in the company. So I appreciate your time this morning.

[Technical Difficulty] the acquisition of Precision Medicine Group for $2.25 billion. This is going to be part of your Oncology and Multispecialty segment going forward. I mean maybe first talk a little bit about the strategic rationale for the deal and then a couple of kind of follow-ups.

Sure. Look, we're really excited about this. About 7 years ago, we stepped back and kind of rethought the enterprise strategy for McKesson. We oriented that strategy around a few pillars. People, culture and talent being the first one, reinvigorating the growth in the core North American supply chain businesses and then thinking about the portfolio, but then focusing our growth and our capital allocation around 2 areas that we think both represent long-term good growth, organic growth opportunities for the company and places where we had differentiated capabilities.

And those 2 markets were oncology and biopharma services. When we look at Precision for Medicine, it has 2 primary businesses, one aligned very well to our oncology growth strategy and one aligned really tightly to our biopharma commercialization business.

And so this acquisition for us is very close adjacencies to both of our growth strategies, which we're really, really excited about. It brings us new capabilities in clinical trials, particularly kind of leading clinical trials oriented around biomarkers, and that complements our existing Sarah Cannon assets, Ontada assets and our U.S. oncology network very well.

So we just view this as a natural mix extension of the assets that we've already built. And then on the commercialization side, takes us into some new markets like payer strategies and helping think about market access for the biopharma companies. So it's a really great fit supporting both of our growth strategies.

I think one of the things that we're extremely proud of at McKesson is when we think about building platforms, right, it's really important that these platforms create assets with our portfolio that are complementary.

So think about distribution, practice management, data and insights, clinical trial services, right, as Brian just mentioned. So -- and with PMG, this really fits that mold perfectly, being able to have a one plus one equals three equation where we can tack on the Sarah Cannon to your point, the Ontada and really provide incremental value for our biopharma partners around it's drug innovation, clinical services, commercialization, as Brian mentioned, and then at the end, as the patients as well, in particular the community setting.

Great. Yes. I think that all makes perfect sense. I do think one of the things that you mentioned that stuck out in the deal announcement and some of the diligence that we did on the asset was just that CRO offering feels like a little bit new for the company. I know that the services offered by PMG are maybe a little bit niche and distinct versus some of the larger full-service CROs. So maybe just expand a little bit about the CRO component and maybe what your aspirations could be longer term in the CRO space.

Sure. Yes. Look, I'd be happy to. I mean in McKesson today and through our Sarah Cannon joint venture, we've got site management operations but really -- and some maybe a little bit of CRO-light capabilities and assets, but PMG brings a true CRO capability, which we think complements that site management operation very, very well. What we really liked about it, though, is that it's really focused on oncology, which is obviously a real strength for us, and we have a lot of unique assets in the oncology space.

And then rare disease, immunology, cell and gene therapy. These are areas that we've made bets in McKesson as well. We have a cell and gene operation that we call InspiroGene. So it's not broad, but it is global. It does give us capabilities in what we view as the most exciting highest growth areas in the CRO segment.

But if it wasn't for that focus on an area of strength we already have, we probably wouldn't have been interested. But it's a really great complement to the assets we have in the markets that we've identified as growth markets going forward for the enterprise.

Okay. That's great. And then just thinking about the financial profile of the asset. I don't think that there was really a lot disclosed on that front. I guess how should we be thinking about the accretion profile and how you guys are thinking about how that contributes to the model over the next few years?

Yes. So we did sign a definitive agreement to acquire the asset. And right now, we are in the approval phase right now, including regulatory review and approval. As we march towards closing on the assets, we will provide more around financial accretion in terms of EPS and the like.

With that said, though, maybe taking a step back. As I said earlier, this is a one plus one equals three equation. We do view that, that's accretive to our overall company from a strategy standpoint, as BT just mentioned, as well as a financial standpoint as well.

So for us, every time we look at any deal, there has to be right rigor, hurdling the cost of capital, nice spread between that ROIC, being able to embed any risk involved as well, balancing that with near-term and long-term value for our customers and our shareholders as well.

And the third leg of the stool is making sure that we balance against the asset at play versus the overall capital allocation structure as well. Obviously, we looked at traditional return back to shareholders. As we said on the Q1 earnings call, this year, we are committed to deploy roughly $5 billion back to shareholders. We're $2.5 was achieved through share repo in Q1 and then our dividend increase of 15%, which is commensurate with our long-term growth. Overall, given the fact that our strong balance sheet, we have the luxury to invest in our business organically through M&A as well and also rewarding our shareholders. Overall, we feel very good about the robustness of our balance sheet.

Got it. And then just to pivot now, going back to Q1 results, obviously, strong results. I think the #1 KPI that probably jumped out the table was the earnings growth in the North America Pharma segment at 19%.

I think it was a lot higher than what we were looking for, and I think most investors were looking for and above recent trends. How should we think about what the key drivers were of that result in the quarter and how you guys are thinking about the phasing of results for the North America business for the balance of the year?

Yes, I can start. So we are extremely pleased with our overall enterprise performance in Q1. We saw double-digit growth across our NAPD business, as you pointed out, our oncology and multi-specialty business and our RxTS business as well. Particularly around your question around what drove the 19% growth for Q1. So if you want just to recap for NAPD, our top line grew roughly 5% and our bottom line AOP grew roughly 19%.

On the revenue side, we saw broad-based growth across the board, across products, channels, brand generics and the like. So broad-based growth, which is not just one single item. For example, we saw really meaningful growth within our specialty -- within our health system products, given the fact that we're seeing strong utilization trends. So we saw nice growth on the revenue side.

And then that worked their way down to AOP because we saw a nice GP tailwind as well given some of the product launches that we saw within the quarter. And then on the supply chain side, we saw really healthy metrics, too. Productivity is robust, and we're seeing really nice automation as well that's driving the leverage from revenue down to GP, down to AOP.

One of the things that we talked about on the earnings call was product launches, new product launches. And what I mean by that is within the quarter, we saw new brands and also BX to GX branded generics. And just to kind of provide some color there, every launch is unique and different, right, depending on various variables, different channel mix, customer mix when it comes to generic number of entrants, for example, the molecule itself. So we did see some favorability in Q1 from that. And the good news is our team tracks this very, very on a granular level. And right now, that is embedded within our full year forecast. But -- and the last question is about the phasing for NAPD.

I think your question behind the question is that if your first quarter is 19% and your full year is 9.5%, why is there a "slowdown" in the back half of the year? I think that's the question behind the question. So for me, my point -- there's 2 points I would say here. The momentum is real. We're seeing underlying strong fundamentals within our NAPD business.

Right now, we are forecasting the back half to be -- to embed investments in our business for business growth, automation and technology. It is the right thing to do for our business here at McKesson, we're all about delivering at the spot moment and building for tomorrow as well. Even this year, we've done that. We invested in our business. I'll give you a couple of examples. We invest in supply chain with AI, really orchestrating between demand, supply, operations, and that's yielding working capital benefits, right? That's just one example.

So we have many, many more. So as BJ and I think about capital allocation, we have the luxury right now, given our liquidity profile to invest in our business while also delivering for our shareholders for the year as well.

Great. So thanks for that. And another, I guess, elephant in the room for kind of all the companies in your space is just that there are a number of large customer renewals that are in focus at the moment. I guess how should we think about renewals broadly and kind of the opportunities and trade-offs that come with a large renewal, kind of where you are in the renewal process and maybe when investors might start to hear more news kind of on this front?

Yes. So look, we generally think about 1/3 of our business every year is up for renewal, and it's been that way forever. Renewals are a great chance for us to be very engaged with the customer opportunity to talk about market dynamics, how we think things are evolving, how we can evolve our service or provide more services to them to help them as they navigate their priorities as a business.

So that is just a pretty normal occurrence of the business. Now obviously, there are some customers that are bigger than others, and we're very, very engaged with customers day-to-day. So renewals are, in some ways, not an event, right? I mean you start thinking about a renewal the day you ink the original contract and start thinking about how you keep that intimacy up, how you evolve your services to support their evolving businesses and their unique needs.

And that's what we do with all of our customers. We try to be a value-based partner, not a transactional partner. We have a lot of capabilities beyond just core distribution that we can bring to help our customers solve problems. And that creates really tight ongoing relationships. So we're very pleased. A lot of our large relationships are 20-plus year relationships.

And the businesses are really tightly aligned and integrated. So we don't often as a point of policy, talk about specific customers for kind of obvious reasons why we don't do that, but we're very aligned. We appreciate the deep partnerships we have. And our goal is to always extend and renew and continue to provide additional value to the customers through every year of a contract cycle.

Yes. And maybe there's -- is there a way to expand a little bit on as you have these conversations, like the type of services that could be of interest? Obviously, you guys are getting more capabilities yourself every day. Like what do you hear from clients?

I mean we've got capabilities in CoverMyMeds. We've got a network. We interface with [ 50,000 ] different pharmacies. We think about supply chain. We think about the AI tools and how they're evolving and how do we get better insights, provide better insights, better connect downstream and upstream to make the entire supply chain more efficient.

So there's a range of those kinds of conversations that we can have. And we prefer to have because the more we have those conversations, we know we're great at the day-to-day transactional. We'll get the product where it needs to be, when it needs to be there for the patient that needs to consume it, but there's a lot more we can do as an industry to help think about the value creation from manufacturer to end provider.

And then if we think a little bit more, I guess, outside of the renewal dynamics, just kind of about the base fundamentals. Obviously, generics have been a very solid contributor to you over the past few years and much more stable than prior periods really across the industry. I guess how do you think about the sustainability of trends in the generic component of the business? And how do you think about kind of the key opportunities with upcoming LOEs, which seem like they're more meaningful than maybe they have been in a little while now?

Yes. I'll let Kenny elaborate on this. But generally, the generic environment is -- look, it's competitive. It's always been competitive, but it's been stable for many years now. And the episode you're referring to, I think, was like 2015 or '16.

So it's long memories in the room, but it's a long way in the rearview mirror. We think about our job in generics as having a scaled, efficient sourcing engine. We have a joint venture called ClarusONE that does our sourcing that we think is as good as any out there. So we got to source for stability of supply, obviously, for price to be competitive. And then we need to be partnered with our customers downstream and make sure we have availability of supply.

And we don't make margin on anything you can't supply. So stability of supply, competitive price and then growing the channels. And then, of course, we have LOE events you can talk about the dynamic there. I would remind everyone, though, before Kenny makes remarks that given the growth of our North American pharmaceutical distribution business, generics are not as material as they may have been in past decades. I mean, just because the growth has been so significant.

Yes. Well, exactly. So I think about Generics and ClarusONE, really good economics and value that drives provide for our customers, at the same time, shortage supplies as well. As you think about the LA clip, we do factor all of that in within our guidance as well, just like the product launches as well. That's something we look at. It is accretive to our business from a margin standpoint, but probably to Brian's point that he just made, not as accretive as it was before, call it, 10 years ago or so.

And definitely a big watch area has been all the dynamics going on in the Part B and D side of the business around your IRA. And obviously, it's good to see that the industry as a whole seems to have been able to maintain economics on the 2026 cohort of drugs that we're in for IRA. Have you started to have those same conversations for 2027? If so, how are those going? And how are you guys thinking about IRA dynamics over the next couple of years?

Yes. Look, our conversations with manufacturers are continuous, just like they are with our end customers. And those are around specific products, portfolios, how we can help support their commercial launches, how we can make their products be more successful. So we are continually in those dialogues.

For the IRA drugs that have come out, we think the manufacturers understand the value that we deliver in getting their products to their end patients and that they pay a fair value for that service. And so while the IRA has been some revenue headwind, generally, it has not been a headwind on the bottom line.

We are currently in those discussions. Obviously, we don't know exactly the prices and the parameters, but we would expect we'd navigate the next wave much like we've navigated the first wave and the waves that have come before that. I mean this is not an entirely new phenomenon. There have been WAC decreases in the past. So we've got a model. We've got ongoing engagement. We've got deep dialogue with our partners, and we think they understand the unique value that we bring.

From my standpoint, it's a muscle we flex and know how to flex in terms of just the building blocks, given the fact that we have continuous discussion with the manufacturers. I think one proof point that's important to depress upon is the fact that the past couple of quarters, we did see lag pressure on the pricing side, roughly a few hundred basis points on the top line.

And even with that, as BT mentioned, you get the revenue headwind, if you will, given the fact that our selling price dictates more of the revenue side. But because of the fixed fee-for-service that we get -- the fee-for-service that we get, roughly 95% of our contracts are fee-for-service. That's the reason why our GP and operating income is more intact. And that's the reason why you're seeing still GP growth, AOP growth with positive leverage within our P&L for the past couple of quarters despite lag pressure.

And then obviously, there's some really exciting potential down the road for Part B biosimilars and then some uncertainty around interaction with IRA and how that might impact the opportunity for the company down the road. I guess, philosophically, like how are you thinking about some of the Part D opportunities that might still be kind of 2, 3, 4 years in front of the company?

Yes. Well, look, we're excited about the biosimilar space in general. We have been for a little bit of time. I think the ramp-up has probably been a little bit slower than some people thought today. I think there's roughly 95 approved biosimilars, [ 745-ish ] that are actually in the market today.

In general, we like biosimilars. We think it's good for patient cost. It's good for health care cost. It's good for choice. It's good for our physicians to have clinical flexibility and finding the right product for the right patients. So we think biosimilars are good for McKesson, good for the health care system, good for patients. And -- but we support biosimilars.

We also support innovators. It's really about the clinical choice that a clinician or a physician is going to make. And our job is to make sure we have the product they want available where they want it at a price point that's competitive. But in general, biosimilars are -- should be better for the McKesson model than the innovator drug. Typically, they are. They would fall somewhere between generic and brand in terms of the value to McKesson. So we're -- we continue to be optimistic in value and focused on that. Now the channel matters and Part B tends to be better for us than Part D. So we view it as opportunity for the business.

And then within the oncology and multispecialty business, you have a lot of different businesses and assets inside of this segment. Great to see the separately reported segment still, by the way. When you think about the long-term guidance and kind of what needs to happen for that to be achievable, like how should we think about what the key building blocks to hitting that 13% to 16% earnings growth are going to be for that segment over the next couple of years?

Yes. As I mentioned, grew double digit for Q1. We are very pleased with that business performance. And just to kind of unpack that a little bit. For Q1, revenue grew roughly 33% and AOP grew roughly 41%. Now that includes core ventures, right, lapping. So I think if you want a proxy, if you will, for organic, back that out and the AOP roughly grew 15% year-on-year. As we think about the building blocks and what are the drivers of that business, there's a few folds. One is we're seeing very healthy volume and growth within existing practices and networks right now. If you think about utilization trends for specialty drugs, we're seeing really nice robust growth on same-store business with patients as well. That's one side of the drivers.

The other driver number two is beyond the MSO side, as you probably know, most of the business is GPO and distribution. So we're winning new business there as well. That's the game that keeps on giving too. And then third but not least, because we are good, disciplined buyers. We know the value of assets and ROIC and NPV and IRR will be the rubric in which we use to evaluate deals. We're seeing nice return on the M&A front as well.

So as you think about going forward, we'll continue to obviously drive volume, that the physician will drive volume through their channels. We'll provide the right support, right? Again, we don't -- we offer a choice, we don't choose. The second piece is winning new business on the Provider Solutions side. And last but not least, you have the M&A being able to find the right deals that's accretive to my first point, to our overall platform and portfolio.

Okay. Great. And then maybe we should spend a minute on prescription technology. I would love to hear a little bit more about recent growth trends for this business, perhaps excluding the contribution from GLP-1s, given some uncertainty about what the trajectory of GLP-1s and GLP-1-oriented prior authorizations are over the next couple of years? Like how should we think about where growth has been more recently and what's going to need to happen for you to be able to be confident in the long-term growth there?

I can start. Sure. So as you think about the long-term growth target of RxTS, it's roughly 10% to 13% on AOP growth. For Q1, we were square right in that range. Top line was 9% and AOP was 13%. So on the high end, if you will, on the spectrum of targets.

In terms of thinking through the drivers of the business, right, I know GLP-1s gets a lot of attention right now and rightly so. A couple of things I'd say on that front. Yes, it is a driver of the business right now, it's particularly around -- the Bridge program, for example, we're seeing nice tailwind from that. It's going really well. Now it's still early innings, by the way, just started in July. And so -- but the good news is the program is performing well. We're performing well as well.

Fun fact, when a PA gets submitted, 95% of the time, we reached a determination within 30 minutes or so or less, right? So for us, that program is going really well. GLP-1s, we have the orals coming in as well. From what we see so far, again, a bit early innings as well. It's accretive over -- versus the injectables, mostly accretive versus injectables.

So we're seeing that nice tailwind as well. But I think one thing again to impress upon is while GLP-1 is important, it's roughly 11% of our total revenue for RxTS. We didn't break this out, but both GLP-1s across affordability, access and adherence within RxTS grew meaningfully.

At the same time, non-GLP-1 therapy also grew as well. So what I'm proud about the business is we continue to bring new brands onto the new programs. And it's a versatile business where depending on the cycle of the product launch, we can tailor our offering to meet the needs of our biopharma partners. So overall, we -- there's momentum in the business. And with technology, we continue to innovate from that space as well.

Maybe just to expand a little bit on the bridge program. I just remind us, I guess, first on the time line is a little gray here, but was it included in the initial guidance? I guess what have you kind of factored in for that into your thinking now kind of out of the first quarter? And I guess, any general framing on like how should we think about the economics of what you're doing for the bridge program versus similar services you provided outside of the Bridge program historically?

Yes, I can start off with the first question. It is part of -- so every year, when we build our plan, we do build in new programs or extension of programs, et cetera, and the Bridge program was one component of that. And we continue to bring new business, new brands into our platform. So overall, as I mentioned, it's in really good shape. And from us serving -- just remember, our goal, we are the central processor for PAs, claims adjudication as well as kind of the payment to the pharmacy. So we kind of sit right that ecosystem.

But overall, again, early innings. And as we learn more, as you see more, we will update the guidance appropriately. But right now, our last guide in Q1 did contemplate the Bridge program. But right now, we're seeing positive momentum.

Yes. So there was no effect in our Q1. The program started in July. So you'll see the first impact when we report in Q2. We did know, though, we were going to be -- have played this role in the bridge program. So we did build it into the guidance that we provided.

Now I would say the program is probably out to a little bit stronger start than we had thought, but it's also a bit of a unique program. And so forecasting the dynamic of a program, how it's going to grow when it has a terminal date is a little bit of art and science. And so we'll provide guidance in our Q2 call.

Okay. Great. And then to pivot to MedSurg, the first quarter, kind of a bit noisy. I think there's kind of a large-ish onetime impact in there that you guys discussed a little bit that muddled some of the underlying trends. I mean how should we think about what the underlying trends were in the first quarter? Any kind of color you can add on kind of what was driving that onetime item? And I guess the last impact would be a couple of your MedSurg peers flagged positive impacts from tariff refunds in this equivalent financial quarter. I'm not sure if you guys discussed that or not, but maybe just let us know if that impacted results in the quarter as well.

Yes, I can start with the first part of the question. So just to recap for MedSurg. For Q1 revenue, we were up roughly 4% one of the highest ones we've seen in the recent periods. And on the bottom line, we're down roughly 20%. As you rightly called out, we did have onetime administrative costs that impacted the year-on-year comp. And the reason why I say year-on-year because some of the year-on-year impact was within this fiscal year, a lot of it was actually last year. So if you think about year-on-year, that's the reason why we were confident a lot of this doesn't repeat, this onetime admin cost doesn't repeat more in the base of the prior year.

Let me pivot towards how we think about the go forward. As we guided on the last earnings call, expecting AOP to be roughly 0% to 4% growth on a year-on-year standpoint, which means -- which implies that the business will improve right? There's no one magic bullet here. Stan and his team have done a good job looking at across the P&L, if you will.

So I'll give you a couple of examples on the path, if you will, to get there. So on the revenue side, the team has a robust pipeline right now. We're winning new deals at a profitable clip. And so that will continue throughout the rest of the year. Pipeline is robust. On the GP side, the team has nice GP initiatives, including continue to expand and grow the private label side of the house, which carries higher margin calories right? But the team isn't stopping there.

We also have cost initiatives, supply chain initiatives on the base cost SG&A side of the house. So therefore, you can see from revenue pipeline to GP initiatives to the cost -- to the SG&A and supply chain, all these 4 pieces work in constant for us to achieve, call it, the 0% to 4% growth for the year.

With that said, though, I think it's important to note that right now, we are about to enter the illness season right now. It's a big variability for our business for MedSurg in particular. And let me give a bit more color on that. So that doesn't really get hot and having and pervasive until probably to the end of the calendar year.

But right now, we're ramping up -- based on what we're seeing, we're seeing a little bit softer than expected. But again, it's early innings right now. We're not really in the season quite yet. But based on indications that we track on a daily basis, it's a little bit softer as we speak. And there's a lot of variability with illness season, the duration, the time, the severity, right? There's obviously ancillary revenue that ties along with it, right, gloves, for example. So for us, we're tracking it very closely. We'll be able to give a formal update on the next earnings call.

Okay. You mentioned tariffs as well, but you didn't really address that. So I'd just first remind people that in our medical business, we don't manufacture products. We can be the importer of record. In fact, most of what we do under our private label.

The largest country we source from is actually the United States. So we don't -- tariffs weren't as impactful in our business as some others. There were some incurred, and we're working through whether we will file for recovery of those and how we'll handle that. But it's not as meaningful since we're not the manufacturer.

Okay. Got it. And then you made a lot of progress on the separation with like the rebrand, the minority investment, working on the balance sheet there. I guess what are the remaining gating items and just a broader update on kind of timing and how.

Yes. So we have made a lot of progress. We -- TSAs are stood up. In fact, some of them are starting to wind down. So that's a great sign. We did get the capital structure in place. We got the investment from Apollo. We launched the brand well versed.

So we're marching right on our time line. Look, it's a lot of work. I mean sometimes -- yes, why don't you separate from that business? It sounds so easy. I mean we've got -- we're standing up an entity that will stand on its own. And the progress -- the team has done a phenomenal job balancing, running the business day-to-day and then all of the work it takes to do that.

We will continue to transition systems out of the McKesson environment into a stand-alone environment. That's really a big focus of the team right now. And for me, the most exciting thing is seeing all that work get done on the time line that we had forecast and then seeing growth come back into the business. So it's very encouraging right now.

As we said on the Q1 earnings call, we are targeting the back half of calendar year of next year. And -- we do the right thing, as BT mentioned. We're seeing the runoff of TSAs as well. So that's standing up. And then in terms of the IPO, we plan to exit the remaining shares after a customary lockup period, exit the remaining shares, either through a split-off or a spin-off or both.

Great. And this has come up in a couple of the other questions. But obviously, AI, huge focus across the board for all of our companies at the moment. I guess how should we think about the investments that you've made so far and the returns that you're seeing there? And I guess if there's any way to characterize the investments you've made to date versus what you might do over the next couple of years?

Yes. Look, we're very optimistic. We're AI enthusiasts. We think that a business of our scale with the transactional intensity that we have, that there's a real role for this to play. And so we have -- we started our -- we call it digital mindset about 4, 4.5 years ago before ChatGPT was on the scene or any of these tools, but we could see the future coming.

And so we've got a few areas that we're focused on. Kenny mentioned the kind of end-to-end supply chain and working capital effects. But we think of it largely in 3 buckets. We think about our employee experience, how do we take -- how do we make more of their time available for high-value work as opposed to administrative work and make McKesson the best place to work in health care.

The second bucket we think about is our customers and their patients. How do we provide better data information tools, insights, communications to take the friction out of being a patient in, for example, a U.S. oncology practice. So we've rolled out something like scribing to over 80% of our providers so that our docs aren't head down looking at their keyboard. They're engaging with the patient.

All the notes are being captured. That doesn't sound like much, but we get letters from doctors wives who talk about, thank you for giving me my spouse back at night because they don't have to do this documentation. So the satisfaction grows from practicing in our network, we attract more to practice in the USA network. So the third area is just obviously productivity, efficiency and then innovation.

How do we compress the cycle times of innovation so we can deliver -- if we've got 30 great ideas on the whiteboard and we used to be able to deliver 5 a year, how do we now deliver 15 or 20 in a year. And we're seeing value across all 4 of those buckets.

That's great. And maybe the last question, we touched a little bit on capital deployment with the deal discussion today. I guess how do you think -- we've obviously seen in the past few years, there's been a heavier dose of sort of MSO-focused acquisitions. And then the deal you announced more recently is a little bit different. I guess how do you think about the profile of the assets that might interest the company over the next couple of years?

Look, first and foremost, it's got to be aligned to our strategy. I mean that's the first gate. And if you think about the last 7 years, we went through an early period where we didn't do a lot of strategic capital deployment. We did a lot more repurchasing shares, and that was because we couldn't find an asset for sale at a value that we like that was aligned to the strategy.

More recently, we have had success in finding very good assets, PRISM, Florida Cancer Specialists, now Precision for Medicine that are tightly aligned to our strategy, and our balance sheet gives us the flexibility to do that. But first and foremost, capital deployment is about alignment strategy. Clearing our financial return hurdles, and that means against alternatives like dividends or buying back stock.

So our capital deployment philosophy has been very consistent for the last 7 years, and you should expect to continue to see that going forward.

Okay. I think that's where we'll leave it. Thanks so much for your time today.

Thank you, Steve. Appreciate it.

Welcome to McKesson's First Quarter Fiscal 2027 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 Paula Atkison, SVP of Corporate Finance and Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, and welcome, everyone, to McKesson's First Quarter Fiscal 2027 Earnings Call. Today, I'm joined by Brian Tyler, our Chair and Chief Executive Officer; along with Kenny Cheung, our Chief Financial Officer. Brian will lead off, followed by Kenny and then we will move to a question-and-answer session.

Today's discussion will include forward-looking statements such as forecasts on 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.mckeson.com and to the Risk Factors section of our most 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 will discuss during this webcast, including a reconciliation of those measures to GAAP results can be found in today's earnings release and presentation slides. The presentation slides also include a summary of our results for the quarter and guidance assumptions.

With that, let me turn it over to Brian.

Good afternoon, everyone, and thank you for joining our call. Earlier today, we reported strong fiscal first quarter results, reflecting broad-based momentum across the enterprise and the disciplined execution of our teams. Revenues increased 8% to $105 billion and adjusted earnings per diluted share increased 20% to $9.93, both results exceeding our expectations. During the quarter, 3 of our reporting segments delivered double-digit operating profit growth, reflecting the strength of our core operating businesses.

This performance is underpinned by good stable utilization and volume growth and is reinforced by our differentiated portfolio of solutions, our focus and the execution of our strategy. We're pleased with the strength of our first quarter performance. which gives us the confidence to raise full year adjusted earnings per diluted share guidance to $44.20 to $45 from the prior range of $43.80 to $44.60.

Before I share an update on how we advanced our strategic priorities during the quarter, I wanted to take a moment to recognize an important leadership transition and recognize someone in the room with me today, Kenny Cheung, who is our new Chief Financial Officer. Kenny joined us in May, and we're excited to have him as part of the team McKesson. Following a thoughtful and comprehensive search, we're confident that Kenny is the right leader for McKesson. He brings extensive experience across finance and operations with a focus on execution and discipline that is well aligned with McKesson's operating model. He has led finance organizations across complex scale businesses with a track record of managing through change, executing portfolio strategy and allocating capital to create long-term value. These experiences are especially relevant as we continue to grow our diversified health care services offering and execute against our strategic portfolio initiatives.

Just as important or maybe more important, Kenny shares our belief that strong performance begins with strong teams, he's stepping into a high-performing finance organization, and I'm confident he'll build on that strength while helping guide McKesson through the next phase of growth. You'll hear more from Kenny today about his approach to the CFO role and his confidence in the business.

Now let me turn to the quarter and highlight several key strategic initiatives that reflect our continued progress against priorities that are shaping the future of McKesson. And I'll start with our people and culture, which is foundational to everything we do. We are committed to developing strong talent and building capabilities our teams need to continue leading in an increasingly dynamic environment. An example of that commitment is how we're empowering our teams to lead in an AI-enabled environment.

During the quarter, we hosted a full day enterprise AI trading at our headquarters, bringing teams together for educational sessions and real hands-on learning experience focused on the practical applications of AI. I had the opportunity to participate in person, and it was great to see the enthusiasm and the energy across team McKesson. I continue to be impressed by the work our teams are advancing to leverage our ongoing investments in tech and I which are driving measurable business outcomes, strengthening how we operate, how we innovate and how we create long-term value.

Now let me turn to our strategic growth pillars, beginning with the oncology and multi-specialty platform. The continued growth of specialty therapies represents a significant market opportunity, and McKesson is extremely well positioned to capitalize on that growth. Our strategy on oncology and multi-specialty is built on the foundation of our scale distribution services, including our GPO services, specialty pharmacy and advanced clinical therapies capabilities to help providers access the medicines their patients need.

Today, we serve more than 14,000 providers across a broad range of community-based specialties. Through Unity and Onmark, we help providers achieve meaningful savings on drug purchases, improving the health of the practices. Biologics supports commercialization and access for more than 200 cancer and other rare disease therapies. And through InspiroGene, we're expanding our advanced therapy capabilities by forming new manufacturer partnerships and bringing complex cell and gene treatments to more patients. Together, this demonstrates the breadth of our specialty distribution capabilities as we continue to enable high-quality community-based care.

While our specialty distribution capabilities extend across many therapeutic areas, we are, of course, particularly focused on building a differentiated platform for oncology and for retina and ophthalmology. These areas have strong innovation pipelines and meaningful opportunities for McKesson to offer additional services. During the quarter, we saw continued growth in our practice management business. The U.S. oncology network grew to approximately 3,400 providers and treats more than 2 million patients annually. It's a leading force in expanding access to care and accelerating innovation in community-based oncology care.

PRISM Vision brings together over 200 providers in 97 locations, helping expand access to high-quality retina and ophthalmology care, again, in the community setting. As we expand relationships with these community-based providers, we create additional opportunities to build off distribution and GPO services. It allows us to expand patient participation in clinical trials, generating more data and more insights. Our clinical trial services joint venture, Sarah Cannon Research Institute continues to bring innovative therapies to patients faster and closer to where they live. I participated in research that contributed to 43 of the 52 adult oncology drugs approved by the FDA in 2025.

Recently, SCRI announced a strategic oncology research collaboration with Pfizer to help accelerate clinical trials. Through this collaboration, SCRI and Pfizer will leverage a next-generation clinical trial delivery model designed to streamline trial operations enhanced site efficiency and reduce administrative burden for investigators and care teams alike.

Let's move on to our biopharma services platform. We continue to enable connectivity across providers, biopharma, pharmacies and payers. We're advancing programs that improve access and affordability while allowing patients greater ease and confidence in navigating their prescription journey. In July, we began supporting the CMS Medicare GLP-1 bridge program, where our integrated solutions help enable the operational workflow infrastructure, including eligibility determination, electronic prior authorization connectivity and pharmacy claims transactions for Medicare beneficiaries. Once a prior authorization request is submitted to the payer, 95% of them receive a determination within 30 minutes. This reflects the power of our scaled network and the important role our technology plays in helping providers, pharmacies, payers and biopharma partners move information more efficiently so patients can get therapy faster.

In addition to the CMS program, we saw continued growth in the new program wins throughout the quarter, demonstrating broad demand across the portfolio. Growth remains diversified across both access and affordability solutions with brands represented across many therapeutic categories. A key differentiator of our biopharma services solutions is our use of technology and automation to reduce manual process and improve productivity. With the advances in AI, we're applying these capabilities to improve how we build and deliver technology.

During the quarter, our team designed, developed, tested and deployed a production-ready external data connection in a single business tick work that historically would have taken several weeks or even months. The impact extends beyond faster software development, greater speed allows us to respond more quickly to customer needs and brings new capabilities to market sooner. While we're still in the early stages of AI-enabled development, examples like this demonstrate the potential to scale these capabilities more broadly across the segment.

Turning to North American distribution. In Q1, we delivered strong growth in our core distribution business, supported by stable business fundamentals. We continue to deliver substantial value to our customers through scaled distribution capabilities, exceptional service and a diversified channel reach. One of the customer channels we're proud to support for many years as independent community pharmacies. In June, we hosted our annual ideaShare conference bringing together independent pharmacy leaders from across the country for education, for collaboration and practical solutions focused on helping them navigate a changing health care environment.

This year's emphasized innovation, including the use of AI-enabled tools as well as advocacy efforts that support the long-term vitality of community pharmacy. These are the types of capabilities and connections that reinforce the value of our distribution platform and help our customers continue to serve the patients in their local communities. We also broke ground on a new regional distribution center in more Oklahoma, an important investment to strengthen the resiliency and capacity of our pharmaceutical distribution network. The new facility will increase throughput by 75% compared to the prior facility, supported by advanced automation, digitally enabled logistics and expanded cold chain capabilities. This investment strengthens the foundation of our supply chain and positions us to serve our customers with greater scale, resilience and accuracy.

Now let me provide a brief update on our portfolio actions. During the quarter, we continued to successfully execute on the planned separation of Medical Surgical Solutions, allowing us to continue to build momentum towards becoming a stand-alone company. We completed the previously announced strategic minority investment from Apollo Funds bringing on an important partner with financial resources and experience in complex separations. Additionally, we completed a $2.25 billion senior secured Term Loan B further establishing a stand-alone capital structure for the business with a clear focus on maximizing long-term value for shareholders. Today, I'm pleased to share that McKesson Medical-Surgical business is becoming WELLVERSE. WELLVERSE delivers a future where health care providers and patients drive.

This is an important step as we establish a distinct market identity and brand that reflects the organization's purpose and vision. The MedSurg business anticipates formally operating as WELLVERSE starting in January 2027 as part of a phased transition. Together, these actions advanced separation readiness support the financial flexibility of welders and reinforce our focus on maximizing long-term shareholder value while executing against the planned separation.

Let me close my comments with this. Our first quarter performance reflects the continued momentum across the enterprise and reinforces our confidence in our strategy and the durability of our operating model. Across the business, our teams continue to execute with discipline advancing our strategic priorities and create continued value for our customers, partners and shareholders. The policy environment remains dynamic. McKesson remains highly engaged focusing on the important rule of community-based care access cost of transparency. Recently, we were pleased to become a signatory to technology pledges under the CMS Healthcare Technology Ecosystem initiative A good example, I think, of our continued engagement.

As a diversified health care services company, we're focused on strengthening the resilience of the pharmaceutical supply chain, improving access and affordability, enabling innovation and helping deliver better outcomes for patients. We're confident that our strategic focus and differentiated market position will continue to position us well for sustained long-term growth.

With that, Kenny, I'll turn it over to you.

Thank you, Brian, and good afternoon, everyone. I'm excited to join you from my first earnings call as part of team McKesson. Since running the company in May, I spent considerable time across the organization in the field, learning about our business in the role we play in advancing health care. What attracted me to McKesson was its differentiated capabilities across the health care ecosystem. Seeing those capabilities come to life firsthand, has strengthened my appreciation for our company, our people and the meaningful impact we make every day. This is an organization with impressive scale strong execution and a proven ability to deliver results. The strength of the business was evident in our strong first quarter performance, driven by continued momentum across the enterprise.

Before I dive into our first quarter results, I want to briefly share how I approach my role as CFO. My focus is clear: remain closely connected to the business understand the drivers of performance, support disciplined execution and maintain what I call, a strong say-do ratio, do what you say you will do. Equally important is allocating capital thoughtfully and responsibly in ways that create long-term value for shareholders while advancing our strategic priorities. These priorities align with McKesson's long-standing operating model and disciplined capital allocation framework. McKesson has a strong track record of investing behind growth, maintaining financial flexibility, on returning capital to shareholders. I look forward to building on that foundation as we continue to execute our strategy and create shareholder value.

Turning to the first quarter performance. we delivered a strong first quarter, with growth led by North American Pharmaceutical and oncology and multispecialty and solid execution within prescription technology solutions. Our performance demonstrates the strength of the underlying fundamentals across the business, continued operational excellence and the benefits of our diversified portfolio. Unless otherwise noted, my comments today will refer to our adjusted results. Revenues increased 8% to $105.4 billion, reflecting solid performance across the business. Growth was driven by higher prescription volumes in North American pharmaceutical and continued strength in oncology and multispecialty.

This was partially offset by expected market dynamics, including lower branded pharmaceutical pricing following wholesale acquisition cost decreases in January 2026 and branded to generic conversions. Gross profit was $3.7 billion, an increase of 13%, driven by growth in North American pharmaceutical and oncology and multispecialty. The increases reflect higher prescription volumes and strength in specialty including oncology and the benefit from branded to generic conversions, which together supported gross profit growth across the portfolio. Operating expenses increased 10% to $2.1 billion, reflecting investments and operating expenses to support growth across the business. As we continue to invest in the business, we remain disciplined in our approach to capital deployment focusing on investments that generate strong returns, enhance our ability to serve customers and drive sustainable growth.

We continue to drive operating leverage in the quarter through strong gross profit growth and effective expense management. During the quarter, operating expenses as a percentage of gross profit improved by approximately 150 basis points year-over-year continuing the positive leverage trends we have demonstrated. Operating profit was $1.7 billion, an increase of 16%, driven by growth in North American pharmaceutical, oncology and multi-specialty and Prescription Technology Solutions. These 3 segments delivered double-digit operating profit growth, reflecting broad-based strength across our core operating businesses. Interest expense was $75 million, reflecting recent financing activities supporting the Medical Surgical Solutions separation, including the $1 billion secured term loan A and $2.25 billion secured from Loan B.

We also completed a $1 billion revolving credit facility in support of the separation, which remained undrawn during the quarter. The effective tax rate in the first quarter was 21.5% compared to 21.4% in the prior year. As a reminder, our effective tax rate can vary quarter-to-quarter driven by timing and the amount of discrete tax items. Diluted weighted average shares was $119.2 million, a decrease of 5%. During the quarter, we repurchased $2.5 billion of shares, including $2.25 billion through an accelerated share repurchase program at an initial average price of approximately $755 per share. Adjusted earnings per share increased 20% to $9.93, reflecting strong operational performance led by North American Pharmaceutical and the benefit of a lower share count as a result of share repurchase activity.

Now let me turn to our segment results, starting with North American Pharmaceuticals. Revenues were $86.8 billion, an increase of 5%, driven by broad-based growth from higher prescription volumes, including an increase in specialty products. This was partially offset by lower branded pharmaceutical pricing following Black decreases in January 2026 and branded to generic conversions. While branded pricing declines impacted revenue, they did not have a meaningful impact on operating profit. As a reminder, revenues from Branded Pharmaceuticals reflect the lack of those products can be impacted by changes in those prices. However, our branded pharmaceutical contracts are structured such that we are compensated for the fair value of the service we deliver. We continue to play a critical role in the pharmaceutical supply chain with strong value proposition to our manufacturer partners.

