McKesson Corporation 2015 Investor Dayinvestor.mckesson.com/.../MCK_2015_Investor_Day_Final.pdf2015...

McKesson Corporation 2015 Investor Day

June 24, 2015

Erin Lampert – Senior Vice President, Investor Relations John Hammergren – Chairman and Chief Executive Officer Paul Julian – Executive Vice President, Group President Distribution Solutions Mark Walchirk – President, U.S. Pharmaceutical Nick Loporcaro – President, McKesson Specialty Health Alain Champagne – President, McKesson Canada Stanton McComb – President, McKesson Medical-Surgical

Q&A: North America and Medical-Surgical Distribution and Services

Paul Julian – Executive Vice President, Group President Distribution Solutions Marc Owen – Chairman, Celesio Management Board

Q&A: International Pharmaceutical Distribution and Services

Break

Pat Blake – Executive Vice President, Group President Technology Solutions James Beer – Executive Vice President, Chief Financial Officer

Q&A: Wrap-Up

Closing Remarks

2015 Investor Day Agenda

Forward-Looking Statements

Some of the information in this presentation is not historical in nature and may constitute forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements may be identified by the use of forward-looking terminology such as “believes,” “expects,” “anticipates,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” or the negative of these words or other comparable terminology. The discussion of financial trends, strategy, plans or intentions may also include forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied by such statements. Although it is not possible to predict or identify all such risks and uncertainties, they may include, but are not limited to, those described in the Company’s annual, quarterly and current reports (i.e., Form 10-K, Form 10-Q and Form 8-K) as filed or furnished with the Securities and Exchange Commission (SEC). You are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date such statements were first made. To the degree financial information is included in this presentation, it is in summary form only and must be considered in the context of the full details provided in the Company’s most recent annual, quarterly or current report as filed or furnished with the SEC. The Company’s SEC reports are available at www.mckesson.com under the “Investors” tab. Except to the extent required by law, the Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements to reflect events or circumstances after the date hereof, or to reflect the occurrence of unanticipated events.

GAAP / Non-GAAP Reconciliation

In an effort to provide additional and useful information regarding the Company’s financial results and other financial information as determined by generally accepted accounting principles (GAAP), certain materials presented during this event include non-GAAP information. The rationale for management’s use of non-GAAP information, a reconciliation of that information to GAAP, and other related information is available in the supplemental material attached as an appendix to this presentation and posted to www.mckesson.com under the “Investors” tab.

Welcome

John Hammergren

Chairman and Chief Executive Officer

McKesson’s Shared Value System

How We Do It

Who We Are

What We Do

McKesson Distribution Solutions

Paul Julian

Executive Vice President Group President Distribution Solutions

Distribution Solutions: Core Operations

Reflects non-GAAP information calculated on an Adjusted Earnings basis. A reconciliation to GAAP is available in the appendix to this presentation and on the Company’s website under the “Investors” tab.

Pharmaceutical distribution,

technology and services in the U.S.

and Canada

Medical surgical supplies distribution and services in the

U.S.

Celesio pharmaceutical

distribution and retail operations

Enterprise-wide sourcing

organization

$176B in revenues and $4.2B in adjusted operating profit in FY15

North America Pharmaceutical

Distribution and Services

Medical-Surgical


International Pharmaceutical


Global Procurement and Sourcing

Distribution Solutions

Delivered Strong Results Across Distribution Solutions FY15 Milestones

1Oracle Retail Week Awards 2015 2Highest ranked EHR, 2014 Black Book Rankings for Oncologists and Hematologists

Operating control

of Celesio

December 2014

New McKesson Global Sourcing & Procurement

3,281 to

3,865 stores

200+ Canadian Banner Pharmacies

Betterlife from Lloyds Pharmacy wins Store Design of the Year1

iKnowMed ranked

Continued to add new physicians The US Oncology Network

PSS integration #1

Oncology EHR2 Meeting or exceeding expectations

Added

Expanded Health Mart from


Driving Operational Excellence Across Distribution Solutions In FY15

~43K orders processed daily

>2.2M lines per day

99.98% order accuracy across North America Distribution and Services

~20% increase in lines processed across U.S. Pharmaceutical

Nearly

$200M in Six Sigma-related savings across North America

International Distribution and Services

19% increase in delivery addresses served

99.91% ~5%

increase in lines for medical and surgical supplies shipped Inventory accuracy


across North America Distribution and Services

Track record of strong financial performance across the segment

Operational excellence is at the core of everything we do

Strong value proposition across all customer segments

Differentiated approach to working with manufacturing partners on a global scale

Proven ability to successfully deliver value from acquisitions

Significant depth of leadership experience and management bench strength

Distribution Solutions Summary


Distribution Solutions Leadership Team

Paul C. Julian EVP, Group President Distribution Solutions (19 years)

Brian Tyler President North American Pharmaceutical Distribution and Services (18 years)

Marc Owen Chairman Celesio Management Board (13 years)

Stanton McComb President McKesson Medical-Surgical (13 years)

Jack Fragie President Global Procurement (33 years)

Saul Factor President Global Sourcing (9 years)


