McKesson IDs Health Mart expansion, Walmart partnership as fiscal 2018 growth drivers

SAN FRANCISCO – Heading into fiscal 2018, McKesson has some tailwinds that are driving optimism for the wholesaler, including a recaptured generics share in the independent retail pharmacy space and a burgeoning partnership with Walmart.



"In the first half of our fiscal year [2017], we saw increased price competition in the independent retail pharmacy channel, which eventually resulted in reduced volumes for McKesson," acknowledged John Hammergren, chairman and CEO. But the wholesaler has recaptured that lost volume, he said. "In the end, it was important that we were able to recapture our volume, but is even more significant to retain and build upon on our longstanding relationships we’ve established with [the] customer base," Hammergren added. "This included expanding our Health Mart franchises ... adding hundreds of new stores."



And the company's year-old generics sourcing partnership with Walmart, ClarusONE, has also made significant progress, Hammergren said. "We are encouraged by the first year success of this initiative, which demonstrates how our sourcing expertise delivers significant value. [And] we are optimistic that we will identify expanded opportunities to partner with Walmart in the future."



"This new organization first, focused on harmonizing pricing across our respective sourcing arrangement," added James Beer, EVP and CFO, McKesson. "This was completed late in fiscal 2017. Walmart is realizing the benefits from this initiative, and we are now progressing on discussions with manufacturers based on our joint volumes from which we expect to share additional synergies." he said. "However, it is important to note that the economics from ClarusONE ... represents only a portion of the overall value of the expanded relationship with Walmart."



"As we exit a challenging fiscal year, I am encouraged by our strong fourth-quarter results,” Hammergren stated. “Our Fiscal 2017 was impacted by both company-specific and industry pressures. However, due to the actions we have taken, I believe we have positioned our businesses well to address evolving market dynamics and to capitalize on future growth opportunities.”



McKesson reported revenues of $48.7 billion, up 4%, for the fourth quarter ended March 31. For the fiscal year, McKesson had revenues of $198.5 billion, also up 4%.



“Despite the difficult business environment, we were able to drive record operating cash flow results in Fiscal 2017,” Hammergren continued. “We were also pleased with the creation of Change Healthcare, which we believe will drive significant value for our shareholders.”