Leveraging our extensive capabilities, we deliver value beyond distribution, including inventory management, central fill and other services that support customers across the pharmaceutical supply chain. Revenues from GLP-1 medications, distribution were $15 billion in the quarter, an increase of approximately $3 billion or 24% versus the prior year. Sequentially, revenues increased 13%. Segment operating profit increased 19% to $894 million, driven by growth in specialty distribution, including health systems and strategic accounts and the timing of new product launches. Fundamentals in the business remains strong, supported by stable utilization trends, specialty growth, and the strength of our generic sourcing program.

Our scaled distribution capabilities include McKesson Plasma and Biologics position us well to support growth and special distribution volumes. ClarusONE, our generic sourcing program continues to deliver meaningful value to customers while supporting stability of supply.

Turning to Oncology and Multispecialty. Revenues increased 33% to $14.2 billion, driven by growth across our platform, including organic and new business growth and provider solutions. First quarter results also reflected contributions from the Core Ventures acquisition, which was completed on June 2, 2025. Excluding contributions from core ventures, revenues grew approximately 24%. Operating profit increased 41% to $405 million, excluding contributions from core ventures, operating profit grew approximately 15% and driven by higher specialty distribution volumes, organic and new growth provider solutions and business growth across differentiated offerings.

We continue to see growth supported by solid utilization trends in the community setting and stable same-store patient visit growth across the provider network. In Prescription Technology Solutions, revenues increased 9% to $1.6 billion driven by higher prescription volumes and third-party logistics and access solutions. Operating profit increased 13% to $303 million driven by higher demand for access solutions, including prior authorization services. We saw strong demand across our technology solutions with growth driven by both GLP-1 medications and other therapeutic categories. Our solutions continue to help manufacturers connect patients the therapy and navigate an increasingly complex environment. The breadth of our technology and service portfolio positions us well to grow the business while delivering value to customers and patients.

Turning to Medical-Surgical Solutions. Revenues were $2.8 billion, an increase of 4% year-over-year, representing an improvement in revenue growth trends compared to the prior quarters. driven by growth across alternate sites of care led by higher volumes of specialty pharmaceuticals. Operating profit decreased 20% to $195 million driven by product mix and onetime administrative expense, partially offset by contributions from the Extended Care channel. On June 1, we completed the previously announced transaction with Apollo Funds which now holds approximately 13% minority ownership interest in MedSurg. We retained majority ownership and continue to consolidate the business for financial reporting purposes.

As part of the transaction, we recorded a noncash GAAP-only accounting adjustment of $293 million related to the remeasurement of the redeemable noncontrolling interest. Wrapping our review with corporate. Corporate expenses were $144 million, an increase of 4%, primarily reflecting technology infrastructure investments.

Let me now turn to cash and capital deployment. We ended the quarter with $5.2 billion in cash and cash equivalents and total liquidity of approximately $10 billion, which is well above the minimum threshold. We had negative free cash flow of $372 million, including $152 million in capital expenditures as we continue to invest in distribution technology, infrastructure and operational capabilities across the business. Free cash flow improved meaningfully compared to the prior year, driven by efficient working capital execution. On a trailing 12-month basis, free cash flow remained strong at approximately $6.1 billion, providing flexibility to invest in the business and return capital to shareholders.

We returned $2.6 billion to shareholders during the quarter through the combination of share repurchases and dividend payments. In July, our Board of Directors approved a 15% increase to our quarterly dividend, representing our tenth consecutive annual increase. We remain committed to dividend growth that is commensurate with our long-term earnings growth target.

Turning now to our fiscal '27 outlook. First quarter performance exceeded our expectations and reinforced our confidence in the fundamentals of the business. As a result, we are raising our fiscal '27 adjusted earnings per share outlook to $44.20 to $45. The increase in the full year outlook is supported by the strength and momentum of our business, the performance we delivered and the confidence we have in our ability to execute throughout the year. It implies adjusted EPS growth of 13% to 15%, excluding the impact of the Norway divestiture and the gain on sale of an equity investment within the U.S. oncology network in fiscal '26. Our outlook implies adjusted EPS growth of 15% to 17%, above our long-term growth target of 13% to 16%. For fiscal '27, we anticipate revenue growth of 5% to 9% and operating profit growth of 9% to 13%.

Let me give you more color on our segment outlook. In North American Pharmaceutical, we anticipate revenue growth of 4% to 8%, and operating profit growth at the high end of the previous range of 5.5% to 9.5%, the updated outlook reflects strong performance and solid underlying fundamentals, including stable utilization trends and specialty growth. It also incorporates accelerated investments into the business during the second half of fiscal '27. We anticipate continued growth of GLP-1 medications, throughout fiscal '27 with quarter-to-quarter variability.

Turning to Oncology and Multispecialty. We continue to anticipate revenue growth of 14.5% to 18.5% and operating profit growth of 13.5% to 17.5%. Outlook reflects the strength across the business and the value of our highly differentiated platform. Within the segment, distribution and GPO-related capabilities remain the largest component of revenue contribution. As Brian discussed, we expect growth in the platform will drive additional value across our business. As we continue to add new providers and expand existing relationships that will drive growth across our practice management services, GPO capabilities, data and analytics and clinical research support.

These offerings are designed to support providers and biopharma customers across multiple points of care and create additional opportunities over time. As a reminder, specific to the fiscal second quarter, we will be lapping prior year gains of $51 million in the segment related to the sale of an equity investment within the U.S. oncology network. In Prescription Technology Solutions, we anticipate revenue to increase by 2.5% to 6.5% and operating profit to increase 11% to 15%. The Performance in this business is not always linear. It can vary quarter-to-quarter, driven by several factors, including utilization trends, product launch timing and the evolution of product support requirements over the life cycle of the product. We anticipate growth in our access and affordability solutions, supported by demand across both GLP-1 medications and other therapeutic categories.

We also expect contributions from new brands programs being onboarded throughout the year. The visibility we have into these opportunities, together with the strength of our existing programs and customer relationships supports our expectations for this segment.

Moving now to MedSurg segments. We anticipate revenue growth of 1% to 6% and operating profit growth of flat to 4%. The MedSurg business has a diversified offering and broad customer reach across alternative site of care, including ambulatory and extended care, consumer health and at home care settings. The team remains focused on disciplined execution and operating efficiencies, which strengthens our position and supports our ability to serve our customers. In corporate, we anticipate expenses of $580 million to $640 million.

As a reminder, we completed our exit from Norway in January. In fiscal '26, the Norway business contributed $74 million of operating profit, including $25 million in the fiscal second quarter.

Turning now to items below the line. We expect interest expense to be in the range of $380 million to $420 million, reflecting financing activity completed in support of the MedSurg separation. We expect income attributable to noncontrolling interest of $295 million to $325 million, which includes the minority ownership interest in that surge. We also anticipate the full year effective tax rate of 18% to 19%, a slight increase from the prior guidance range, driven by incremental tax expenses result of higher operating profit growth. We expect the quarterly phasing of tax rate to be broadly similar to fiscal '26 with variability driven by timing of discrete tax items.

Wrapping up our outlook with cash flow and capital deployment. Our capital allocation priorities are unchanged. We remain focused on investing in our strategic priorities, maintaining financial flexibility, returning capital to shareholders and upholding our investment-grade balance sheet. We anticipate free cash flow of approximately $4.5 billion to $4.9 billion. We expect repurchasing approximately $5 billion worth of shares during fiscal '27 of which $2.5 billion was completed in the first quarter. This activity reflects the deployment of proceeds from the MedSurg financing transaction and the Apollo minority investments.

As a result, we estimate weighted average diluted shares outstanding to be in the range of $115.5 million to $117.5 million. In closing, I am pleased with the strong first quarter results and confident in the path ahead. McKesson is operating from a position of strength with robust growth outlook, strong balance sheet position and long track record of execution I'm excited to contribute as we build on the foundation and drive long-term value creation. I appreciate everyone's time today. Look forward to engaging with many of you in the months ahead, including an investor event in September. With that, let's move to the Q&A session.

[Operator Instructions] And our first question will come from George Hill with Deutsche Bank.

I guess, Kenny, as it relates to the outperformance in the North American pharma segment in the quarter, I guess you mentioned something about investments. Could you talk a little bit more about kind of what's driving the organic growth and the margin expansion just because I think it's been a while since we've seen relatively in line revenue growth and the operating earnings in the segment grows strongly. So I would love if there are any onetime risks that are in there? And just any color on that segment.

George, it's Kenny. Absolutely. So North America Pharmaceutical had a really strong quarter for us. And I'll go through top line and then walk through the of the AOP and margin side. So on the top line, overall 5% growth are they driven by the increased prescription transaction volume, including higher volume from Specialty Products. That was offset a little bit by the lower branded pharmaceutical pricing following the WAC decrease, as I mentioned in the prepared remarks, and also some branded to generic conversion as well.

Again, while branded pricing declines impacted revenue, there was very, very little impact on the operating profit side. On the AOP, we increased 19% for the first quarter. That's really driven by the distribution of specialty products to the health systems and timing of new product launches. By timing, it was both on the new branded side as well as branded to generic as well. Those are the 2 factors on the timing in terms of that comment. On the margin side, you're correct. AOP did grow faster than revenue, implying a higher margin mix profile Generally, George, for our business, operating margin changes in the segment can be driven by a couple of things.

One is customers, right? So it could be a split between national account, grocery segment, community to pharmacy, also product and also impact margins profile as well, branded, specialty, generic, biosimilars and then obviously channel, right, between retail, specialty and hospitals. Overall, the business is robust, and we continue to expect momentum carry into the outer quarters as well.

And next will be Stephen Baxter with Wells Fargo.

Just a follow-up to the North America discussion. Just as we look at the improvement to the guidance that you made at least versus our model, it looks like the improvement is really just primarily driven by the outperformance in the first quarter. So wondering if there's anything to call out about the drivers of our performance that either could be timing related or maybe you're just taking kind of a conservative approach to the rest of the year when you think about repeatability of that.

Yes. You bet. So you are correct. So right now, the -- in terms of the guide up for the full year, the majority of the driver is driven by the NAP business, North America pharmaceutical being on the high end of the ELP range of 9.5%. And then I think the question behind the question is more about the confidence behind the guide. So let me share with you my thoughts on that one.

We are pleased with the continued momentum in our business. And that is the reason why we guided $0.40 above the last midpoint and you can see broad-based growth, right? NAP, as you mentioned, has not been shown momentum, but it wasn't just NAP, it was O&M as well and RxTS all grew double digits for the quarter. I think from my lens, the forecast of the guidance is what I would say is what we see today. It is intended to be a balanced view of the year, not the best-case scenario. We feel really good about the momentum we're seeing in the business and the strength of execution in our Q1 results and the X rate as well. June was the strongest month of the quarter.

As always, there is always opportunities and risks along the way. And as a management team, we're really focused on 3 things: number one, execute with discipline. Number two, mitigate potential risk where we can. And last but not least, position the business to capitalize on opportunities as they emerge. So as you can see, is a very thoughtful process. And when it comes down to it, that's the reason why we're very confident there for your guidance.

And next will be Elizabeth Anderson with Evercore ISI.

As we think about the drivers of oncology and multispecialty, obviously, some very, very nice growth quarter. How do you think about -- could you parse that apart a little bit more. Is Florida cancers are performing in line to your expectations, exceeding that? And anything else you could provide to sort of talk about sort of that accelerated growth through that in that segment?

Yes. You bet. You bet. So for oncology multi specialty, we had a really strong quarter there as well. Let me unpack your question a bit. So for the quarter, top line revenue was roughly 33% growth. There are 3 key drivers of that 33% growth for oncology and multispecialty. Number one, we saw really nice growth in existing provider solutions and specialty distribution. So that's what I call penetration. Number two, we won new business as well, and the pipeline continues to be robust. The last but not least, to your last point, there was contribution from the acquisition side, meaning Core Ventures. If you normalize for Core Ventures of the 33%, it's roughly 24%. And then on the AOP side, we grew 41% year-over-year. You could normalize for Core Ventures, it was roughly 50%, which is in line with the long-term target.

And if you reflect specifically on Florida cancer, we've been very pleased with the work the team has done to integrate them into McKesson operations have been very, very solid. Execution has been fantastic. And we are on the high end of the guidance range we provided for you at the time of the acquisition. So been very successful, both in the cultural integration, the operational execution and the financial performance. I would note that we began lapping that transaction starting this quarter.

And next will be Brian Tanquilut with Jefferies.

Maybe just as I think about the comments you made on GLPs, expecting that to continue to grow throughout the year. Just curious what you're seeing there in terms of market dynamics, especially as it relates to employer coverage and how you're thinking about that going forward and also balancing that with the consumer side of things, the direct-to-consumer aspect of GLPs.

Sure. Well, we continue to be pleased with the growth that we're seeing in GLP-1s. There is a vibrant cash market for GLP-1s. It's one of the only product categories out there that I think we could say that's true for. But we've seen very strong growth in the coverage segment as well as evidenced by the performance of CoverMyMeds and the revenue that's showing up in APD. There has been some debate about coverage, but it really hasn't moved super significantly, and you can obviously track the overall growth and performance of this category and see that the growth remains healthy and robust.

And next will be Lisa Gill with JPMorgan.

Brian, you mentioned that you continue to monitor what's happening from a policy perspective. And I just really want to understand 2 things. One, we've heard about some incremental changes around 340B, and I'm curious if there's any impact to your North American business do that? And then secondly, anything else that you're watching. I know you and I have in the past have talked about Globe and the fact that pricing goes around the physician practice and doesn't really have an impact. But is there anything else that we should be thinking about from a business perspective?

Sure. Let me start with 340B, and I should frame the discussion I remind everybody that this is probably pretty preliminary because the current proposal remains under a comment and review period. We think it's going to be important to let that process play out before we draw any conclusions about the final structure or timing or anything. And Lisa, you will well know, we've seen many 340B proposals come and go over the last half a decade or more. 340B is a complicated ecosystem.

And I think any reform we see there will create both opportunity and challenges for various stakeholder groups some participants will benefit from operational clarity and transparency. Others could face impacts to their economics, cash flows, et cetera. We serve many of those stakeholders, hospitals, health systems, contract pharmacies, community providers, biopharma manufacturers. So we really think about this from a very holistic or multiple perspectives. Our focus will be to help our customers navigate this change like we do for all policies that we've had to deal with over my 30-year career, and we'll think about all the constituents we serve as we approach that. And I think regardless of the ultimate direction of the reform takes, we think that our scale, our technology, expertise, our compliance expertise and our strong relationships will allow us to continue to create value. So It'd be premature to speculate on the financial impact.

But I feel very confident in the capabilities of McKesson in partnership with our customers that we can navigate that. Your second question, I think, related more towards what other things are we watching? There's obviously been a lot of discussion about IRA Part D and I would just remind everyone that, that is not going to go into effect until January of 2028. And again, there's a lot of unknowns. We don't know what the MFP will be. We don't know if there will be supporting reimbursement changes around that. We don't know if biosimilars will come into the market and therefore, bit eligibility for that program.

What we do know is that fundamentally, the community provider setting is the low cost setting with the highest and EDs access to care. We believe the government and our legislators understand that. and we would put forth evidence for that, the program you referenced, Globe, where as they attempted to push prices lower in this demonstration project, mechanism to achieve that is a rebate directly from the manufacturer to CMS, therefore, with no impact on the provider practice itself. We think that is a good solution. That's a working solution that supports the goal of lowering drug prices, but it also protects the community-based provider and therefore, creates an incentive for care to have in the community where it's low cost, i.e., good for the government and easy for the patient to access.

I think one thing just to add, when we talk about -- think about IRA, there's a lot of discussions around WAC pricing, and let me share with you how I think about that topic. Just a reminder, on WAC pricing, WAC movements impact top line because our revenue is recognized on the drug selling price, right? However GP and operating profit are far less sensitive on these price changes. And just so you know, more than 95% of our branded drugs are fee-for-service as we earn a fair value for what we deliver. I think one truth point that I like to kind of talk about is this past quarter, as I mentioned in my prepared remarks, we did see back pricing decreases. And despite this dynamic, we were able to achieve growth, margin expansion and strong operating leverage as well. So this is another proof point that as a company, we know to manage through these dynamics.

And next will be Erin Wright with Morgan Stanley.

So within the North America distribution business, I think you spoke to some of the accelerated investments that you called out you so much touched on the confidence you have in the guide. But I guess, more specifically, is there anything to call or we should be aware of from a quarterly cadence perspective as we kind of map out the balance of the year within that segment?

Yes. So in terms of quarterly cadence, let me go through the enterprise and give you a bit more detail. So first, we -- from a North America standpoint, seasonality can play a factor here. So if you look at prior years, Q4 will be the biggest quarter for us from a dollar standpoint. If you look at TS, from a quarterly standpoint, where I remind you, Q4 is our annual verification season. The quarterly cadence can vary due to internal investment patterns, product launch timing, general product lifestyle and which may shift to other services in termination. On that surge, right now, we closed the minority interest of tests from Apollo, so just to make sure you model the quarterly NCI correctly in terms of that front?

Again, for Norway divestiture that was completed in January 2026. So in terms of the phasing of it, this quarter in Q2, it was roughly $25 million from a year-on-year standpoint. And then last but not least, on U.S. oncology and multispecialty. From a quarterly cadence standpoint, this quarter, meaning Q2, we have a $51 million gain that we're lapping last year driven by the a sale of equity investment within the SAN business.

And next will be Eric Percher with Nephron Research.

Want to return to Anko and Multi, and I appreciate the commentary on organic growth. There's been a lot of discussion of what the growth rate is today. And I'd be interested in your 15% to your view of the long-term what do you view as the market growth versus your growth given the assets and specialties that you're in? And then Brian, I might come back to you on how can you extend that growth via additions of additional providers or other services?

Yes. Look, we're very pleased with the growth that we had seen in oncology and multi-specialty and even adjusting for the last quarter of FCS impact, we grew 24% in the segment. That's a combination of the organic growth resident in the market same-store visits or patient traffic that was up sequentially over our last quarter. We continue to add to our practices by recruiting physicians and expanding geographically. All of those things, Eric, support growth algorithm. We don't think there'll be opportunities for kind of the scale of adding additional FCS, but we do continue to think that geographical expansion and recruitment to build the practices locally will be an important part of the growth algorithm.

And then as we continue to introduce technologies, AI or otherwise, into the support of these physicians. It should allow us to expand our capacity to see patients. And that's a growth driver we haven't really talked about a lot in the past. So very, very pleased with the performance. We feel very good about the positioning of our business, the quality of the service we deliver and the impact we have on patients' lives.

The outlook reflects the outlook and guide reflects the overall strength of the business and the value of our highly different platform. The 50% growth I mentioned earlier, that is all organic, no M&A in there, and we do expect that to continue on the forward to hit the long-term targets. Growth will come from, as I mentioned, a couple of areas, right? Yes, there will be some M&A along the way, some talk-in along the way. And then you also have driving more throughput through existing provider network and also winning new business as well. As you probably know, on the USA side, for example, we have 3,400 providers. But then we also have a bigger basket of 14,000 in total, which we support the GPO and distribution side as well. So we expect broad-based growth across the board.

And next will be Kevin Caliendo with UBS.

Kenny, welcome aboard, love the energy on this calls. It's great. Question about the free cash flow. I know guidance hasn't changed, but I just want to -- I'm kind of asking Kenny this question. It's basically down not just year-over-year but for over the last couple of years. And I know with your business, it's always lumpy in this way. But now this is sort of like a 2-year trend. Earnings are growing a lot faster than free cash flow. And I'm just wondering if there's anything in there that we should think about or when we might think about the free cash flow is starting to accelerate a little bit because just optically, it looks a little off or it looks a little odd that it's not growing along with the income.

Yes. I understand the question. I followed completely. So first quarter, we had usually first quarter free cash flow is negative because of working capital and inventory timing. With that said, though, this year was much improved. Last year, we were roughly down $1 billion in free cash flow. This quarter, it was roughly $370 million. So much improvement there. A lot of it is structural, which is very, very encouraging. It's still early in the year for us. And as you pointed out, there's a lot of moving pieces on day of the close -- the week of the close, et cetera.

So right now, we're providing -- we're sticking with the current guide was provided on the last quarterly call. With that said, from my vantage point, we are seeing using technology, AI, et cetera, really structural improvements within our working capital management. And I do believe some of that should still see for the rest of the year. So as we progress through these projects and more to come on this 1 is my answer. More to come with this. Right now, I feel very good about our forecast. And we do have opportunities along the way to beef that off out of the year.

That question will come from Michael Cherny with Leerink Partners.

Yes, welcome Kenny as well. I apologize to come back on it, but I just been doing some rough math, even if you go to the high end of your North American Pharma guidance for the rest of the year, you're at about 6.8%. Now this is very squarely in line with the LRP. But as you think about the moving pieces for that segment in the back half of the year, are there anything on the comp dynamics to think about? And how are you thinking about the pathway forward both utilization as well as additional potential launches within that market would be greatly appreciated.

Yes. Well, again, very pleased with the first quarter and the strength coming out of the gate. We think the utilization environment continues to be steady. I would say, Michael, that we probably had some favorability in the generics portion of the business that came earlier in the year than we would have expected it to. That obviously will come at the expense of later quarters, we benefited early. But other than that, I don't think there's anything structurally that Kenny, you might want to comment.

Yes. Yes. So as I mentioned earlier, there were some new product launch timing. As I mentioned earlier, these were the both the new branded and branded to generics, and that did pop up a little bit on the AOP growth in Q1. As I think about the rest of the year in terms of the NAP guidance, right? So the under -- the updated outlook reflects strong performance and solid underlying fundamentals, including a continuation of stable utilization trends and specialty growth. It also incorporates accelerated investments in the business in the second half of the year as well, focused on growth and also AI.

So we do have that baked into our current forecast. And the return on investment is accretive to our enterprise and the return timing will most likely be the beginning of 2028. At McKesson, we're always thinking about ways to deliver the spot moment at the same time, both for tomorrow as well. And these are the right thing to do with the company.

So it's been part of our algorithm.

That's exactly it.

Okay. Well, thank you again, everyone, for joining us today. We always appreciate your questions, and thank you to Cynthia for facilitating the call. McKesson's first quarter results were strong and they're a testament to strength of our business and the fundamentals of the markets we participate in and the differentiated solutions that we bring to those markets. I do want to thank all McKesson employees for their dedication, their unwavering commitment to our partners, to our customers and to their patients. As we look ahead, we're confident in our ability to consistently execute, extend the business momentum and deliver long-term shareholder value. Thanks again, everyone. I hope you have terrific evening.

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

[Audio Gap] Allen Lutz, health care tech and distribution analyst here at Bank of America. We are delighted to have McKesson here. We have Britt Vitalone, Executive Vice President and CFO. Thank you, Britt, for joining us.

Kicking off with the North American pharma business, we've gotten a lot of questions just around what, if anything, has changed as we went from 2025 to 2026. As we think about utilization, drug price changes. As you think about going from 2025 into 2026 in that North American pharma business, has anything changed? Is there a deceleration at all going on within that business as we think about gross profit dollar growth? And we'll start there.

Yes. Well, first of all, thanks for having us here today. And maybe I'll just step back and say we're really pleased with how we finished our fiscal '26. We had a very strong fourth quarter in terms of revenue growth, adjusted operating profit growth and adjusted EPS. We had 3 of our 4 segments have double-digit adjusted operating profit growth. And for the full year, not only do we have strong revenue growth, but we had 15% AOP growth and 18% EPS growth, all above the long-range targets that we set. So there's a lot of really good momentum in the business.

As we think about our North American pharmaceutical distribution business, we continue to see stable and growing utilization. That's really one of the foundational building blocks for our business. So that continues to be strong. We continue to see innovation and growth in specialty pharmaceuticals. We're very well positioned there. We have a very scaled set of capabilities there. Our specialty distribution now is over $100 billion and growing. So we're pleased with the growth there. And it's not only across our North American pharmaceutical distribution businesses and health systems and retail, but also across our multi-specialty business, including oncology.

We're continuing to see growth in GLP-1s as part of that. GLP-1s last year were roughly $53 billion in revenue, which was well over 25% growth. Sequentially, we did see a slowdown in the fourth quarter, but it still was over 20% growth in the fourth quarter, and we expect and anticipate that GLP-1s will continue to grow. We have a strong customer set. We have strong relationships with manufacturers. So all of those building blocks are in place that are supportive of not only a strong fiscal '26, but the guidance that we set for fiscal '27, again, from an adjusted operating perspective is at the upper end of the range for the long-range targets that we set.

In terms of what are we seeing a little bit different. Clearly, we saw some manufacturer list price or WAC declines in the fiscal fourth quarter, which I would just remind you, they have a revenue impact, but from a gross profit and adjusted operating profit perspective, really no impact. Again, just to remind, we are paid a fixed -- we are paid a fair value on a fixed fee-for-service basis for the services that we provide on behalf of the manufacturers and their products. And so if there's a change in that WAC or list price, it doesn't have an impact to us. We retain the value through that fair value of services that we provide.

So yes, there's a revenue impact. But underneath that, there's stability in prescription transaction volume. There's retention in terms of the fair value for the services that we provide. And in fact, in the fourth quarter in that segment, we saw adjusted operating profit margin expansion of 9 basis points, which I think is supportive of those comments. So we feel very well positioned, very scaled business, and it sets up very nicely for the guide we put forward for '27.

As we think about some of those moving pieces, you called out the IRA, WAC price changes, you called out GLP-1s. As we think about the fiscal 2027 guidance and we think about the free cash flow guidance and the change there year-over-year, are either of those 2 items impacting free cash generation? When we typically think about McKesson's business, we don't really look too much at revenue. It's more about operating profit growth. But as we think about the working capital and free cash flow generation, is IRA or GLP-1 sales, are those impacting the change in cash flow on a year-over-year basis? Or is there something else going on there?

Yes. I mean from year-to-year, actually from quarter-to-quarter, our cash flow can have variability really related to the timing and the day of the week that the quarter ends on. It could be reflective of changes that we make to our own internal business in fiscal '27 as an example -- or '26 as an example. We continue to use automation and AI tools to develop more and more efficient ways of managing our working capital. We think that, that's going to sustain itself over the next few years.

So as we continue to grow profitability, our cash flow will continue to follow that. If you really look at a moving average over the last 7 years, you're going to see growth, and you're going to see growth that is in line with the growth of the business. So we think about it more from that perspective rather than quarter-to-quarter.

The free cash flow generation continues to be strong. The conversion of our working capital to free cash continues to be quite strong. And that really puts us in a strong position from a balance sheet perspective and the flexibility we have to deploy that.

So all of these things that are happening, we can manage through that through our efficiency of working capital and working capital management, and we've done that quite well.

There's been a lot of investor questions around STELARA, similar to the questions around HUMIRA a couple of years ago and what the large PBMs are doing there. Can you just talk about the level of profitability of those specific drugs? And as we think about the pipeline for Part D drugs, can you talk about how big of a market there is for those Part D biosimilars and whether or not there's any potential impact to your business?

Yes. So again, these are large revenue drugs where we're providing a set of basic logistics and supply chain services for that. From a profitability perspective or from a margin rate perspective, they're going to be lower margin rate as a result of the services that we provide and of course, the size of the revenue. We believe that biosimilars are going to be a long-term opportunity. We are supportive of biosimilars because they offer more choice. They offer lower cost options for both clinicians when they choose the drug that they're going to practice with as well as lower cost to patients. We think that they provide more operational simplicity, more efficiency. So as these drugs convert over to a biosimilar, it's really supportive of access and affordability, which we're -- which we support.

As you think about biosimilars, the channel that, that drug goes through does have a determination on the profitability. So if you think about a retail channel where there's fewer distribution and logistics services that we provide, the margin rates that we're going to earn on that are going to be lower because again, they're going to reflect the fair value of the services that we provide. In the case of it going through a channel where it might be a provider channel where we provide more services, GPO services, other wraparound services, we're going to be delivering more fair value, and that's going to be an opportunity for greater margin enhancement for us. But most importantly, better access and more affordability for clinicians and for patients.

So as these things happen, they have a bigger revenue impact depending on the channel that these drugs go through, that will determine really the margins for a distributor like McKesson. Generally speaking, biosimilars are going to have better margin opportunity than the innovator drug.

I want to move on to the oncology part of the business. You've owned U.S. Oncology for a very long period of time. So you have a lot of perspective here that others may not have. Can you talk about some of the historical biosimilars in oncology, Avastin, Herceptin, Rituxan that went biosimilar? As it relates to your MSO, your provider business, can you talk about the economics at the MSO level, at the provider level? When those drugs go biosimilar, does that improve the economics of the practice? Would love to get a sense of what the history is with those drugs in that setting.

Yes. Well, I'm not going to comment on the economics of provider. That's not really appropriate for me to do. What I will do, though, is talk about the relationship that we have with the providers and what we do. What we do is we use the scaled capabilities that we have to provide distribution services as well as GPO services that provide more choice to the clinicians. So if the clinician decides for clinical purposes that they want to practice with the innovator drug, they can do that. They want to practice with the biosimilar, they can do that. Our job is to provide them that choice, that availability on stability of supply and low cost.

The clinicians make the choice. We do not practice. We do not make clinical choices. But we do everything else to be supportive of the practice and the decisions that they make. And so we believe that, generally speaking, biosimilars offer that additional choice and at a lower cost, and also with good supply stability. So I don't want to comment on the provider economics themselves. They make those choices on those 2 parameters of clinical decision-making as well as cost. We provide all the services that allow them to make that right decision.

A similar question. McKesson recently added a biosimilar to its North Star portfolio Stimufend, a biosimilar for Neulasta. Can you talk about that product specifically? It's sort of a change in strategy for McKesson a little bit going into the biosimilar. So talk a little bit about the strategy there and what does the initial demand from customers look like there?

Yes, it follows right on what I was just talking about. We've had North Star for many years in the generic space, where we think that we can provide opportunity in terms of choice, lower cost, better supply stability. That follows on in the biosimilar space. Again, what we're doing here is we're selecting a drug that we think that we can provide supply stability at a low cost for clinicians to make that choice. And so this is our first entry into this. Again, the clinicians will determine whether they want to practice with this biosimilar that we're producing or not. But we believe that it gives them additional choice, operational simplicity and stability of supply. So that's really what the strategy is here is it really follows on.

When we talk about what the mission at McKesson is, very important in that is access and affordability, access and affordability in our provider space, access and affordability options in our prescription technology space. So providing a drug like this and producing a drug like this really falls right into that.

Okay. And I'd love to compare that Neulasta biosimilar with the forward outlook for biosimilars in that clinic setting. There are several large biosimilar launches that are going to take place over the next several years. I would flag KEYTRUDA in oncology and EYLEA in retina. Is it reasonable to assume that McKesson could pursue a similar strategy as with the Stimufend? Or is there something different about those specific medications that maybe you wouldn't pursue that type of opportunity?

Yes. I think it's something that we'll evaluate. Obviously, we're very early into this particular drug. So we want to learn from this and see what the reception is to this. And over time, if we think that it's going to advance affordability and access, if we think that there's going to be receptivity to the additional choice that's available, I'm sure it's something that we'll study. But again, anything that's going to advance access and affordability, better choice, better stability of supply, better operational simplicity, those are things that we will study and evaluate.

And then the last question on the oncology and multi-specialty business. You've been very acquisitive over a period of many years here. Would just like an update on what the pipeline looks like there, how you think about where M&A fits within your capital deployment strategy, if there's any change there versus maybe a year ago?

Yes. So let me start with our capital deployment strategy to begin with, and I'll kind of fold this in, we think about capital deployment really across 3 main pillars. Our primary priority is to grow the business. We can do that through M&A. We can do that through organic investment. We do both. As we think about growing the business, we want to make capital deployment decisions that are on strategy. So those strategies are growing our oncology and multi-specialty business, growing our biopharma services business. And of course, they have to have the right financial return and profile. Where we can find those opportunities, we're going to deploy capital against that.

Secondly, if we can't find those opportunities, we're going to be efficient with the balance sheet. We're going to return capital to our shareholders through share repurchases. And we're going to continually do that whether -- where those opportunities are. And we're going to continue to increase the dividend in relation to earnings growth. We think that, that's important to do as well. All of this is underpinned by a strong balance sheet. And our balance sheet, I think, is as strong as there is out there. It's a BBB+ rated. It's got a lot of flexibility to it, and we think that it's supportive of the capital deployment that we have in place.

As we think about oncology and multi-specialty generally, and I'm speaking mostly to retina and ophthalmology, we think that there's still opportunities to add providers and practices. Recently, we added Cancer Care Northwest to the USON network. We've added a couple of opportunities here to our retina and ophthalmology, most recently, Retina Macula Institute. So we're expanding that where providers practice similarly to the platform and where we think that there's opportunity to grow in geographies that make sense for us to do that. And we think that there's going to be continued opportunities to deploy M&A dollars against that.

That's great. And then shifting gears to the RxTS segment. You gave first time fiscal '27 guidance, low to mid-single-digit top line growth, but really strong AOI growth within that segment. Can you unpack the drivers of the revenue growth there? It's a pretty material deceleration versus fiscal '26, but there's a lot of different businesses within RxTS. What's driving that change in revenue growth? And how should we think about the cadence of revenue growth over the course of fiscal '27?

Absolutely. To your point, there are a couple of different businesses within that segment. From a revenue perspective, roughly 55% of the revenue is comprised of third-party logistics services. Those services are more distribution like. There are services that we do, obviously, for biopharma. The contribution to AOP, or adjusted operating profit from third-party logistics, is less than 5%. So big revenue number, low contribution to overall segment adjusted operating profit.

There's a lot of variability within third-party logistics. It could be the timing of a program launch or it could be a delay in a program launch, it could be a delay in a product launch. So even within third-party logistics, you're going to see variability from quarter-to-quarter. And again, it's 55% of the segment. The rest of the segment is made up of access services such as prior authorizations, affordability solutions, things like e-voucher and other discount type cards and affordability programs. And those are all technology driven, so they have better margin profile. We're seeing really good growth in both of those businesses.

But again, there could be variability from quarter-to-quarter depending on the timing of a product launch, the timing of a program launch. It could be the requirements that are necessary from a payer or a formulary requirement. It could be investments that we make into these businesses. We've been expanding our capabilities, whether that be in prior authorization, as an example, adding capabilities like denial conversion and reject conversion and reporting, lots of different things that we're now adding in support of these programs for manufacturers.

We're continuing to see brands being added to our technology businesses. I think we added over 40 new programs last year as an example of the receptivity to the programs that we have. Again, specialty is growing the fastest of all the product categories that fits right into the technology services that we have, which are supportive of access and affordability, mostly for specialty drugs.

So quarter-to-quarter, we're going to have some variability on the top line. But if you look at the growth in adjusted operating profit and the growth in the margin rate of that business, they're both expanding, and they're expanding above the long-range target growth rate that we set. So we think that we're well positioned despite some of the variability that you're going to see on the top line, which is driven mostly from the distribution side of the house.

Yes. The AOP growth was really, really strong for fiscal '27 relative to our expectations. And I want to talk about probably your favorite topic, which is GLP-1s. As we think about prior authorizations going from calendar '25 to calendar '26, or I guess, fiscal '26 to fiscal '27, there's been a very rapid shift in the beginning of calendar 2026 from insurance covered to direct-to-consumer offered GLP-1s. And based on our math, and it may not be completely accurate, but what we saw at the end of 2025 is that GLP-1 insurance-eligible scripts were growing 70%. And then in January, that slowed to high single digits. Would love to get a sense directionally about the GLP-1 prior authorization momentum you're seeing in the business, is it slowing materially as you've entered calendar or fiscal '27? You said on the call that it's still growing, but would love to kind of unpack that a little bit more if it is slowing maybe a little bit more.

Well, first of all, when we talked about the distribution of GLP-1 medications, we did see a sequential slowdown from our third fiscal quarter to our fourth. Again, you're going to see variability from quarter-to-quarter. We've seen that over the last 3 years. In terms of the prior authorization business, that continues to be very strong. And we are seeing now the adoption of orals and that coming into the market. It's early days, but what we're seeing on that aspect is that orals are actually additive to the overall GLP-1 market, not taking volumes away from injectables, we're seeing that being additive.

Over time, there could be an expansion of the availability of these drugs through Medicare. That certainly could be an opportunity depending on what the requirements are around formulary restrictions or other payer restrictions or formulary requirements. We continue to see good growth in that business. And so I think we're not seeing any slowdown at this point.

From a direct-to-consumer basis, it's still a fairly nonmaterial number to the overall population of GLP-1s. We do have some opportunities on the direct-to-consumer, where we do some back-end pharmacy-related services and fulfillment services for cash payer direct-to-consumer. So there's multiple different ways that we're involved in this process. We think the market is still growing and there's still an opportunity for not only in the distribution side, but in our prior authorization side to continue to see that expansion through '27.

Is -- you mentioned Medicare Advantage. Is McKesson involved in the bridge program? Or does that get outsourced to the MA providers? How does that...

We're not involved directly in those programs.

Okay. Got it. But if there is expansion to Medicare Advantage plans for GLP-1s and prior authorizations are part of it, would McKesson be...

Yes.

Okay. Got it. And then another thing -- another question that we get is just around the prior authorization revenue model. Just from a high level, we talked about the direct-to-consumer offerings. If the -- in a -- let's use an example. Let's say a patient goes to a direct-to-consumer platform that has an eligibility check on that specific DTC option, they go -- it goes through, but it says they are denied and then they ultimately get a direct-to-consumer script for a GLP-1. Can McKesson still get paid in that scenario where someone is actually not going through and getting approved and they actually go to the direct-to-consumer channel?

As I mentioned, we do have some back-end fulfillment services that we provide to that channel. If there are prior authorization services required, as we've mentioned before, we have the relationships with the manufacturers on the majority of these GLP-1 programs. As I also mentioned, we have products like denial conversion and handling rejects and other reporting.

So we've continued to expand our offering to help supplement and make sure that there's higher adherence to these drugs in supportive of the programs that the manufacturers provide. So yes, there is opportunities for us in the DTC channel. It's maybe a different type of fulfillment service that we would do rather than just the general billable GLP-1 prior authorization, but we have expanded our capabilities outside of that.

Great. And then this is around the RxTS business, but maybe it's even a broader question. You talked about AI and automating some manual or human workflows. And I think over the past couple of quarters, you've talked about during the blizzard season, each employee has been able to handle more transactions to manage costs. Can you talk about where McKesson -- or I guess, first, what is McKesson spending money on there that's driving the improvement in margins? And where are we if this is a 9-inning game? How do you think about the opportunity to continue to leverage AI with that specific use case in mind, but maybe even more broadly for the rest of your business?

I continue to be fascinated. All investors are baseball fans, but I used to watch baseball, but I don't know what inning we're in. I'd say we're in the early innings, maybe we're in the third inning. AI is something that we've been focused on. And I wouldn't just say AI, AI is just used as a term ubiquitously, but wherever there's an automation opportunity, it could be robotics process automation, it could be AI, it could be some other automated aspect here, we're looking to implement these across the business. It could be automation that we're doing to better -- do better demand planning and supply chain logistics. It could be AI in our oncology practices where they're using ambient scribe as an example.