North America Pharmaceutical Distribution and Services

Paul Julian


North America Pharmaceutical Distribution And Services Leadership Team

Brian Tyler President North America Pharmaceutical Distribution and Services (18 years)

Mark Walchirk President McKesson U.S. Pharmaceutical (14 years)

Alain Champagne President McKesson Canada (5 years)

Nick Loporcaro President McKesson Specialty Health (12 years)

Emilie Ray President McKesson Pharmacy Systems & Automation (15 years)

North America

FY15 Milestones Across North America

1Source: KLAS, 2015 Rankings

U.S. Pharmaceutical McKesson Specialty Health

McKesson Pharmacy Systems & Automation

•  Added more than 500 Health Mart stores •  ~40% year-over-year growth in OneStop Generics •  >$150M in Six Sigma-related savings •  1.6M lines processed per day •  99.98% order accuracy

•  Continued track record of new physician additions to US Oncology since acquisition

•  Expanded multi-specialty revenues by 26% and achieved leading position in rheumatology

•  >20,000 lines processed per day •  99.96% order accuracy

•  Solid retail banner performance with more than 200 stores added

•  20% growth in Specialty business •  >580,000 lines processed per day •  99.97% order accuracy

•  Continued growth in key customer segments, including 27% growth in hospital outpatient setting

•  EnterpriseRx ranked as a leading outpatient pharmacy system by KLAS1

•  99.95% system availability for hosted clients

McKesson Canada

North America

Demographics, chronic disease

and coverage expansion

Mid-Single Digit Compound Annual Growth from 2014-20191

Pharmaceutical Industry Landscape

1Source: This information is an estimate derived from the use of information under license from the following IMS Health information service: Market Prognosis North America for the period 2010-2019 (IMS Health Market Prognosis reports for Canada and the U.S. published March 2015). Note: IMS expressly reserves all rights, including rights of further copying, distribution and republication. McKesson does not warrant or represent the accuracy of IMS data or McKesson’s interpretations of IMS data. Any subsequent use or interpretation of this data will be the liability of the receiving party and not of McKesson or IMS.

0

2

4

6

8

10

12

14

0

100

200

300

400

500

% Change Sales (USD Billion)

2018

2017

2016

2015

2014

2013

2012

2011

2019

2010

Steady organic growth

Pricing trends and

healthy pipeline

Overall U.S. and Canadian Market

North America

A Broad Value Proposition Across North America

v

Payers

Pharmaceutical Manufacturers

Retail Pharmacies

Alternate Care Sites

Physicians

Health Systems

Regulatory Agencies/ Government

North America

•  Retail chains and independent pharmacies •  Health systems and alternate care sites •  Community clinics

Manufacturing Partners

Customers

•  Procurement scale •  Supply chain efficiency and product safety •  Product commercialization services

Patient

Focused On Customer Success

Oncology and multi-specialty distribution and services

US Oncology

GPOs

Canadian infusion clinics and services

Payer solutions

Manufacturer services

Clinical research services

iKnowMed

Pharmaceutical distribution services

Brand and specialty

Generic

Health Mart

Canadian banners

Private label

Central fill

Supplylogix/ Inventory Management

Pharmacy automation

Supply chain expertise

Specialty distribution

Data analytics

Consulting services

340B services

Packaging services

Outpatient pharmacy systems

Retail Health Systems Community Clinics

Procurement at Scale Plus Supply Chain Excellence North America

Industry-Leading Capabilities For Manufacturers

Scale and Reach

High Efficiency Best-in-class network; organized for quality, efficiency and speed

customer locations spanning market channels

Strong footprint of banner pharmacies

Flagship generic procurement programs

Services

Product commercialization Consulting and data analytics Clinical research capabilities Patient access and support Risk evaluation mitigation

~50K

Multiple channels and market access

North America

Supporting pharmaceutical development life cycle

Specialty Drives >50% of North American Pharmaceutical Market Growth 2013-20181

Positioned For Growth In Specialty

1IMS Health Global Outlook for Medicines Through 2018, November 2014. Represents percentage of absolute growth in USD using constant currency exchange rates for North America (by market) from 2013-2018 Note: IMS expressly reserves all rights, including rights of further copying, distribution and republication. McKesson does not warrant or represent the accuracy of IMS data or McKesson’s interpretations of IMS Health data. Any subsequent use or interpretation of this data will be the liability of the receiving party and not of McKesson or IMS Health.