Certainly, in the RxTS business, it could be AI to further the technology and the automation that we already have in place for our solutions. It could be chatbots that are used in a call center where we used to have humans. It could be lots of different ways. Wherever there's human or manual processes and there's an opportunity to make it more efficient, that's an opportunity for us that we're looking at. So I think a lot of these automation opportunities and AI opportunities play right into the strengths that we already have in our RxTS business.

Got it. I'm not a huge baseball fan. What I'm going to say it's the end of the first period of...

There we go.

As we think about the LRP, you reiterated the LRP this quarter. Can you talk about the sources of confidence? Maybe just a high-level overview of what informed the reiteration of the LRP this quarter?

Well, I think it's several things. It's the consistent performance in the results that we've shown for several years now. It's the building blocks that I talked about. It's stable and growing prescription utilization. It's continued growth of specialty drugs and specialty drugs across not only our North American pharmaceutical, but across specialty and multi-specialty providers. It's the continued opportunities that we see in our access business and our affordability business. So all of those things play into sort of the key building blocks.

I would say that another important piece here is the operating expense leverage that we've been able to drive over the last several years on a consistent basis. Some of that is borne out of the automation solutions that we've put across our business to be more efficient. I talked about in the last quarter that we saw 293 basis points of operating leverage as you think about operating expenses as a percentage of gross profit. So we're continuing to drive more efficiency through our operations. All of those things give us confidence that not only do we reiterate our long-term growth targets, but our guide for this year for each of our 3 core segments is slightly above or at least at the high end of that range. So we have good visibility into fiscal '27 to place those growth rates in that outlook at the high end of the range.

And then moving on to the MedSurg segment. Would love high-level comments on the deal rationale on that agreement with Apollo. What was the rationale for that? Can you provide any more commentary on the terms of that deal? Who came to who? Any additional information would be helpful.

Yes. So we're about a year now since we announced our intent to separate the business. In that year, we've done a lot of work. So we have -- the business is now operationally and legally separate. We've worked on putting in place TSAs to run that business on an independent basis. We've got audited carve-out financial statements, which is no small task, a lot of work there. And we've done the first leg of putting in an independent capital structure. So we put a revolving credit facility in place in our early April as well as some Term Loan A issuance as well. We plan on doing more in the first half -- the back end of the first half of this year. All of that is really foundational for us.

We thought the opportunity to add somebody like an Apollo and the Apollo funds who has experience in some of these complex carve-outs and certainly has both the operational and financial experience and in the public markets experience would be additive to the business. And certainly, it credentializes the business. It sets a valuation target and a valuation number that we think is important to have in place. And we think that they'll bring a lot of experience to the Board operationally, but also their experience with some of these complex carve-outs and certainly with the public markets.

Sticking with MedSurg here. Can you talk about how does the volatility in commodity prices impact the MedSurg business for basic products like gloves and syringes? And how should investors think about that moving forward?

We've seen volatility in commodity prices, fuel prices really over the last 10 years. It's been pretty constant in the business. So I think we do a good job managing through that. We have lots of manufacturing partners that allow us to manage through that. We're -- I think we've done a good job of managing the cost side of it and certainly protecting the margin side of it. So this -- certainly, there's a little more volatility now than there maybe has been in the last couple of years, but volatility in these types of products, in fuel and transportation costs.

Last question here with about a minute left. Just on the utilization. [Audio Gap]

Welcome to McKesson's Fourth Quarter Fiscal 2026 Earnings Conference Call. Please be advised that today's conference is being recorded. At this time, I would like to turn the conference over to Jeni Dominguez, VP of Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, and welcome, everyone, to McKesson's Fourth Quarter Fiscal 2026 Earnings Call. Today, I'm joined by Brian Tyler, our Chief Executive Officer; and Britt Vitalone, our Chief Financial Officer. Brian will lead off, followed by Britt, and then we'll move to a 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.com and the Risk Factors section of our most recent annual and periodic SEC filings. For more additional information concerning risk factors that could cause our actual results to materially differ from those in our forward-looking statements.

Information about GAAP, non-GAAP financial measures that we will 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 guidance assumptions. With that, let me turn it over to Brian.

Thank you, Jeni. Good afternoon, and thanks, everyone, for joining McKesson's fiscal fourth quarter earnings call. Earlier today, we reported a good fourth quarter that caps a year of strong performance. In our fiscal 2026, we grew adjusted earnings per diluted share by 18%, driven by momentum across our strategic growth platforms. Our operating cash flow of $6.2 billion was strong and exceeded our plans. We returned $5.1 billion to shareholders. .

Fiscal '26 was another great year of execution and disciplined portfolio actions that sharpened our focus and drove continued operating momentum. At the beginning of the year, we added Core Ventures and PRISM Vision to our oncology and our multi-specialty platforms. Both businesses have been onboarded seamlessly delivering strong growth momentum while expanding high-quality care in the community setting.

One year ago, we announced the plan to separate our Medical Surgical Solutions segment into an independent company. Since then, we've made significant progress towards that objective. We put transition service agreements in place, executed on financing transactions and signed an agreement to welcome Apollo as a minority interest investor while advancing the separation readiness of the business itself. As we continue to execute towards our planned separation, we're confident that it will unlock shareholder value and create strategic clarity for both organizations.

In January, we completed our exit from Norway, continuing our disciplined approach to portfolio optimization and fulfilling our commitment to fully exit the European business. Operationally, we made moves to better align our organizational structure to our strategy. We introduced new reporting segments, allowing increased transparency to our growth areas and better aligning reporting with how we operate the business and how we allocate capital. Our execution on these strategic initiatives drove the strong results we delivered in fiscal '26 and position us well for fiscal '27. Looking ahead, we anticipate adjusted earnings per diluted share to be in the range of $43.80 to $44.60 in fiscal '27. With a strategically focused portfolio, a strong balance sheet and a clear operating model, we are well positioned to deliver long-term value for shareholders while performing the critical role we play across the health care value chain.

Now let me share with you how our company priorities are shaping the future of McKesson. I'll start with our focus on people and culture, which remains the key enabler of everything we do. We are operating in a complex and rapidly evolving environment and defining our future requires us to continue evolving how we lead while being grounded in our values and our mission. We embed this into our culture with our I²CARE principles, which represent our values: integrity, inclusion, customer-first respected excellence, and through LEADRx, our leadership principles, Together, this is our leadership prescription framework. It reinforces accountability, trust and focus on serving our customers. LEADRx provides a common standard to guide bold decision making, deliver results that matter with speed and to build the teams of tomorrow. I'm always inspired by Team McKesson in how they demonstrate these leadership behaviors. Today, I want to recognize two individuals have been exceptional partners to me and to our leadership team. During the quarter, we announced the planned retirement of Britt. Over the course of his tenure, he's played a critical role in strengthening McKesson's financial foundation, advancing our capital deployment framework and positioning the company for long-term sustainable growth. His leadership has been marked by disciplined clarity and an unwavering focus on value creation for shareholders. Britt has helped build a strong, deep finance organization that will continue to serve the company well into the future. I would be remiss if I didn't note that during Britt's tenure as CFO, we delivered over 500% increase in shareholder returns. That's over 20% annual growth rate. Thank you, Britt.

Additionally, we are announcing changes to our Board. Don Kanouse will complete a service on our Board prior to the 2026 Annual Stockholder Meeting in July, consistent with our outside director age guidelines. I want to thank Don for his steady leadership and significant contributions as the independent Chair of our Board. Effective May 1, I was elected Chairman of our Board to serve alongside Dominic Caruso, who has 7 years of experience on McKesson's Board, who will serve as the lead independent director ensuring continued ongoing strong independent oversight.

I'd like to now discuss our strategic pillars. Let me start with oncology and multi-specialty platform. We continue to see strong growth in specialty medications, and we're leveraging our differentiated portfolio of solutions to improve access, support providers in the community and empower biopharma customers with valuable data and insights. We are pleased to see continued expansion of these platforms. For the U.S. Oncology Network, it's been a remarkable year of growth. We added more than 570 providers in fiscal '26, the largest net increase since 2010.

In April, we further expanded our footprint with the addition of Cancer Care Northwest with clinic locations across Washington and Idaho. We continue to leverage our capabilities and onboard core ventures onto our platform. Ontada, our data and insights business, for example, is now incorporating in-office dispensing data from Florida Cancer Specialists and Research Institute. This expands the data we provide to biopharma customers to better assess adoption and performance trends across the broader community oncology landscape.

As we scale the platform, we're embedding automation and AI to improve workflow and enhance the patient experience. Within the U.S. Oncology Network, ambient scribe technology is now used by more than 1,900 providers. This allows them to spend more time with patients and less time on documentation, allowing them to do the jobs they trained for. These capabilities illustrate how we're using data technology and scale to meaningfully improve our physicians' productivity and dedicate more time to care delivery.

Within our retina and ophthalmology platform, PRISM Vision increased providers by approximately 20% over the past year and welcome two new practices, Spokane Eye Clinic and more recently, in May, the Retina Macula Institute, extending its footprint beyond the Mid-Atlantic region.

Let's move on to our biopharma services platform. Our fiscal fourth quarter is typically the busiest time of year as we support patients with their annual verifications. This year, we delivered the most successful season to date, supporting a record number of 3.4 million patients in their journey to access the medicines they need. We achieved this through strong execution, disciplined planning and continued productivity investments, including the application of technology and automation. As a result, each full-time employees supported 120 more patients this season compared to last year.

We're pleased with the continued business momentum, supported by a differentiated and scaled network. We're digitally connected to over 50,000 pharmacies and more than 1 million providers and we support over 650 biopharma brands, representing most therapeutic areas. Over the past year, we helped patients save approximately $10 billion on brand and specialty medications, the majority of which were for non-GLP-1 drugs. We helped to prevent an estimated 12 million prescriptions from being abandoned due to affordability challenges, and we enable patients to access their medicines more than 135 million times.

Building on this scale and continued momentum, we consistently reinvest into the business to advance our strategic focus on technology-enabled services. These investments focus on enhancing product functionality, improving the customer experience and introducing greater automation. Recently, we launched an industry-first integrated specialty access and affordability solutions designed to address the fragmentation that often delays starting a treatment. By connecting benefits verification, prior authorization and affordability support into a single coordinated workflow, this solution helps manufacturers accelerate time to therapy for high-cost, high-touch medications. This is a powerful example of how we're leveraging our scale and technology to support biopharma customers where access matters most.

Turning to North American distribution. We remain focused on operational excellence and long-term sustainability as we continually build a more resilient, scalable distribution platform. Recently, we achieved a key milestone with the successful launch of our new Montreal distribution center. As part of our supply chain of the future initiative, this state-of-the-art facility expands critical capacity and features industry-leading automation, including an advanced storage and retrieval system powered by AI and robots, which raised the standard for precision and performance. Once fully ramped, this facility will enhance resiliency, improve service reliability across Eastern Canada and reinforce our ability to serve customers and patients with greater speed, consistency and efficiency.

Across our supply chain, AI-driven inventory planning capabilities are helping us move from reactive to more technology-enabled real-time decision-making. We implemented an advanced planning system that uses AI to connect and orchestrate end-to-end planning across demand, supply, inventory and operations inside an integrated environment. This transformation enables us to deliver working capital savings and meaningfully contributed to the strong operating cash flow in fiscal 2026.

As we operate a scaled network that distributes approximately 1/3 of pharmaceuticals in North America, we take great pride in protecting the resiliency of our supply chain. In January, a significant winter weather across more than 20 states strain transportation networks. Through early risk monitoring, proactive planning and strong execution, we maintain safe operations and minimize disruptions to our customers and their patients. This is yet another example that underscores the strength and reliability of our operating model and our focus on excellent service.

In the past quarter, we successfully navigated the first wave of branded pharmaceutical price changes related to the Inflation Reduction Act. As expected, there was an impact to revenue growth, but the fundamentals of our business and the strength of our value proposition to manufacturers remain very strong, evidenced by the double-digit adjusted segment operating profit growth in fiscal '26.

We continue to manage the business with discipline, ensuring appropriate compensation for the critical services we provide, which position us well for sustained long-term growth. We're operating in a dynamic policy environment. McKesson has a unique role to play, collaborating with policymakers and advocating for changes that advance health care for all. We're confident that our differentiated capabilities will continue to position us to evolve with the market and to enable better outcomes.

Now let me provide a brief update on our portfolio actions. In April, we reached an important milestone in preparing Medical Surgical Solutions for separation. We completed 2 financing transactions, a $1 billion senior secured Term Loan A and a $1 billion revolving credit facility. This aids in establishing a stand-alone capital structure for the business supporting separation readiness and positioning NewCo with financial flexibility as an independent company. We also announced a definitive agreement with Apollo Funds for a $1.25 billion strategic minority investment in Medical Surgical Solutions, representing approximately 13% minority interest and valuing NewCo at approximately $13 billion of total enterprise value. The transaction is subject to regulatory approvals and customary closing conditions, we will retain operating control and majority ownership while benefiting from Apollo's experience in supporting complex carve-outs and public market transactions. This is another meaningful step forward as we execute the next phase of the separation and prepare for the planned IPO with a clear focus on maximizing value for shareholders.

Let me close with this. McKesson delivered another year of strong operational performance, reflecting the strength of our growth strategy, the value of our differentiated portfolio and our disciplined portfolio management. We enter fiscal '27 from a position of strength with clear momentum across the business. We're well positioned to continue building on that momentum and to deliver sustainable long-term value to our customers, partners and shareholders.

Before I turn the call over to Britt, I want to thank McKesson's employees for their commitment and contributions, which are fundamental to our success. This is also Britt's last earnings call. I want to thank him for 20 years of outstanding leadership and service. As planned, Britt will continue to support the team through the CFO transition, ensuring continuity and stability for the team and operations. He will also serve as a strategic adviser, providing valuable perspective as we execute our priorities, including the planned separation of the medical business. With that, Britt, I'll turn it over to you.

Thank you, Brian, and good afternoon. Fiscal 2026 represents another year of exceptional financial performance. We delivered robust growth across our core strategies, while expanding operating leverage through disciplined execution and portfolio actions that create long-term shareholder value.

For the full year, consolidated revenues reached $403 billion, a 12% increase. Adjusted operating profit grew 15% to $6.5 billion and adjusted earnings per diluted share increased 18% to $39.11. Excluding the gains from McKesson Ventures investments in fiscal 2025, adjusted earnings per diluted share increased 20%, driven by strong execution across the business and continued strength in our operating fundamentals. Notably, these results exceeded the long-term growth targets that we are reaffirming today. Today, I'll review our fourth quarter and full year results, followed by our fiscal 2027 outlook. Unless otherwise noted, my comments will refer to our adjusted results.

Before turning to our consolidated results, I want to briefly address 3 items that impacted fourth quarter GAAP-only results. First, we recorded net gains of $480 million related to the divestiture of our retail and distribution businesses in Norway reflected within other. This transaction successfully marks the completion of our European divestiture. Second, fourth quarter results included approximately $122 million of noncash adjustments to redeemable noncontrolling interests from the Core Ventures acquisition in our Oncology and Multi-Specialty segment. And finally, we recorded $182 million LIFO credit related to inventory accounting within the North American Pharmaceutical segment.

Turning now to fourth quarter consolidated results. Our fourth quarter results were an extension of sustained operating excellence and disciplined growth. Earnings per diluted share were $11.69, a 16% increase over the prior year. This growth was driven by broad-based demand across the portfolio, including continued specialty pharmaceutical distribution growth across North American Pharmaceutical, strong growth in oncology and multispecialty, and ongoing momentum in biopharma solutions programs within Prescription Technology Solutions.

Consolidated revenues increased 6% to $96.3 billion, while gross profit grew 14% to $3.9 billion. Growth was led by provider expansion and specialty distribution within oncology and multispecialty, including contributions from acquisitions and higher prescription volumes in North American Pharmaceutical, partially offset by lower contributions from branded pharmaceuticals. Operating expenses increased 14% to $2.1 billion, reflecting higher expenses within oncology and multispecialty, including current year acquisitions. Our continued focus on operating execution delivered efficiency across our operations.

Operating profit grew 13% to $1.8 billion, driven by specialty distribution growth across oncology and multi-specialty and North American Pharmaceutical as well as increased demand for access solutions in our Prescription Technology Solutions segment. Operating profit also included pretax losses of $15 million or $0.09 per share from equity investments within McKesson Ventures portfolio which is included in corporate expenses.

Interest expense was $59 million, reflecting higher average loan portfolio balances during the quarter. The effective tax rate for the quarter was 12.1%, which included net discrete tax benefits of $158 million related to the liquidation of our investment in a wholly owned affiliate. Fourth quarter diluted weighted average shares outstanding declined 3% to $122.7 million, reflecting ongoing share repurchase activity. During the quarter, we entered into a $2.25 billion accelerated share repurchase program, which had no meaningful impact on diluted weighted average shares in the quarter.

Turning now to fourth quarter segment results, which can be found on Slides 8 through 12, beginning with North American Pharmaceutical, where revenues were $79.1 billion, an increase of 3% year-over-year driven by higher prescription volumes, including continued strength in Specialty Products. This growth was partially offset by lower branded pharmaceutical revenue, reflecting declines in manufactured prices on certain products which reduced year-over-year revenue growth by approximately 3% in the quarter.

GLP-1 distribution revenues reached $14 billion in the quarter, an increase of $2 billion or 22% compared to the prior year. However, revenues declined 4% sequentially. Importantly, the impact of branded pricing declines and the sequential decline in GLP-1 volumes had no impact on operating profit in the quarter. Segment operating profit increased 11% to $980 million with operating margins expanding 9 basis points year-over-year. Performance was primarily driven by specialty product distribution growth including the health systems and ongoing operating efficiency.

Turning to the Oncology and Multispecialty segment. Revenues increased 35% to $12.7 billion fueled by strong provider growth and expanded specialty distribution and contributions from acquisitions. The acquisitions of PRISM and Core Ventures contributed approximately 13% to this growth. Operating profit for the segment increased 53% to $385 million. Excluding the impact of acquisitions, organic operating profit grew a healthy 13%, reflecting strong underlying performance.

In the Prescription Technology Solutions segment, revenues increased 12% to $1.5 billion, driven by higher prescription volumes in third-party logistics and technology services businesses. Operating profit increased 13% to $322 million, driven by higher demand for access solutions.

Turning to Medical Surgical Solutions. Revenues were $2.9 billion, up 1% compared to the prior year, driven by higher specialty pharmaceutical volumes, partially offset by lower contributions in the ambulatory care channel. Operating profit decreased 5% to $271 million. During the quarter, illness season product demand, including vaccines and testing, trended below the prior year. And finally, corporate expenses were $209 million, reflecting previously discussed losses from McKesson Ventures portfolio as well as increased technology infrastructure investments.

Let me turn to cash and capital deployment, which can be found on Slide 13. We continue to execute a disciplined, value-creating capital deployment strategy in the fourth quarter. We ended the quarter with $4 billion in cash and cash equivalents and total liquidity of $9 billion. During the quarter, we generated free cash flow of $3.2 billion, including $185 million in capital expenditures. This performance was driven by strong operating results and working capital timing. As a reminder, our free cash flow and working capital metrics can vary quarter-to-quarter, including the day of the week a quarter closes. We returned $2.8 billion to shareholders during the quarter, including $2.7 billion through share repurchases and $101 million in dividends. This included $2.25 billion of share repurchases under an accelerated share repurchase program that was launched in March.

In April, our Board of Directors approved an additional $5 billion of share repurchase authorization, bringing our total share repurchase authorization to approximately $7.7 billion as of April 2026. This action further demonstrates our confidence in the durability and growth outlook of our business.

Stepping back, fiscal 2026 was a year of exceptional performance that exceeded both our initial guidance and long-range growth targets. Full year revenues increased 12% to $403 billion and operating profit grew 15% to $6.5 billion, with 3 of our 4 segments delivering double-digit growth. When adjusting for $101 million in net gains related to McKesson Ventures in fiscal 2025, and $51 million in net gains within the U.S. Oncology Network in the second quarter of fiscal 2026, operating profit increased 16% compared to the prior year.

Our disciplined capital deployment led to expansion of our oncology multi-specialty growth pillar with the acquisitions of PRISM and Core Ventures, which contributed approximately 34% of segment operating profit growth. We are encouraged by both the integration progress and the performance to date. We also continued to deliver strong operational execution and enhanced efficiency, driving a 293 basis point improvement in consolidated operating expenses as a percentage of gross profit compared to the prior year. We achieved this operating efficiency while simultaneously making targeted investments, modernize our operations through automation and AI-driven capabilities, which we anticipate will accelerate growth, creating enterprise-wide efficiencies.

Strong earnings growth translated into free cash flow of $5.4 billion. This included $745 million in capital expenditures centered on distribution technology and infrastructure to support future growth. Free cash flow exceeded our guidance range driven by exceptional operating performance, working capital efficiencies and timing. We also continued to demonstrate a clear commitment to returning capital to our shareholders. In fiscal 2026, we returned $5.1 billion through share repurchases and dividends. Since the start of fiscal 2020, we've returned approximately $23 billion to shareholders while delivering a 17% adjusted earnings CAGR, which reflects the combination of consistent outstanding operating performance and disciplined capital deployment. This outstanding performance is reflected in a return on invested capital of 34%, highlighting the strength of our operating model and the effectiveness of our capital allocation strategy.

Now let me turn to our outlook. Over the past several years, the breadth of our capabilities and leading portfolio of assets across oncology and biopharma services have led to consistent value creation for our customers, partners and shareholders. Supported by this operating momentum, a differentiated portfolio of assets and a strong balance sheet, we are reaffirming our long-term growth targets. We continue to expect long-term adjusted earnings per diluted share growth of 13% to 16%, supported by sustained operating leverage and disciplined execution. We're also reaffirming our long-term adjusted segment operating profit growth targets of 5% to 8% from North American Pharmaceutical, 13% to 16% for oncology and multi-specialty and 10% to 13% for Prescription Technology Solutions. We entered fiscal 2027 with significant momentum. For fiscal 2027, we're establishing an adjusted earnings per diluted share guidance range of $43.80 to $44.60, representing 12% to 14% year-over-year growth.

To assist with year-over-year comparisons, I want to highlight two items from fiscal 2026 that I referenced earlier. First, revenues of $1 billion and operating profit of $74 million from the Norway business included in other, which we divested in January of 2026. And second, $51 million in gains recognized in our second quarter related to the sale of an equity investment in market decisions within the U.S. Oncology Network. Excluding these two items, our fiscal 2027 earnings per diluted share outlook implies 14% to 16% growth, which is at the upper end of the long-term growth target range.

Let me start with the segment outlook for fiscal 2027. In the North American Pharmaceutical segment, we anticipate revenue to increase 4% to 8% and operating profit increased 5.5% to 9.5%. This growth outlook is supported by our scaled distribution capabilities, operating discipline and excellence and stable prescription volume growth. We anticipate continued growth in the GLP-1 category of medication. While fiscal 2026 GLP-1 revenues increased 27% to $53 billion. We anticipate continued category growth in fiscal 2027 with quarter-to-quarter variability driven by market dynamics. In the Oncology and Multispecialty segment, we anticipate revenue growth of 14.5% to 18.5% and operating profit growth of 13.5% to 17.5%. This outlook reflects continued expansion across oncology and multi-specialty platforms, driven by higher multi-specialty distribution volumes across community settings.

The outlook also reflects the continued successful integration and growth of PRISM Vision and Core Ventures. Both acquisitions are performing well and expanding our capabilities to advance care in oncology and retina settings. As previously mentioned, fiscal 2026 results included a $51 million gain from the sale of an equity investment and market decisions within the U.S. Oncology Network.

In the Prescription Technology Solutions segment, we anticipate revenue growth of 2.5% to 6.5% and operating profit growth of 11% to 15%. Demand for our differentiated access and affordability solutions remains strong, particularly for complex and specialty therapies including GLP-1s. We're seeing sustained volume growth in the brands we support with continued pharmaceutical innovation and increasingly complex care setting, attractive long-term growth opportunities.

As I previously discussed, revenue and operating profit trajectory in this segment is not linear. It can vary from quarter-to-quarter, driven by several factors, which include utilization trends, the timing and trajectory of new drug launches, the evolution of a product program support requirements as it matures, which could result in the shift to other services or a program termination, product delays and supply dynamics, payer utilization and formulary requirements, the annual verification programs that occur in our fiscal fourth quarter and the size and timing of investments to support and expand our product portfolio. Overall, the strength of our platform, disciplined execution and continued demand for our solutions support our confidence in the long-term trajectory of this business.

Let me provide an update on Medical Surgical Solutions and our progress towards establishing it as an independent entity. Since announcing the separation, we've achieved several key milestones. Business is now operationally and legally separate. We've completed audited carve-out financial statements. And we finalized all required separation and transition service agreements. In early April, we took initial steps to establish an independent capital structure which included a $1 billion revolving credit facility and the issuance of $1 billion in term loan A facilities. We also entered into an agreement with Apollo Funds under which they will acquire approximately 13% minority interest in Medical Surgical Solutions, implying a total enterprise value of approximately $13 billion. Additionally, Apollo brings deep experience supporting complex carve-outs and public market transactions. McKesson will retain operating control and majority ownership of Medical Surgical and consolidate the segment's results for financial reporting. The Apollo ownership will be reflected as noncontrolling interest when the transaction closes. We anticipate the transaction will close following regulatory approvals and customary closing conditions.

We also expect to issue up to $2.25 billion in additional term loans in the second half of the first quarter of fiscal 2027. The proceeds from all these transactions will be used to satisfy existing intercompany agreements with McKesson Corporation. We intend to deploy these funds in line with our disciplined capital allocation strategy, principally towards share repurchases. Together, these transactions will complete the establishment of an independent capital structure for the Medical-Surgical business. For fiscal 2027, we anticipate revenue growth of 1% to 6% and operating profit to be flat to 4%. In Corporate, we anticipate expenses to be in the range of $580 million to $640 million as we continue to invest in technology innovation and efficiency.

Turning now to items below the line. We anticipate interest expense to be in the range of $380 million to $420 million. This reflects the new $1 billion term loan A placed in April and the anticipated issuance of $2.25 billion in additional term loans to support the separation of the Medical Surgical Solutions segment. We anticipate income attributable to noncontrolling interest to be in the range of $295 million to $325 million. This year-over-year increase is primarily driven by the anticipated minority investment in Medical Surgical by Apollo Funds. Finally, we anticipate the full year effective tax rate will be in the range of 17% to 19%.

Moving to cash flow and capital deployment. For fiscal 2027, we anticipate free cash flow of approximately $4.5 billion to $4.9 billion, reflecting continued operational efficiency and disciplined working capital management. Consistent with our capital allocation framework, we plan to repurchase approximately $5 billion of shares in fiscal 2027. This accelerated activity is supported by the deployment of proceeds from the Medical Surgical financing in the Apollo minority investment. As a result, we anticipate weighted average diluted shares outstanding to range between 116 million to 118 million for the full year.

Wrapping up fiscal 2027 guidance. We anticipate revenue growth of 5% to 9% and adjusted operating profit growth of 8% to 12%. For fiscal 2027, we anticipate earnings per diluted share of $43.80 to $44.60. We expect the earnings per share cadence to be broadly similar to fiscal 2026 from a first half, second half perspective with quarter-to-quarter variability in part driven by the timing of discrete tax items recognized in fiscal 2026.

In summary, we delivered a strong year, driven by disciplined execution across our core businesses and a steadfast focus on long-term value creation. Our balance sheet and cash flow generation provide us the flexibility to invest in our strategic priorities while consistently returning capital to shareholders. We remain confident in our outlook and are well positioned to execute against our strategy and deliver sustainable growth.

On a personal note, this will be my last earnings call as McKesson's CFO. It has been a privilege to serve in this role and to partner with an exceptional leadership team and finance organization. I'm proud of what we have accomplished together, and I'm confident in what lies ahead. Our fundamentals are strong, our strategy is clear, and we're well positioned to deliver sustainable long-term value creation. Following my retirement, I'll continue to support McKesson in an advisory capacity to ensure a smooth transition and maintain our current momentum. I want to thank all of you for your continued support of McKesson. And with that, we'll move to the Q&A session.

[Operator Instructions] And our first question will come from Allen Lutz with Bank of America.

First, Britt, congrats on your retirement. We'll all miss you. On the RxTS segment, looking at the fiscal '27 revenue growth here, 2.5% to 6.5%, I think maybe that's a little bit slower than where growth has been over the past few years. But there's a lot of different pieces of that segment. Is the slower growth coming from the 3PL business? Or is it coming from another part of the business? And as we think about the GLP-1 component in the prior authorization business, you mentioned that GLP-1 revenue declined 4% quarter-over-quarter in the distribution business. What are your expectations for GLP-1 growth within that prior authorization business over the course of fiscal '27?

Thanks for your question, Allen. Let me talk a little bit about the revenue and Prescription Technology. We've talked about this over the last several quarters. If you think about the composition of revenue in that segment, as we've talked about over the last several years, the 3PL component of that business represents roughly 55% of total revenue. And as we've talked about, that business can vary quite significantly from quarter-to-quarter or year-to-year, driven by a number of factors. It could be the timing of product launches, for products that we may support under those 3PL programs. It could be the timing of program launches for products that are launching. All of those things can drive some significant variability for the revenue portion of that 3PL business. And as I mentioned, it's really the predominant component of revenue for that segment. When you look at the operating profit momentum, which our guide for next year is really at the upper end of the long-term target range, that's really reflective of the the really good recognition and support and demand that we're getting for the programs of our technology services, primarily our access programs, which include GLP-1. So I think that's a good signal that our programs within our Technology Services aspect continue to have strong demand and are driving a lot of value. And so I think the operating profit that we've cited here is a good reflection of that.

And next will be Lisa Gill with JPMorgan.

Britt, wishing you the best in your retirement. Just really want to dig into oncology and multispecialty on the guidance side. Can you talk about what's in revenue and adjusted operating profit as far as organic versus inorganic? Where we are as far as some of the acquisitions that you made and how they'll contribute to 2027? And then further, when we think about what happened in this quarter, where there any impacts here from weather? We know that you had talked about weather, but any impact there? And anything else that you would call out as we think about fiscal '27 specific to oncology and multispecialty?

Lisa, thanks for your question. Let me start with the weather question because this is one that we've got really over the last several months. And I can tell you that as Brian mentioned in his comments, we did see some weather impacts in January. But for our full quarter, weather did not have an impact on our operations. Whatever impacts that we saw on demand during that couple week period in January recovered within the quarter. So that's not a factor that we've talked about and it's not one we're talking about today. As we think about the oncology and multi-specialty segment, we are going to be lapping both acquisitions of PRISM and Core Ventures that we completed in the first quarter of last year. And underlying, I mentioned this a couple of times in my script, the organic growth of that segment has really been coming in right around 13%. Now when you look at the guide, remember, as I called out a couple of times here, last year, we did have $51 million of gains in the second quarter related to sale of an equity investment and other market actions. So the organic performance of the segment is actually a little bit stronger than the guide reads. And we believe that the guide is strong, and it's actually at the upper end of the long-term target range. So we feel good that the acquisitions are performing well. The integrations are going well. And as we lap that, the organic growth rate is going to be really in the middle of that long-term target range.

Yes. And I would just add, we continue to look to grow the provider network either through the attraction of oncologists to our existing practices or we have a funnel of what we think are attractive targets, obviously, projecting the timing of those is not that easy, but we continue to be an active negotiation. We think that will continue to be a part of the growth algorithm for this business.

And next will be Erin Wright with Morgan Stanley.

Great. I was wondering if you could unpack a little bit about what you're seeing in just the core North American Pharmaceutical segment. What's embedded in guidance in terms of just underlying utilization trends. I think you mentioned stable in your prepared remarks. And then just for the quarter as well, I think you called out just specialty products more broadly last quarter. And in this quarter, you're specifically calling out specialty products to health systems. I guess, can you talk a little bit about what you're seeing on that front and what continues into 2027?

Yes. Thanks for the question. On the utilization front, we have seen stable utilization. And what I mean by that is year-over-year growth in utilization has been fairly constant now for several quarters. It's growing, albeit at a very stable rate really for the last, I'd say, 2, 3 years. And so we factored that into our guidance as really one of the foundational aspects. Specialty continues to be where you're seeing the most innovation, you're seeing the most growth of all categories. We're well positioned there. We talked at our Investor Day about the size and scale of our specialty business, both on the distribution side and to multi-specialty that continues to be strong for us. I mentioned health systems. We've been strong positioned in health systems for many years. We continue to have a strong value proposition there. And certainly, specialty products in the health systems has been valuable for us and we are bringing a lot of value to our customers. So we're seeing good growth. We saw very strong growth in fiscal '26. We expect that, that growth will continue into '27. And our guide, where we placed our guide again is at the upper end of the range, the long-term target range that we provided. So we feel good that the momentum continues to be strong.

And next will be Brian Tanquilut with Jefferies.

And Britt, thanks for all the partnership over the years. Maybe just as I think back to the GLP commentary, I appreciate your answers to the questions earlier, but when we think about the LRP, how are you thinking of what -- or how should we think about let's assume there in terms of the sustainability of demand in the Access Solutions portion of the business as it relates specifically to GLPs?

Yes. Great question. I would say really on both the distribution side as well as on our Technology Solutions side, the growth has been strong over the last 3 years from a distribution perspective. Again, we're seeing distribution revenue growth of in the mid-20% range for the last several years. Sequentially, it was down in the fourth quarter, as I talked about, but again, it still grew 22% in the quarter. And the solutions that we provide, both on the prior authorization as well as on the affordability are still a high demand and driving a lot of value. There's a lot of other services beyond just the basic prior authorization that our teams have added adjacent products to. And we're still seeing very strong growth there. And I think that's evidenced by the operating profit growth in the segment and the guide that we put in place for next year. So the category continues to grow, the need for the services that we provide, both prior authorization and some of the affordability products continues to be strong.

And next will be Michael Cherny with Leerink Partners. .

Britt, good luck on the golf game as you go forward. Maybe to talk a little bit about the MSO side, and especially as your onboarding Core Ventures in the Florida Cancer business. As you think about the ongoing wrap services that you have relative to the oncology as a whole, -- how is the pipeline changing in terms of additional services you can build out as you get bigger in scale? And where are the opportunities to continue to expand, whether it's within oncology or other areas, the totality of services to potentially drive incremental revenue and profit streams.

Michael, I'll start on this one. So I just mentioned a moment ago, we still think we have room to go just expanding the base of providers. And part of that expansion rests on the strong value proposition we have for providers, including the investments we're making in the practices themselves in things like ambient scribe, making the physician work experience, just focus more on patient care, less on administrative version that we think that helps address burnout. That attracts people to our network that is either individuals or other practices. So that's still, I think, a key part of the growth algorithm. And then we think we can use technology to continue to operate the business more efficiently, but to extract better and deeper insights that can help support and scale our Ontada business. And to, frankly, continue to grow out the SCRI ability to engage more physicians more deeply in the recruitment of clinical trials. So I think as these technologies emerge and we continue to take better and better advantage of them, we'll continue to find ways to deepen both our value proposition for the physicians and for the manufacturers, and that creates sort of this virtuous cycle.

And next will be Elizabeth Anderson with Evercore ISI.

Congrats, Britt, on your retirement and look forward to hearing about that. In terms of your -- what are the things that's come up, I think, for people on the earnings calls this quarter, is what's happening with the biosimilar shifts? And obviously, you've been helpful in educating us about the difference between Part D biosimilars and the Part B biosimilar waves to come. How are you kind of working with your customers to sort of anticipate some of STELARA these shifts and others in the Part D space? And how do we think about that being incorporated in your guidance for 2027?

Well, I'll go ahead and start, and certainly, Brian can add. I think as we've talked about now for the last several years, we're -- we think the biosimilars have a lot of opportunity going forward. And really, they're a win-win-win. There are a win for our providers who can make a clinical choice and determine what products they want to use for their clinical protocols, they're generally lower cost for patients, more efficient for a distributor In terms of distributor economics, it does matter, which -- whether it's Part B or Part D drug and the type of services and the number of services that McKesson can provide. And so really nothing has changed on that front. We provide services for our providers. They make the clinical choices on the products that they want to use. And if there's additional services like GPO services or other type of handling services that we can provide, that just adds to the overall experience. It lowers the cost for both providers and for patients. So we think that there's -- it's growing. We're up to 89 now that are approved and 72 launch. So that continues to grow and it continues to add choice and lower cost, and we think we're well positioned to provide those services.

We do distribute biosimilars to all our segments: hospitals, retails, pharmacy, obviously, community, Part D channel is the most attractive for us.

And next will be Glen Santangelo with Barclays.

Can I just -- Brian, can I just follow up on Elizabeth's question there for a second. I think you just said that the Part B channel is the most interesting for you. And I apologize if that's not what you said. But I think what people are really concerned about is if you look over the next several years, you have more than 1/3 of the oncology market that's clearly going to be impacted by either the IRA or a biosimilar transition. And so when you think about the price of those oncology drugs coming down, Britt, if I heard you correctly, you just said it's a win-win-win for the provider. But if he's getting reimbursed based off of ASP and the price of that drug is sort of coming down, is the practice better off? And then Brian, I don't know how to think through sort of the by margin impact that it may have on your distribution business given the lower price. So I think we're really just trying to understand that biosimilar transition through your specialty business. And if you really believe it's going to be -- augment your longer-term operating profit. Sorry for the word salad.

I was -- you get the prize for the longest question, but well framed. So on the distribution side of the business, I think we've said that biosimilars will be for us somewhere between generics and the brands, and we continue to think that that's true. The dynamic is a little more complicated in the community setting, the Part B setting. We've got this dynamic of ASP. And usually when -- in our early experience with these products, when they launched, the initial launch, this is a good thing for the practice. As Britt referenced. And then you've got to make sure you sustain that ASP. And we've seen biosimilars come into the market and come out of the market. But the one advantage that we have is because of the network effects, particularly in U.S. oncology and we think ultimately retinology is we can drive adoption to these biosimilars or to the innovator drug in a more uniform and rapid way. And that creates value for the manufacturer that they're willing to compensate the GPO and the distribution business for.

And next will be Daniel Grosslight with Citi.

I'll add my congrats to Britt on your retirement. It's been great working with you over the past few years. I wanted to focus a bit on free cash flow and capital deployment priorities for fiscal '27. Guidance does imply a bit of a step down in free cash flow, about 13% reduction year-over-year despite the 10% increase in AOP. So I was just curious what's driving that reduction in conversion in fiscal '27? Obviously, fiscal '26 was fairly strong. And as we think about capital deployment priorities, doesn't seem like you're taking your foot off the pedal on investing in the business, shareholder -- share repurchases are strong. So I'm curious how you're thinking about M&A in fiscal '27? And if there's any shifting in your M&A priorities or just the available targets?

Yes. Thanks for both of those questions. Let me start with the first one. I think when we look at our '27 guide for cash flow, we feel really good about that. If you look over the last several years, the guide that we gave today is still a very strong guide. So a lot of free cash flow is being generated. And we're investing -- as you mentioned, we're still investing in the business in a very accelerated way to drive operating efficiency for future growth. I mentioned in my remarks for '26 that part of our cash flow generation in the fourth quarter was driven by timing. And look, we've always talked about timing, whether it's the day of the week that a quarter ends on or the day of the week that we either have a large payment to a manufacturer, it could be a Tuesday, Wednesday at the end of a quarter. working capital timing does impact quarter-to-quarter. But if you look over a long period of time, the moving average on cash flow is up, and it's in line with really the performance that we've had on an operational basis. As we think about our capital deployment strategy, it has not changed. Brian and I have always talked about there's really three pillars to that, and it really starts with growth. Our priority is to continue to grow the business and grow the business on strategy. We're able to find opportunities to advance our growth pillars with good financial returns. That would be the priority for us to do that. Secondly, we're always going to be returning capital to our shareholders. We've got a growing dividend that is growing in relation to earnings growth. And of course, we want to continue to return capital to our shareholders through share repurchases. We think that, that's been very value creative over the last several years. And then finally, underpinning all of that is the maintenance of our very strong investment-grade credit rating, which we've -- I think we've done a really nice job given the strength of our balance sheet. And so that's always a priority for us. So again, I think if we step back and think about it, we want to not only grow the business, both organically and inorganically, but at the same time, continue to return capital to our shareholders. And obviously, we have a unique situation here as we separate the medical business. We've got some funds that we're raising, which we can utilize in a value-creating way, modeling purposes for our outlook. We've put that into share repurchases. But as we've always talked about, if there's opportunities for growth that are on strategy with good financial returns, we have the opportunity to move capital from the repurchase side over to the growth side or vice versa. We always try to be very efficient with our balance sheet. And I think if you look at the percentage of our cash flow that we've deployed back either through M&A or to our shareholders, it's quite high. So we do have a very efficient balance sheet. So our strategies are strong. They've delivered a lot of value and really nothing has changed as we think about '27.

And next will be Charles Rhyee with TD Cowen.

Congrats, Britt. Good luck to you to the future here. If I can go back basically to the North America pharma guide. Obviously, you kind of touched on the rev guide here, and I would understand that's probably sort of the continued impact of price changes in the market. First, is that the right way to think about it? But the second part is when you look at the AOI growth here, it's actually a little bit above the LRP targets of 5% to 8%. Maybe you can help us understand what's maybe driving the better than expected performance there and similar to biosimilars, but there's a lot of small molecule generics coming maybe characterized how that might be a benefit either in this fiscal year or in coming fiscal years.

Yes. Thanks for the questions. Let me start with the North American revenue. As we think about going from '26 to '27, there's a couple of things that we're lapping here. First of all, we had 1 quarter of revenue related to a large customer that we onboard in the previous year. So we're lapping that. We also had 3 quarters of revenue related to Rite Aid. It's not an income impact or it was a very minor income impact. But from a revenue perspective, we do have 3 quarters of that Rite Aid revenue that we're lapping. And as we mentioned in my remarks, at least in the fourth quarter, we saw some impact from branded pricing manufacturer declines in those prices that we'll have those for a full year now. And so when you look at those factors and you look at the underlying organic growth -- revenue growth of the business, it's actually quite strong when you look at it historically. In terms of the adjusted operating profit growth, we feel really well positioned. As I mentioned, specialty pharmaceuticals continue to grow very well. We're very well positioned and have scaled position in that marketplace. We're getting great operating efficiency. I talked about the consolidated operating efficiency in terms of operating expenses as a percentage of gross profit was down 293 basis points in FY '26. A lot of that efficiency is coming from the investments that we've made across our network, investments that we made in infrastructure, and certainly, a lot of that is having a positive impact on the North American segment. So again, I think the segment remains strong. There's good momentum in that segment, and we feel good about our '27 guidance.

Okay. Well, thank you, everyone. I appreciate everyone joining us today for our call. And as always, taking your thoughtful questions. I appreciate our operator facilitating this. As we close out a really great fiscal '26, I want to thank the 43,000 McKesson employees for their commitment to the work they do every day to advance our mission. We're pleased with the momentum across the enterprise. Leveraging our differentiated portfolio of health care service solutions. We're excited to continue execution on our strategy and the value creation for our shareholders, our customers and their patients. And just a final note of thanks Britt to you for your dedication and your friendship. It's been a tremendous pleasure the last 20 years.

Thank you.

Thanks, everybody. Have a great evening.

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

All right. Good afternoon, everyone. Thank you for joining us here. For those of you who don't know me, I'm Glen Santangelo. I'm the analyst at Barclays that covers the drug wholesaling group. And for our next presentation, we're very excited to have McKesson here with us today.

And to my right is a very special guy, Britt Vitalone, who I think most of you know is the Chief Financial Officer of the company, but only for a couple of more months. We got some very sad news that Britt has -- well, happy news for him, sad news for us that Britt has decided to retire, but he'll be around for a couple of months. And let me just say thanks for everything, and we're obviously very sorry to see you go. And if it's any indication, you saw the way the stock reacted the day that press release came out. So that should give you some indication of how valuable people thought of you at the company. So we wish you nothing but the best in retirement in Sarasota, right? And your golf game. So best of luck to you.

So I think right off the bat, it's kind of important to say there's nothing behind your retirement or anything like that. There's no change to the guidance or anything like that. So we could just move on from that retirement conversation and let you retire in peace. Is that fair?

First of all, thank you for having us here and for your kind words. We did reaffirm guidance. We gave the dates for our May earnings event as well as conferences upcoming. And so we reaffirmed our guidance there. Our long-term guidance or targets that we provided are still in place today.

So it's just a good time for me after 20 years with the company and 8 years as the CFO for the company. It's a good opportunity for me to do some retirement things like work on my golf game, but also to continue on as an adviser to the company, particularly focused on the separation of MedSurg. And I was saying this morning that when I joined the company 20 years ago, I joined the MedSurg business. That's how I came to McKesson, and I get to be an adviser on the way out as we separate it. So it's a good way to kind of close things out.

But you'll be in your seat until May 29, so that will incorporate the fiscal 4Q results and conference call and the fiscal '26 guidance and stuff like that?

Yes.

Or '27 guidance, rather?

That's right.

Okay. Excellent. All good. So we'll have you around for a little bit.

You will have me around for a little bit.

All right. So maybe, okay, with all that sort of put aside -- and sorry, I felt like it was important to spend a couple of minutes on that. But why don't you maybe just sort of give us a quick recap? I mean, the company a couple of weeks ago reported fiscal 3Q, stock obviously had a positive reaction. Maybe you just want to sort of recap some of those highlights from the quarter, maybe some of the things that might have surprised you on the upside or maybe things that maybe didn't play out as you expected.

Yes. We had another good quarter of financial results and performance. And this is just an extension of many quarters over really a multiyear period now where we've continued to operate with operational excellence and deliver strong performance again in all of our segments as well as a company. We had 16% adjusted EPS growth over the prior year. We had 13% adjusted operating profit growth versus the prior year. So very strong operating performance.

We saw a strong performance in our North American pharmaceutical distribution business, and we saw very strong performance in our core strategy pillars of both oncology and multi-specialty and in our CoverMyMeds business, which had 18% growth in adjusted operating profit year-over-year. We continued along the path of portfolio management, which I think we have done a really great job over the last several years and made some good progress on our separation activities related to MedSurg and continue to execute against a disciplined and strong balance sheet and capital deployment. So it's just -- for us, it was a continuation of many quarters of strong performance. And really, the focus that we have and the consistency of executing against our strategy really played out into another strong quarter.

Okay. All right. So why don't we sort of dive in on the North American pharma business, you sort of talked about that. I mean the revenue growth, I think, was 9%. The operating profit, a little bit slower at 6%, but I think there were some unusual items in there that maybe you could just help us sort of think through. But I think when you factor those out, you were looking at almost 9% of operating profit growth. When you sort of unpack the performance in that division this quarter, anything stick out to you in terms of just volume growth, sort of generic performance? Like what's -- help us think through the core and what's driving that above-average growth in the cores to help us assess kind of the durability of those trends?

Let me first address the year-over-year. Last year, in Q3, we had held-for-sale accounting in our Canadian business related to our exit of Rexall. And so when you account for that, we really had much stronger growth, closer to the revenue growth that you cited here.

We're seeing good performance across North American Pharmaceutical, both in our U.S. Pharmaceutical business as well as in Canada, where utilization remains stable and growing. Our scaled networks and capabilities continue to deliver good operating performance. We're seeing operating leverage being delivered across the business through the efficiency of our capabilities.

And we continue to see strong growth in specialty. And specialty revenues are still growing faster than any other area. And within health care, we're seeing our customers, our largest customers are growing faster in this area. And that really is playing to the scale distribution capabilities that we have. So across the board, the performance is very strong. And again, I would just emphasize, we continue to see efficiency gains within the business, and that's leading to operating leverage.

All right. Just to lean on that topic a little bit. I mean, when we think about the volume trend that you've been seeing, to your point, it's been kind of strong. When we were coming into this year, just thinking about the macro, I think people were somewhat excited about tax refunds and the benefit to the consumer. Maybe there was some concern around ACA reforms and how that might ultimately impact utilization. We've seen some wobbling in the job market and maybe some companies are laying people off. Anything macroeconomic-related that makes you -- that catches your eye with respect to volumes or anything along those lines?

I wouldn't say anything that stands out. I mean, utilization has been steady and stable and continues to grow. And as we had anticipated when we were putting together our guide last year, it is strongest still in specialty. So those kind of macro factors are playing out really in line with the building blocks that we had for our guidance.

All right. Maybe just sort of thinking about the continued strong generic performance. One of the things we do is we're always trying to assess generic pricing and the impact and how that ultimately filters down to your business. And through some of our work and some of the consultant conversations we've had, it sort of feels like to us that generic pricing has probably gotten maybe 1 turn a little bit better as opposed to -- or I should say less bad as opposed to maybe what it was, call it, a year or 2 or 3 years ago. And I'm just kind of curious, when you think about the generics performance, is pricing something that's playing a role in that solid performance? Or is there something else that we should be thinking about? And are you seeing this improving generic pricing trend?

Yes. I would say that what we use is we leverage the capabilities we have at ClarusONE to provide us a really strong position in terms of the scale, the partnerships that we have across hundreds of manufacturers that allows us to source as effectively as anybody else. And we do that with really two key goals in mind. One is surety of supply for our customers, and the second is the best low-cost quality product available. And we do that, we sell that back into our customers at a low-cost way with that high surety of supply, and that allows us to create a spread for McKesson as well at the same time.

And we've seen some stability in that over the last year. It's -- obviously, generics continue to be a competitive marketplace, but I would say competitive and stable. And it's one of many capabilities that we provide to our customers, along with specialty products and specialty distribution and cold chain capabilities, one of many things that a full-line wholesaler does really well like McKesson.

One of the things when I -- I mean, we picked up coverage of the stock, as you know, back in December. And having been away from it for a few years, having covered it for a long time before that, it was interesting sort of getting back up to speed. And it felt like to me, most investors had a positive view of the space. But one of the things that they were concerned about is sort of the IRA pricing implementations and maybe the reduction of some pricing across the branded spectrum in '26 and '27.

And I guess the concern might have been, right, has McKesson been able to renegotiate all their fee-for-service contracts effectively, how do we get comfortable that there's not going to be any hiccups along the way. Would you say the company had adequate time to sort of respond to those changes? And how would you sort of describe the negotiations around your fee-for-service contracts to account for the IRA in '26 and '27? And do you feel comfortable with the actions McKesson may have taken?

Well, first of all, this is a normal part of our operations is to work with manufacturers to understand what their pipeline is, to understand where those drugs are going to be distributed into what channels and what services are needed by McKesson to do that. And we work with our supplier partners as we have for as long as I've been with the company on exactly those things. And we work with them to establish a fair value for the services that we provide, and we get paid a fixed fee-for-service for that. So this is nothing unusual. It's something that we've done for as long as I can recall and a natural part of our operating platform.

In the case of IRA, we had more time because the drugs were selected back in 2023. So we had more time to work with the manufacturers on what their strategies were and what services they needed and to establish that fair value. But it's no different than the process that we've gone through for years and that we will continue to go through. We provide a select set of activities that the manufacturer needs, and we've set a fair value for those services, and we're paid a fixed fee for that.

Okay. All right. Maybe shifting gears, why don't we talk about the oncology and multi-specialty business for a second. Going back to last quarter, I mean, revenue growth, 37%, and operating profit, 57%. And obviously, that's somewhat influenced by an M&A benefit. But when you think about the core organic trends in there, still very strong. Could you strip out the M&A piece for people to help us think about how fast that business is actually growing?

Yes. So we're really pleased with the oncology and multi-specialty adding not only our oncology platform centered on U.S. oncology and the addition of Florida Cancer at the beginning of our fiscal year, but now the build that we're doing on our retina platform with PRISM. And then adding to that, we added the Spokane Eye Clinic is a good example of that later in the year. The full year guide that we've given for the segment is AOP growth of 51-or-so percent, 50% to 53%. And we've guided that 30% to 34% of that is going to come from acquisitions this year.

So underneath the acquisition performance, which has been really good, and we're really pleased with the integration that we've seen thus far, the core business is continuing to grow in a very solid way. The platform has practice management, has drug distribution. It has GPO services. Ontada, which is our data and insights business, as well as some of the clinical trials and clinical trial research business that we have. So it's a very broad set of capabilities. It's growing at a very healthy pace, and we're excited about what's going to happen in the future.

And the other thing that I would say that I think it's lost a little bit, even outside the strength that we have in oncology and now in our Vision platform, we are still providing distribution and GPO services to over 14,000 providers across a multitude of specialties. So it's a very scaled and effective network of drug distribution, GPO services and other types of capabilities for those providers.

I mean, McKesson clearly deserves a lot of credit for being early in the specialty game. I mean, I can't remember when that original oncology deal was -- somewhere around 2010, but it's just amazing. When you think about sort of here we are all these years later and you're still growing that business close to 20%, right, ex acquisitions, it's pretty impressive. So how do we think about the maturation of that business and the outlook for that business without giving any sort of guidance or anything? But like where do you think we are in terms of the growth curve of that business?

Well, I would just step back for a minute and talk a little bit about the strategy. What we're looking to do here is build platforms and build platforms where there is high drug innovation, high drug investment, which leads to high drug spend. And then we can service that drug spend on behalf of biopharma and the providers in a very efficient and effective way. And on top of that, we can build a set of GPO services that is going to, again, benefit providers and their patients through quality and low-cost access to products and services.

We've got data capabilities. If you think about our oncology business, all the providers -- and there are now almost 3,400 oncology providers within USON -- they're clinically providing care on 1 EHR. So you're enriching the data with insights and additional analytics to 1 EHR for clinical support purposes. Also, it can be used for -- by manufacturers as they're developing their drug pipelines with clinical research and insights there. And then, of course, the clinical aspect of it in terms of clinical trials and clinical trial research and site management, that's also a part of the platform. So a very broad platform of services and capabilities that's providing additional access, low-cost quality products and services and affordability to both clinicians and their patients.

Right. So when you think about how diverse these platforms are that you just sort of described and all the different services that you're providing, it seems like there would be ample sort of M&A opportunities to continue to augment these platforms, right, and build upon these services and deepen your penetration within them. And so how do you think about the M&A landscape and just sort of given you kind of maybe created the blueprint and other companies are maybe trying to follow in that blueprint? I mean, essentially, how do you think about the M&A market at this point? And are you starting to see greater competition, upward pressure in acquisition multiples? Like how should we think about the evolution here in the next sort of couple of years?

Well, again, I would just come back to we are going to look to build platforms where there's high drug innovation and investment spend. So it's not on strategy for us to just go out and buy a bunch of providers. It's -- practice management economics are -- they don't really meet our threshold, and managing a bunch of providers is difficult. And so when you can do a lot of other things to support the providers and support their clinical decisioning and clinical choices and so forth with all these other services, that's a better economic output for all in that platform.

We will continue to look to add providers to both oncology and to our Vision platform to continue to augment that. And I think we will continue to look at capabilities that support our clinical capabilities, whether that be clinical trials or site management capabilities, not only in oncology, but potentially on our Vision platform as well.

All right. One of the areas that maybe doesn't get enough attention -- you talked about all these biopharma services that the company provides, and it's clearly becoming increasingly emphasized in the communications with the company. How do we think about the contribution from these services? And how meaningful is it? And where can it ultimately be?

Yes. So I think you're talking about our Prescription Technology Solutions. Yes. So that business now is going to generate over $1 billion in AOP, adjusted operating profit. And what we have done over a long period of time is a lot of the hard work in plumbing. We've put together a set of capabilities that is connected inside the workflow of providers and payers and pharmacies, all supporting capabilities and products and services that biopharma needs for their drugs.

And we have over 1 million providers now on our platform. We have over 50,000 pharmacies. There's over 23 billion transactions going through Relay every year. And that's all interconnected. So what we have in a very differentiated way is the scaled platform that is connected in the workflow of providers and payers and pharmacies, providing them capabilities to better drive access, affordability and adherence solutions. And we think that, that is really the hard work and the differentiation is that scaled set of integrated networks.

Just maybe two more direct questions on Prescription Technology because I think it's important to sort of hear from the company. One of the big drivers last year and even last quarter, 18% operating profit growth in that division. You talked about the demand for access solutions, right? And I think investors have focused on the evolution of the GLP-1 market and maybe that demand for those access services or pre-authorization and eligibility checks and things might be less going forward than maybe what they've been historically. Do you see any potential degradation in the demand for some of these products, just sort of given the evolution of that market? Or is that not the right way to think about it?

Well, we haven't seen it, and GLP-1s continue to grow. GLP-1 prior authorizations remain steady, stable and growing and an important part of the business. I think we've talked about this before. GLP-1s are an important program for us for prior authorization, but they represent about 11% of the segment's revenue. So there's lots of other products and services and solutions within the portfolio. We -- in our access capabilities, we supported over 700 brands so far until today. So there's certainly the GLP-1 products, but there's over 700 other brands that we have provided access solutions for.

So it's a broad set of solutions across pharma and their needs. We've got affordability solutions that we provide. Again, our focus on access, affordability and adherence solutions across these product solutions in a very scaled way. So I think the growth is there. The solutions and the differentiation continue to be strong, and the receptivity to these solutions remains very high.

Maybe just one more question. I'm almost even a little embarrassed to ask this, but one of the things -- the questions we get from investors is around AI vulnerability, right? People just -- they want to focus on the fact that McKesson runs different technology businesses. And we were in this crazy environment in the month of February where anything software-related was getting hit. And so, do you get the question? You've been marketing with investors, do people ask you about it? Do you have any sort of commentary around AI vulnerability or anything along those lines that's worth sort of calling out for people?

Look, it is a question that we get. Are you going to be disrupted by AI? Are other companies going to do that? And I would say a couple of things. First of all, we are implementing AI and technology in a very strong way. I'll give you a couple of examples here in a second. And I think the other key piece here that is very difficult to replicate is the scale of the connectivity across the number of providers, payers and pharmacies that we have and the fact that our solutions are integrated inside their workflow. That is very difficult to disintermediate.

Now there's a few things that I would just point out of how we're using technology today. We have -- within CoverMyMeds, we have a chatbot that is now handling over 35% of all transactions. That's one example. The second example I would give you is we're using automation to increase the efficiency of our personnel in terms of the number of cases that they can handle during verification season. They're now -- case loads are 120 cases more per person than they were a year ago, given some of the automation and efficiencies that we've added. Those are just two small examples. We're continuing to look at adding technology into our integrated solutions.

Can we circle all the way back to where we started around the medical business, where you started with McKesson 20 years ago, the planned divestiture in 2027. Talk to us about why does that make sense? Particularly looking at the fourth quarter results. I mean, operating profit down again, sort of lower volumes. Why is that business sort of better on its own? Just talk about the rationale behind that spin and how confident are you in that business's ability to do better on a stand-alone basis?

Yes. Look, this is a great business, and it's been a great business for a long period of time. We have really good product capabilities on the private brand side. We've got excellent distribution into physicians' offices across really all sites of primary care. And we've got a strong footprint in extended care, particularly out to the home.

So the products and the services that we have are very strong. Being able to focus that business and stand it on its own so we can focus on its strategy with its own growth capital, I think will really set it on its path. Today, inside McKesson, we've been very clear that our strategic pillars where we have differentiation in higher growth, higher-margin areas is in biopharma services and oncology and multi-specialty. And that's where we're focusing. And so while we've been allocating capital for the operations of the business for MedSurg, we've not been allocating growth capital. We're very disciplined about how we're allocating capital within the company, and we're allocating it in biopharma services and oncology and multi-specialty.

So separating it allows that business to stand on its own, go after its own strategy with its own capital structure. We've done this before. We did this with Change Healthcare when we divested that business. We exited our European businesses. We exited our retail assets in Canada. We felt like in all cases, it put those businesses on their own path with their own growth capital. And in all cases, McKesson was able to get more disciplined with its capital allocation and grow faster.

Maybe since we're just -- we're pretty much out of time, I have one last question for you. It's a financial question. Can you just quickly comment on the guidance that you discussed on the fiscal third quarter call? You raised and sort of narrowed the range for essentially the balance of the fiscal year, which is just the end of this month. Any sort of thoughts on what gave you the confidence to raise and sort of refine that range a little bit outside of maybe just a stronger-than-expected 3Q? And then I fully get you're not going to comment on fiscal '27 or don't want to guide fiscal '27. But any sort of high-level pushes and pulls that we should be thinking about for fiscal '27?

Well, first of all, we raised and narrowed given the performance that we've had all year, the visibility that we have into the rest of the year, the momentum that we've had, not only this year, but really the last several years. And given the portfolio of assets and how they're performing, as we just talked about here earlier, we felt confident that we could raise and narrow that guidance. And that guidance now will be -- that range gives you 17% to 19% year-over-year adjusted EPS performance. And underneath that, 13% to 17% in terms of adjusted operating profit. So it's very strong.

Again, as we think about next year, we are well positioned in not only North American pharmaceutical distribution, where we have a strong specialty footprint, but our oncology and multi-specialty business. Again, not only the oncology and retina platforms, but again, servicing providers across 14,000 providers within that segment in a very strong way. And then the continued growth momentum that we're seeing in Rx Prescription Technology Solutions. All of that is underpinned by a strong balance sheet and strong cash flows and disciplined capital deployment.

Okay. As we're done and we're wrapping up, I want to give you -- I want to flip it back to you to give you the last word if there's anything we didn't discuss you think is important to mention, any final word you want to leave with the investors here today?

I think McKesson has performed on a consistent, stable and strong level for years now. And the consistency to the strategy that we've laid out year in and year out, our ability to continue to invest in the business to drive modernization and automation and get further efficiencies. These businesses are very well performing, and they're well positioned to continue to grow in the future.

Well, congratulations. Britt Vitalone, CFO of McKesson.

Thank you.

Great career. Incredible.

All right. Good morning, everyone. Thank you for joining for this session of Leerink Global Healthcare Conference. I am Mike Cherny, the healthcare tech distribution analyst here at Leerink. It's my pleasure, I believe, for the last time, for me at least, to have Britt Vitalone, CFO of McKesson. For anyone who missed it, Britt announced his retirement, I believe, last week, I've lost all track of time. So we will certainly miss Britt. We have a number of the members of the McKesson IR team, finance team here, Jeni Dominguez, Paul Atkinson. I thought I saw you come in somewhere. Yes. Perfect. So a great team here. Really appreciate everyone coming. And first of all, Britt, congratulations. You'll certainly be missed given the track record that you and the team have had.

Maybe as you kind of start very big picture. Think about your 8 years in the CFO role, obviously a longer time at McKesson. Like what are you most proud of in terms of the position of the business that you're leaving with as you step into retirement?

Yes. Well, first of all, thank you. I think that I'm proud of a lot of things, the company has been around for over 190 years. And I think what we've done over the last several years is build a consistent set of performance. We've built a good track record. We've built good teams within the company. And I'm certainly proud of the financial organization. It's a great organization. I'm proud of what they've been able to do. And I think that we have worked on building a portfolio that is focused on a differentiated set of assets that we have.

We're smarter with our capital allocation as a result of really applying that strategy in a very consistent way. And ultimately, that's led to really consistent strong performance over a very long period of time. So I think the company is in a really good spot to continue executing against that. And I look forward to seeing how that plays out over the next several years.

I know you're sticking around as advisers. You're not completely gone with everything, but I appreciate that perspective. And so maybe just diving into the business, you talked about the consistency of the performance. A lot of it from our perspective has been specialty-led. As you think about the components of your specialty business, and we appreciate that you broke it out into a new segment, so we can track some of that growth. How do you think about where the contributions have come on the combination of pure distribution capabilities versus biopharma services versus some of the leading MSO assets, given that you obviously have been in the market for a significant time owning U.S. Oncology and others.

Yes. Well, I think it all starts with if you think about where there's higher innovation from a drug research perspective. So there's high innovation in specialty therapies. There's high investment in those therapies, and that's led to over the last several years, higher growth in specialty products. We have a very scaled distribution network to provide logistics and supply chain services to support across all channels within healthcare. Across all those channels, specialty revenues in FY '25 were about $180 billion. Now, that's continued to grow this year, obviously, as specialty continues to grow.

In the more high complex, high-dollar specialty primarily in our MSO in oncology, multi-specialty and health systems. Our specialty revenues last year were about $90 billion, and they've grown it compound annual growth rate of 18% over the last 5 years. So it's the track record of the scaled networks, the efficiency of those networks, the high service and supply levels that we provide to our customers, all of that has been very helpful to the growth of that business. In oncology and multi-specialty as an example, we have built very strong platforms that are provider-led and providing them not only specialty therapies but services to support their clinical decisions in specialty therapies.

In oncology and multi-specialty, we serve over 14,000 providers now across many different specialties. And then, of course, on the biopharma services side within our Technology Solutions, we have a number of services, whether that be providing higher access affordability or adherence solutions to support specialty therapies. And recently, maybe we'll talk about this in a minute, recently we added a capability within CoverMyMeds, our specialty access and affordability solutions, which is now going to further integrate the capabilities that we have beyond covering those drugs and therapies under the pharmacy benefit to also cover drugs and therapies that are under the medical benefit. So I think there's a lot of capabilities across the company that support specialty.

And maybe just start there before we hop back on to the -- some of the distribution services. When you think about CoverMyMeds, it's had a multiyear significant outperformance, thanks to the rise of GLP-1s and your role in helping to provide access with the prior authorization work. As you think about that next leg of access, like what does that look like in terms of the ability to continue to make sure that you're not just providing an opportunity for cost management for within the channel, but also just additional services above & beyond, given how much affordability has become so much more, at least in the headlines relative to the drug pricing side?

Yes. Well, I would just start maybe just back up a little bit. When you think about the capabilities within CoverMyMeds, GLP-1 prior authorizations are 1 component of that. I think as we've talked about in the past, the revenue contribution to the segment for GLP-1 prior authorizations is somewhere around 11%. So important, but that just speaks to the number of other products and services within the portfolio, whether that be prior authorization for other specialty drugs, and we have many programs that we provide access and prior authorization for or affordability products. And certainly, we're working on providing adherence capabilities as well.

And I think adding the capabilities of specialty access and affordability and really focusing on expanding beyond the pharmacy benefit is a good example where we look for opportunities to grow across an integrated set of solutions that we have on a scaled platform. And I think that's really the key is we have spent a lot of time building out a scaled platform of over 1 million providers, over 50,000 pharmacies, billions of transactions annually that go through relay, all integrated on a common platform and all of this going through the workflow of those providers and pharmacies. And I think that's really the key is that integration capability that we have.

I constantly marvel at the amount of touch points you have on that side of the business. we'll probably come back. But jumping back to especially the core North American pharma business. There are a lot of market changes heading into '26, first year of IRA negotiated drugs. You've been fairly transparent in your comments that from a unit economics basis, you were able to successfully negotiate with a lot of manufacturers to make sure that economics were still met. How do you think -- maybe give some more context of what those negotiations brought to light in terms of your ability to continue to prove the value add for the core logistics, core handling capabilities in terms of the network that you've created over time?

Well, it builds on the long relationships that we have with biopharma and whether it be a change to a price on a Part D or a Part B drug, if we're providing logistics and supply chain services on behalf of those products, we're going to be paid a fair value for those services. And this is something that has been part of the conversations that we've had and the partnerships that we've had for years and years and years. So whether it's IRA or some other reason that there's a change to a WACC price, the conversations that we have with the manufacturers are still the same. It's what services do you need for what products and what channels what do you need McKesson to do and let's establish a fair value for those services, and we'll be paid a fixed fee for those services.

So in the case of IRA, now you've got drugs that were announced in 2023. So that actually is a longer period of time than we typically would have to work with a manufacturer on a price change, and that gave us more visibility into it and more time to work with the manufacturer on exactly what the change was and what they were going to need from that.

And I appreciate the flagging that this is not the first time you've seen a manufacturer price change. I mean, I know category-wise, we all saw insulin a couple of years back. But as you think about the next wave of negotiations, be it the next leg of IRA drugs, potential changes on further MFN agreements. What does the push and pull look like to make sure that when you work with manufacturers that you also are providing the ample value that they want so they can get their drugs effectively to market?

Yes, there's a great recognition of what we do. And I think people sometimes just think about us moving boxes from point A to point B. There's so much more involved in that. Some products require special handling or cold chain. And I think the manufacturers also recognize the financial intermediary component that we play where we hold the inventory for them. We hold the receivable on behalf of the end customer for them. So there's a huge working capital responsibility that McKesson takes on as well. And there's so many delivery points that McKesson coordinates where a manufacturer, in many cases, can deliver to our redistribution center, our national redistribution center, deliver the product at one point, and then we'll handle all the forward logistics beyond that. So that makes the conversations a little bit easier in the sense there's a great recognition of all the different value and touch points that we provide.

Maybe a little bit of current events. We've all been watching what's been going on in the Middle East, both from just a geopolitical perspective, but also the change in fluctuations on commodity pricing. You have a business that has a lot of logistics functionality. Can you just remind us what happens when you -- in the past or how you work on contracting when you see some of these potential moving pieces, especially involve a level like this on oil and gas and some of the other commodities?

Yes. This has happened many times in my career where we've had this. I think we've been able to manage it quite well. Look, we have conversations with both sides, both our customers and our partners. We try to understand what the impact is going to be, try to minimize that impact. I mean at the heart of what we do as a company, our goal is to provide better access, affordability for our customers and their patients. And so we do that. In some cases, we will pass the cost on to our customers. In some cases, we'll defer that. But we're always doing something that is at the core is to provide surety of supply, low-cost, high-quality drugs and medical supplies, and we're trying to do that at the best cost available for our customers.

Thinking about the role of biosimilars. As you think about the various different touch points of the organization, how are you thinking about where biosimilars could be most impactful to your business? And I guess maybe to ask a second question, what proactively can McKesson do to enhance the adoption of biosimilars, both within the Part D and Part B setting, if anything?

Yes. Well, first of all, we don't make clinical decisions. We provide the ability for our clinicians to have choice and flexibility and surety of supply. I say this a lot, but it really does come back to providing capabilities in terms of flexibility, low-cost, high-quality access. And so in the case of biosimilars, I think they're very additive in the sense that they provide another way for there to be access to drugs. So there's more flexibility and choice. Generally, for clinicians, it gives them more clinical choice depending on what therapy regimen they want to provide for their patients. It generally provides additional surety of supply into the marketplace, and it's generally lower cost for both the providers and for patients.

So our job is really to partner with manufacturers to introduce those into the network to provide that choice and that surety of supply and ultimately, the value for that for customers is a better cost alternative.

And then maybe thinking specifically within oncology and ophthalmology retina care because you have greater access given the U.S. Oncology core ventures, PRISM, et cetera. What are some of the strategic decisions look like there as they work to manage the combination of best care for individuals versus opportunities to optimize the business through biosimilar adoption?

Well, one of the things that we have within those platforms is we have data going through one EHR system, which provides better clinical information for the clinical choices that our doctors and providers make within the practice. And then our job is to use the scale and the capabilities within our GPO and our sourcing capabilities to provide them as much choice as possible so that they can have a choice for how they actually implement those therapies. And I think we do a really great job of that. So we have more capabilities. Those capabilities provide more access to choice for clinicians and ultimately, the same or better quality and lower cost.

Speaking of sourcing, I feel like we don't talk about ClarusONE much anymore.

10-year anniversary this year.

I feel like that's a good thing because if we're not talking about it, it probably just means -- I don't want to say it's on autopilot because I know it's hard work, but it means that it's doing what it's supposed to be doing. Can you just give us a quick update on some of the activities that ClarusONE is pursuing now as you continue to improve your sourcing functionality?

Yes. It has been 10 years, and I think it's been a tremendous venture for the company, for our partners and for our customers. We have good scale. We have continued to improve our sourcing capabilities in the way that we negotiate and partner with manufacturers, the size and choice that is on the platform now. And additional things that we're doing is a good example, we partnered with U.S. antibiotics to partner to bring domestic production to our customers for antibiotics, which would give greater access and more surety of supply for those particular drugs. So that's a good example where we're partnering with a domestic firm to provide that additional surety of supply at a better cost, and that's a good example of how the partnership is continuing to grow.

Maybe if we think about your customer base, you have an extremely wide group of organizations. You obviously service now 2 of the largest mail pharmacies. But the independent pharmacies have been long been a key component of your base of your ability to service, your ability to add incremental value add . How do you think about the health of your independent customer base right now? And how are you thinking about the additional services you're continuing to roll out to them given that they are obviously different entities than some of the larger national pharmacies that you tend to work with?

Yes. Well, their needs are different. And so obviously, we've had a long history through Health Mart of working with independent pharmacies and providing them a whole source of capabilities, whether it could be inventory tracking, it could be medication adherence capabilities. Obviously, drug spend is one of those. They are a very -- they're very strong and vibrant group. They've gone through a lot over a number of years, but they've continued to reinvent themselves and thrive through that. They're an important node to the community care. Again, we talk about what McKesson is focused on is access and affordability in the community setting. They're an important node to that community setting. And so we have continued to work very closely with them and closely on the capabilities that we have that will address the needs of independent pharmacy. And we think that, that's a very important part for a thriving community set of care.

And as you think about their pain points, GLP-1s seem to be a pain point for every pharmacy, but you would think that there's more pain points given the mismatch of pricing and product availability over time. Are there areas, whether it's GLP-1s or others, where your ability to create excess value becomes even more important because of potentially upside on economics that they have to deal with, just given the nature of category and drug class?

Well, one of the things that we do through Health Mart and Health Mart Atlas is reimbursement services and reimbursement capabilities. So that's another opportunity for us to provide them more choice and more access to low-cost reimbursement options. So that's a good example of where we can, across the network, provide some of that scale.

Maybe coming back to the Pharmacy Tech Solutions business for a bit. I mean we highlighted some of the dynamics of CoverMyMeds, but RelayHealth is the backbone of so much that goes on, on the pharmacy side. As you think about the role of RelayHealth in particular, where -- how does that platform, the technology platform, evolve over time? And it seems like an area where you could apply AI to make it even more valuable. How are you thinking about whether it's there or other aspects of the tech platform, your opportunity to monetize AI in a way that makes McKesson a better offering to clients?

Relay, I think, is just one important aspect to a really scaled platform. Obviously, it has a connectivity into 50,000 different pharmacies. And so that's an important part. But it's really the integration of all the different components within CoverMyMeds, whether that be RelayHealth, whether that be our prior authorization and access services or affordability solutions. We have begun to implement AI in many different places. CoverMyMeds now has chatbots, which are addressing over 35% of all the volume that comes in.

So that's a way of us being more efficient and again, integrating that technology into the platform as well. We're using AI in our call centers and in our verification programs. It's actually helped the efficiency of our employees. Now employees are handling more than 120 more cases than they were a year ago as a result of some of this technology. So those are just 2 examples of where we're using it. I think over time, we'll continue to implement that into our products. Again, the fact that we have such scaled networks and the durable foundation that they provide, continuing to implement technology across all parts, not just Relay, but all parts of it are going to be important for us.

And as you think about your broader technology offering. You talked on a piece of CoverMyMeds, we have the iKnowMed EHR, which integrates a lot of your organizations. And then you have Ontada, which I know isn't just a technology platform but is intended to encompass all of your various different oncology components. Where does Ontada sit today? And how does Ontada create monetization opportunities, revenue opportunities for McKesson?

Yes. So Ontada ends up being that central focus point for the platform in U.S. Oncology. It is the -- it manages the EHR, which all of our providers are practicing on a single EHR. It helps to analyze and enrich and add insights to that data, both for clinical purposes as well as for opportunities to partner with manufacturers as they continue to look at innovative ways to develop their drug portfolio. That's a way that we can monetize that. But the critical component of that is the fact that all of our providers are practicing clinically on that. That data is going through there. It's being enriched and insights are being added, real-world evidence. And so for clinical purposes, it makes it stronger, but also it provides opportunities for manufacturers as they continue to innovate their drug portfolios.

And as you think about the expansion there, like what are some of the opportunities or maybe even looking back, where has Ontada expanded where that incremental value has come into place? I know you have some joint ventures on the clinical research side. Is that how we should think about the continued mushrooming expansion of Ontada in terms of a value-add entity, whether it is sold outside or just used for the umbrella.

It's really -- it's leveraging the integration of the data across the platform, whether that be in the practice themselves, it could be used for GPO capabilities to provide better access and cost for our providers. Certainly, the clinical data and the enrichment of that and the real-world insights that are going through that. So I think, again, it's sort of that central fulcrum point for all the activity within the platform.

And how has the JV gone relative to the work you're doing with Sarah Cannon Institute on some of the clinical trial opportunities within U.S. Oncology?

Yes. I think we're really happy with that. We've got well over 3/4 of the providers within U.S. Oncology now are doing clinical trials in some way. There's an opportunity for them to continue to accrue more patients. But the partnership has expanded the clinical trial capabilities. It's certainly added site management opportunities. And so I think it's gone really well. There's an opportunity for it to continue to grow, to continue to bring more providers in to do clinical trials, to continue to accrue more clinical trials. I think we're pretty excited about the opportunities there.

Maybe turning to MedSurg. You've been fairly transparent in the steps in the process. As you think about preparing that business to be a separate business, like where are we right now in terms of the standup efforts? And how should we think about the next level of milestones on the organizational side, leadership appointments, capital structure, et cetera?

Well, I'll start with the leadership. The leadership is in place. The leadership that's been running that business for the last several years has done a great job, very close to the business. And I think we may make additions, obviously, as any company, you become independent, you add capabilities or things that you need to do, you're going to add additional leaders to that, but the leadership is really in place for that today. We've done a lot of the hard work already. So we've identified the services that needed to be done in a transitional way. We're executing against those TSAs. So they're in place.