•  Multiple distribution channels •  Leading position in community oncology •  Leading positions in rheumatology,

gastroenterology and ophthalmology •  85+ infusion community clinics in

Canada •  Access and patient programs for banner

pharmacies •  Data and analytics •  Clinical research capabilities

Overall U.S. and Canadian Pharmaceutical Market

2013 2018

Specialty

North America

Priorities Across North America Distribution And Services

North America

Achievements

Well-positioned in growing markets

Deep customer relationships and a differentiated approach to value creation

Proven expertise and robust offerings across channels

Priorities Maximize global sourcing opportunity

Expand value provided to existing and diverse customer base

Drive innovation and operational excellence

U.S. Pharmaceutical

Mark Walchirk

President U.S. Pharmaceutical

v

U.S. Pharmaceutical Has A Broad Value Proposition

North America

•  Industry-leading service levels •  Proprietary OneStop Generics program and NorthStar

private label •  Technology offerings, including RelayHealth and Supplylogix •  Clinical services and pharmacy systems

Independent and Small Chain Pharmacy

Retail National Pharmacy

•  Health Mart franchise •  Proprietary OneStop Generics program •  Technology offerings, including RelayHealth and Supplylogix •  Managed care contracting and pharmacy solutions

Health Systems and Institutional Pharmacy

•  Proprietary OneStop Generics program •  Clinical / Operations solutions and consulting •  Technology offerings, including Macro Helix •  Packaging and inventory management

Payers


Retail Pharmacies


Physicians

Health Systems


Patient

U.S. Pharmaceutical Market Overview

1IMS Health Market Prognosis North America for the period 2015-2019, March 2015 2IMS Health Global Outlook for Medicines Through 2018, November 2014. Represents percentage of absolute growth in USD using constant currency exchange rates for North America (by market) from 2013-2018 3IMS Health National Sales Perspectives, December 2014; sales in year prior to expiry for 2009-2014; MAT Sept 2014 sales shown for 2015-2019 Note: IMS expressly reserves all rights, including rights of further copying, distribution and republication. McKesson does not warrant or represent the accuracy of IMS data or McKesson’s interpretations of IMS data. Any subsequent use or interpretation of this data will be the liability of the receiving party and not of McKesson or IMS.

7.2% CAGR 2015 to 20191

Generic Growth

Generic Launches

$85.1B of brand sales at risk from 2015 to 20193

Expect >50% of market growth in the North American pharmaceutical market will be from Specialty medicines during 2013 to 20182

Specialty Medicines

2.9% CAGR 2015 to 20191

Brand Growth

North America

FY11

FY10

FY15

FY14

FY13

FY12

Our Generics Programs Continue To Drive Value For Customers

OneStop Revenue

OneStop proprietary generics program

Strong compliance and

growth

Expert product sourcing and deep relationships with

100+ manufacturers

Competitive pricing, choice and industry-leading service levels

North America

>10 years of leadership in NorthStar private label

McKesson: A Valuable Partner To Retail National Pharmacies

Rite Aid

Assumed responsibility for

sourcing and

distribution

Operationalized daily direct store

delivery to

4,500+ stores

Strong track record of

renewing and expanding our customer relationships

Broad service offerings cater to individual customer needs

North America

Health Mart is the Largest Network of Independent Pharmacies in the U.S.

McKesson: A Valuable Partner To Independent Pharmacies

Health Mart Store Count Health Mart Strategy

Access to preferred networks

Drive patients

into store

Expand store revenue

FY15

3,865

FY14

3,281

FY13

3,096

FY12

2,941

North America

2014 Pharmacy Innovator of the Year Award from Chain Drug Review

Better Health For McKesson’s Independent Pharmacy Customers

Results

•  Grew prescriptions per day by >15% in a two-year period in a competitive environment

•  Integral part of the community, driving customer loyalty and keeping the business strong

Offerings

•  Fully branded Health Mart

•  Purchases generics through OneStop Generics program

•  Participates in AccessHealth

•  Utilizes marketing, data analytics and adherence programs

Heath Mart Customer Spotlight

#1 Independent network in largest national pharmacy quality program

Health Mart and AccessHealth provide preferred access to ~4 million lives

North America

McKesson: A Valuable Partner To Health Systems And Institutional Customers

Solutions-led approach combining robust distribution capabilities with unique services and technologies

•  Data analytics

•  Supply chain expertise

•  Cost containment and revenue enhancement services

•  Specialty consulting

•  340B services

Federal Department of Veterans Affairs Department of Defense

IDNs Supply partnerships with the nation’s leading health systems and alliances

Alternate site Tailored capabilities for long-term care and specialty pharmacies

North America

Operational Excellence

99.98% order accuracy

One third of medicines in North America delivered daily

•  New NRDC fully operational •  ~20% increase in lines processed

across the network •  Six Sigma process improvements

generated >$150M in savings

FY15 Highlights

Efficiency Quality Productivity

Focus Areas •  Ongoing capital investment to maintain

state-of-the-art distribution network •  Investments in technology and

automation to drive productivity gains •  Best-in-class NRDC services

North America

Investing in

technology to increase productivity

Our operational excellence is driven by our people, infrastructure and investments

North America

McKesson Specialty Health

Nick Loporcaro

President McKesson Specialty Health

•  The leader in community oncology •  Leading position in rheumatology •  Increasing scale in other specialties

Supporting Key Stakeholders to Drive Better Patient Outcomes McKesson Specialty Health

A Strong Position with Payers

A Valuable Partner to Manufacturers

A Leading Position in the Community Channel

v

Payers


Retail Pharmacies


Physicians

Health Systems


North America

•  National presence across specialties •  Best-in-class tools to optimize payer contracting

•  Spectrum of services across the drug life cycle, from clinical research to commercialization