We're executing against those. And now we're moving to the next stage, which is really preparing the capital structure of the company, and that work is ongoing today. We've done a lot of the boring things like put controls in place and do carve-out audits, super important, obviously, to prepare our company to be independent. Lots of hard work that goes into that, but all of that is in place as well. So we're focusing on the company, the operations, improving the performance of that business and getting it ready as we go forward into the next stage of the S-1s and things like that.

Boring is not always a bad thing.

Boring is super important, trust me.

But relative to the business, I mean, it's still part of McKesson. Obviously, it's an elongated process just because of the nature of standard business up. What's going on that business in terms of the strategic investment, strategic prioritization? There's been a number of restructurings you've done given the nature of the business. Like how are you thinking about making sure that, that business has the best footing once it is a stand-alone company?

Yes. I think the products and services and our capabilities that we have are really, really strong. It's identifying the markets and channels that we think we can have differentiated growth in. In some of the channels that we're in today, like the physician office is not growing as fast as it once was. And it's still a vibrant opportunity for us, but there are other channels, physicians affiliated with health systems as an example, where we have an opportunity to continue to grow there. So I think it's really focusing on the cost structure, I think, is in a good spot, continuing to focus on that as we stand it up, but really focusing on our go-to-market capabilities in some of these higher-growth segments.

We have a very strong private brand portfolio, continue to add to that. That provides more choice and better cost for our customers, continuing to focus on our sourcing capabilities outside of just private brand, but across, continue to focus on the operations of the business. We've made a lot of investments in the operations of the business over the last several years. So I think the business is structurally in a good spot. It's really figuring out those strategies in those higher-growth markets where we have really good opportunity to grow.

Turning back to the recent MSO acquisitions. Where are we in the integration, both of Core Ventures FCS and PRISM in terms of McKesson's ability to make them better businesses?

Yes, also good businesses that we've acquired to start right. We have done the integration work in terms of bringing the sites on, bringing them on to our contracts, getting the drug synergies. We'll continue to do that over time. So the integration work has gone very, very well. We're in the phase now of how do we grow those businesses, bringing them in into McKesson with the scale and the set of solutions that we have, there's an opportunity for them to continue to grow and to add to them. So we added the Spokane Eye clinic as an example, and we'll continue to add additional providers to that platform. So I think it's gone really well. We're pleased with the performance in the first year. We continue to feel good about the 3-year road map that we gave you on the contribution. I think that they're at or maybe even slightly ahead of where we guided originally. So we're pleased with it.

And you talked about the additions. And I think one of the underappreciated things over time with especially your ownership of U.S. Oncology is the organic growth. It's one thing to buy chunky assets. FCS is obviously very chunky, but it's another thing when you keep adding 2-doc practices, 5-doc practices, those add up. As we think about these 2 assets, is there still additional platform capabilities, be it in smaller pieces or chunkier assets to continue to grow, continue to scale on their own?

The opportunities really are going to be on the clinical capability side. So we talked about clinical trials within U.S. Oncology. Are there other clinical research services and capabilities that we can add to that. We're studying that. We're going to put into place things that we think we have a differentiated capability for. But certainly, in both of those instances, both on the vision side and on the oncology side, there is an opportunity to continue to advance and add clinical capabilities.

We talked about AI relative to the outward-facing side and the ability to have as a customer-facing entity. You started to touch on AI, especially on your most recent earnings call, inward-facing, operational efficiencies, working capital management, et cetera. How should we think about where the priorities will lie internally on the AI front, given that you have a business that is incredibly scaled and has a ton of automation, but continuous process improvements can never hurt.

Yes. And we've been investing in the business for several years. And if you look at the culmination of all of those investments over time and you look at the operating leverage that's come out of that, it's very significant. At Investor Day, I talked about the fact that not only are we investing in some of these capabilities, but our operating expenses as a percentage of gross profit has improved 1,200 basis points in the last 5 years. In the recent earnings call, I talked about operating expense leverage improving 138 basis points.

So it's no single one investment that we're making or single capability. It's a culmination of all these. It could be things like automating demand planning. It could be automating our procurement processes. It could be things that we're doing in the back office around chargebacks, which is a very important process as well. It could be a whole number of financial or other IT transactions that we're automating. So we're looking at all of these. All of these have had an impact over time. We'll continue to make investments into this because it is driving operating expense leverage.

Well, Britt, I think we've reached the end of time. I only hope that the -- your predecessor will have the same level of consistency that you brought to the company and help shepherd it. So thank you for everything and best of luck.

Thanks so much. Appreciate it. Thank you.

Thank you, everybody.

Welcome to McKesson's Third Quarter Fiscal 2026 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 Jeni Dominguez, VP of Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, and welcome, everyone, to McKesson's Third Quarter Fiscal 2026 Earnings Call. Today, I'm joined by Brian Tyler, our Chief Executive Officer; and Britt Vitalone, our Chief Financial Officer. Brian will lead off, followed by Britt, and then we'll move to a 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.com and to the Risk Factors section of our most 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 will discuss during this webcast, including a reconciliation of those measures to GAAP results can be found in today's earnings release and presentation slides. The presentation slides also include a summary of our results for the quarter and guidance assumptions.

With that, let me turn it over to Brian.

Thank you, Jeni. Good afternoon, everyone. I appreciate you joining McKesson's Fiscal Third Quarter Earnings Call. Today's results once again demonstrate the strength and the durability of our business. Revenue and adjusted EPS grew double digits, driven by continued momentum across oncology, biopharma services, and North American distribution. The consistency of this performance gives us the confidence to raise full year EPS guidance to a range of $38.80 to $39.20, which reflects 17% to 19% year-over-year growth. I want to thank team McKesson for their unwavering commitment to excellence and to innovation, driving tangible impacts every day for our stakeholders and keeping patients at the center of everything that we do. Today, my remarks will focus on the continued progress of our company priorities and the momentum we are driving across the organization and of course, recognizing the dedication and engagement across team McKesson. Then as is customary, I'll hand it over to Britt for a more detailed review of the financials.

So let me start what I usually do at our people and our culture. We aspire to be the best place to work in healthcare and supporting our employees' growth and success remains a top priority. Our employee resource groups play a critical role in strengthening connections and reinforcing our culture of care and belonging. These employee-led networks empower colleagues to come together to advance the business and to build an environment where everyone can thrive. This year, we're pleased to see membership of more than 30%. Participation in these groups results in increased employee engagement, improved retention and to better business outcomes.

Now let me move on to our two strategic growth pillars: oncology and multispecialty and biopharma services. Within our oncology and multispecialty business, we continue to support a growing network of providers through a portfolio of services, including distribution, practice management, commercial services and clinical research. Today, the U.S. oncology network has approximately 3,400 providers, and PRISM Vision brings together over 200 providers in retina and ophthalmology. During the quarter, we continue to make progress in the integration of Florida Cancer Specialists and PRISM Vision, contributing meaningfully to the strong performance of the segment.

Oncology continues to be a compelling growth opportunity, and we're leveraging our scale, leadership and connectivity in the community space to stay ahead of the market's evolving needs. Recently, we released our advancing Community Oncology report, highlighting the central role of community practice in cancer care and the anticipated growth in precision medicine and innovative therapies. These insights underscore the strength of our platform and the opportunity to leverage our solutions to deepen provider and biopharma partnerships to expand access to next-generation treatments and to address barriers to care in the community setting. The report highlights our role in helping community providers navigate a dynamic policy environment. We have and we will continue to be actively engaged with lawmakers, patient coalitions and provider organizations to advocate for changes that will expand patient access and support the growth of community practices. We firmly believe in the unique value of community-based care and the importance of advancing high-quality local cancer care, in particular.

In November, we hosted our inaugural McKesson Accelerate conference, an annual event focused on the future of community oncology with more than 1,500 industry leaders in attendance, the event brought together the people, the insights and the innovations that will strengthen care delivery and advanced patient outcomes. It reinforced the powerful momentum across our oncology platform and the critical role McKesson plays in shaping the future of cancer care together with our many partners.

Moving on to our biopharma services platform within our Prescription Technology Solutions segment. Our industry-leading platform supports a wide range of brands across all stages of the product life cycle from product launch, all the way to the [ loss of ] exclusivity. During the quarter, we added over 50 new programs across 43 unique brands to our platform, highlighting the strong demand for our access and affordability solutions. With the pace of drug innovation accelerating, we're energized by the tremendous opportunity to bring novel therapies to patients and to enable real-world impact. To achieve this goal, we continue to invest thoughtfully across the business, modernizing and expanding the services we provide to our biopharma partners and building next-generation patient access and affordability solutions. As an example, we're investing in capabilities to simplify the electronic patient enrollment process, reducing time from days or weeks to sometimes just minutes while reducing administrative errors and improving accuracy. Today we're digitizing enrollment for more than 1,600 specialty medications, creating an opportunity to apply our experience in improving access to retail medications and helping stakeholders navigate through the complex enrollment process for specialty medications. Our evolving suite of solutions will accelerate the patient authorization workflow, speed up the process for patients to access medications, introduce transparency with real-time prescription benefit check and improve affordability with automated searches for financial assistance programs. We're also focused on opportunities that improve our own work flow efficiency. By applying technology, automation and enhancing training to streamline our operations and elevate the customer experience, we are improving our efficiency. As an example of this, in our annual verification season, each full-time employee is successfully supporting 120 more patients than we achieved last year. This is a meaningful increase in our productivity.

Let's move on to our pharmaceutical distribution business in North America, which I would remind you includes our combined footprint in the U.S. and Canada. We continue to see strong broad-based momentum supported by stable utilization trends, strength in specialty and focus on operational excellence. Our growth is underpinned by the strength of our long-standing strategic partnerships with manufacturers. Together, we're navigating an evolving market, shaping the future of health care and advocating for solutions that will improve the access and affordability of care.

In January, the Inflation Reduction Act planned Medicare Part D price changes went into effect. We work closely with our manufacturer partners to ensure a smooth transition. As a trusted distribution partner, we bring unmatched scale, deep supply chain expertise and broad channel reach to deliver exceptional quality every day. We're positioning the business for long-term growth by investing in capabilities that meet the evolving needs of our customers and the market. And an example of this would be our multiyear plan to expand the refrigerated capacity across our network. We're halfway through this 5-year effort. And once completed, we will have increased refrigeration capacity at many of our forward distribution centers by more than 50%. This expansion strengthens our ability to support temperature-sensitive products and further strengthens our commitment to meeting customer requirements with operational excellence.

Within our North American pharmaceutical business, our teams continue to leverage AI and automation to drive efficiencies. In Canada, we're modernizing our contacts and our digital operations, create a more advanced and simplified customer care experience. It includes capabilities like agent assist and enhanced live chat. Our early pilots are demonstrating strong results with close to 100% service accuracy and reliability while reducing turnaround time. In the U.S., we launched an AI chat tool in November to specifically handle customer inquiries related to the Drug Supply Chain Security Act. By enabling natural language answers to complex DSCSA data questions, we prevented 75% of inquiries from being escalated and materially improve first contact resolution. These are strong examples of how we're using technology to simplify the supply chain at scale while improving customer experience.

And last thing I'd like to note in this segment. I'm proud to share with everyone that recently our Health Mart pharmacy franchise was honored as a recipient of the 2026 American Pharmacists Association H.A.B. Dunning Award. With this award, we're joining a prestigious list of chain pharmacies and other industry supporters who are dedicated to advancing the practice of pharmacy.

Let me give you a brief update on our portfolio actions. We continue to progress in our separation of the Medical-Surgical business. On January 1, we reached a major milestone in the separation journey with transition service agreements now in place across the enterprise. This is an important step as we prepare the Medical-Surgical business to be an independent operation. We continue to focus on the next steps, which include establishing an independent organization and capital structure. We continue to track towards the time line of an IPO by the second half of calendar 2027, subject, of course, to market conditions and customary regulatory approvals.

In January, we announced the completion of the divestiture of our Norwegian business. marking the final step in our full exit from the European region. Over the past 4 years, our teams executed this multistage initiative with dedication and focus, ensuring a smooth process and a successful outcome. With the invaluable experience we've gained, we're confident in our ability to execute on our current portfolio actions, optimizing our assets, portfolios and accelerating growth for the enterprise.

So let me conclude my remarks. McKesson delivered another strong quarter of results. Our strategy is working, and it continues to propel us forward as we advance our mission, as we grow the business and as we drive meaningful value for our shareholders. Looking ahead, I continue to be confident in our ability to extend the momentum and execute against our strategic priorities. Our broad portfolio and our diversified solutions position us to continue to drive sustained long-term growth.

With that, Britt, I'll turn it over to you.

Thank you, Brian, and good afternoon. Today, we reported another strong quarter of execution, advancing our strategic priorities with clear measurable performance. We reported record quarterly revenue and adjusted operating profits and saw year-over-year double-digit adjusted operating profit growth in our oncology and multispecialty and biopharma services platforms and continued strength across North American pharmaceutical distribution. These results demonstrate the resilience of our portfolio, disciplined and consistent strategy deep customer relationships and the scale and breadth of McKesson's portfolio.

Before turning to our adjusted results, I want to begin with two brief updates, starting with the divestiture of our Norway operations. On January 30, we completed the divestiture of our retail and distribution businesses in Norway included in our Other segment. This transaction marks the final step in our planned exit of Europe. In the third quarter, held-for-sale accounting for Norway contributed $0.05 of adjusted earnings per diluted share. For fiscal 2026, we now anticipate the Norwegian businesses to contribute approximately $1 billion of revenue and approximately $70 million of adjusted operating profit, which is inclusive of approximately $0.10 of adjusted earnings per share accretion due to held-for-sale accounting.

The completion of this transaction reflects disciplined execution, strategic clarity and commitment to sustain long-term value creation for our shareholders.

Additionally, during the third quarter, we recorded a GAAP-only pretax credit of $160 million or $118 million after tax within the North American Pharmaceutical segment related to the bankruptcy of Rite Aid. Remainder of my comments today will refer to our adjusted results. I'll begin with our third quarter fiscal 2026 performance and then address our full year outlook.

Consolidated revenues increased 11% to $106.2 billion, reflecting broad-based growth across the business. Higher prescription volumes from retail national account customers within our North American Pharmaceutical segment, continued momentum in our oncology and multispecialty segment, including expanded distribution of oncology and multispecialty products and contributions from recent acquisitions contributed meaningfully.

Gross profit was $3.7 billion, an increase of 10%, led by a provider growth and continued strength in specialty distribution within the oncology and multispecialty segment.

Operating expenses increased 7% to $2.1 billion reflecting higher expenses in our high-performing growth platforms within the oncology and multispecialty and Prescription Technology Solutions segment, including current year acquisitions. We delivered strong operational execution and enhanced efficiency, driving a 138 basis point improvement in operating expenses as a percentage of gross profit as compared to the prior year. At the same time, we're making targeted investments to modernize our operations through automation and AI-driven capabilities, which we anticipate will accelerate growth while creating enterprise-wide efficiencies.

Operating profit was $1.7 billion, an increase of 13% year-over-year. This growth reflects increased demand for access solutions in our Prescription Technology Solutions segment, as well as strong growth in specialty distribution volumes in both the oncology and multispecialty and North American Pharmaceutical segments.

Interest expense was $59 million, a decrease of 5% year-over-year, driven by effective cash and portfolio management. The effective tax rate for the quarter was 23% compared to 23.9% in the prior year.

Third quarter diluted weighted average shares outstanding were 123.7 million, a decrease of 2%, reflecting ongoing share repurchase activity. And third quarter earnings per diluted share increased 16% to $9.34, driven by strong operational performance, including contributions from acquisitions within the oncology and multispecialty segment.

Turning now to third quarter segment results, which can be found on Slides 8 through 12 and starting with North American Pharmaceutical. Revenues were $88.3 billion, an increase of 9% driven by higher prescription volumes, including higher volumes across retail national account customers and continued specialty product distribution strength. GLP-1 distribution revenues were $14 million in the quarter, up $3 billion or 26% when compared to the prior year. GLP-1 sequential revenue growth was 7%. The segment operating profit increased 6% to $872 million, benefiting from growth in the distribution of specialty products, including to health systems. As a reminder, prior year results included a $19 million benefit from held-for-sale accounting related to the sale of our Canada-based Rexall and Well.ca businesses. The prior year held-for-sale accounting benefit had an approximate 3% impact on year-over-year segment growth.

Turning to the oncology and multispecialty segment. We delivered another strong quarter, demonstrating the strength of our differentiated platform and the value we deliver to our providers. Revenues increased 37% to $13 billion, driven by strong provider growth, expanded specialty distribution and contributions from acquisitions completed this fiscal year. The acquisitions of PRISM and Core Ventures contributed approximately 13% to third quarter segment revenue growth.

Operating profit increased 57% to $366 million, led by growth in provider solutions and specialty distribution, including contributions from acquisitions. Excluding the impact from acquisitions, organic operating profit increased 15%, highlighting the segment's strong underlying performance.

In the Prescription Technology Solutions segment, we delivered another strong quarter of performance, with revenues increasing 9% to $1.5 billion, supported by higher prescription volumes across our third-party logistics and technology services businesses. Operating profit rose 18% to $277 million, driven by continued demand for our access solutions, including prior authorization services. Our connectivity and workflow integration remain key differentiators for patients, providers and biopharma partners.

Turning to Medical-Surgical Solutions. Revenues were $3 billion, an increase of 1% compared to the prior year, driven by higher specialty pharmaceutical volumes. Operating profit decreased 10% to $265 million, reflecting lower volumes across physician office settings and lower incidence of seasonal illness.

Wrapping up our review with corporate. Corporate expenses were $156 million, which included increased technology infrastructure investments. Corporate expenses also included pretax gains of $11 million or $0.07 per share from equity investments within McKesson Ventures portfolio as compared to gains of $6 million or $0.04 per share in the prior year quarter.

Turning to the third quarter cash and capital deployment, which can be found on Slide 13. We ended the quarter with $3 billion in cash and cash equivalents. Third quarter free cash flow was $1.1 billion, which included $175 million in capital expenditures. For the trailing-12 months, McKesson delivered free cash flow of $9.6 billion, demonstrating strong operational performance and working capital management.

During the quarter, we also returned $781 million of cash to shareholders, which included $680 million in share repurchases and $101 million in dividend payments. Our balance sheet remains a significant source of strength, underpinned by strong cash generation and disciplined capital allocation. This robust financial position gives us the flexibility to invest in growth initiatives, while continuing to return cash to shareholders.

Let me move now to our fiscal 2026 outlook. We continue to see sustained momentum across our core businesses as demonstrated by our fiscal third quarter results and improved full year outlook. We're raising and narrowing our fiscal 2026 earnings per diluted share guidance range to $38.80 to $39.20 representing 17% to 19% growth over the prior year. We anticipate revenue growth of 12% to 16% and operating profit growth of 13% to 17%, reflecting our strong third quarter performance and the confidence that we have in the trajectory of the business.

The consistency of our strategy, operational execution and disciplined portfolio management have led to outstanding long-term results. Over the past 5 years, we've delivered a compound annual growth rate in operating profit and adjusted earnings per share of 11% and 18%, respectively.

Turning to the segment outlook for fiscal 2026. In the North American Pharmaceutical segment, we continue to deliver a differentiated and dependable value proposition, providing best-in-class solutions to our customers and their patients. We anticipate revenue to increase 10% to 14% and operating profit to increase 8% to 12%.

The increased operating profit outlook reflects strong third quarter performance, stable utilization trends, strong specialty distribution growth and our continued focus on operational excellence and efficiency. In the core distribution business, we anticipate continued growth of GLP-1 medication. However, we anticipate this growth may vary from quarter-to-quarter. And as a reminder, prior year results include a $0.15 impact from the divestiture of our Canada-based Rexall and Well.ca businesses at the end of the third quarter of fiscal 2025.

In the oncology and multispecialty segment, we anticipate revenue growth of 29% to 33% and operating profit growth of 51% to 55%. The guidance includes the acquisitions of PRISM Vision and Core Ventures completed in the first quarter of fiscal 2026. We're pleased with the performance of these acquisitions, and we anticipate that they'll contribute approximately 30% to 34% to the fiscal 2026 segment's operating profit growth.

Our full year outlook reflects the impact of these acquisitions and strong organic specialty distribution volume growth. We remain well positioned to support innovation and growth across the oncology and multispecialty markets through our diversified portfolio of assets, [ spanning ] the care continuum.

In the Prescription Technology Solutions segment, we anticipate revenue to increase by 9% to 13% and operating profit to increase 14% to 18%. We remain confident in the outlook for this segment, driven by organic volume growth across our access and affordability solutions. Our improved full year outlook reflects the strength of our annual verification program, and we've observed meaningful year-over-year volume increases through the end of January.

Our full year outlook also anticipates technology infrastructure and capability investments. We anticipate fiscal fourth quarter technology investments be an approximate $0.05 incremental cost as compared to the prior year.

As I previously discussed, revenue and operating profit trends in this segment are not linear, and results can vary from quarter-to-quarter due to a range of factors, which includes utilization trends, the timing and trajectory of new product drug launches, the evolution of a product's program support requirements as it matures, which could result in the shift to other services or a program termination, product delays and supply chain dynamics, payer utilization and formulary requirements, the annual verification programs that occur in our fiscal fourth quarter and the size and timing of investments to support and expand our product portfolio.

Moving now to the Medical-Surgical Solutions segment. We anticipate revenue and operating profit at the lower end of 2% to 6% growth. We're closely tracking the development of the current illness season. We have observed a soft illness season demand in our fiscal third quarter. In the second half of December, illness severity levels peaked based on CDC data. Variability remains a key factor, timing, severity and the duration of each illness season can drive variation and meaningfully affect results on both a quarterly and annual basis. We continue to execute the separation of Medical-Surgical segment with discipline and focus. And with the transition service agreements in place, we're making significant progress to establish the Medical-Surgical segment as an independent company. McKesson has a strong track record of advancing our mission and unlocking shareholder value in complex and strategic transactions. In recent years, we've demonstrated this multiple times including the exit of Change Healthcare, Europe and our Canada-based retail operations. These portfolio actions have streamlined the company, sharpen strategy and created significant shareholder value, including more than doubling returns on invested capital.

Looking ahead, we remain confident in our ability to execute on the planned separation, accelerate growth across our differentiated platforms in oncology, multispecialty and biopharma services and maximize shareholder value.

We anticipate corporate expenses to be in the range of $620 million to $650 million, which includes the year-to-date impact, $15 million of pretax gains from equity investments within the McKesson Ventures portfolio.

Turning now to items below the line. We're narrowing the guidance range for interest expense to $215 million to $235 million. We anticipate income attributable to noncontrolling interest to be in the range of $230 million to $250 million, driven by the continued success of ClarusONE generic sourcing operations, and we anticipate the full year effective tax rate of approximately 19%.

Wrapping up our outlook with cash flow and capital deployment. For fiscal 2026, we anticipate free cash flow of approximately $4.4 billion to $4.8 billion. Our outlook includes plans to repurchase approximately $2.5 billion of shares with weighted-average diluted shares outstanding of approximately 124 million. We remain committed to a disciplined capital allocation framework that balances investment in high-return growth opportunities, the return of capital to shareholders and the preservation of a strong balance sheet supported by an investment-grade credit rating.

Our focus on accelerating growth across the portfolio of businesses aligned with our strategy, continues to deliver superior shareholder value creation. This consistent focus on execution has increased return on invested capital by more than 1,900 basis points since fiscal 2020 and now exceeding 30%. Our financial strength and flexibility remain a competitive advantage, enabling us to invest for future growth while returning meaningful value to our shareholders.

In summary, McKesson delivered strong third quarter results, driven by performance across our core businesses, and accelerated growth in our strategic growth platforms, oncology multispecialty and biopharma services. The updated outlook reflects our confidence to build on this momentum, delivering optimized value creation for our shareholders. Our continued focus on executing against our strategies, combined with disciplined portfolio management and thoughtful capital deployment provides the foundation for a durable financial profile and positions us for sustained future growth.

With that, let's move to the Q&A session.

[Operator Instructions] Our first question will come from Allen Lutz with Bank of America.

A two-part question. First for Brian. You talked about technology and automation, allowing some of your employees to support more patients in the annual verification season. Can you talk about the specific investments you're making there? And then as a follow-up to Britt. How should we think about the longer-term opportunity to improve margins in that segment? It seems like through this annual verification season, you're seeing really strong margin pull-through there. Just curious what those margins can look like longer term?

Thanks, Allen. Yes, we were very pleased to see the investments we've been making in technology and whether we want to call it AI or large language models or generative AI or just other general tech tools to improve basically the workflows we experience internally to allow, for example, e-mails to be automated and red and queued up to agents in a way they're able to work through them in a much more rapid fashion, and that translated into a big boost in productivity. And what, as you all know, is a very person intensive blizzard season for us. So we're very pleased with that, and that's not a sole example. I also gave an example of how for DSCSA, which was a new process being stood up around a new regulatory requirement. We sort of built it digitally native from the start so that we're able to autonomously resolve 75% of customer inquiries, which is obviously a great outcome for the customer, and it's a great outcome from us for an efficiency and a productivity standpoint.

I can really go through examples like this throughout the entire business. We think of it in 3 different areas. We think about our employee experience, how do we make it easier to be an employee at McKesson. So there's less kind of paperwork that has to be done and all your time can be focused on the job at hand, and it's just a great experience to work at McKesson. We want to focus on our patients and our customers. We want to make their experience with us seamless as can be. And then obviously, we want to focus on things where we think we can translate it into efficiency, productivity, leveraging the scale of the business. So it's really, I could -- if you want to give me the rest of the 28 minutes, I could go through company by company, business by business. I don't think we want to do that, but we're very excited, and we think these are strong proof points that the investments we've been making in the technology are yielding results for the company.

Allen, maybe I'll just follow up on your question. I have a lot more to add than what Brian said. But as we look at the portfolio within the segment, I just would remind you that half of the revenue of the segment is related to third-party logistics services, which are more distribution related. But the other half are technology service businesses to support biopharma. And as Brian pointed out, we look to position the portfolio to continue to automate capabilities and automated services and products on behalf of our biopharma partners. And I think we like the trajectory that we're seeing in the business. If you look at the segment, we've seen operating margins grow over 130 basis points year-over-year. So again, focusing on positioning our capabilities and our services to automate those products for biopharma partners is going to continue to improve that trajectory going forward.

And next will be Brian Tanquilut with Jefferies.

Congrats on the quarter. Maybe, Britt, just as I think about 2027 -- Fiscal '27 guidance, obviously, a little earlier, just with one quarter behind us. Just curious, any puts and takes you would call out or any nuances that we need to consider? And then as I think about just oncology and multispecialty margins, I think those were down almost 50 basis points sequentially versus down 10 last year for comparable periods. So any call outs there that you would share with us, especially since the moving pieces of the segment are new to The Street?

Brian, thanks for the question. Let me try to address that for you. As we think about '27, as we typically do, we will provide you a full set of our outlook and guidance thoughts in May when we to our fourth quarter call. But I would just point out a few things that clearly, we're seeing in the business. Brian and I both talked about stable utilization trends. We continue to see very strong specialty distribution growth and specialty product growth, and that's playing out very well, not only in our North American Pharmaceutical segment, but also in the oncology and multispecialty segment where we're investing. We're acquiring providers and building out platforms, and that certainly is having an impact on the positive growth that you're seeing. I think some of the things that Brian also talked about, we just chatted here briefly about the operating efficiency that we're seeing across the company. And as I mentioned, we saw a 138 basis point improvement operating expenses as a percentage of gross profit. So continuing to focus on efficiencies in the distribution centers, in the back office across the products that we're building. Those are all really positive building blocks as we move forward into FY '27. As I think about the segment itself, to your question, we're really pleased with the growth that we're seeing in the segment. I talked about the organic growth of the business. We had 24% organic revenue growth. When you strip away the acquisitions, we had 15% organic adjusted operating profit growth. Quarter-to-quarter, you're going to have some variability from mix. Generally speaking, we're pleased with the -- how the segment is building and progressing on both revenue, operating profit dollars and the overall margins and adding acquisitions like PRISM and Core Ventures are going to be accretive to all of those.

And next will be Lisa Gill with JPMorgan.

Britt, I just want to follow up to that comment. So if I go back to last quarter, you talked about $51 million of a nonrecurring gain in oncology and multispecialty. So actually, if I back that out, it looks like the margin improved in that division by nearly 100 basis points. So you also made the comment today that between PRISM and Core Ventures that the contribution is still roughly the same as what you said last quarter, 30% to 34%. So I want to ask the question in a different way. It appears to me that the margins are improving quarter-over-quarter. And I'm just curious what's driving that? I know at our conference, Brian and I talked about, for example, ambient [ scribing ], making that more -- the physician more effective. We talked about biosimilars. Is there anything you would call out specifically as to what's driving that margin improvement? And how we think about that going forward?

Yes. It's a good point, Lisa. And again, that gain that you mentioned that was in the second quarter. As we added the providers to the platform for Florida Cancer, as we've continued to build out our vision platform, those are positive mix attributes to the segment. We're also seeing continued growth in specialty and specifically in oncology products. So those are favorably impacting the overall operating margins of the segment.

And to the point that Brian made, we are early in our journey of automating and building AI capabilities for our customers, but we are seeing that have an impact, and we would expect that impact will continue to build over time. Quarter-to-quarter, you'll have some variability. You'll have some mix variability. But overall, as I mentioned in my comments to Brian, we believe that the additions of both PRISM and Florida Cancer are accretive, not only to revenue and operating profit dollars but also to the margins over time.

And next will be Michael Cherny with Leerink Partners.

Really nice job on the quarter. Maybe if I can hone in a bit on North American pharma for 4Q. The implied guidance still indicates a pretty nice acceleration in terms of overall growth quarter-over-quarter or I guess for the full year. Is there anything we should consider relative to the growth trajectory, anything that's driving that within the North American side? And then relative to what is a wider range than normal, any way we should be thinking about differences in the puts and takes on the top and bottom of the range?

So again, I think if you think about our third quarter results, as I mentioned, we had the held-for-sale accounting benefit last year, that created about 3% year-over-year impact to the segment. So our results were still quite strong in the quarter. As we continue to move into the -- to our fourth quarter, we're pleased with the growth that we're seeing in specialty. I mentioned the growth that we're seeing, specifically in health systems and overall, the efficiency gains that we're seeing. Again, I mentioned the operating expenses as a percentage of gross profit. That's been consistently improving for us. That's the efficiency and the operational excellence and some of the investments that we've been making across our distribution center and in other areas to support our business, whether that be inventory management or demand planning. So I think just generally speaking, the momentum in the business is good. I don't know that there's anything else specifically that I would call out. But overall, the momentum, the mix, the scale of our operations is performing well.

And next will be Eric Percher with Nephron Research.

Maybe a question on the regulatory front. And Brian, I would ask you, it feels like the distributor value prop has held up very strong in the face of IRA, MFP, there seem to be a lot of variables in D.C. right now. I'd be interested in your view of what areas you're leaning into the most? And how you try to influence things that may be outside of your direct negotiation like MFN and changes to gross to net?

Yes. Sure. I'll attempt to tackle that one. As it relates to IRA Part D, the first 10 drugs that went live -- just went live in January. So that's obviously not in our Q3 numbers, but it is in the increased guidance range that we have provided to you. And as you know, these kinds of things are -- they happen routinely. And so we sit down with our manufacturing partners continuously and talk about evolution in their portfolios and their pricing strategies and the value that McKesson brings and speaking in a very constructive way, we feel good about how those conversations have progressed. As we've talked in the past about MFN, for example, we think that it's -- the way it's rolled out today, it's largely a niche population of cash-paying patients that those with commercial insurance will still access their medicines through the same way. We will continue to monitor it. We'll continue to watch it. As you know, we have lots of assets that can support and help scale those if we thought that that's the direction the market was going to go. And then as it relates to the policy landscape in general, there's a lot out there. But as we have evaluated it, we continue to think that implications for McKesson are quite navigable. If you take something like Globe, which is Part B, it's a -- it exempts anyone that already has an IRA drug out there. It is only applicable to 25% of the ZIP codes. It's only about 35% of oncology Medicare business. And as you start to do the math and chunk it down, we don't think it's going to be that material. And the fact is that the mechanism that they're using to administer the rebate is -- really goes, doesn't impact the provider reimbursement in any way. It's direct from the manufacturer to Medicare. So the policy landscape is dynamic. We continue to have a great team in D.C. that is very engaged in the conversation. We take the approach to try to understand the problem that they want to solve. And then help find a solution that is supportive of the industry and importantly, is supportive of care being practiced in the community, where it's lower cost, it's higher accessibility, and we think it's the right answer for Americans.

And next will be Glen Santangelo with Barclays.

I just also wanted to follow up on Michael's question regarding the North American Pharmaceutical segment operating profit. Britt, I hear you if you sort of back Rexall out of last year, it looks like the growth in that segment was sort of 9% this quarter, if I'm doing my math right. And then if I look at your full year segment guidance, you're kind of implying growth of 5% to 18%. And again, as Michael suggested, it's a little bit wider than normal. And I think I ask because kind of looking at the stocks today, obviously, the market is paying a little bit more attention about the potential for decelerating growth in that core. And so I'm just kind of curious if you're seeing anything that registers on your radar screen positively or negatively heading into fiscal 4Q and fiscal '27 that we should be paying closer attention to, positive or negative for that matter.

Glen, thanks for the question. Let me just stop and just make sure that we're on the same page here. We took our adjusted operating profit growth targets for the full year from 5% to 9% to 8% to 12%. So the width of the range is the same. What we've done is just simply increased it. One, for the performance that we've seen through the first 3 quarters of the year; and two, really, the confidence that we have in the trajectory through the balance of the year, given really the strong specialty distribution growth that we're seeing, our continued focus and execution on operational excellence, the utilization trends that we're seeing. All of those are supportive of the raise that we provide you today for our full year outlook, again, with the same width of the range at 8% to 12%. So I -- and we are very pleased with the performance. We are very pleased with the trends that we're seeing. Certainly, the growth that we're seeing in specialty distribution, the strength that we're seeing across the business in retail pharmacy as well as health systems. And as I mentioned, the operational efficiency gains that we're seeing. So all of those are certainly positive and have led to the raise that we gave today for the full year adjusted operating profit.

And next will be Elizabeth Anderson with Evercore ISI.

Given the IT investments you talked about in response to Allen's questions and certainly makes sense in the long-term vision of the company. If we think about your cap deployment priorities, and you've always talked about this portfolio management, should we expect sort of a shift more towards those internal growth investments versus what we've seen recently in terms of being more acquisitive? Or would we expect a sort of continuation of what we've seen in the historical pattern?

Yes. I don't think we've changed our philosophy at all. And we have continuously for the last many years, been investing back into our businesses to innate new products, add new features, extend our differentiation. And we've similarly deployed capital sometimes to acquire capability that we think it's better to acquire than take the time to build internally. But our capital allocation framework is still the same. We still are excited about the opportunities we have to continue to scale through inorganic acquisitions that are aligned to our strategy, that fit our business model and that meet our financial returns. But our first priority is always to invest back in the growth of the business, and that can take two forms. That could be internally, we can invest in people, technologies, other resources to help expand the differentiation and expand maybe our market opportunities or we can do it through inorganically. And we're -- I think we've got a successful track record of doing both, and we would look to continue that.

Maybe I'll just add one more comment here, just to talk about our balance sheet and the financial position that we have, we have strong cash flows. And as I mentioned, our balance sheet is a competitive advantage for us, and it gives us the ability, not only continue to invest back into the business to acquire assets that are on strategy and then it will accelerate our growth opportunities, but also at the same time to return capital to shareholders and maintain a very strong balance sheet and investment-grade credit rating. We're able to do all of those given the execution that we have, the focus that we have of being disciplined, and that strength of the financial position, I think, is an advantage for us.

And next will be Charles Rhyee with TD Cowen.

Britt or Brian, I just wanted to ask, obviously, strong results here, and you saw accelerating core growth in both North America pharma and oncology, and multispecialty by our estimates here. Some of your competitors are kind of seeing maybe a little bit more deceleration in performance on a year-over-year basis. Anything specifically that you're doing or seeing specifically in your business that's contributing to that?

Well, I don't want to talk about my competitors' business, but I'd love to talk about my business. And I think it boils down to a clear strategy that's been in place for an extended period of time, a focused management team that is investing and deploying capital and resources to advance those strategies. Some good deployment of capital this past year, both PRISM Vision and Florida Cancer were great additions that fit right into our model that we're very, very pleased about. And then just great execution in the day-to-day by the teams across the business. And really embracing the possibilities of improving the business, having that mindset every day, how do we improve and make the business better. So I think it's a combination of right strategy, good execution, focused discipline and execution against that, and that's what I think's what I think has produced the momentum we've seen over the last several years.

And next will be Erin Wright with Morgan Stanley.

Great. So as it relates to PRISM and FCS, I guess, can you speak a little bit more about how the transactions are progressing. You maintained the guidance expectation in terms of the contribution for those deals. Is that true for both assets? And anything you can break down in terms of underlying MSO business growth and how we should think about that longer term? Anything to call out that you're seeing now on the MSO side, excluding or stripping out that distribution component of that segment?

Yes. Well, I would say that we maintain the full year -- the year 1 accretion guide that we provided. But as I've mentioned before, not only are we pleased with the business, we're pleased with the integration. We're pleased with the volumes that we're seeing thus far. We did make a small acquisition to add to the PRISM platform earlier in the fiscal year. And I think, generally speaking, both businesses are performing on their acquisition case, in the case of PRISM, maybe slightly ahead. So I think we're -- everything that we saw going into it and that we guided you, we -- has come to fruition. And in addition to that, I think we're really pleased with the integration work that's been done. And certainly, the volumes have been stable and growing. And all of those have led to at least maintaining the guidance that we provided. And as I mentioned, maybe just slightly ahead of our acquisition case.

And next will be Daniel Grosslight with Citi.

Congrats on a soft quarter here. I want to focus a little bit more on the RxTS segment, particularly the strong operating profit results. Hoping you can provide a little bit more detail on the drivers there. It sounds like it was mostly access and affordability on the bottom line. But how much of that growth is coming from GLP-1-related programs versus other specialty drugs? And given the significant growth we've seen in the cash pay GLP-1 channel, particularly with the launch of oral GLPs, oral [ Wegovy ]. Are you seeing any shift in prior authorization behavior?

I'll start and then Britt, feel free to add on if you want. I briefly in my opening remarks about the quarterly results, adding 50 new programs across 43 different unique brands. And that was really not concentrated in any particular area. It was LoyaltyScript, it was hub services, it was access and affordability programs. So we continue to find the market very receptive to the solutions that we have that improve access and affordability. And in the Technology business, the scale of adding new customers is very constructive for the business. It was also -- we talked about the impacts of running the business more efficiently, and that certainly added to the performance of the business. But I would say we're just pleased with the breadth of the product portfolio and the broad market support we're seeing for the solutions that we offer.

I would just make the point that as I mentioned in my remarks that what we've seen thus far in terms of our annual verification programs, they've been off to a really good start as well. We're seeing meaningful volume growth. And to Brian's point, where we're adding new programs and new customers, we're seeing good volumes across all of those, not just GLP-1s, but the new brands and programs that we're adding. And so all of this is certainly accretive to the business on a year-over-year basis, and we're certainly comfortable in raising the outlook for the full year based on that.

And next will be Kevin Caliendo with UBS.

You had called out earlier, you've made positive comments about annual verifications. I'd love a little bit more color on that. And also, do you see GLP-1s possibly introducing new utilizers on the prior authorization side? Like is that part of the thing that's giving you more confidence in the business? How is that trending? How should we think about it? I think we're all wondering sort of how RxTS is going to continue to grow at the same pace into fiscal '27 and beyond and what the other drivers are. So if you could expand on those 2, that will be great.

Yes, the -- Look, the -- it's very early days for the oral GLP-1 launch. So it's really hard to try to dissect trends from the -- given the size of the injectable market versus a few weeks of launch of the oral drug. But we are seeing some prior authorizations come through there. I think -- we'll have to track this over time. I mean I don't think anyone could tell you what share of GLP-1 oral growth will come at the expense of the injectable or what share of it will be net new customers. So that's something that we'll watch. But we're very confident the category will continue to grow.

And next will be George Hill with Deutsche Bank.

Brian and Britt, I'm not sure which one is -- which question -- which of you guys this question is for. But we know that going into your fiscal fourth quarter, we're going to see a significant number of brand drug manufacturers take price decreases. It doesn't look like it's going to hit your income statement at all, either at the revenue line or at the operating earnings line. But Britt, I would just love if you could opine what you've seen from pricing actions for branded drug manufacturers, whether we should expect to see any impact? I know that you don't want to speak to fiscal '27? And I'd love to hear you talk about how McKesson has negotiated around its value proposition and maintained it's economics?

Yes, George, I'm happy to do that. We've maintained very strong relationships with our manufacturing partners, and we have continual conversations with them about the products that they need us to support and about the fair value for the services that we provide. So we've continued to have very constructive conversations. We've continued to maintain the value that we're providing in our pricing, in our agreements with the manufacturers. And what we've seen thus far in terms of pricing activity and changes in prices has been right in line with our expectations, it's really nothing out of line and really consistent with what we've seen over the past few years. So there has been a lot of a lot of changes over the last several months, but nothing that has impacted our economics, at least from a bottom line perspective. Pricing declines will have an impact on revenue, but it's not really material to our results. And I think we're really pleased with the strength of the relationships that we have with our manufacturing partners and the ability to retain the value.

Great. Well, yes, thank you, everyone. Appreciate the great questions and really appreciate you joining the call tonight. I'd like to thank Cynthia for facilitating the call. We -- McKesson is really proud of the strong results that we delivered in our fiscal third quarter. We continue to demonstrate our strong and our compelling value proposition and our ability to deliver superior returns for you, our shareholders. I would be remiss in this call without thanking all of our employees for their outstanding contributions and their unwavering commitment to McKesson and the execution of our strategies. Together, we're all excited and the progress we're making to advance health outcomes for all. Thanks again, everybody. I hope you have a terrific evening.

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

Good morning, and thank you for joining us. My name is Lisa Gill, and I head up health care services here at JPMorgan. It is with great pleasure this morning that I introduce McKesson. Speaking for McKesson will be CEO, Brian Tyler. After that, we will have a fireside chat where Britt Vitalone, CFO, will join us. So with that, let me turn it over to Brian.

Thank you, Lisa. Good morning, everybody. On behalf of the McKesson Board of Directors and the 40-ish thousand employees of McKesson, it's my pleasure to get to share a little bit about the McKesson story and journey with you this morning.

Before I do, of course, the standard cautionary statements about forward-looking comments and non-GAAP discussions. I would point everyone to the disclosure that's on the screen behind me, and you can also find more information on the McKesson website.

So McKesson is a diversified health care services leader serving virtually every constituent in health care, pharmacies, providers, biopharma manufacturers, payers, patients. And we do this really off scaled and scalable platforms, whether that's the 33% of pharmaceuticals we distribute across North America every day, or it's the network connections that we have into the workflow of pharmacies and providers, over 1 million providers, 50,000 pharmacies. It's the scale through things like our USON MSO. We will touch over 20% of all cancer patients in the U.S. this year. Excuse me, it's just a little loud back there.

And we do this through a deep commitment to partnership, both with our customers and the manufacturers that are upstream. We're pretty pleased with the consistency and the stability of the strategy that we've been executing now over multiple years. And that is to deliver growth against our strategic priorities in oncology, biopharma services and in our core North American distribution businesses. It's through a very disciplined approach to portfolio optimization and management. We have done both acquisitions in the past to support growth. We've done divestitures, which created a more focused, nimble company, allowing us to double down on our execution against our strategic priorities. And we're delivering superior long-term results.

Our adjusted EPS CAGR for the last 5 years is 18%. So just outstanding financial performance. And doing this with a sharp lens always on capital allocation and a focus on value creation. Over the last 5 years, our ROIC has more than tripled in the business.

This is kind of our story on one page about how we delivered that growth algorithm. It starts with our purpose to advance health outcomes for all, and it's founded in a core set of values in the company we call I2Care, which is to operate with integrity in an inclusive way with a customer-first lens, accountability to deliver what we say we're going to deliver, to do that in a way that is respectful and with operational excellence. And these have been our foundational principles for over 20 years.

Our priorities always start with our focus on our people and our culture. We want to be the best place to work in health care. We want to attract the best talent. We want to invest in that talent to develop them to be future leaders in our industry. Our growth pillars in oncology and multi-specialty and biopharma services, I'll elaborate on in a moment. I mentioned the strength we have in North American distribution. and an intense focus on how we continually invest into the business to modernize and accelerate the performance of our businesses. So you take the organic growth we have in these markets, combine it with the operating leverage that we're able to deliver on consistently and our disciplined approach to capital allocation, it creates a long-term adjusted EPS growth targets of 13% to 16% for the enterprise.

I thought it would be useful since I talked about our focus on portfolio optimization to just reflect a little bit back on the business and the way we talked about it and what the assets were in our fiscal year '20 and then where we are today. You can see we used to report in U.S. Pharmaceutical and Specialty Solutions, which included U.S. Pharma and our oncology businesses. We reported in Prescription Technology, our European Pharmaceutical segment, Medical-Surgical and then other, which included Canada and Change Healthcare. For the past several years, we've obviously exited Change Healthcare. We've made the decision to exit Europe. We have announced our intent to separate our medical business, and we will soon close the transaction with Norway, which will be the last exit in our European businesses.

And what that does is give us a segment structure we announced in our Investor Day a few months ago that's very much aligned to our strategy and gives our investors great transparency in the business reporting in the North American Pharmaceutical segment, oncology, multi-specialty, prescription technology. Other will fall away with Norway and medical, we think in the back half of 2027, we will have successfully stood that business up stand-alone.

So segments aligned to the strategy. And that work, that execution against that strategy that I just talked about has really delivered, in our opinion, some quite strong results. Adjusted operating profit growing at a 9% compound annual growth rate, adjusted EPS at 17%, free cash flow improving between $0.5 billion and almost $1 billion. You can see the ROIC improvement of 1,900 basis points, and we've reduced our leverage by just over -- just about half. So tremendous consistency and really, really strong financial performance.

I want to reflect on our growth strategies for just a moment. I'm going to start with oncology. And you can see we've been at this for a while. It started in 2007, 2008 with the acquisition of a specialty oncology distribution company and then complementing that with some GPO services. In 2010, we got into the MSO business with the US Oncology Network. And as we got into that business and began to understand it and see the full opportunity, we started to expand our capabilities, adding a specialty oncology-focused pharmacy, get into radiation oncology. We stood up internally through internal investment, a data analytics and insight business that we call Ontada. We expanded into clinical trials business through a joint venture with SCRI and the acquisition of a company called Genospace.

And then last, this past year, we were really pleased to welcome Florida Cancer Specialists to the USON network and the acquisition of Core Ventures, which gives us a great footprint in Florida and adds complementary scale to our existing network.

So this is a very unique and broad set of capabilities, all focused at the oncology marketplace. What does it add up to today? 3,300 providers in our network supporting over 1.4 million patients on the oncology side. And the PRISM in retina and ophthalmology, 200 providers growing. And I think the real key here is that each of these components of our business, take oncology, for example, complement each other. As we add scale through like a Florida cancer or organic growth, it creates more data in our iKnowMed EMR, which is a leading EMR in all our practices operate. That creates more data, allows us to create more insights, allows us to enroll more patients into clinical trials in the community. And so each of these business, we think, is highly complementary and additive to each of the other components.

The market is large, growing and complicated. I guess the bad news is on the left side of the slide, 2-plus million people will be diagnosed with cancer this year, and there are 18 million people currently living with cancer. The good news is on the right side of the page, through the amazing clinical and scientific work that biopharma does, there are over 425 therapies on market today. And we are able to treat cancer patients and deliver outcomes in a way that is just stunning compared to 15 years ago when we got into this business.

And the good news is that innovation is continuing. 41% of all clinical trials today are focused on oncology. So there is more innovation and growth coming, and we project that the oncology drug spend will grow by 60% in the next 5 years. So a very healthy, large and growing market.

In terms of the size of the markets we play, it's over $100 billion. We would characterize it as roughly $115 billion. We have leading positions in each one of these components of the market. And you can see our margin goes from lower to higher as we move up the value chain, scaling from distribution all the way up to clinical research. So a very, very broad and differentiated portfolio of capabilities at McKesson.

The second business -- growth business I want to talk about quickly is biopharma services. And you can see a similar journey here in how we have systematically built up the capabilities and components of this business to help biopharma solve problems of access, adherence and affordability. The RelayHealth network is connected to over 50,000 pharmacies, really focuses on our affordability solutions. In 2017, we added CoverMyMeds, which gave us connectivity into the provider space, helping us scale affordability, helping us expand into access and really creating a unique differentiation in our connectivity to over 1 million providers and 50,000 pharmacies right in the workflow. In 2020, we took an important step of putting this into a combined or a unified business as opposed to thinking of it as point solutions. We think about it as a single technology-focused business oriented at breaking down the barriers that prevent people from getting on therapy and staying on therapy and living better lives.

So what does that really mean? This past year, we helped enable patients access their medications more than 100 million times. Through the support of our biopharma partners, we were able to provide $10 billion of out-of-pocket savings for the patients that we jointly serve. And 12 million times, we help people get on a prescription that otherwise would have been abandoned. This all in support of enabling better health outcomes for the customers and patients we serve.

So if you step back, we think both of these platforms are scaled, very differentiated in their capability and playing in markets that are large and growing quickly. And this is the performance that this strategy has turned into. You can see from our fiscal '21 to our fiscal '26, we will more than double our adjusted EPS growing at a compound annual growth rate of 18%. We have provided an adjusted EPS outlook for this fiscal year of $38.35 to $38.85. We anticipate adjusted operating profit growth will be 12% to 16% and that adjusted earnings per diluted share guidance will be between 16% and 18% compared to the prior year.

I did want to pause for a moment and just reflect on capital deployment. We anticipate approximately $2.5 billion in share repurchases in our fiscal '26. We have over $6 billion of authorization as of September 25 still. And we will continue to follow the disciplined capital allocation strategy that we have long abided by. And that is to, first and foremost, look to invest in the future growth of the business, but to be good stewards of the capital and to consistently return capital through a dividend that grows in line with our earnings and to return share -- return value through share repurchases.

So if I wrap all that up, the strategy, the capital allocation framework, the differentiated scaled platforms, this is what we think our long-term financial growth targets look like. 5% to 8% in North America, 13% to 16% in oncology and multi-specialty, 10% to 13%. And then with this disciplined capital employment that we just discussed and our really, really strong balance sheet, we expect long-term growth targets of adjusted EPS to be 13% to 16%.

So that's a little bit of the McKesson story, a quick introduction to a business I'm really, really proud to be a part of. I think you can see we have consistently delivered on our financial performance. We think it's distinctive. We have continued to stick to our strategy in a very disciplined way, deploying capital internally to extend our capabilities in these markets and extend our differentiated portfolio and growth products. We have been rigorous in our evaluation of the businesses that we are in and continue to take an ongoing look to make sure our businesses are positioned in markets where we have the capability and the opportunity to win. And we believe McKesson is a compelling value creation opportunity for you all.

So with that, thank you for your time and attention this morning. We'll go to the fireside chat.

Yes, sounds great. So Brian, thank you so much for that. If I look back over 2025, you upped your long-term targets. You integrated several large new deals on the MSO side. Can you talk about, especially on the MSO side, how you feel that you're positioned competitively?

Sure. Well, look, it has been a very active year and candidly, all pretty active years. Yes, as it relates to the MSO business, we're very pleased this past year to add Florida Cancer and Core Ventures to the portfolio. That -- Florida is a great market. They have a great footprint. But more importantly, they practice oncology very consistent and aligned to the way we practice oncology in USON. And so we've taken that first step and the first immediate step is obviously to move them on to our distribution and GPO platforms to leverage off that scale.

I think our MSO is quite unique. I mean, a, we've been at it for a long time. So we well understand this market. And we have proven that we can continue to expand the services that we provide to create a more attractive value proposition for oncologists to want to join our network. And you think about the uniqueness of our scale, you think about the industry-leading EMR in iKnowMed, you think about Sarah Cannon, the premier brand in community-based clinical trials. I mean, so we think we're very well differentiated by scale and capability.

You touched on Florida Cancer Specialists. Can you talk about how that integration has progressed? And has there been anything that surprised you? And I guess then we can ask Britt, if we're running along the time line of the 3-year accretion that you had anticipated?

I couldn't be more pleased and more proud of the teams on the integration. We've obviously done many of these over the years. And the important -- most important part of integration actually happens in the diligence process upfront, where the planning happens, where you know you've got connectivity. But I'd say both the leadership of Florida Cancer and U.S. Oncology has been amazing in their collaboration and coordination.

In the early days, it's a lot of mechanics, right? You got to shift over the distribution. You got to get on the GPO contracts. You've got to do the kind of boring stuff, but like platform them on McKesson kind of technologies and then get into the more exciting things about synergies and sharing of best practices across the platforms. But I would say, if I was surprised by anything, I'm pleasantly surprised how smoothly it's gone.

Yes. I would echo that. And I would say that to Brian's point, we have shifted the distribution over. We've begun to execute on the GPO capabilities and opportunities for providers. Certainly, as time goes on, there's opportunities to continue to add providers to that platform as well as continue to see growth in not only data and analytics services. But to Brian's point, providers will continue to accrue patients on to clinical trials. There will be other opportunities for clinical services in addition to that.

So we're right on the pace that we anticipated. Our year 1 accretion was estimated around $0.40 to $0.60, and we feel that we're right on pace for that. And then over time, as we continue to add capabilities as volume continues to grow and some of these other services that we would get to $1.40 to $1.60 at the end of the third year. So we feel very good about where we're at so far.

On January 1, we saw some changes because of the IRA around WAC pricing. Can you just talk about the impact on your business and your ability to go back and renegotiate with the manufacturers? And should we assume that you've been able to do that and there won't be an impact?

So we've known this was coming for multiple years. And in many ways, this is just part of the way our business always runs. We are always in partnership and discussion with our manufacturers on how we support them, and they understand the critical role we play and how they need to support us. So it's -- in my mind, it's just like we always do. We sit down, we talk about the services we provide, the essential services we provide, how we get fairly compensated for that. And I would say that the rollout on January 1 has gone exactly in line with how we thought it would.

When I think about GLP-1s, we've talked a lot about GLP-1s over the last few years and a little bit of a headwind because of the special handling. When we think about the oral GLP-1s potentially coming to market in 2026, one, there is an anticipation that perhaps we even see more utilization. So if you can talk about that from each side of your business. And then secondly, talk about the potential margin impact as we shift away from that higher cost injectable to the oral product.

So I would say this, Lisa, clearly, an oral product that's ambient will flow through our network in a much more natural way. And we already have the embedded scale. I wouldn't see the need for incremental investment. And so it will be lower cost to serve. But that said, it remains to be determined how is an oral adopted? What is the uptake? How does it impact the injectable? Do I switch from injectable to oral? Does it actually just open up a new market for people that are fearful of an injectable. And the product has been out for like, I don't know, what, 10 days. So I mean, it's a little bit early.

In terms of the [ CoverMyMeds ] the Rx Technology Solutions business, much like the injectable, it's going to really depend on how payers choose to manage the utilization and the accessibility and the decisions that employers make in terms of how they want to avail this. And so that's going to take a few months to play out as these products go through the normal cycle being reviewed.

I think there is some expectation, Brian, in the market that it does open a new channel, right, that maybe perhaps people and previously that didn't want to do an injectable are willing to do the oral. The other thing that we've heard is around pricing that perhaps as pricing comes down, we'll see more utilization. But it may be early before we see that. And then on the flip side, I was on a panel yesterday where someone in the consulting business said that they're seeing 15% of their employers drop coverage in '26 because of the cost. And therefore, you're starting to see more activity going through private pay, whether it's LillyDirect, et cetera. Does that have any impact on your business?

Well, look, we've seen good growth to this point in time. And I got something in my throat. But those...

Do you have water?

Yes. Do you want to answer this one?

Yes. I guess I should have jumped in a little sooner. I think we continue to see good growth quarter-to-quarter. Year-over-year growth is still over 26% in the third quarter. So I think over time, we'll kind of see how this plays out. But I think at this point in time, we see this continue to be additive to our business.

We touched on your oncology and multi-specialty business a little bit, but you clearly are the industry leader from an oncology perspective. And it's always been a significant growth driver. You talked about 13% to 16% growth within that business. Can you remind investors how you benefit from adding providers to the US Oncology Network, whether it's the traditional distribution, as you talked about with Florida, increase in GPO volume, expanding the offering like iKnowMed, et cetera. Like so if you can walk us through how to think about that?

Sure. First, we grow the network a couple of ways. I mean, where we have a practice and a presence, we think we have a strong value proposition based on all those services, and I'll walk through them in a minute, that can attract independent physicians into our -- to join our network to benefit themselves from all those capabilities. So that's how we organically grow and expand.

And obviously, over the years, we've been an active acquirer of practices. Where we think that practice fits with USON culturally, clinically, they want to practice medicine as part of a network and benefit from the scale that network brings and meets our financial thresholds, we can grow the network inorganically. And as we grow, we grow distribution scale and volume, which makes us more relevant. We grow GPO scale and volume, which makes us more relevant. They migrate on to iKnowMed, our EMR, which gives us more data, more patient records, more insight into how things actually work on the ground in community oncology. It allows us to identify and enroll more patients in clinical trials. And so -- and as we enroll more patients in clinical trials, we become more relevant to biopharma that wants to think about how they move those trials into quick commercial adoption.

And the other focus we have that we should talk about is because it's equally important to us is how we invest in our tools and technologies to enable our physicians to spend more time with patients, delivering more care and growing the patient flow through our clinics. And just a recent great example, I'll say it because it's trendy with AI going on everything, like 75% of our practice is now using ambient scribing. And the uplift in their time savings that we've seen, that's how you keep a value proposition to attract oncologists to want to join your network.

Did you have initial pushback in some of our other meetings when we talk about ambient prescribing -- transcribing, that there's maybe some of the physicians initially push back and then ultimately, they're hearing from others that it frees up the practice time and you really start to get momentum within the physician.

Physicians are people, too, right? We're all a little bit resistant to have to change our process. There's always, though, the forward-leaning early adopters, and it's one of the great things in a network effect, so to speak, because it's exactly that. We don't roll it out full scale. We'll pilot it with willing early adopters who then prove it and then have the credibility with their colleagues, it's to say, hey, this works and this is the impact it had on me, and then we see uplift incredibly quickly.

Is there any issue from a HIPAA perspective or anything else? Because I -- for example, my medical practice uses it, and I remember signing the waiver the first time I went to see my primary care doc.

Look, we're -- the first step in every process we roll out for a new technology or a change is compliance, regulatory compliance. It's essential. That obviously includes HIPAA.

Outside of oncology, you've invested in retina with PRISM. What are the key specialty areas that you're really focused on as far as that long-term growth target?

I'll start, and Britt can add on to this. You've asked us many times over the years what the next ology would be. And now we can answer it. I mean the first most important thing is we want to find markets that we can add value to. That value can come through aggregation. It could come from scaling up a GPO and leveraging the healthy drug pipeline innovation that we see coming. And it comes from providing kind of simplification in back-office functions that scale delivers real benefit. So we've been looking on and off for years at this, and we think retinology and ophthalmology finally met that threshold mainly because the drug innovation pipeline has really deepened. And so we continue to look at other ologies, but they're going to have to meet those criteria. We have to be convinced there's a network effect that there's adjacencies and ancillary services we can invest in and develop then that basically continue to extend the growth trajectory of being in that space.

How important is the drug component? And I think you were going to answer something around that, Britt. But how important is the drug component when you think about that ology? And we think about retinol and other areas where -- and especially in oncology, where we have a number of biosimilars that are coming to market. And again, when you think about that flywheel effect that you talked about, as you become larger, your GPO becomes larger, your ability to purchase at a better price, et cetera, how much of that goes into your thought process when you're making these acquisitions?

I think it's a starting point. And to Brian's point, where we build platforms, and I'll parse this into 2 different answers. Where we build platforms, we're certainly looking where there is the innovation, there's the investment and then you can build a group of services around that. And certainly, the drug innovation is the starting point, but it's not the end point. It's all the innovation leads to other capabilities and services that we can provide.

I would also point out that outside of the platforms that we've been building, where we have this breadth of services, we do support lots of multi-specialty providers in other ologies. They're a big part of our distribution services that we provide. Where we focus to build the platforms is where that innovation is. And I think Brian's slide that showed in oncology, what percentage of new innovation, new drug trials are focused on oncology, and now we see that happening in retina and ophthalmology. That lends to the platform, but it is important to know that we have a thriving multi-specialty business that provides a lot of logistics services to many providers.

Just shifting a little bit to one of the other growth areas of your business, and that's Prescription Technology Solutions. Broadly, you've had a variety of compelling assets within Prescription Technology Solutions. When we think about the longer term, much of this segment's growth has come from prior authorization. You've broken out for us, particularly in GLP-1s. How do we think about the future of that business and where we could see the growth?

Well, the business is really focused on leveraging technology to break down the friction from patients transitioning from getting a script to actually starting and getting on that script, being able to afford that prescription and then staying on that prescription. And so this business has a broad set of capabilities. It's not just prior authorization. We've got a hub service. We've got co-pay. We've got messaging and workflow, all oriented to help bear this out. So we grow the business by convincing more brands that we can help them solve these access, affordability and adherence programs. And we do that with an array of products that really follow through the life cycle. So when a product launches, it's going to have a specific set of services, lots of times focused around access to get it going. But then you transition as it matures into affordability and how do I extend the life and how do I make sure I'm getting all of the people that are eligible to be on product on my product.

And so we grow it through expanding -- we may have a relationship with the biopharma today, and we can expand to additional brands. There may be a biopharma that has yet to benefit from our solutions. We can expand that way. And then we continually invest in this business to innovate better, quicker tools that make them more attractive. So in prior auth, for example, we, this past year, created a pathway for a patient to see what the status of their prior auth is. That was long a frustration. I got a prior auth, but I don't know when it's going to get approved. So we're trying to give insight in that, which makes the patient experience better, which makes the biopharma services experience better.

And then if I think about that business, you also come at prior authorization from the other side, working with employers and health plans around prior authorization. Are you seeing any changes in that marketplace? I mean I know a lot of employers are struggling with pharmacy costs, trying to -- are they lessening the barriers around prior authorization, increasing the barriers around prior authorization -- bigger business...

I mean honestly -- I think in aggregate, it feels pretty stable. I mean there are -- it does depend on decisions employers make, and it depends on decisions payers make. And we've seen both happen. We've seen expansion and we've seen contraction. And it's really localized decision. But overall, you've seen the growth and the results we have in the business. It's a very healthy business.

Just maybe one other thing to say about this segment. I think what's very supportive for the solutions that we're developing is you are seeing specialty still being the highest growth area within pharmaceuticals and the investment in innovation. And that's supportive of the programs and services that we have today and that we're building to support those drugs as they launch. So I think that that's another aspect that's supportive of the growth of that segment.

Last year, you announced that you would look at separating the Medical-Surgical business, since then, you talked about a potential for a spin of that business at some point. Can you just maybe walk us through kind of the thought process of why this is the right time to separate that business? Will there be stranded costs as we think about this? And anything else that we should think about as you move down the road towards separating from the medical supply business?

I think it starts with strategy. And it's -- and our capital allocation follows our strategy very closely. And then Brian talked about the evolution of our portfolio over time, which is really following that strategy, very clear pillars of where we want to grow. And the medical business is a great business. It has grown very well historically. It's well positioned. It has a broad set of solutions and products to offer. But from a strategy perspective of where we're going to allocate growth capital, it doesn't fit that. We believe that the business is well positioned for further growth, better for that growth outside of McKesson, where it can attract its own capital and approach its own strategies in that way, and McKesson can continue to grow the portfolio evolution that we laid out here that Brian talked about.

So the time really is right to follow our strategy, follow our capital allocation strategy. We thought that, that time was now. We believe that we have been very effective at doing this historically. We have a playbook to do that. We think that this business is well positioned for an IPO second half of calendar '27. We've done a lot of work internally to set this business up in an independent way. We crossed some important milestones here recently where we've completed all the TSA work inside the company. That's an important mechanical aspect of this. And the business is now operationally and legally independent inside and consolidated within McKesson, but it's an important milestone to have the business prepared and ready for its independent operations. So we're well along the way and along the path that we've set out for this business. We think that it's going to help propel growth in both businesses in a separate way. And we're excited about the opportunities in front of the medical business.

We touched on a lot of different things we started by talking about the IRA WAC changes. But when I think about drug distribution in general, we generally hear around what happened with price increases on the branded side here in the first weeks of January. We always have conversations around what's happening with generic pricing. Maybe we can just spend a few minutes there.

So my understanding, and please correct me if I'm not correct, is that we've seen price increases from manufacturers roughly in line with what we've seen in the last few years, kind of a mid-single-digit range. And that generics feel like it's a pretty stable business right now. Are you seeing anything different or anything on the horizon on either side for branded or generic?

No, I think you answered your question in your question. We're seeing in early January is exactly consistent with what we expected and frankly, what we experienced in multiple prior years. And the generics market is very stable and very consistent. It's -- this business is very important to McKesson. But as McKesson has grown over the decades, it's not as impactful as it once was, but it is healthy and it is important, and we do focus on it because it's important to our customers as well. And so I don't know, Britt, do you want to talk about our sourcing strategy at all, but...

Yes. I think it's important to note that we're almost 10 years into our ClarusONE launch, and we believe that we source as well and as effectively as anybody. Certainly, as Brian talked about, it's very important to our customers. And our sourcing engine provides the lowest cost available to our customers with the highest surety of supply. And the stability that we've seen now for many years in this particular environment is supportive of that and supportive of bringing better cost opportunities to our customers. So we feel very well positioned to continue to source effectively for our customers.

I know almost every year, we talk about the independent pharmacy market, and we look at this, you have Health Mart, there's a number, whether it's the GPO, et cetera. I know Britt doesn't like to talk about the fact that you had a customer that went bankrupt. But I will note as the analyst that we never saw it in the numbers. So when I think about the independent pharmacy and I think about some of your other customers, is it that some of those other customers were able to absorb some of the volume and you just didn't really miss a beat. Is it that perhaps the independents are becoming a little bit healthier than what we've seen historically? Maybe just talk for a minute because I think the independents are important and the fact that they've remained as resilient as they have has been always a little surprising.

Yes. Brian, do you want to talk about the independents in a second?

Well, look, Lisa likes to share the story that when she was early in her career, she did a report that projected independent pharmacies would go from 20,000 to...

About 5,000.

About 5,000 in the next few years. And today, there's still roughly 20,000.

And I'll remind you that was 1998 when I wrote my McKesson initiation report.

Excellent. Well, so the point is they are incredibly resilient. And they -- and we support them in that resilience by helping them figure out how to attract patient flow locally, the network with physicians, where the prescriptions generate from, how to operate both behind in the pharmacy and if they -- and some have front shops, some don't. But -- they choose to how they optimize that. So we continually invest in those tools. If you look at the bulk of the pharmacy closures over the last 5 years, they've mostly been big chains. That's not to say they don't have pressure, but that's our job is to help them figure out how to navigate those pressures because they are essential to providing care in so many communities. And we're very optimistic and continue to advocate that there are more that independent pharmacy could do that they could bill for services that they could provide in those local communities.

Yes. And just the economics on the specific customer you're talking about, very consistent with what we've talked about really for the last year that from a materiality perspective, that particular closure was not going to have an impact on our business. The customers that were part of that particular customer of McKesson still have scripts that are in the environment today. And the breadth of our customer base, the breadth of our independent base captured a lot of those customers.

We only have about 90 seconds left here. Britt, is there anything I need to think about as we think about the cadence for the last half of your fiscal year? Anything that you would call out that perhaps you feel like people mismodeled or don't understand?

Well, I would just start with where Brian started. This is another year of very strong performance for the business, and we expect 16% to 18% adjusted EPS growth. Within that, as a business of our size and the segments that we have, from quarter-to-quarter, there will be things that will happen from a cadence perspective. I maybe call out 2 things. Last year, in the second half of the year, we announced the divestiture of an asset in Canada, and we had some held-for-sale benefits last year. That is within our North American Pharmaceutical business last year, not this year.

And I think the other 2 things I would call out is we expect to continue to invest in our RxTS business in the second half to continue to build capabilities and extensions of our product base. And then from a tax rate perspective, we are looking at 18% to 19% for the full year effective tax rate. That's very consistent with what we've communicated all year. However, quarterly cadence, we would anticipate that the third quarter would be closer to 23% to 25%. So those are the 3 things that I would call out. But when you look at our performance annually, very consistent growth year-to-year.

I think we had covered all that in our model. So with that, I want to thank you guys very much today. Thank you, everyone, for participating.

Thank you.

Thank you everyone for joining us this morning. It is nice to see everybody here and online. I'm Elizabeth Anderson. I'm the Health Care Services analyst here at Evercore. I'm very pleased to be joined by Britt Vitalone, a man who needs very little introduction, EVP and CFO of McKesson. Anything you want to kick off with? Otherwise, we'll jump straight into questions.

Well, first of all, thank you for having us here. Maybe what I would start with is we're really pleased with the performance that we've had so far this year. We're halfway through our year. Our second quarter results were strong. We've been consistently strong. We had 10% revenue growth in the quarter. We had adjusted operating profit growth of 26%, and we had adjusted earnings per share growth of 39%.

We were able to based on that performance and the confidence that we have in the rest of the year, raised our guidance for the remaining -- for the full year again. We're continuing to generate really strong cash flow. I think our business is very well positioned. And so we're pleased to be able to continue this performance that we've shown now for several years, the consistent performance, consistent focus that we have. So happy to talk about whatever you'd like.

Yes. Sounds good. Maybe since somebody phrased it yesterday, this is the year of the Gs, the GLP-1s, the GPTs, that kind of thing. We'll start there. Obviously, they've been a major revenue driver for you, but not necessarily a profit driver as you guys have pointed out. As we think about the supply and demand normalizing and the channel stabilizes, how do we think about the -- how are you thinking about the profitability of that group, particularly as those drugs start to maybe go into the oral solid stage in 2026?

So we certainly have seen continued really strong growth in GLP-1s. I think McKesson is a little uniquely positioned in the sense that in addition to the core distribution services that we provide, and I think we do a great job with that, very efficient job with that. We have our Rx Technology Solutions business, which provides affordability and access through prior authorization services for all the major GLP-1 brands.

We have very strong relationships with the brands to provide those services. We've continued to expand those services as required and as requested by those brands and the initiation of prior authorization, the submission of a prior authorization, reporting, denial conversion, reject management, so I think we've continued as we do with most of our access programs to evolve those services with manufacturers as the product continues to evolve and mature. So we believe we're very well positioned for this growth. If this continues as it moves into potentially oral solids, we're well positioned both distribution and through our technology solutions to provide good services for these drugs.

That makes sense. Maybe switching topics slightly. You raised your fiscal '26 AOI contribution from PRISM and Florida Cancer Center to, I think, 280 to 320 from the prior 220 to 270. How do we think about what's driving that higher outlook? And how do we think about that on a multiyear basis as you kind of complete the integration and synergy capture process?

So maybe I'll just start by saying we're really happy to continue to build out our oncology and multi-specialty, not only through growing our oncology platform, which we believe is very strong and very well diversified, but moving into vision through retina and ophthalmology with PRISM. We haven't changed our full year guidance or year 1 accretion on either of those acquisitions. Those both happened in the first quarter of this year.

We believe -- continue to believe that from PRISM Vision, the first year accretion will be $0.20 to $0.30, and it will grow over the next 2 years and onward to $0.65 to $0.75 of contribution in year-3. That continues to be the guide that we've provided for PRISM. Now PRISM is off to a really strong start. We're really pleased with the performance of PRISM. We're pleased with how we've been integrating that business. We recently completed the acquisition of Spokane Eye Clinic and added another 27 providers. So it's off to a really good start. We believe we're performing slightly better than the acquisition case. But again, the $0.20 to $0.30 contribution is what we have guided for the year 1.

Okay. That makes sense. And if you think about that operationally, like when you think about adding some of these new assets onto your platform, you can think about it, I think from the analyst side, we think about, okay, you can easily fold the acquisition of the drugs and sort of the distribution into your main network and that comes through. But as we think about sort of the multiyear picture and the multiyear synergies, like what comes sort of next? Like what are some of these other like longer-term operational improvement drivers?

Yes, it's a great question. So I would say that first of all, our strategy is to look in areas and build platforms where there is drug investment, drug innovation and increasing drug spend. Those are areas where we can build a platform, not just manage providers, not just do the drug distribution, but it's drug distribution, it's GPO services for those providers to provide better cost for the providers and the patients. It's adding on data capabilities.

If you think about our oncology business, we have an Ontada asset that provides data back for clinical purposes to the providers, but also upstream to manufacturers as they're looking at developing their pipeline. It's clinical trials and clinical trial research, site management. Again, within our oncology platform, we have a very strong joint venture with Sarah Cannon Research. So it's building out an entire platform.

We don't look to go into a therapeutic class or therapeutic area and just manage providers or just do the drug distribution. In fact, we do drug distribution and GPO services for many specialties, neurology, retinology, neurology, all specialties, we do drug distribution and GPO services for. But where we're building out platforms, it's where we can drive differentiation through a platform and a suite of capabilities, which would include all the way up through clinical and commercial capabilities.

Got it. No, that makes sense. And then if you talk about those different platforms that you have across oncology and retinal and other places, like how much interchanges are between them? Or like are they sort of -- we should think about them as discrete platforms? Or are there sort of places like in some of the Ontada or some of the clinical trials where you can sort of click people up more generally and there's sort of crossover in that regard?

That's a great question. It's early days with our Vision platform. Certainly, there's synergies from a drug distribution perspective. There will certainly be some synergies from the GPO capabilities. But beyond that, we believe that these platforms will have unique characteristics. And there are going to be research opportunities within vision care, just like there are research opportunities within oncology. But the management of a clinical trial, the management of a site for those trials, the research, they may require different clinical capabilities. There may be different commercial capabilities.

I think having the experience that we have with U.S. Oncology and with our oncology platform will lend itself to helping us build that out. But the synergies, I think, are generally -- there are general synergies, but in each of the therapeutic areas, there will be some specific unique characteristics.

Okay. That makes a ton of sense. So I think one of the questions people maybe had coming out of the Investor Day, just in terms of understanding the FY '26 EPS bridge. The guidance was raised by $0.30 despite the $0.80 beat. And I think it was just because of the timing of the Investor Day and the thing it was obviously a very impressive raise, one and then that's one follow. So for people who are still sort of confused on that point, like how would you sort of view that sort of outperformance in the quarter versus sort of the guidance and then what you put through at the Investor Day?

Yes. So great question. Again, if you step back to where we guided the year to begin with, we had a strong first quarter, we raised guidance then, and then we did the resegmentation. And we had our Investor Day. And at that point in time, we certainly knew that the performance was strong. We were pleased with what we were seeing in terms of volumes, in terms of the performance, the operating leverage that we were having. And so we provided an $0.80 raise at that time at Investor Day, and we thought that, that was appropriate to do.

The quarter finished and the quarter finished in a strong way, and it certainly was appropriate for us to give you the right view that we had for the remainder part of the year. So I think it was really just the timing of when we provided the Investor Day update, and we're certainly pleased to be able to provide a little bit more on top of that. And so we have raised guidance from the initial guidance at the first quarter at Investor Day at the end of the second quarter, and we feel very confident in our ability to reach this raised guidance for the full year, and we're certainly pleased with the performance that we're seeing really across the business.

Great. No, that's good to hear. And then maybe going back to sort of the Oncology and Multispecialty segment. Should we think of it as primarily like MSO-related revenue and profit? How do you kind of think about the mix between like the drug contribution and the growing importance of the underlying platform and other services that you're adding?

Yes. Again, if you go back to our Investor Day, we laid out for you as the market opportunity within Oncology and Multispecialty was about $115 billion. And we view the opportunity within that for distribution and GPO services to be about $80 billion. So there's still a pretty big opportunity to grow the data and the commercial capabilities as well as the clinical capabilities. And we are seeing good growth in clinical trials and site management.

The accrual rate that we're seeing for clinical trials is about 25% growth year-over-year. So that is reaffirming to us that we're on the right path in developing those clinical capabilities within Oncology. We believe that those will also exist within our Vision Care platform. So the opportunity certainly is large. The distribution component of that is the lion's share of that. But within that, there's still a very white space of opportunity for clinical and commercial capabilities.

Okay. And that makes sense, too, because I think sometimes people think of it, oh, now the market is all wrapped up, everybody has bought most of all the big players, that there's not much more opportunity. But what you're saying is don't think about it from that sort of like provider standpoint. Yes, maybe all the providers have a relationship or most of them with somebody, but it's that sort of space within it and what additional value-added services, et cetera, can you put to them?

Absolutely. Now in oncology, just to step back on that for a minute, we have over 3,300 oncologists within our oncology platform today. And the growth that we've seen over the last -- since 2017 is about 119%. So certainly, we've seen great growth from a provider standpoint in oncology. The opportunity for us in retina and Vision Care is larger. We're getting started on building out that platform.

Now it's not as big a space as oncology is. But certainly, we believe that there's a good runway there for provider growth as well. But as you continue to provide GPO services and more commercial and clinical services, certainly, the opportunity is large for us from a white space opportunity today and the margin profile is higher.