•  Solutions for different types of specialty products, both innovator and biosimilar

Patient

A Broad Footprint Across Multiple Specialties McKesson Specialty Health

Scale Technology Breadth

Fast Facts1: •  >3,000

oncologists

•  >4,500 other specialists

•  >400 payer relationships

North America

Practice Locations: •  The US Oncology Network •  Open Market Oncology •  Other Specialties

1McKesson Specialty Health statistics as of March 31, 2015

The US Oncology Network Enabling High-Quality Clinical Care

Largest Community-Based Oncology Network in the U.S.1

•  >60,000 clinical trial patients

•  >50 FDA-approved drugs representing ~1/3 of approved cancer therapies

•  >120 early-phase studies

•  >300 peer-reviewed publications since January 2013

Network Services •  Practice strategy planning

•  Innovative managed care contracting •  Clinical research •  Clinical education •  Best-in-class EHR (iKnowMed) •  Cutting-edge clinical decision support tools

(Clear Value Plus)

•  Physician oncology portal

North America 1US Oncology statistics as of March 31, 2015

Enabling Guidelines and Pathways at the Point of Care Specialty Health Payer Solutions

Clear Value Plus Value Pathways •  Ability to interface with any EHR •  Engage physicians before treatment

decision is made •  Real-time reporting to support quality

programs

•  Powered by direct collaboration with National Comprehensive Care Network (NCCN) physicians

•  Evidence-based protocols to manage overall cost of care

•  Regimens based on efficacy, toxicity and cost

North America

Providing Solutions for High-Quality, Low-Cost Care McKesson Specialty Health Payer Solutions

Episodes of Care Innovent Oncology Oncology Care Model

Collaboration with payers to help patients understand and manage side effects and consider advanced care planning

Single, upfront payment for each episode

Episode payment can increase if outcomes improve or total cost of care decreases

Proposed payment model pilot that includes financial and performance accountability for episodes of care surrounding chemotherapy

North America

Supporting Unique Needs of Specialty Drugs Specialty Manufacturer Value Chain

Patient support

Outcomes tracking

Development

Limited distribution and dispensing

Specialized handling

Detailed inventory control

Large to niche populations

Physician education North America

Supporting Unique Needs of Specialty Manufacturers Specialty Health Manufacturer Solutions

Value-Added Services •  Efficient clinical trials •  Prescriber outreach and education •  Patient counseling and assistance

programs •  Reimbursement support •  Market analytics and insights •  Sales force optimization •  Drug safety monitoring •  Pharmacy transaction data •  Clinical outcomes assessment •  Adherence services

Offered Solutions US Oncology Research

Clinical Trial Management Systems

My Care Plus

Physician Portal

iKnowMed

Market-Connect

Universal Hub

Cold Chain Shipping

3PL

Managed Distribution

North America

Supporting Biosimilar Launches Through a Comprehensive Platform Positioned For Success With Biosimilars

Strong Partnerships with manufacturers

Multichannel Presence Access

via network and group purchasing organizations

Commercial Capabilities

•  Distribution •  Patient care •  Services

Biosimilar Considerations

•  Time to develop and product commercialization

•  Ability to substitute

•  Physician views on quality and efficacy

•  Number of players and competing products

•  Channel of delivery

•  Therapeutic area of pharmaceuticals

•  Regulatory approvals pathway

North America

Partnering with Key Stakeholders to Deliver Better Health McKesson Specialty Health

North America

Improving Complete product life-cycle support


Optimizing Payer contracting

Enabling High-quality clinical are

Payers

Physicians

v

Payers Pharmaceutical Manufacturers

Retail Pharmacies

Alternate Care Sites Physicians

Health Systems


Patient

McKesson Canada

Alain Champagne

President McKesson Canada

McKesson Canada: A Strong Value Proposition

Taking Advantage of Scale

Operational Excellence

A Unique Portfolio of Business Assets

North America

v

Payers


Retail Pharmacies


Physicians

Health Systems


•  National presence across specialties •  Global sourcing and Sivem •  Banner programs strengthening Canadian

independent pharmacy

•  Operational excellence and Six Sigma discipline •  Highly engaged workforce

•  Well-positioned for profitable growth •  Strategically aligned to enable strong customer

partnerships and quality patient care

Patient

Market Overview

1IMS Brogan, a unit of IMS Health, Monthly Market Monitor MAT purchase data, May 2015 2IMS Brogan, a unit of IMS Health, Pharma Focus 2017 Canadian market forecast for retail pharmacy Rx purchases, 2014 3IMS Brogan, a unit of IMS Health, Pharma Focus 2017 Gx/Bx script share, 2014

Driving Business Growth In A Dynamic Market

$24B CAD

88%

67%

Shift in prescribing1,3

Generics trend increasingly stable and predictable

56%

44%

67% - Gx

33% - Bx 2005 2014

Pharmacy Rx purchases1

Pharmacy Rx purchases via retail pharmacy2

of Canadian retail pharmacy prescriptions are generics3

Canadian pharmaceutical market continues to evolve

North America

Independent Pharmacy Banners Specialty Pharmacy

McKesson Canada Offers A Broad Market Reach

of Canadian independent pharmacies

>1,900 banners servicing nearly

Distributor

15 Distribution centers

7 Specialty pharmacies

85+ Infusion clinics

•  Integrated supply chain •  IT connectivity solutions •  Tele-triage

Connecting the Canadian healthcare environment

40%

North America

Partnering With Independent Pharmacies To Improve Store Revenues And Performance

+ +More

Scripts More

OTC Sales More Private Label Sales

Increased National Footprint

>1,900 stores

FY15

>1,700 stores FY14

10% increase in SKUs from FY14 to FY15

Better Business Health for Independent Pharmacies

12%

Medicine Shoppe Canada

North America

Expanding Comprehensive Specialty And Distribution Capabilities For Patients And Payers

Strong manufacturer programs that enable clinical success •  Comprehensive reimbursement assistance •  Improved patient adherence

Infusions Annually

Medical conditions addressed: Hodgkin's Disease, Metastatic Colorectal Cancer, Ankylosing Spondylitis, Crohn’s Disease, Psoriasis, Ulcerative Colitis and Rheumatoid Arthritis

89K

North America

Leveraging McKesson Global Sourcing Platform Growing Sivem Portfolio To Meet Market Needs

Benefiting from McKesson’s global sourcing reach

in molecules available across Canada during FY15 20% growth

Launched national expansion

Collaboration with NorthStar

Supply quality and certainty

North America

Driving Operational Excellence Unmatched National Reach Driving Performance

Distribution Centers

Specialty Pharmacies

Infusion Clinics

Retail Pharmacy Banners

Extensive network enables next-day service or better to

of Canadian population

95%

North America

Leveraging Our Core Competencies Positioned for Growth

•  Leverage North America and global sourcing

•  Work with preferred networks

•  Continue to grow Sivem

•  Use automation to further optimize supply chain

•  Further enhance capabilities to support specialty commercialization and growth

•  Lead drug delivery channels and manufacturer programs

•  Explore expansion of oncology pilots

•  Integrate new banners

•  Strengthen independent pharmacy with banner programs

•  Position McKesson as the leading partner in Canada

Drive Volume and Margin in Distribution

Grow Banner Business

Grow Specialty

Leverage Technology to Strengthen Business Channels

•  Focus on connectivity across operations to enable growth •  Expand RelayHealth to optimize patient and provider connectivity

North America

McKesson Medical-Surgical

Stanton McComb

President McKesson Medical-Surgical

•  Favorable demographic trends

•  Continual rise in U.S. healthcare spending

•  Consolidation of customers and suppliers

•  Growth expected in lab and home care markets

•  Healthcare increasingly influenced by consumer interest in convenience, pricing and quality

Medical-Surgical Results And Market Overview

Note: 2013 revenue includes approximately 5 weeks of PSS World Medical (PSS) and 2014 includes a full year of PSS

Medical-Surgical Revenue

$3.1 $3.6

$5.6 $5.9

FY12 FY13 FY14 FY15

Market Trends

Medical-Surgical

Sales (USD Billion)

•  >1,400 field sales reps •  Serving >225,000 customers

Strong Customer Value Proposition through Service and Platform McKesson Medical-Surgical

Sourcing Expertise

Distribution Network

Sales and Service

v

Payers


Retail Pharmacies


Physicians

Health Systems


•  National presence across specialties •  Medical supplies, private label, equipment,

laboratory, vaccines and Rx •  Over 275,000 products

•  National network •  Flexible service model •  Low-cost-to-serve through scale

Medical-Surgical

Patient

Leader Across Alternate Site Markets

Market Share #1

Physician Offices

200,000 Customers

Surgery Centers

6K Customers

#1 Home Care

12K Customers

Long-term Care

18,000 Customers

Surgery Centers

6,000 Customers

Home Care

12,000 Customers

Long Term Care

18,000 Customers

#1 Market Share

Ambulatory Surgery Center

Multi-Specialty

Imaging Center

Orthopedic

Dialysis and Infusion

Primary Care Practice

Urgent Care

Home Health Agency

Community Health Centers

Durable Medical Equipment

Long Term Care

Laboratory

Serving the Ambulatory and Post-Acute Care Continuum

Medical-Surgical

Unrivaled Platform Is A Catalyst For Growth

Alignment across

platforms

Better costs and

service

Preferred supplier growth

Greater competitive

position, gross profit and

commissions

Medical-Surgical

Meeting Customer Needs Through a Broad Portfolio of Products Leveraging Private Label Offerings

Creating better business health for customers

Continued growth of high quality product portfolio

Medical-Surgical

Benefiting from market leadership and scale

Manufacturer partnerships driving customer value

Harmonized 3,000+ private label products across combined portfolio

•  Established leadership teams and retained >1,400 sales reps

•  Met or exceeded all synergy goals

•  Began realization of procurement synergies

•  Migrated ambulatory sales team to new, unified compensation model

•  Completed integration of distribution network and ordering platform for post-acute care markets