Yes. No, that makes a ton of sense. And obviously, there's good overlap with the core distribution business in terms of the percentage of drugs used in oncology and retinal practice. Are there any other -- how do you feel about other allergies?

So we service a lot of those other specialties today from a drug distribution perspective. And we believe that, that's an important part of the oncology multi-specialty space from a distribution perspective. What we're looking to do, though, when we make an investment to build out a platform is we're looking for more. It certainly starts with pharmaceutical distribution because that's what we're really, really good at. It's building the capabilities around GPO, which we think will provide better cost opportunities for providers and their patients. And then we're looking for those broader commercial and clinical opportunities to round out a platform. We don't want to just manage providers. We think having a broad base of diversified capabilities is important.

That makes sense. And the policy environment has been volatile, I think it's fair to say this year, but you guys have operated successfully in a variety of policy environments. As we sort of think about a couple of things that have maybe come up this week, one, on sort of anything that might change on sort of WAC pricing or gross to net, I know we've been through this conversation before. But for people who are maybe newer to the story or not as in the weeds, could you maybe talk about that and why you're probably, I'm guessing, not too worried about that?

Yes. It's an important question, and I certainly appreciate that. Look, when we distribute products on behalf of biopharma, what we do on a constant basis is work with our partners to understand what services they need on behalf of those products. That could be core distribution services. That could be special handling. It could be cold chain. It could be a variety of other types of services. And those services also could change with the manufacturer. They introduce new products. They have changes to what is needed for those products, the different channels or different services.

So we're constantly having these conversations with manufacturers to make sure that the fees that they're paying us for the services that we're providing fairly reflect the services that we're providing back to them. And that's an ongoing conversation. And so whether a WAC price of a drug is $1,000 or $100, if the services we provide are the same, we expect to be paid fairly for those services regardless of what the price of the drug is.

Okay. That makes sense. And maybe one other sort of relatively newer policy announcement. There are some new demonstration programs the team of mine is [running glove], et cetera. How would you sort of think about those? I think the policies are still under development. So it's a little bit of an unfair question at this point and sort of the answer is TBD clearly. But is there anything that you would point out that you think of as a positive or potentially a future headwind in how we currently understand some of those programs?

Yes. I think these are early days. To your point, it's hard for me to really speculate on that for demonstrations and pilots, and we'll learn from that. I don't feel negative or positive about it, to be honest with you. I think we're well positioned for whatever comes out of those pilots. And we'll be in a really good spot regardless of how those pilots turn out, and we'll learn from it.

Okay. That's fair enough. At the Investor Day, you started -- you highlighted some of the migration to cloud and AI-powered logistics. Are there sort of specific margin or profit level improvements that you expect from these digital innovations and obviously, within the context of your overall algorithm, but how do you see that playing out?

Yes. So I think there's -- this is a really good question, and it's one that we've spent a lot of time on as a company, really figuring out how we continue to modernize our operations. And that comes in, in many different forms. It comes in the forms of just automating your back office, providing automation to your distribution and your distribution network. It comes in providing better tools and services for your customers. It could be automation tools within a call center.

So we have been really focused on automating and modernizing the entire operation. In the case of a distribution center network, as an example, we're putting more automation in that will drive -- in the case of new DCs that we've put in place, 90% of what happens in a DC now is automated. So that drives significant leverage, significant efficiency. We're also putting in automation in some of our call centers.

We're doing AI-assisted agents that are helping drive more efficiency within our call centers. We're driving products within our oncology platform, which is helping providers free up more time and capacity by giving them things like ambient scribe capabilities or helping them take notes and put those into large language models that provides more efficiency for them. There are certain things that we're doing in the back office to take hands-off keyboards and make that more automated.

So I think we're really focused on this. It has been part of some of the operating leverage that we've already seen to date. We've talked about over the -- at Investor Day, I talked about over the last 5 to 6 years, we've seen about 1,200 basis points of operating leverage measured as operating expenses as a percentage of gross profit. And in our second quarter results, we talked about year-over-year operating leverage of over 500 basis points. So we believe that continuing to automate and modernize the business, making investments to do that is going to drive more efficiency, but it's also going to drive greater customer centricity, particularly in the platforms that we're building around oncology and retina.

Got it. That makes sense. Maybe switching over to the medical business. Obviously, you've talked about the separation time line and it being largely tax-free. Can you walk us through the milestones and sort of where you are in terms of -- you talked about the capital structure and the carve-out audits and the targeted completion date?

Yes. So first of all, we made the decision to separate our medical business because we believe that it's a great business, a great franchise has performed very well for a number of years, very well positioned across all of the alternate site channels. And we believe that separating this is going to free it up to go after its own strategies with its own capital structure, and it's going to generate more value both for the Med-Surg business, but also increased the focus for the McKesson parent business.

So what we're really focused on right now is some of the mechanics, getting TSAs in place to help the business be more independent. We have completed carve-out audits. Those are obviously time-consuming but necessary aspects. And so that is taking up a lot of the work today. We are well positioned on that. I think that we have done a great job cross-functionally to do that. And I think we're right on track where we would have expected to be.

So we're pleased with that. The business is very focused. We have talked about doing a tax-free separation, targeting an IPO sometime in the second quarter or second half of fiscal '27, depending on how the markets play out at that point in time. It's obviously too soon to determine how that will look. But we've done this before. I think that's the other important thing to point out here. We really focus on managing our portfolio. We have a very focused strategy. We want our businesses to be on that strategy. We've separated businesses before that we, again, we think are good for those businesses that have added higher return and more focused capital to the McKesson parent.

We did that with Change Healthcare. We did that with our European asset. We did that last year with Rexall in our Canadian business. Again, good businesses that we felt like that allocating that capital back to the core strategies was more effective. And what we've seen over time is continued growth within McKesson. We've seen continued cash flow growth, and we've seen increasing levels of return on invested capital.

So this is a play that we will continue to use to focus our portfolio on the places where we have clear differentiation. So that's where we are in the process. I'm certainly pleased with the work that we've seen, the TSA work that we've done, certainly the carve-out audits and being prepared to be an independent company.

That makes sense. And maybe just to think about that as an independent business for a moment. Given the private label penetration, what impact from tariffs or import cost inflation are you seeing? I know you have a pretty nimble strategy in terms of how you work with your private label partners. So if you wouldn't mind telling us a little bit more about how that's going?

Yes. So the private label aspect of the Medical-Surgical business, the McKesson brand has been great for the business, but it's also been great for our customers. We work with a number of suppliers across dozens of countries, and we're continuing to focus on this surety of supply and having a diversity of supply, and we think that, that's worked very well for us. We've managed tariffs, I think, pretty effectively. It has not had an impact on the business, the tariffs specifically. And so McKesson brand and continuing to expand McKesson brand and continue to expand our private label in the areas that will drive the most value for our customers is, again, something that we have done very routinely over the last several years, and it will be an important part of the strategy going forward.

Okay. Makes sense. I think one of the things people have been very concentrated -- focused on the biosimilar opportunity. Maybe thinking about sort of the core generics portfolio, you have great leadership -- cost leadership in ClarusONE and some of your strategic customer onboarding. How do we think of that as a profit lever going forward, particularly as that generic wave picks up again at the end of the decade?

Yes. So generics are certainly an important part of what a full-line wholesaler provides to its customers. And so it's an important part of what our customers need. It's an important part of our business. And having a focused sourcing engine like ClarusONE really solves that challenge for our customers. We believe that we have a very scaled sourcing engine at ClarusONE. We believe we source as well as anybody in the marketplace. We focus on surety of supply, high service levels as well as low cost for our customers.

And from a McKesson perspective, we focus on generating a spread. Again, high service levels, high availability of supply, low cost for customers and generating a spread for McKesson. We've done that very well now for really almost 10 years at ClarusONE with Walmart, and we're very pleased with the results of that business. And again, generics will continue to be an important part of the business.

Certainly, the growth that we've seen in specialty, the growth that you're seeing in oncology, the growth that you're seeing in immunology is higher than any other category that's out there. So that is becoming an increasing part of the portfolio that McKesson provides to customers. But generics will always continue to be an important product capability for McKesson to provide good service, good low cost.

Yes. No, that makes sense. Can you talk about also -- I think post some of the, let's call it, drama in generic pricing in the early 2010s, you guys changed your model around generics and sort of the sensitivity to generic pricing, I believe. Can you talk about that? And is it sort of -- people should think about it maybe focus more on sort of the overall -- to your point, it's a lower growth driver than specialty, but sort of think about it as more just a function of the increased economics from those conversions and growth and not necessarily like the change in price within the generic basket. Is that fair to say?

So you mentioned drama. We certainly had more -- we certainly had less stability for a period of time in the middle of the decade. We have seen good stability in the marketplace, competitive, but certainly a stable marketplace. What we focus on is we focus on earning an appropriate economic value for each product category that we provide services for on behalf of the manufacturer and to our customers. And we reflect that value in the price that we charge our customers.

So I think it's important that we're very thoughtful about being diverse across the customer base, diverse across the manufacturer base and reflecting an appropriate fair value for our services in our price. Now as you think about managing generics, there's a lot of discussion at what I would call a composite level. So there's a lot of focus on there's more deflation. There's less deflation, there's more inflation. That's not how we manage the business. Inside a basket of generics that a customer may buy from us or that we provide services for, there are thousands of generics. We manage each one of those. Each one of those has different characteristics.

There could be 2 suppliers on a generic, could be 8 suppliers on a generic. The API is different within the formulation of that molecule. And all of those will generate different levels of cost, different levels of inflation or deflation. We manage every one of those, and we manage every one of those for high supply as well as low cost for our customers and creating a spread. So we don't really focus on the composite generic basket. We focus on each individual molecule because that's how our customer is buying from us. And by doing that, I think we've been very efficient and very effective at creating that low cost for our customers as well as a good spread for McKesson.

Yes. Okay. That's a helpful distinction. Maybe turning to RxTS. You've had a very -- that's obviously been a very successful growth driver of the business as well. If we look at the AOI guidance now 13% to 17% versus originally 9% to 13%. How do we think about the drivers and the contributors to that outperformance?

It's a business that has performed very well now for several years. And if you think about our long-term target for this business, we see continued growth over the next several years. When you think about this business, there are really 3 key buckets that I would put it in. First of all, we have a set of 3PL capabilities and services that we provide. That represents roughly 50% of the revenue of the segment. Those are distribution margin like margins that are contributing around less than 5% of the profit of the segment. So those are important.

We're certainly seeing a lot of innovation and growth opportunities within 3PL services, but different from the other half of the business, which is more technology focused on providing access and affordability solutions. So they represent really the other half of the revenue. Within that, if you think about our access solutions, the flagship within that are the prior authorization services. Certainly, GLP-1s, we have relationships and provide services for all the major brands, but also for other specialty brands, many specialty brands.

And as manufacturers product is maturing or the needs for that product change over time, the services that we provide within that are also going to change, and that provides an opportunity for us to continue to invest and extend those services. And then there are a set of affordability programs, think about e-voucher or discount cards or those types of capabilities. So it's a business that we've seen good growth. Certainly, GLP-1s have been a part of that. But we're continuing to grow the relationships and new product wins that we're having, providing on both the affordability and the access solutions side.

Okay. That makes sense. And maybe digging into a couple of the things you said there. It seems like there have been some market shifts and maybe share shifts in the 3PL landscape over the last couple of years. If you look at the landscape now, where are the incremental opportunities for McKesson?

Yes. So it's a business that we think we run very efficiently. There -- if you think about 3PL services, there's probably 3 buckets that you can look at this. There's the established pharma players that are looking for services that may require more specialized or advanced capabilities and advanced logistics. There's certainly the more emerging players, emerging biopharma players who are looking for a higher level of capabilities, could be logistics, could be advanced handling and services.

And then I think there's also now cell and gene. And certainly, in cell and gene, there's more emerging opportunities, more products come into market. And we have a business called InspiroGene that is designed to handle those types of services for cell and gene. We've just launched and built a new distribution center within our 3PL business itself for cell and gene capabilities. So we're excited about that. There's more innovation. There's more growth and opportunity within 3PL, within cell and gene that's going to drive potentially more opportunity for McKesson.

Okay. That makes sense. And if we think about the rise in cash pay prescriptions with GLP-1s, those are obviously outside of traditional channels and by definition, cash pay and so don't necessarily go through sort of prior authorization. Does this -- should investors be worried about that as a potential headwind to the GLP-1 sort of contribution to the RxTS business and the prior authorization business? Why or why not would you say?

Well, first of all, I think that cash pay is pretty small today. It could grow certainly over time. I think we already provide a lot of services for cash pay. We're already providing some services for some of these direct programs today. So I think that plays right into the capabilities that RxTS has. So I think that we'll see how this -- if it becomes more material, that could be more opportunity for us, just given the unique capabilities that we have within RxTS as an enabler.

And so I don't worry about it. I view this as something that we will continue to monitor and watch. But again, given the capabilities and services that we have, it could represent an opportunity for us. And we're already providing some of those services -- enabling services on behalf of some of these direct models today.

Okay. Yes, that was going to be my next question, sort of looking at some of these direct models that we've seen, you guys provide core distribution services to them and are part of that growth wave more generally. What are some of the -- should we think of those as sort of like small but high-growing regular distribution partner -- channel partners? Or are we thinking about these as something else to your point about maybe there's additional ways that you can serve them with services or what have you?

So first of all, if you think about these direct-to-consumer models, there's this core distribution behind that. And so there's providers that need distributors like a McKesson to provide some of those core distribution services. In addition to that, maybe I would point out 3 things. We already have capabilities around distribution outside of that central fill as a service within our CoverMyMeds business, where we can deliver medications to a patient's home or to their stated pharmacy directly. We have a pharmacy -- specialty pharmacy capabilities with biologics by McKesson, where, again, we can service oncology and rare disease specialty pharmacies medications.

And again, those can be delivered directly to a patient's home with the support for those medications. And then the third thing I would say is we have some pharmacy services where within CoverMyMeds, again, today, we are working with some of these branded portals to help provide a seamless integration of the intake, the fulfillment and the dispensing of those prescriptions today. So we have unique assets, both on the general distribution, some of the central fill distribution as well as the specialty pharmacy capabilities within biologics. And then as I mentioned, some of these pharmacy dispensing capabilities.

Got it. No, that makes sense. Maybe the business is obviously, to your point before, seeing outsized growth in specialty and oncology. If we think about the business from a cash flow perspective, McKesson has always generated very strong free cash flow, negative working capital, that part -- can you talk about the differences in the cash flow cycle for the specialty and oncology providers versus what we think of as maybe some of the traditional pharmacy distribution?

Well, there's an aspect that's very similar, and that is a lot of that business is pharma distribution. And so it takes advantage of the scaled network that we have, the efficiency that we have around our working capital. So there's -- I think there's different aspects of the business. There's the distribution and the efficiency that we have within the distribution network.

There's the more direct management of payers and providers that's going to have a different certainly a set of cash conversion metrics and then within the technology business, a very efficient cash flow-driven business as well. You just look historically, the cash flow conversion for this business has been high, it's been very consistent, and we anticipate that, that will continue going forward.

Okay. So we shouldn't think of any broad shifts in that. And then as you sort of we think about that strong contribution, obviously, you've been investing a lot in MSO platforms and RxTS. How do you kind of see the evolution of that continuing over the next couple of years? Like what's most interesting to you at this point? You obviously talked about some of the platform adds to the MSOs. Anything else that sort of comes up that you think is very complementary to the core business?

I think the opportunities that we have in automating the business, modernizing the business, some of the AI capabilities that we are already implementing and using, those are going to make not only a more efficient business, but again, some of these customer-centric solutions that we have, particularly as they relate to our providers, I think, is going to be really a great opportunity for us. Continuing to invest in RxTS to add extensions to the capabilities that we have today, we talk about the investments that we expect to have in the second half of the year, an increased level of investment. That's a normal level of investment that we have in the business.

We believe that adding these additional services like reporting and denial conversion and some of the affordability programs that continues to widen the moat that we already have with these differentiated assets. So I think it comes on 2 fronts. It's product extensions, it's automating some of the aspects of the distribution network and it's providing some more automated solutions that are more customer-centric, provider-centric.

Got it. And should we be thinking of those as a mix between sort of either vendors that you're just working with or your own internal investments and M&A? Do you have a view on sort of do you need to own the AI solution? Or can you partner...

We are partnering with a lot of these large companies today. And certainly, they're providing some leverage for us with their tools.

Okay. That makes sense. If we think about it, maybe one slightly off-wall conversation. It struck me at the Investor Day that you talked about when you first walked in and saw Brian, and it's been a very successful partnership over the last several decades. What do you think it is about...

20 years.

Yes, exactly. What do you think it is about your relationship or sort of how you 2 work together that enables that successful partnership to have lasted for so long?

Yes. I think generally speaking, we have -- we think about business in a very similar way, not exactly, obviously. But we're very focused on strategy. He is a strategist by heart. So I've learned a lot from him over the years from that aspect. We're very focused. So strategy is important, making sure that we're focused on that strategy. If you think about our strategy, it is there are 4 pillars. And those 4 pillars have been pretty consistent as well.

So I think we see the business in a very similar way, not exactly. And I think that's good, to be honest with you. We have a very good open communication and dialogue, and we've gone through a lot of experiences together. So you talked about what happened during the 2010s in the pharma landscape. We were both in the pharma business at that point in time. So I think the shared experiences, the shared views, the shared focus, all of those have made really good relationship.

Got it. And I hate to end on a short-term question, but just your businesses obviously has very nice like long-term stable dynamics. But anything you want to point out on seasonality that you think would be important for investors just as we get through the year?

Yes. So again, it's a very big and diversified business still. And so you will see some variations from quarter-to-quarter. We try to pull those out and call those out for you. Tax rate is certainly one of those. The mix of our profits and where they come from impacts that as well as the timing of discrete items that is -- will generate variability from quarter-to-quarter.

As we think about the second half of our year, there are a couple of things -- discrete things that I could call out. Last year, we divested our Canadian business. That business sits within our North American Pharmaceutical segment today. There was a held-for-sale accounting benefit last year of roughly $0.15. So we're certainly lapping that asset.

And which quarter, can you just remind me?

That was in the third quarter. Certainly, I talked about the tax rate. As we think about the second half of the year, we have increased our tax rate for the full year to 18% to 19%, and we've given a range of 23% to 25% for the third quarter specifically. Again, try to give you as much information again, knowing that the mix of business and the timing of discretes could still impact that. And I would remind you, as I just mentioned, the investments that we're making in our RxTS business, we anticipate those to be higher in the second half of our fiscal year than they were in the first half of the year.

And then just generally speaking, the business does still have variations from quarter-to-quarter. There could be seasonality impacts from the illness season. We've seen a weak illness season through the first half of the year, weaker than we had anticipated, weaker than we've seen over the last 5 illness seasons. And then the business just generally will have and has seen variations from quarter-to-quarter. We are very confident in the full year guide that we've provided.

The fact that we have been able to raise that guidance with performance through the first half of the year, we are very confident in the guidance that we've provided of $38.35 to $38.85. That represents 16% to 18% growth over the prior year. And when you exclude the venture gain that we had last year, that's 18% to 20% operating profit growth. So we are -- again, we're very confident in the full year. There could be variations from quarter-to-quarter. But again, this is another strong year for McKesson.

That makes sense. And just to just put a point on the illness season comment, we should think about that as impacting the core North American distribution business. Is that where most of that sort of -- not that that's a huge percentage of the overall business or by any stretch of the imagination, but just in terms of thinking about that...

So here's 2 places that will impact. Certainly, the medical business itself. So there's the illness season in the medical business has been weak now for a couple of years. So there's the aspect of just the illness season impact to medical as well as it does have some of a pull-through impact. You're seeing less illness, you may have less incidents to go see your doctor that's going to drive through less medical supply. So -- that has impacted that segment much more impactfully. There is an illness season impact in our Pharma business. It's just a smaller impact given the size of that segment.

Okay. That's fair. Well, thank you very much, Britt.

Thank you so much. Appreciate it.

Good morning, everybody. Thank you for coming to the UBS Healthcare Conference. I'm Kevin Caliendo, UBS Healthcare IT distribution analyst. And we are really, really proud and happy to have Britt Vitalone, who is the Executive Vice President and Chief Financial Officer of McKesson. Britt, thanks so much for coming today.

Thanks for having me.

It's been a great few years. It's been a great more than a few years, but it's been especially great few years. Maybe take us through a little bit, I want to start with North American Pharmaceutical because you've had this business for a long time. You broke it out this year. You separated the Specialty business from North American Pharma. And I was a little bit surprised to see the margins of North American Pharma stand-alone were stronger than I thought they might be ex the Oncology or ex the Specialty business. I know you rolled Canada into that. But are they -- if we go back and look, like what's changed in that business? What's made it stronger for you in the past, and we still track the generic stuff and generic pricing and generic mix and everything, that doesn't seem to be changing. So something else is improving. Maybe just talk a little bit about that?

Yes, I'm happy to. Maybe I'll just start at a little bit higher level, what we've been doing over the last several years. And we've had a number of what I would say, transformations within the portfolio, which I think is really important, it's kind of got us to where we are today.

The most recent Investor Day, what we did is we resegmented our business first to help provide a little bit more clarity on where our strategies are going forward. That includes our North American Pharmaceutical business, which is our U.S. Pharma business plus our Canadian Distribution business, separating our Specialty Oncology, it's an area that we've made a lot of investment in over really the last 15 years, our U.S. Oncology business, now the addition of PRISM and building out a new platform around Vision, specifically retina and ophthalmology. And then our third piece remains unchanged is the segment, which we call our Rx Technology Solutions business, which is focused on our biopharma services capabilities.

It's important to kind of backtrack because what we've done over the last few years is focusing on our strategy where we have a right to win, where we can win and then focusing on how we do win. And that's leveraging what we believe are differentiated capabilities that we have, both in Oncology, multi-specialty and in biopharma services. In our North American Pharmaceutical business that you asked about specifically, I think there's a number of factors that are really delivering this year.

First of all, we've seen solid and consistent utilization over the last several years now. So it's been a consistent growth. I think the continued demographics and demographic trends and continued in innovation in drug development, drug distribution are all playing a part of that. We have continued to invest in this business and in automation and technology and capabilities that are driving operating expense leverage. And I think just the breadth of services that we have, the breadth of channels that we support, our sourcing capabilities, both on the generic side as well as on the branded and specialty side. All of those are leading to a more scaled, efficient and effective North American Pharmaceutical business. We think the continued growth of specialty and specialty drugs is also playing into that. And again, that's being leveraged against the broad platform, the efficient platform that we have.

So to that end, you're saying utilization is stronger. Is there a change in mix in any way, shape or form in the North American business? I don't want to get into specialty, but is there a mix happening there that's benefiting you or is it just the fact that you're able to leverage the OpEx line because through automation, through the investments that you made, is that what's driving the higher AOI margins?

I think there's a couple of things. I think there is a mix that continues to shift more to specialty drugs in specialty distribution. Generics are an important part of the basket that we provide as a full-line wholesaler, but the impact that generics have today is less than it was 10 years ago. I mean, there's fewer launches, although there are still launches that happen and then the growth of specialty. And so I think specialty has become a bigger part of the bucket. The scaled business that we have and the footprint that we have allows us to be more efficient combined with the investments that we're making in automation and into our distribution network. I think all of that is factoring into higher margins.

Specialty drugs 5 years ago, 6 years ago, 8 years ago, weren't necessarily moneymakers for you, right, on the core distribution side. They were treated similarly to brands. So what's changed there? Or tell me I'm wrong, but that was always the impression I had. Listen, everything was built around getting generic share. Now it sounds like specialty is a way to make money in the core North American distribution business. Is that...

Well, this started many, many years ago. We were very focused on making sure that we earn a fair value for the services we provide in each category of services. So clearly, in Generics, it's a -- there's a buy spread opportunity there, and we use our capabilities in sourcing. We use the scale that we have to drive a buy-sell spread that's beneficial for our customers as well as the company.

But we've been very focused with branded products, specialty products, now biosimilar products to make sure that we're paid a fair value for the services that we provide. Regardless of price, regardless of the product, whatever is needed by the manufacturer, we negotiate with them to make sure that whatever services we provide that there's an applicable value associated with that. So there's greater focus on each individual category and each individual product to make sure that, that fair value is reflected.

And that's with the manufacturer, not necessarily with your pharmacy partners in this business, right? You're getting better economics from manufacturers.

We're getting fair value from our manufacturers. That's being reflected in the prices that our customers pay us. And so I think it's just a focus of making sure that there's fair value across all categories has been important, and it's something that we started many, many years ago.

I think we don't appreciate the automation and the costs. If you look at McKesson and take the gross profit line as you report it in the operating income line as you report it, it's been a fantastic rise in terms of the margin there, just looking at those 2 line items as opposed to the revenue number that you defined. I'm assuming that's mostly because of automation, and that's because you become more efficient. It's hard for us to see that in the outside world. Can you talk a little bit about it? And where can it go? I mean, are we at a point where OpEx can stay flat even if you're growing 3%, 4%? How much of it's tied to the actual cost? Is there more improvements that you can make maybe through automation, AI, whatever it might be?

Yes. So we've talked about this for as long as I've been with the company, the term that we've used is operational excellence. And operational excellence not only means delivering the product at the right time to the right customer at the right price and doing that in a very efficient manner. It also means doing it in an operationally cost-effective manner.

Four years ago at an Investor Day in 2021, I talked about some of the improvements that we were seeing in our operating expense leverage. We measure that as operating expenses as a percentage of gross profit. And we were seeing some of the benefits of the focus that we are making at that point in time. You fast forward to this past Investor Day, we've continued to implement new technologies, new automation. We just opened a DC in Ohio that is now 90% automated. Now that's a tremendous efficiency. It's tremendous accuracy and our customers feel the benefit of that as well.

But those types of investments, improved processes, improved efficiencies, improved processes in the back office, all of that is continuing to drive operating expense leverage. At Investor Day, I talked about the fact that over the last 5 years, our operating expense leverage has improved over 1,000 basis points. And it's not something that we look at each quarter. It's year to year to year, we're making the right improvements to be more efficient, more accurate and those benefits will flow through to both our partners and in the manufacturing world as well as our customers.

And so I'm really proud of that focus. I think it delivers better value to our customers, and I think that we can continue to do that, the early stages of AI. We've been investing in this now for the last 18 months. The pace of AI innovation inside McKesson is picking up. More and more people are becoming aware of the capabilities and they're now introducing it into their daily jobs. In fact, I was just -- Kirk Kaminsky is here, we have a leadership meeting this week in Dallas, 2 days, and it's going to be focused on how do we use automation and AI in all of our processes. We're bringing together the top 150 leaders at McKesson to talk about that. And it's something that we believe is going to continue to drive really good benefits for the company, for our customers and over time, it will deliver more efficiency.

So in 5 years, when you were sitting back here again, you're going to talk about another 1,000 basis points of...

I think the opportunities are certainly there to continue to -- I think we're in the very early stages. A lot of the things that we're doing today are low-hanging fruit opportunities. There's more transformative opportunities, I think, out there in front of us. But again, we've got the power of thousands of people across McKesson that are now being introduced to these capabilities. And that technology mindset, I think, will pick up steam over the next several years. I'm not predicting 1,000 basis points, but we're on this journey. And I think that's going to be an important part of our story.

Got it. A couple of specific things. Understanding that specialty is so much more important than Generics. But we did notice a step down a little bit in specialty generic pricing and the data that we track in September, maybe a little bit into October. Is this something -- is there anything there, like we used to -- the first question every conference call was what's happening with generic pricing? Should we care about the nuances month-to-month or over a quarter or something in terms of generic? I know you have a spread, but I'm just saying when you -- we track the spread and it felt like the spread got a little bit tighter, yes, in specialty.

I mean, we manage the business for the long term. And obviously, we look at the same set of data that you do. I don't really worry about a month-to-month change. I look at trends over time. And I look at the underlying trends. The pricing environment has been stable. And it's been consistent, it's competitive, but it's stable. I think month-to-month, you could see variations for a whole lot of different reasons. It could be mix related. It could be the introduction of a new product. If you look at it on a year-to-year basis, there's good stability in the pricing environment.

Pricing has obviously been a big factor, a big headline over the last couple of months with TrumpRx and everything else. So maybe it's a good transition to talk about it. And what was announced on Friday with the GLP-1s and how that could impact you. Do you see any way where government gets involved in Medicaid pricing or TrumpRx has a list price where prices are clearly lower than what they -- does this impact you guys in any way, shape or form? Maybe first on the core North American Pharmaceutical business, and we can talk about specialty and RxTS.

Yes. So we're going to continue to work with the manufacturers to be paid a fair value for the services we provide. So if there's a distribution of one of these products regardless of whether it's on TrumpRx or it's going directly from the manufacturer from us to a patient, whether it's direct-to-consumer, again, where we distribute that product, we'll be paying a fair value for those services. So we don't see any direct impact from the announcements that happened on Friday or similar ones that we anticipate could happen.

So direct-to-consumer as an example, has been around for more than a decade. We have plenty of capabilities that would support continued expansion of direct-to-consumer. It's pretty small today. We expect that it's going to continue to be a pretty small component of overall pharmaceutical distribution.

But we have a lot of capabilities to support this. On the distribution side within CoverMyMeds, we have Central Fill as a Service where as a patient, we can direct your prescription to your particular pharmacy of choice or to your home. We have pharmacy capabilities with Biologics by McKesson, where we have an independent specialty pharmacy distribution arm, which can again support rare and oncolytic type specialty drugs, where we can send it directly to a patient's home as well as well as the clinical support services that go with that. And then we have a number of pharmacy-related capabilities through CoverMyMeds, which really in a comprehensive way, try to integrate what's necessary with a brand manufacturer's patient portal. It could be helping with the intake, the fulfillment and the distribution of that back to a particular patient. So it's been around. It's been pretty small for a number of years. We anticipate it will continue to be small. But we are aligned with an array of assets that would support this going forward.

So what I understand getting paid your fair value for what you do. I know you also get paid for working capital and taking on working capital, right? And so if the price -- are you still getting that part of your fee based on what the price -- the list price is or what the price is, I don't want to say post rebate or post discount. You understand what I mean, if a GLP-1 is $1,000 and you're taking on $10 million worth of it, the working capital fee or this does not matter because it's such a small piece of the fee that you're getting. I'm just wondering how the working capital aspect changes? And is that, in any way, affect your profitability on a script?

So we're paid a fixed fee for service for the fair value for those particular products. If the cost to us to deliver that is, let's just say, $5, it doesn't matter whether the cost of the drug is $1,000 or $100. We're still going to be paid a fixed fee for service based on the fair value that we provide.

In terms of the working capital, again, it's -- we take on that responsibility to manage the inventory as well as the receivable. We still have to be efficient in that. Again, regardless of what the price of the drug is, we're still managing that working capital on behalf of the manufacturer and on behalf of the customer and the efficiency that we do that is going to drive a cash outcome. And so we're very focused on having efficient working capital.

So if I'm thinking about this same drug, lower price, lower working capital, your margin actually will look better presumably because you're still getting that fixed fee. I mean, I know we're talking about a small thing. I just -- understanding how this works for you has always been a little bit complicated.

Let's talk a little bit about Oncology and multispecialty. At Analyst Day, you talked about some of the deals that you've done, including the addition of Florida Cancer Specialists. Is there more opportunity in Oncology? It feels like the biggest assets have been scooped up by either you or your peers. But is there more opportunity there? And you also said at Investor Day that you were going to start looking at other specialties. Maybe talk about what those might be because I have some questions about that.

Yes. So we're really pleased with the platform, starting with U.S. Oncology that we've built really now over the last 15 years. And we -- now with the addition of Florida Cancer, have a little over 3,350 providers in the network that are providing clinical services in over 27 states. So there is still some opportunity in certain geographies for us to go into. I think the largest players have probably been spoken for or signed at this point in time. But there's still opportunities for us to continue to add in certain geographies.

What we're really focused on, though, is what kind of value can we provide for these providers, whether that be through drug distribution, through the GPO services that we provide. Certainly, there's a lot of clinical data that's available for clinical practice that the providers provide as well as upstream information for the manufacturers as they look to continue to innovate within their drug pipeline.

And then there's the clinical trial side of this. There's a lot of clinical research being done in Oncology. I think there's 41% of all new drug trials are still focused on Oncology drugs. So we have an opportunity there through our Sarah Cannon Research Institute joint venture to continue to provide clinical trial access, site management, clinical trial management, which will help the over 1,300 research providers today that are doing research and clinical trials within the network.

So we think that the opportunity with drug distribution is still good. We think the opportunity to grow some of these other services, whether that be data, whether that be clinical trials, some clinical research capabilities is still that next leg for us. At Investor Day, we talked about the total opportunity being about $115 billion, about $80 billion of that, we estimate is drug distribution. That leaves a wide opportunity for us in some of these other platform building capabilities.

And you mentioned other platforms that we're looking at. What we're focused on is moving in and building platforms where there is high innovation, high drug spend and the ability for us to build a platform around that. We're not looking to just go out and buy a bunch of providers in a particular therapeutic area. There's practice management associated with that, but it's hard to manage providers. And the economics and the return on invested capital for that, we don't believe is high where you can build a platform around drug distribution, GPO services and clinical research and clinical capabilities, we believe the return is good there. We think that retina represents that opportunity for us. There's good drug innovation. There's increasing drug spend and there's a lot of clinical research in that area. So we believe beginning to build that out is going to be another platform for us to deliver a lot of value through.

Okay. A couple of follow-ups here. Do you have all the assets that you need to provide the services to these providers or -- that you need to have, that you just described, $115 billion. A couple of years ago, I remember there was a lot of chatter for lack of a better term around McKesson being interested in CRO or CRO-related assets.

I never heard that.

I know you only had to address it about a 100 times. But you did say CRO -- certain pieces of CROs you were interested in, do you feel now that you've developed those capabilities to provide all these services at this point? Does McKesson have what it needs?

So what we are interested in is where there are clinical capabilities within the areas that we've chosen to build platforms on. So going out and being a general CRO would be difficult. There's strategically where there are capabilities that support Oncology or Retina or Ophthalmology that makes sense because we're building a platform around that.

I think the Sarah Cannon Research Institute JV is a good example where we identified an opportunity for us to add capabilities around expanding clinical trial access, expanding site management. That's a good example of adding to the platform. I think there will be other opportunities for us to add some of these clinical capabilities that support the platforms that we're building around Oncology, Retina and Ophthalmology.

With these provider assets that you have, have you ever contemplated going at risk with the providers or just you simply just comfortable with the current reimbursement model? And I say that, I'm not talking necessarily about value-based care. But when I -- when you had your partnership with Optum, right, they love to be innovative. You guys love to be innovated out.

The first thing I thought was, hey, maybe there's going to be something they can do in Oncology here where both sides would benefit, right? There could be -- now it's -- I don't know that the world wants to hear you guys would be doing something like that. But have you thought about it? Is there an opportunity either in that relationship or broadly with the assets that you have to maybe benefit for some of the care providing that you do in and above just getting paid for the services?

Well, what I would say is that our providers are already doing a lot of value-based care. The Oncology care model is a good example where we had a significant portion of the providers within the U.S. Oncology network participate and drive a significant amount of savings. And in the enhanced Oncology care model, we're seeing similarly that U.S. Oncology providers are participating at high levels and driving significant value. That's a choice that our Oncology providers make to do value-based care or not. And we're seeing that they're leaders in value-based care.

In terms of getting more innovative, I mean, certainly, we have -- one of the things that we talked about at Investor Day is we have large customer relationships, how we can deepen and broaden those relationships out over time. HCA is a good example. We started with the Sarah Cannon Research Institute joint venture, where we could build out more clinical capabilities around Oncology. And that extended into a distribution partnership. Similarly, we've seen that with Walmart and with other customers where we start with a particular aspect that we have good skill and capabilities in. And over time, if it makes sense, we will broaden that relationship out.

In terms of your specific question, I don't really have an answer for that today. I mean, I think we're always open to areas where we have skills and capabilities, and we have differentiation that we can build on. That's not one that we have looked at today. In the future is that one that we could look at, possibly, but it's not where our focus is today.

You sort of answered a question that I had when you said you have certain -- when you're looking at new specialties, which you said at Analyst Day, some of the things they need to have is high drug spend. We get in Ophthalmology, we certainly get it in Oncology. It's hard to understand, are there other specialties out there that have a lot of high drug spend? And the 1 area that I've heard private equity has been scooping up everything is sort of infusion centers, right, which would have a high amount of drug spend. But I don't know that, that's necessarily what you're talking about, but it feels like there's something going on in that world as well. What other specialties have that kind of spend or can you talk maybe a little bit more broadly, what goes above and beyond Ophthalmology and Oncology in that space?

Yes. Well, look, we start with every year, we go through a 3-year process where we look at the drug pipelines in both branded areas, specialty area, biosimilars and generics. And from that work, we look and see where the concentration of innovation is going to be where the pipeline is going to be in.

What we see today is that Oncology still has the largest spend and the largest innovation in it. We see new drugs coming to market, even biosimilar type drugs in the Vision space, so that was obviously an opportunity for us. Those are the 2 areas that we see today that make the most sense for us to build a platform around. There's a lot of research going on in other therapies. But in terms of the drug innovation and drug spend on the market, it's not there today, certainly could be over time. So we look at the pipeline on a regular basis. If there's a particular therapeutic area that shows promise from an innovation and drug spend perspective, that could be an area where we could build a platform around. But the 2 areas that we're focused on today are in the Vision space as well as in Oncology.

So infusion by itself as an infusion center or whatever, that's not an interesting opportunity for McKesson?

It's not something today that we have spent a lot of time on. But again, we look at a lot of different things, and we try to assess whether there's an opportunity and whether there's a breakout from a growth perspective. I can't really say why private equity does what they do. They have a lot of capital to invest.

Fair enough. The 3% operating margin in the specialty in Oncology and multispecialty business was a little bit lower than I was expecting it to be. For whatever reason, it doesn't matter. That's my opinion. But the -- when we break out how to think about the margin between the MSO and the GPO, I know this is something you don't necessarily want to get into a lot of detail about. But how do we think about -- how big is the GPO? Does the GPO just service McKesson oncologists? Are you outside of the 3,300 oncologists that you have in purchasing for more? How does it work? Can the MSO work without the GPO? Can the GPO work without the MSO?

Well, there's a lot to unpack in there. I would say that when we build out a platform is to build out a whole breadth of services, GPO being one of those. The GPO that we have today services thousands of multi-specialty providers. So outside of the U.S. Oncology network, there are multi-specialties that access and utilize our GPO as well.

So from that perspective, it is a -- I think it's a scale GPO that many benefit from inside of McKesson and outside McKesson relationships. That's maybe how I would answer that. I mean, back to your question on the margins, again, today, a lot of the platform is still driven off of drug distribution. And so again, we were paid a fair value for the services that we provide for those particular drugs. Over time, we see more and more growth beyond just drug distribution, and I talked about that already.