•  Complete transition to single technology platform and distribution network

•  Complete harmonization of all product offerings

•  Increase customer focus and sales force engagement

•  Achieve and exceed synergy case

PSS Meeting Or Exceeding Expectations On All Fronts

Backed By the Strength and Scale of a Fortune 11 Company

Year 1 and 2 Accomplishments Year 3 Focus

Medical-Surgical

Supply savings and lowered cost of doing business

System integration reduced orders-to-invoice errors from 15% to <1%

McKesson provided resources on-site to manage 3,700+ ship-to addresses

•  Medical supplies

•  Pharmaceuticals

•  Medicare Part B billing services

•  GPO support programs

•  Electronic Data Interchange integration for ordering and invoicing

Serving the Alternate Site Needs of Large and Diverse Ecosystems Case Study: Customer Benefits

Medical-Surgical Products and Services

Customer Benefits

Ambulatory Surgery Center

Multi-Specialty

Imaging Center

Primary Care Practice

Laboratory

Third-Party Billing

Health System Customer Needs

Medical-Surgical

Driving Excellence Through Customer Partnerships

Medical-Surgical

North America and Medical-Surgical Distribution and Services Q&A

International Pharmaceutical Distribution and Services

Paul Julian


Celesio: Extending Our Reach

Strengthening our ability to meet the increasingly global needs of the pharmaceutical supply chain

Providing partners significant potential for higher efficiency and economies of scale

Diversified revenue streams across the world creating a strong platform for growth

Empowering more than 6,500 owned and banner pharmacies

We supply 65,000 pharmacies and hospitals every day1

International

1Source: Celesio Annual Report, Short Fiscal Year 2015

North America and Europe Represent >55% of Global Drug Spend by 20181 Global Procurement And Sourcing

1Source: IMS Health Market Prognosis, September 2014, Estimates global spending for North America and Europe for 2018 Note: IMS expressly reserves all rights, including rights of further copying, distribution and republication. McKesson does not warrant or represent the accuracy of IMS data or McKesson’s interpretations of IMS Health data. Any subsequent use or interpretation of this data will be the liability of the receiving party and not of McKesson or IMS Health.

Global footprint of combined distribution & pharmacy operations

McKesson Global Procurement & Sourcing

Overview

•  Established London-based Global Procurement & Sourcing office in January 2015

•  Enterprise-wide sourcing and procurement responsibility overseen by experienced McKesson and Celesio leaders

•  Engaged in active discussions to establish worldwide partnerships

•  Robust procurement analytics platform

International

Synergy Target

Allows for aggregation of data and analytics

Creates platform for organization-wide private label strategy

$275M − $325M in transaction synergies

by the end of FY19

Centralizes overall view of sourcing across McKesson in one area

Creating value globally for our partners, customers and shareholders

International

Strategic Value and Experience •  Sourcing at scale •  Supply chain excellence •  High product quality and availability

Increase private label OTC penetration in new

and existing geographies and categories

Advance opportunities in global medical-surgical

supplies based on U.S. scale

Manage opportunities in U.S. and Canada and consider longer-term

opportunities in Europe

Aggregation of Worldwide Private Label Spend Drives Opportunities Across the Portfolio

Global Private Label Offerings

OTC Medical Supplies Generics

International

Creating Value for Manufacturers Translating Expertise For The European Market

•  Supply chain economics and safety

•  Forecasting and data visibility

•  Value-added services

Manufacturer services

•  Efficient distribution network

•  A culture of process improvement

•  Preferred generics formulary at retail

•  Off-site replenishment/central fill

Supply chain excellence

•  Data-facilitated service offerings

•  Clinical care insights

•  Connectivity

Data and analytics

International

Better Health For Retail And Banner Pharmacies

Market data as of March 31, 2015

A Global Footprint

12,000+ owned and banner pharmacies globally

•  More than 3,800 Health Mart stores

•  Nearly 40% of independent pharmacy market in Canada with more than 1,900 banner stores

•  6,500 owned and banner pharmacies across Europe

International

Post Operating Control: Business Priorities and Progress Celesio Observations

International

Celesio

Marc Owen

Chairman Celesio Management Board

Celesio Core Operations

1U.S. Census Bureau International Database (2015) Note: Celesio’s Brazil operations are held for sale as of March 31, 2015 and are not included.

Extensive network across 13 countries in Europe

Leader in pharmaceutical distribution

Strong retail presence with over 6,500 owned and banner pharmacies

Population of nearly 350 million in the markets we serve1

Highlights

International

Celesio Country Leadership

Marc Owen Chairman Celesio Management Board 13 years (McKesson)

Cormac Tobin Managing Director UK/Ireland (9 years)

Andre Blümel Managing Director Germany (28 years)

Hubert Olivier Managing Director France/Belgium (4 years)

Andreas Windischbauer Managing Director Austria/Brazil/Portugal (22 years)

Leonardo Ferrandino Managing Director Italy/Slovenia (11 years)

International

Celesio Has A Broad Value Proposition

v

Payers


Retail Pharmacies


Physicians

Health Systems


•  Distribution services •  Pharmacist training •  Pharmacy, IT and back-office solutions •  Private label

Manufacturer Services

Independent and Chain Pharmacies

•  Exclusive distribution and order management •  Data analysis and business intelligence •  Repackaging and marketing services support

International

Patient

Demographics, chronic disease

and new medicines

European Pharmaceutical Industry Landscape

Source: IMS Health Market Prognosis Summary Europe 2015-2019, value based figures, March 2015

Stable growing market

Increasing generics

penetration

-4%

-2%

0%

2%

4%

6%

0

50

100

150

200

250

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

% Change Sales (USD Billion) Overall European Market

International

Country Snapshot: United Kingdom

1U.S. Census Bureau International Database (2015) 2Management estimate 32014 Health and Social Care Information Centre 4German Association of Pharmacists (ABDA), 2015 5OECD Health Data 2014: Health expenditure and financing: OECD Health Statistics (figure for 2012)

Healthcare Providers

Public and Private Payers, Providers

Hospital Industry2

76% National Health Service Hospitals

24% Private Hospitals

Population

64 Million1

Healthcare Spend

9.3% of GDP5 >1,300 hospitals3

>14,000 pharmacies4

International

Celesio Snapshot: United Kingdom

1IMS Health Market Prognosis Summary 2015-2019 Europe – UK, March 2015

•  National distribution presence •  Wholesale margin: Tied to

manufacturer contracts

•  2nd largest retailer •  Retail pharmacy margin: Dispensing

fee plus payment for additional clinical services

•  Pharmacist has authority to make generic substitution (unless doctor rules out explicitly)

•  Mail order allowed

Wholesale and Retail Market Dynamics

>65% generic penetration by volume1

>14,000 pharmacies served

International

Country Snapshot: Germany

1U.S. Census Bureau International Database (2015) 2Eurostat, based on hospital beds by ownership type, 2011 3Statistiches Bundesamt, figures for 2013 4German Association of Pharmacists (ABDA), 2015 5OECD Health Data 2014: Health expenditure and financing: OECD Health Statistics (figure for 2012)



Hospital Industry2 Population

81 Million1

Healthcare Spend

11.3% of GDP5 >1,500 hospitals3

>20,000 pharmacies4

30% Private, Not-for-Profit

30% Private for-Profit

40% Public

International

Celesio Snapshot: Germany

•  National distribution presence •  Wholesale margin: Fixed on

reimbursable drugs

•  Retail third-party pharmacy ownership prohibited; 1 pharmacist allowed to own 1 main pharmacy and up to 3 additional affiliates in regional area

•  Retail pharmacy margin: Fixed on prescription drugs

•  Generic substitution mandatory (unless ruled out by physician)

•  Mail order allowed

Wholesale and Retail Market Dynamics

Generics choice driven by payer

>6,200 pharmacies served

International

Country Snapshot: Norway

1U.S. Census Bureau International Database (2015) 2Eurostat, based on hospital beds by ownership type, 2011 3Pharmaceutical Health Information System (PHIS) Norway, 2011 4German Association of Pharmacists (ABDA), 2015 5OECD Health Data 2014: Health expenditure and financing: OECD Health Statistics (figure for 2012)



Hospital Industry2

Population

5 Million1

Healthcare Spend

9.3% of GDP5 >85 hospitals3

~800 pharmacies4

3% Private, Not-for-Profit

6% Private For-Profit

91% Public

International

Celesio Snapshot: Norway

1IMS Health Market Prognosis Summary 2015-2019 Europe – Norway, March 2015

•  Self-distribution to pharmacies •  Wholesale margin: Tied to

manufacturer contracts

•  One of the leading retailers •  Retail pharmacy margin:

Fixed by government for prescription drugs

•  Generic substitution allowed •  Mail order allowed for OTC products

Wholesale and Retail Market Dynamics ~300

pharmacies served

>40% generic penetration by volume1

International

Celesio: Foundation of Success

Grow Customer Relationships

Global Sourcing European Pharmacy Network

(EPN)

Operational Success

Our People

International

Grow Customer Relationships

EPN

Patient Manufacturer

Health Focus

Scale

Business Intelligence

Expanding Breadth of Services

Scale

Technology Supply Chain

Excellence

International

Investment in IT Platform Operational Success

Multi-year investment in ERP implementation will align systems with McKesson and help drive global procurement

and distribution efficiencies

Country-Level Data Customers

Market Data

Suppliers

International

Operational Excellence Driving Business Improvement

Six Sigma drives efficiency of the business, which benefits patients, pharmacies and Celesio

•  Inventory accuracy 99.91% •  Delivery addresses served +19% •  Lines per hour +2.1% •  First Six Sigma pilots initiated

Operational Excellence Statistics

International

Initiative to Centralize Procurement Continues; Coordinating with London Office Global Sourcing

International

Broad Retail Footprint Across Europe

Note: Brocacef is a joint venture where Celesio has an equity interest of 45%

Belgium

Germany

France

United Kingdom

Norway

Italy Sweden

Netherlands

Ireland

International

Improves Celesio’s Owned and Co-op Pharmacies European Pharmacy Network

Lloyds’ concept elements customized for pharmacies Focusing on specialty services and product categories