Got it. I think one thing that we look at as we see a drug like KEYTRUDA, which I think has been a big driver of oncology drug spend. It's a fantastic drug. It's used in a lot of different indications. I'm sure your GPO is purchasing a lot of KEYTRUDA. What happens -- KEYTRUDA's on the IRA drug list, right? We know that. What happens when that price goes down or the biosimilar comes? Can you just sort of explain how it impacts the GPO and MSO aspect? And this isn't until 2028, right, or 2029 when this is going to happen. But just mechanically, what happens to McKesson when that happens?

So you have 2 different things in there. So let me just parse those out. You talked about biosimilar.

[indiscernible] at the same time, there could be a lower [indiscernible]

Yes. So let me just -- let me bifurcate those. From a biosimilar perspective where there are drugs that go biosimilar that we provide more services to support those that would go through the U.S. Oncology channel as an example, where we provide more services, more GPO services, more wrap around services on the platform, our economics are going to be better than they would be for the innovator drug itself, generally speaking. So channel matters from that aspect. Biosimilars are going to go through the retail channel, if you will, a Part D drug where the services required by McKesson are less, our economics will be lower than -- they're probably better than the innovator drug themselves, but they won't be as high where we're providing more services. That's the biosimilar aspect to that.

In terms of KEYTRUDA itself, I mean, I think we're kind of speculating on what will happen here. My understanding is that drug has been pushed back to 2029 for MFP pricing. What that price looks like, I couldn't speculate on that. Is that going to be the same as the particular price that ASP is reimbursed at today? I don't know the answer to that. If it is a lower MFP price, those units will be part of the overall ASP calculation and there will be reimbursement impact from there.

I also can't tell you what's going to happen to the reimbursement for providers because we fully believe and we believe that many others see the same trends that the most efficient and economical place provide cares in the community. And so we believe that whatever changes are taking place today is not intended to impact community providers. So I think we have a number of years to see what will happen. But in terms of where community providers are placed, we still think they're the most effective and the most economical.

We have about 5 minutes left. And I want to talk a little bit about Prescription Solutions. The announcement on Friday about GLP-1s coming to market at a lower price shouldn't affect RxTS. It may actually help, right, if there's maybe more prescriptions depending on how it works. Do you anticipate there being any change from payers in terms of what they're interested in doing in terms of prior authorizations? Or any change just from a lower price, maybe there's more prior authorization. What do you expect the impact to be on RxTS just simply from lower GLP-1?

You're going to hate this answer, but I don't know the answer to that. But what I can say is that it could actually open up more coverage and more coverage could be more volume that goes through the system. Now the prior authorizations are typically different, whether it's a diabetic product versus a weight-loss product. There could be different restrictions on a diabetic product versus a weight loss product, the time to renew the prior authorization for a diabetic product versus a weight loss product. That time could be different, and that changes payer to payer. So I think it's a little early to say what the reaction is going to be putting these on the Medicare platform themselves, making them available to more Medicare patient could open up more volume. I think we'll have to see how that plays out.

Has there been any change in the economics to McKesson over the last year from GLP-1s in terms of what you get paid for a prior auth and a second prior auth or anything like that? How has it worked? I know GLP-1s are not as important as they were for Prescription Solutions, but I'm sure they're still important. I'm just wondering how they've changed.

Well, it's going to depend on the manufacturer. It's going to depend on the specific product. And it's going to depend on what the manufacturer is looking to drive out of those products. Do they just wanted a basic initiation and submission for the prior authorization? Certainly, there's going to be economics around that. Are they looking for help with appeals or denial conversions or rejects or services to support that prior authorization monitoring, reporting?

So there's a whole host of adjacent products to support a particular product, depending on what the manufacturer is looking for, depending on where it is in its life cycle. So yes, economics will change depending on like any other prior authorization really depending on where the product is in its life cycle, what the manufacturers' needs are to support that particular drug.

Do you think there'll be any difference for you with -- when oral solids come to the market versus injectables?

There could be. Again, it's going to depend on what restrictions are necessarily placed on those particular drugs, what services are going to be needed. So there could be.

Okay. I want to ask because we only have 2 minutes left, but is there any messaging -- we're through 2Q, 2 quarters. I know the way the guidance has played out, it was pretty clear. Is there anything we should think about in terms of seasonality, anything to consider for the second half of the year? I know you and I talked about the step down in the pharma growth, but you said there was no change in the actual LRP. This is just adjusting for Optum in the deals. But is there anything else we should think about in the second half of the year for this year in terms of the guidance, seasonality tax rates? I know things move around a lot.

Yes. So we're really pleased with the performance that we've had thus far this year. If you look at our guide on adjusted EPS, $38.35 to $38.85, that's 16% to 18% growth. And when you exclude the McKesson Ventures gains that we had last year in the first half of the year, that really represents 18% to 20% growth. So that's above the long-term ranges that we provided. So we're really pleased with that.

To your point, there are a couple of things in the North American Pharmaceutical last year. We had the onboarding of a strategic customer in the first quarter of the year. So we're obviously lapping that in the first half of this year. And in the back half of the year in our Canadian business, which is now part of this segment, we had the benefit from held-for-sale accounting for Rexall and Well.ca, so we're going to be lapping that in the second half of the year.

We have some investments that we're making that we talked about that are going to increase in the second half of the year in our Rx Technology Solutions business. And then the tax rate, as you mentioned, we've got an 18% to 19% full year tax rate. We anticipate that the third quarter will be 23% to 25%. And that it's really related to the mix of our business and the timing of discrete items. But again, that 18% to 19% is relatively in line with what we provided slightly higher with the third quarter being a little bit elevated.

Sir, thank you very much.

Appreciate it. Appreciate it.

Welcome to McKesson's Second Quarter Fiscal 2026 Earnings Conference Call. Please be advised that today's conference is being recorded. At this time, I would like to turn the conference over to Jeni Dominguez, VP of Investor Relations. Please go ahead.

Thank you, operator. Good afternoon. and welcome, everyone, to McKesson's Second Quarter Fiscal 2026 Earnings Call. Today, I'm joined by Brian Tyler, our Chief Executive Officer; and Britt Vitalone, our Chief Financial Officer.

Brian will lead off, followed by Britt, and then we'll move on to a question-and-answer session. Today's discussion will include forward-looking statements such as forecast 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.com and to the Risk Factors section of our most recent annual and periodic SEC filings for additional information concerning risk factors that could cause or actual results to materially differ from those in our forward-looking statements.

Information about non-GAAP financial measures that we will discuss during this webcast, including a reconciliation of those measures to GAAP results can be found in today's earnings release and presentation slides. The presentation slides also include a summary of our results for the quarter and guidance assumptions. With that, let me turn it over to Brian.

Thank you, Jeni. Good afternoon, everyone. Thank you for joining our call today. Earlier today, we reported strong second quarter results, which reflect sustained momentum in our business and the strength of our diversified portfolio. Consolidated revenues in the quarter increased 10% year-over-year to $103 billion and adjusted earnings per diluted share increased 39% to $9.86. These results demonstrate the impact of focused execution across the enterprise with notably 3 of our segments delivering double-digit adjusted operating profit growth as we continue to deliver against our strategic priorities. .

Given our first half performance and our confidence in the outlook for the year, we are raising our guidance on adjusted earnings per diluted share to $38.35 to $38.85. This builds on the $0.80 increase announced at our Investor Day in September. At the event, we also affirmed our company priorities and highlighted the differentiated capabilities that underpin McKesson's long-term growth.

I'll walk you through our continued progress we achieved in the second quarter. At that conference, we also introduced our new reporting structure that sharpens our strategic alignment and provides enhanced transparency into the growth areas of our business. The newly formed Oncology and Multi-specialty segment will focus on accelerating our strategy in the higher growth, higher-margin segments. And we established a North American Pharmaceutical segment, bringing together our pharmaceutical distribution capabilities in the U.S. and Canada.

This quarter marks our first set of results under this structure and I'm pleased with how our teams have come together to deliver consistent financial performance. We are confident that the new reporting structure will optimize our portfolio management and drive sustainable long-term value creation for shareholders. Britt will share more about the quarterly results in his remarks. But let me start by talking in a minute about our people and culture.

Team McKesson is the driving force for the continued innovation and excellence. It's the foundation of everything that we accomplish. Our best talent strategy continues to raise the bar across McKesson and is evident in the way our teams and our Board approach service, integrity, teamwork and performance. That commitment is exemplified by our Chairman of the Board, Don Knauss, who was recently honored with the B Kenneth West Lifetime Achievement Award from the National Association of Corporate Directors.

This is a well-earned recognition of his leadership, and I am grateful for his many, many contributions to McKesson. We believe that a strong culture is an integral part of our talent strategy, and it's reflected in how we support our communities and our people. In September, McKesson team members came together to participate in our annual community impact days. We supported more than 60 organizations nationwide, giving back to our communities and reinforcing the values that drive our everyday work.

We support and care for our people through extensive resources and programs. And in October, employees across McKesson took part in our Annual Wellness Day, we refer to it as Your day, Your Way. It's now in its fifth year and it underscores our continuing commitment to our team's well-being.

Let's move on to our 2 strategic growth pillars: oncology and multi-specialty and our biopharma services. Our differentiated specialty platform remains a central pillar of our growth strategy and is now reported within the newly established oncology and multi-specialty segment. Our differentiated capabilities have us well positioned to advance cancer care and expand into other therapeutic areas through scale, connectivity and innovation.

Foundational to our oncology and multispecialty business is our unparalleled distribution breadth. Specialty is a growing market with many unique medications and distribution requirements. We have market-leading capabilities and scale through our strong presence in the community provider setting, serving more than 14,000 providers across a wide range of specialties.

Complementary to the core distribution capabilities are our group purchasing organization, specialty pharmacy offerings and infusion management services. Our diverse capabilities enable us to support a wide range of customers with varying needs and accessing specialty meds, including innovative therapies that are transforming care. This includes the launch and commercialization of cell and gene therapies. In August, we launched InspiroCare, a patient hub designed to simplify the complex journey of cell and gene therapies and provide personalized compassionate support for patients.

In September, we opened a world-class cold chain facility dedicated to cell and gene therapy distribution. This 12,000-foot facility is equipped with ultra frozen and cryogenic storage technology, specifically designed for the unique requirements of these medications, ensuring proper storage and the highest standards of compliance and care.

Our best-in-class oncology platform provides support to community providers through a comprehensive suite of services, including practice management, clinical trial access and industry-leading technology solutions that empower them to deliver world-class care. The U.S. oncology network has been leading the cancer care transformation for more than 15 years and is now supporting over 3,300 providers across more than 700 sites across the country.

In October, the U.S. oncology network formed a collaboration with Blood Cancer united around a shared goal of strengthening cancer care and access to clinical trials close to home. The collaboration will provide personalized clinical trial education as well as clinical trial matching through the Sarah Cannon Research Institute. It will also offer patient navigation services to facilitate participation in clinical trials for patients with all types of blood cancer.

During the second quarter, progress continued with the integration of Florida Cancer Specialists and PRISM Vision, bringing both practice groups onto our distribution and GPO agreements to unlock the full value of our broader services and take advantage of the expanded relationships.

PRISM Vision recently expanded its footprint with the addition of Spokane Eye clinic located in Spokane, Washington, extending its reach now beyond the Mid-Atlantic region. Spokane Eye Clinic has a growing team of 27 eye care specialists in 4 clinic locations. It marked an important milestone for PRISM in building a comprehensive national eye care platform and continuing to enhance patient experiences.

Let's move on to our biopharma services platform with our Prescription Technology Services segment. Our leading technology platform is designed to make medicine more accessible and more affordable for everyone. What differentiates McKesson is the breadth and depth of our capabilities to address the most pressing challenges of access and affordability. Our network spans approximately 1 million providers and more than 50,000 pharmacies processing approximately 23 billion transactions annually. This connectivity and scale is the foundation that enables us to streamline access to life saving therapies, reduce friction across the health care continuum and deliver measurable impact for our customers and patients.

Our platforms combined tech-driven patient support services, automated prior authorization, co-pay and voucher programs, all designed to help patients start, stay on and afford their therapies. We complement these offerings with best-in-class third-party logistics, advanced analytics and AI-enabled solutions that optimize efficiency and unlock value for our biopharma partners.

This integrated approach positions McKesson as a trusted leader not only solving today's challenges, but continuing to invest in the future, expanding our solutions for specialty therapies, modernizing technology and leveraging innovation to advance health outcomes for all.

Let me touch on our pharmaceutical distribution business in North America. This is a foundational business that continues to deliver strong growth, underpinned by operational discipline and a differentiated value proposition. The sustained momentum of the business, driven by leading scale, strong operating leverage and robust cash flow generation enables us to continue to reinvest in the business to advance all of our enterprise priorities.

We have made focused and significant investments in automation to support the growing complexity in the supply chain management. These investments improve operating efficiency, enhance customer experience and unlock productivity in our workforce. An example of the advanced automation technologies we have implemented is the order storage retrieval system, which has been introduced in facilities across North America.

The most recent application being in our U.S. National Redistribution Center serving as the core of our hub-and-spoke distribution model. This sophisticated system improves our service levels and accuracy, streamlines processes and expand our storage capacity to better serve our customers. As an example, what would have normally taken 8 physical human touches to complete a pick, pack and ship process, now only takes 2 human touches. We are committed to investing in technology and automation, which will continue to position us for long-term growth in the future.

In August, our U.S. Pharmaceutical business achieved a major milestone in the implementation of the Drug Supply Chain Security Act. We are now actively exchanging serialized transaction data with supply chain participants in compliance with these new FDA requirements. Behind this achievement was the extraordinary collaboration across the enterprise from technology and operations to regulatory affairs and customer support. Throughout this very complex implementation, we maintained exceptional service and accuracy with almost no disruption to our customers.

We're proud to lead in this initiative that will enhance the safety, transparency and integrity of the pharmaceutical supply chain. Now let me provide a brief update on our portfolio actions. Our teams continue to actively execute on multiple work streams to separate the Medical-Surgical business, positioning it to become an independent, well-capitalized operating company. As shared in Investor Day, we're targeting to exit the Medical-Surgical Solutions business through an initial public offering. Following a customary lockup period, we intend to exit our remaining interest through a spinoff or a split-off transaction or possibly a combination of both.

We anticipate that this separation could be completed by the second half of calendar 2027, subject, of course, to market conditions and customary regulatory approvals. In summary, McKesson delivered another strong quarter of performance. Our strategy and execution are driving outstanding results, and this momentum continues to build across the enterprise. We operate in the dynamic market and policy backdrop, and we're highly engaged in that process across the organization.

Importantly, we're executing from a position of strength and credibility. We remain committed to collaborating closely with policymakers and stakeholders to advocate for changes that align with the values of our company and are good for health care. We're confident that our differentiated capabilities will continue to deliver value to customers and patients and be an important part of addressing health care's most pressing challenges.

Lastly, I want to thank my fellow McKesson team members for their dedication and their contribution to advancing our mission. Together, we are advancing health outcomes for all, and we are excited about the opportunities that lie ahead. With that, I'll hand it over to Britt for some additional financial details.

Thank you, Brian, and good afternoon. We're pleased to report another quarter of strong execution and financial performance exceeding our expectations reflecting the strength of our diversified health care platform. My comments today will refer to our adjusted results.

I'll begin with our second quarter fiscal 2026 performance, followed by an update on our fiscal 2026 outlook. As previewed at our Investor Day in September, we implemented a new reporting structure beginning in the second quarter to enhance transparency and sharpened visibility into our growth platforms. This framework highlights the differentiated capabilities within our oncology and multispecialty and biopharma services platform, verticals where McKesson is best positioned to deliver sustainable long-term growth.

This realignment reinforces our commitment to disciplined execution, strengthens our strategic focus and accelerates long-term value creation for all stakeholders. Turning now to results for our second quarter. McKesson delivered another strong quarter, achieving record quarterly revenues of $103 billion, an increase of 10% compared to the prior year, driven by robust performance across our portfolio of businesses.

Growth was led by the North American Pharmaceutical segment, reflecting increased prescription volumes from retail national account customers and by the Oncology and Multi-specialty segment, supported by expanded distribution of oncology and multi-specialty products and contributions from recent acquisitions.

Gross profit increased 9% to $3.5 billion, primarily due to strong specialty distribution and provider growth within the Oncology and Multispecialty segment. Operating expenses decreased 1% to $2 billion, reflecting divestitures in our Canadian business and disciplined cost optimization initiatives in the Medical-Surgical Solutions segment.

These reductions were partially offset by continued investment in the Oncology and Multispecialty segment, including acquisitions completed in the first quarter of fiscal 2026. Our unrelenting focus on cost discipline and operational efficiency powered by a technology-first mindset and AI-driven modernization continues to create value for all stakeholders. This progress is evident again in the second quarter.

Operating expenses as a percentage of gross profit declined 570 basis points, delivering significant operating leverage as we accelerate and modernize our operations. Operating profit reached a quarterly record of $1.6 billion, an increase of 26% year-over-year, reflecting growth across all operating segments. This strong performance was driven by increased specialty distribution volumes in both the oncology and multi-specialty and North America Pharmaceutical segments, increased demand for access solutions in our Prescription Technology Solutions segment and continued benefits from cost optimization initiatives in the Medical-Surgical Solutions segment.

The acquisitions of PRISM and [ Core Ventures ] in the Oncology and Multispecialty segment contributed approximately 6% to year-over-year growth. Additionally, the sale of an equity investment and market decisions within the U.S. Oncology Network contributed approximately 4%. Excluding these 2 items, organic growth was approximately 16% in the quarter underscoring the strength and momentum of our core business. Interest expense declined 6% to $68 million, resulting from effective cash and portfolio management, including our derivative portfolio.

The effective tax rate was 17.5% compared to 21% in the prior year. In the second quarter of fiscal 2026, we recognized net discrete tax benefits of $96 million, primarily related to the release of a valuation allowance compared to net [indiscernible] tax benefits of $44 million in the second quarter of fiscal 2025. Second quarter diluted weighted average shares outstanding was $124.4 million, a decrease of 4%.

The Second quarter earnings per diluted share increased 39% to $9.86 driven by several key factors: robust core operational performance, contributions from the first quarter acquisitions of PRISM and Core Ventures in our Oncology and Multispecialty segment, approximately $0.30 or 4% from net gains related to the sale of an equity investment and market decisions within the U.S.

Oncology Network in our Oncology and Multispecialty segment and a lower effective tax rate. Turning to second quarter segment results, which can be found on Slides 8 through 12 and starting with North American Pharmaceuticals. Revenues were $86.5 billion, an increase of 8%. This growth reflects a continuation of solid pharmaceutical utilization, including higher volumes from retail national account customers and specialty products.

Our ongoing focus on operational excellence also delivered operating expense leverage during the quarter. Revenues from GLP-1 medications were $13.2 billion in the quarter, an increase of approximately $2.6 billion or 24% when compared to the prior year. On a sequential basis, GLP-1 revenue increased 6%. The Segment operating profit increased 13% to $851 million, driven by growth in the distribution of specialty products to health systems, the impact of new product launches and continued operating expense efficiencies.

In the Oncology and Multi-specialty segment, revenues increased 32% to $12 billion, driven by strong provider and specialty distribution growth, including contributions from acquisitions completed in the first quarter of fiscal 2026. The acquisitions of PRISM and Core Ventures contributed approximately 12% of the second quarter segment revenue growth. Operating profit increased 71% to $397 million driven by increased provider and specialty distribution volumes and contributions from the acquisitions of PRISM and core Ventures.

These acquisitions contributed approximately half of the segment operating profit growth in the quarter. Second quarter operating profit results also included nonrecurring net gains of $51 million from the sale of an equity investment and market decisions within the U.S. Oncology network. Excluding the impact from the acquisitions of PRISM and Core Ventures and nonrecurring net gains, segment organic operating profit increased 13%, highlighting the strength and momentum of the core business.

In the Prescription Technology Solutions segment, revenues increased 9% to $1.4 billion, driven by increased prescription volumes across our third-party logistics and technology services businesses. Operating profit rose 20% to $261 million, reflecting increased demand for access solutions, including prior authorization services for GLP-1 medications.

Turning to Medical-Surgical Solutions. During the second quarter, we observed softer illnesses and product demand compared to the prior year, including vaccines and testing and lower volumes across ambulatory and extended care settings. Revenues were $2.9 billion, flat compared to the prior year. Higher volumes of specialty pharmaceuticals were offset by lower contributions from illness and products and testing across the ambulatory and extended care studies.

Compared to the prior year, revenues from seasonal vaccines and testing volumes represented an approximate 4% headwind. I Operating profit increased 2% to $249 million, driven by operational efficiencies and cost optimization initiatives. This was partially offset by the headwind from lower contributions related to illness season products and testing.

Wrapping up our review with Corporate. Corporate expenses were $151 million in the quarter. As a reminder, in the second quarter of fiscal 2025, we recorded pretax losses of $15 million or $0.09 per share related to equity investments within the McKesson Ventures portfolio compared to gains of $3 million or $0.02 per share in the second quarter of fiscal 2026. Excluding these impacts, corporate expenses were flat compared to the prior year.

We turn to cash and capital deployment for the second quarter is shown on Slide 13. We ended the quarter with $4 billion in cash and cash equivalents, underscoring the strength of our strong liquidity position and capacity to deploy capital in a value-creating manner. Second quarter free cash flow was $2.2 billion, which included $196 million in capital expenditures. This robust cash flow performance reflects disciplined working capital management and continued operating execution strength.

During the quarter, we returned $907 million of cash to shareholders which included $818 million of share repurchases and $89 million in dividend payments. These actions underscore our commitment to balance capital deployment and long-term shareholder value creation. Before reviewing our updated fiscal 2026 outlook, I'd like to provide 2 portfolio updates.

At Investor Day in September, we reaffirm McKesson's long track record of consistent financial performance driven by strategic clarity, consistency and disciplined execution. Our new segmentation reflects the portfolio evolution, leading to sharper strategic focus, enhanced transparency and increase long-term financial targets. Our strategic clarity and execution positioned the company to deliver sustained value across multiple environments and different cycles of health care, leading to sustained value creation.

Let me start with Norway. Our fiscal 2026 outlook contemplates contributions from operations in Norway for the full fiscal year. Beginning in the second quarter of fiscal 2026, we discontinued recording depreciation and amortization on the assets involved in the transaction due to held-for-sale accounting treatment. This resulted in an accretive impact of $0.03 in the second quarter.

For the full year, we now anticipate approximately $0.13 of adjusted earnings accretion due to held-for-sale accounting in fiscal 2026, which compares to our prior guidance of $0.20.

Next, we're committed to executing the separation of our Medical-Surgical Solutions business in a tax-free transaction, maximizing shareholder value. Since it was announced in May, we've made significant progress towards establishing the Medical Surgical business as an independent operating company. As I mentioned at Investor Day, we anticipate exiting the business by way of an initial public offering.

Following a customary lockup period, McKesson intends to exit its remaining interest with spin-off, or a split-off transaction or potentially a combination of both. We currently anticipate that this separation could be completed by the second half of calendar 2027, subject to market conditions and customary regulatory approvals.

Our fiscal 2026 outlook assumes 100% ownership of the Medical segment. Our portfolio transformation has delivered consistently outstanding financial results, growth and returns to shareholders. Now moving to our fiscal '26 outlook.

Our strategy continues to deliver outstanding results propelled by the growth and differentiation of our oncology and multi-specialty and biopharma services platforms. These platforms are supported by a durable foundation of distribution assets and capabilities, positioning McKesson for sustained success.

At our Investor Day, we raised our earnings per diluted share outlook by $0.80 to a range of $38.50 to $38.55 which was a testament to the clarity of our strategy, strength of our portfolio and disciplined execution. Building on our strong second quarter performance and continued confidence in our outlook for the remainder of the year, we're further increasing our fiscal 2026 earnings per diluted share outlook by $0.30 and to a new range of $38.35 to $38.85, which represents 16% to 18% growth over the prior year.

This update builds on the $0.80 increase announced at Investor Day in September. For fiscal 2026, we anticipate revenue growth of 11% to 15%, reflecting growth across all core businesses and operating profit growth of 12% to 16%, driven by continued momentum in execution.

Let me start with a review of our segments. In the North American Pharmaceutical segment, our core pharmaceutical distribution operations continued to demonstrate a strong and diversified value proposition to customers. We anticipate revenue to increase 10% to 14%, and we're increasing our guidance for operating profit to 5% to 9% growth. The increased operating profit outlook is driven by solid utilization trends volume growth and continued strong specialty distribution expansion.

In the core distribution business, we also anticipate continued growth of GLP-1 medication. We anticipate this growth may vary from quarter to quarter. And as a reminder, prior year results include the impact of the divestiture of our Canada-based Rexall and Well.ca businesses at the end of the third quarter of fiscal 2025. In the Oncology and Multispecialty segment, we anticipate revenue growth of 27% to 31% and operating profit growth of 49% to 53%.

The guidance includes the acquisitions of PRISM Vision and Core Ventures completed in the first quarter of fiscal 2026. We're pleased with the performance of these acquisitions. We anticipate that they'll contribute approximately 30% to 34% to the fiscal 2026 operating profit growth in the segment. Our full year outlook reflects the impact of these acquisitions and strong organic specialty distribution volume growth.

Our oncology multispecialty platform continued to deliver across distribution, practice management, data and analytics and clinical research. In the Prescription Technology Solutions segment, we intubate revenues increased by 9% to 13%, and we are increasing the operating profit outlook to 13% to 17% growth.

The improved operating profit outlook reflects strong organic volume growth and momentum across our access and affordability solutions, particularly higher contribution from prior authorization services, including those related to GLP-1 medication.

As I previously discussed, the revenue and operating profit trajectory in this segment is not linear. It may vary from quarter to quarter, driven by several factors, including utilization trends, the timing and trajectory of new product drug launches, the evolution of a product program support requirements as it matures, which could result in a shift to other services or a program termination, product delays and supply shortages payer requirements, including utilization management and formulary strategies, annual verification programs that we provide for our customers that occur in our fiscal fourth quarter and the size and timing of investment to support and expand our product portfolio.

Moving to the Medical Surgical Solutions segment. Due to lower-than-anticipated illness season product volumes compared to the prior year, including vaccines and testing, and lower volumes across ambulatory and extended care settings, we anticipate revenue and operating profit at the low end of 2% to 6% growth illnesses and variability remains a key factor and the timing and severity level of [indiscernible] can drive variability from quarter-to-quarter and year-to-year. We anticipate corporate expenses to be in the range of $600 million to $650 million which incorporates the impact of $4 million of pretax gains related to equity investments within the McKesson Ventures portfolio in the first half of the fiscal year.

Turning now to items below the line. We anticipate interest expense to be in the range of $210 million to $240 million. Reduced interest expense target compared to the range provided at Investor Day reflects continued strong debt portfolio management and commitment to maintaining our strong investment-grade credit ratings.

We anticipate income attributable to noncontrolling interest to be in the range of $215 million to $235 million, which includes the impact from fiscal 2026 acquisitions. And we anticipate the full year effective tax rate will be in the range of 18% to 19%. We also anticipate that the quarterly tax rate will be higher in the third quarter than in the fourth quarter due to the timing of discrete tax items.

We anticipate the third quarter tax rate to be in the range of 23% to 25%.

Wrapping up our outlook with cash flow and capital deployment. One of McKesson's enduring strengths is our proven ability to consistently generate strong free cash flow and execute value-creating capital allocation. For fiscal 2026, we anticipate free cash flow of approximately $4.4 billion to $4.8 billion. Our outlook includes plans to repurchase approximately $2.5 billion of shares with estimated weighted average diluted shares outstanding of approximately 124 million. Our strong operating performance, combined with disciplined working capital management continues to provide ample liquidity and financial flexibility.

We've also strengthened our financial position by reducing leverage and optimizing our debt portfolio over time. Our focused and disciplined approach to capital allocation remains a cornerstone of our strategy and a key driver of long-term shareholder value creation. In summary, McKesson delivered strong second quarter results, including record quarterly consolidated revenue and double-digit operating profit growth across 3 segments. Our updated earnings per diluted share range of $38.35 to $38.85 reflects both our second quarter results and our confidence in the business for the remainder of fiscal 2026.

As we continue to execute against our strategic and financial framework. The ongoing evolution of our portfolio is in line with the increased long-term targets that we committed to, and this transformation continues to translate in stronger earnings higher returns on invested capital and a fortress balance sheet positioning McKesson for discipline and strategic capital deployment. And with that, let's move to the Q&A session.

[Operator Instructions] And our first question will come from Lisa Gill with JPMorgan.

Great results again this quarter. Just want to understand 2 things. When I look at the revenue growth versus the operating profit expansion, especially in North America pharmaceutical as well as prescription technology solutions. I heard what you said -- Britt, especially in your last comments around it all being organic growth when we think about Prescription Technology Solutions. Is it new products you're bringing to the market? Is it enhanced programs that are driving that margin?

So if I could just understand really what's happening on the margin profile there. And then if I go back to your Investor Day, I had thought that you had talked about some incremental investments that you needed to make in app business. So how do we think about the sequential quarters as we go throughout '26.

Yes. Thanks for the question, Lisa. Let me start with your first question. What we did see in the quarter is a continuation of the strong performance in all of our segments. And we actually saw operating margin expansion in our 3 core segments. There's a number of things that are driving this, specifically in the Rx technology business. we are seeing good mix.

So we're seeing more growth in our technology services component. And that is really all of the things that you mentioned. There are new products and programs that we're seeing growth in. and we're certainly seeing growth in some of our access programs like prior authorizations, particularly for GLP-1. So it's a little bit of all of those things that are all driving in the right direction and the mix from those technology services is driving more margin growth in that segment.

As it relates to the investments, yes, you did hear that right, and we do anticipate a higher level of investments in the second half of the year. So if you think about the cadence for the year, Certainly, we had very strong operating profit growth in that segment in the first half of the year. We expect that to continue to be strong in the second half of the year, and that's going to be against an increased level of investment spending that we have included in our guidance for the balance of the year. So we're really pleased with the performance in the first half of the year, our ability to increase that that guidance for the full year, but also while we're making additional investments through the back half of the year.

And I would just add to these growth investments have been part of the algorithm for many, many years now, and it's not always linear. It's measured up against what we see as opportunities to continue to innovate, to continue to expand the market -- the markets that we can go after and support our future growth. So we're actually glad when we have these opportunities. .

And next will be Brian Tanquilut with Jefferies.

Rick, maybe just as I think about oncology and multispecialty, strong results there, but you're maintaining the guidance. Just curious was the beat on the quarter essentially already contemplated in your guide when you did Investor Day and highlighted the expectations for that business? .

Yes. Thanks for that, Brian. So a couple of things. We did call out some nonrecurring gains. Most of -- there were 3 items really that made up that that all happened in this quarter. The majority of those were known and included in the guidance at Investor Day. There was a third item here that the cadence of that was more back half weighted in our guidance than we had at Investor Day. .

But really, when you break the business down, as I mentioned, the strong growth, about half of that is being driven by the acquisition performance, the 2 acquisitions that Brian and I both talked about that happened in the first quarter of fiscal year those businesses are performing well.

And as Brian pointed out, we were adding to that platform on the PRISM platform, and we're pleased to be able to do that. The organic business, as I talked about, is growing at about 13% year-over-year. And that's right in line with long-term guidance that we provided for the segment. So we're pleased that not only are we adding from an acquisition perspective, some strong assets to the portfolio. But from an organic perspective, the business is performing as we had anticipated.

And next will be Elizabeth Anderson with Evercore ISI.

Congrats on the nice quarter. I was wondering if we could double-click on the health system strength you called out in the quarter. Obviously, there were some good [indiscernible] all around, but I think we don't talk about that business as much, and that seems like it was an incremental source of strength in the quarter. So I'd be curious if you could talk about that in a little bit more detail.

I think we're very pleased with the way our health system business continues to perform. It's a segment of the market that we put some focus on a few years back. We think we're at a point now where we have market-leading share. We think the volumes have been strong in that space. And as our customers see strong traffic flow through their settings, we're benefiting from that volume and that expansion. And I think it speaks to the quality of the partners that we have in the health system. So thank you for calling that out. We don't often talk about it.

And next will be Charles Rhyee with TD Cowen.

Yes. Thanks for the question. Britt, I might have missed it a little bit before, but when you were thinking about the tax rate for the year, if I remember [indiscernible] guidance, you said you get the range in the first half would be higher than the second half and the first quarter higher than the second. And obviously, we saw it was a little over first quarter, I think it was 17.5% this quarter. Full year, you're still guiding '18 to '19, actually brought it up towards the higher end. How should we think about tax rate in the back half of the year? .

Yes. Thanks for that question. Obviously, as we've talked about, the tax rate could vary from quarter-to-quarter, not only the mix of income will be an important factor of that, but the timing of discretes. And -- we are anticipating that the second half will have a slightly higher rate than we had at Investor Day, [indiscernible] what's really driving the guidance from '17 to '19 to '18 to '19. That's really just a modest change in our outlook there.

But as I provided here, we gave you specific tax rate guidance for the third quarter. We anticipate that the third quarter will come in right around 23% to 25%. And we would anticipate that the timing of some discretes and mix of income drive a lower rate in our fourth quarter.

And next will be Eric Percher with Nephron Research.

There are several macro indicators of specialty volume, treatment acuity that have expanded the last 2 quarters. And I don't you agree that the trend has been elevated in the first half? Do you expect that the same type of specialty trend continues in the second half of the year if it is an elevated level? And then I'd ask just on the edge of that, can you help decode what a market decision with within the U.S. Oncology Network meeting. .

So not 100% sure. I know what data set or a set of statistics you're answering your question in. But what I would say is that in our oncology business, we have continued to see good foot traffic volumes in our existing footprint, complemented obviously by the new partners that we bring to the network as we continue to expand.

So we see good patient flow. And our view of the community setting is it being the low-cost, most accessible and a high-quality place to receive cancer care. As the network has matured over the years, we find ourselves able to take on and treat more and more complicated. Oncology-type patients. And so that's certainly been part of our algorithm. And obviously, if you look at the therapies, the more complicated therapies that are coming to market, that also supports the strength that we've seen in that segment.

Eric, as it relates to your question on market decisions, I mean we had 2 things that happened in the quarter. We had the realization of an equity investment that created again. And then the market decision aspect.

From time to time, we will either enter or exit a market, depending on really the profile of that particular marketplace and how it aligns with the U.S. oncology market and the U.S. oncology strategies. And so in this particular quarter, we exited 2 markets. And from time to time, we will we will see exits from markets. We'll also see obviously entries into new markets. So this is unusual in the sense that we had a couple of these items all happened in the same quarter. Doesn't usually -- we don't usually have 3 of these type of items in 1 particular quarter. .

Yes. And we're more typically a recent history have been adding, but it's important that we maintain the discipline to continually review the portfolio and the footprint of our practices. And that's something we'll remain committed to.

And next will be Kevin Caliendo with UBS.

Want to unpack the guidance a little bit or at least the implied guidance. If I look at the Pharma segment growth in the first half of the year, the actual is north of 11% would imply the second half is less than 4%, 3.5% roughly. I know there's some investments in spend. Is there anything else to call out incrementally from what you've achieved in the first half of the year versus what would happen in the second half of the year, just in the U.S. Pharma segment?

Yes, Kevin, thanks for that question. I would point to 2 things. As you may recall, last year, we onboarded a new strategic customer into this segment that started in the second quarter of fiscal 2025. So first half of this year would have on incremental quarter of operations from that particular customer. And last year, as I mentioned in my remarks, we exited our Canada-based Rexall and Well. ca businesses.

And as a result of that, we had some held-for-sale accounting accretion in last year's numbers. Those 2 things are really the key drivers for the first half versus second half.

And next will be Daniel Grosslight with Citi.

Congrats on another strong one here. There's been a lot of chatter about the cash pay channel recently. Folks going away from their insured benefit. For calendar year 2026, if we do see an increase in uninsured and more insured people paying cash for their prescriptions, perhaps through [indiscernible], how do you anticipate that will impact your prior of business, your RTS business and what's contemplated in guidance there? And are you planning to work with the Trump administration to integrate some of your technologies into the [ Trump RX ] website?

Sure. Let me -- let me start. I mean, the Trump Rx or the direct to patients, there's been 3 or 4 announced as part of the MFN letter that went out from Trump. Our view on these right now is first step back, and there's been direct patient pharmacy for like over a decade. I mean, so it's not really new in the marketplace. And the view that we would hold right now is that the population that's eligible and can afford even the discounted prices really remains pretty small based on assessment that we've done to this point in time.

And therefore, we don't see a big impact on the prior authorization business. As part of our affordability offerings, we do have tools -- we've built these tools that allow us to automate pharmacy, to interface with patients to support patient inquiries last mile delivery. So we have a lot of the tools that can play a role, and we are playing a role in some instances in this today. As far as the Trump administration, our commitment is to work with all governments, policymakers, legislators to try to advance the U.S. health care system in a way that brings cost down makes it more accessible for people and deliver high-quality outcomes.

I don't -- I can't tell you exactly what that might look like, but we are highly engaged at all levels trying to bring the tools, whether it's in prescription technology solutions or distribution tools to bear on the challenges that our leaders are trying to solve today. And we think we've got many, many tools and resources that can be important parts of the solutions to those challenges.

And next will be Allen Lutz with Bank of America.

Britt, 1 for you. This was the third straight quarter where SG&A was down year-over-year and gross profit is actually accelerating. I know that you don't give quarterly guidance around those metrics or those metrics in general. But it seems like a pretty unique dynamic. You talked a little bit about first half, second half. How should we think about that trend in the first half of the year and the trajectory of gross profit and SG&A into the back half of fiscal '26?

Yes. Thanks for the question. Maybe I'll just start with expenses. If you think about expenses, I did mention that last year, we exited our Canada-based Rexall and Well.ca businesses. So that is going to have an impact both on the gross profit and the operating expense line.

Certainly, operating expenses, you're going to have just a gross amount of operating expenses that leave the business. And then from a mix perspective, certainly, we have a more favorable mix of businesses now than we did when we had the Canada-based businesses that was sold last year. The other thing I think is important is just our continued focus on efficiency and I talked about how we lead with the technology first and focusing on AI and modernizing our businesses. And that's driving a significant amount of operating expense efficiency, which certainly is good for all stakeholders that McKesson deals with. So I think we're very pleased with the quality of the operations and the quality of relationships we have that are driving a more favorable gross margin mix. Certainly, the growth that we're seeing in our technology-based businesses like RTS, which grew 20% in the quarter and then the efficiencies that we're seeing in our operating expense leverage.

I mean this is really, in many ways, some of the manifestation of investments we made in years prior, let to do physical automation, to use digital technologies to automate processes. And these are big projects often, they can take years. And then as they come online, this is the kind of the results we expect to see and which is why we think continued investments be part of the algorithm.