Consistent European brand A differentiated pharmacy concept

Common store appearance New technology and product focus helps drive store traffic

Owned Pharmacies Franchise Partner Cooperations and Independents

Customer-Centric Approach Across All Offerings

International

EPN: Expanding Our Broad Retail Footprint

Innovative health services and

pharmacy management

A strong network

of owned, franchise and cooperation pharmacies

Economies of scale

Leader in service, quality and

innovation

International

Shared Values

International

International Pharmaceutical Distribution and Services Q&A

McKesson Technology Solutions

Pat Blake

Executive Vice President Group President Technology Solutions

Strong Value Proposition As The Industry Looks Beyond EHR Adoption

Focusing Ahead to Manage Shift to Value

Expanding Margin

Connecting the Healthcare Economy

v

Payers


Retail Pharmacies


Physicians

Health Systems


•  Payer and financial solutions •  Connectivity, data and analytics •  Provider revenue and risk management services

•  Transaction and subscription-based revenue drives the majority of segment operating profit

•  Long-term adjusted operating margin goal of “high teens”

•  300 payers •  4,000 hospitals; 630,000 providers and clinicians •  50,000 pharmacies

Technology Solutions

Patient

Technology Solutions Leadership


Pat Blake EVP, Group President Technology Solutions (19 years)

Rod O’Reilly President McKesson Health Solutions (12 years)

Pat Leonard President Business Performance Services (20 years)

Erkan Akyuz President Imaging and Workflow Solutions (1 year)

Jim Pesce President Enterprise Information Solutions (33 years)

Jeff Felton President Connected Care and Analytics (15 years)


Our Customers Continue To Undergo Significant Change

Shifting Volume Cost Containment Consolidation Performance Consumerism

Pharmacies Redefining roles in care delivery and consumer

engagement

Payers

Diversifying and evolving to enable value-based

reimbursement

Providers Scaling and integrating to

adapt in the shifting payment environment


Key Payer Needs For Enabling Value-Based Reimbursement

Develop and manage high-performing

provider networks

Manage complexity of supporting FFS and value-based models

Automate contract and reimbursement management

Ensure clinically appropriate medical

utilization Technology Solutions

Empowering Payers With Automation And Intelligence

Financial Management

Payment integrity solutions, bundled payment automation and claims analytics

reduce administrative cost

• 80% of top 20 health plans

• >225 managed care clients

Network Management

Design, manage and optimize networks for high performance across the full spectrum

of reimbursement models

• Deployed with >30 health plans • Networks covering >40M lives

CASE STUDY Network Development for Value-Based Care

Centralized and standardized contracts while driving administrative cost reductions for a regional health plan

• 30%-50% reduction of network rollout costs • 50% reduction on contract re-work


Aligning Payment And Delivery Of The Most Appropriate Services

Continued Innovation

•  InterQual Mobile •  Industry’s first admissions criteria with

co-morbidities •  Criteria for >700 molecular diagnostic

tests, including support for gene panels

InterQual Clinical Criteria

Evidence‐based clinical intelligence for optimizing care management decisions and

managing medical costs

• >4,000 hospitals and facilities • 80% of top 25 health plans

CASE STUDY Evidence-Based Decision Support

Reduced cost while maintaining quality by driving appropriate care for a government payer

•  60% reduction in average length of stay •  28% avoidance of inappropriate care


Key Provider Needs For Revenue Management And Clinical Connectivity

Facilitate patient pay and reduce bad debt

Manage claims and reimbursement process

Enable interoperability and data aggregation

Comprehensive revenue cycle services


Business Performance Services

Comprehensive revenue cycle and physician services improve business

performance and clinical effectiveness

•  Serve >80K physicians

•  Process >$24B in charges per year

Helping Providers Navigate Reimbursement And Maximize Performance

RelayHealth Financial

Cloud-based revenue cycle solutions streamline health system operations and

accelerate payment velocity

• 2,400 hospitals

• Process >$1T in billing annually

CASE STUDY Revenue Cycle Outsourcing

Multi-year improvement for a health system-employed medical group

•  Increased net collections by 6% • Decreased days in A/R by 69% • Reduced A/R greater than 120 days by 59%


RelayHealth Clinical

Cloud-based solutions enable connectivity, data aggregation, care coordination and

patient engagement

• Touch 1 in 5 U.S. patient records • 2.4B clinical transactions per year

Connecting Providers In Expanding Enterprises And Across The Care Continuum

Medical Imaging

Diagnostic imaging, workflow and vendor-neutral solutions support

enterprise imaging

•  Deployed in >2,850 facilities

•  68M images managed yearly

CASE STUDY Enterprise Medical Imaging

Centralized image management and enabled clinical interoperability for an expanding, multi-state health system with 30 hospitals

“With McKesson, we achieved a vendor neutral environment that meets the enterprise imaging needs of our growing affiliate health systems.”


Key Market Needs In The Rx Ecosystem

Optimize prescription claims reimbursement

Access members for clinical management

Achieve regulatory compliance

Automate co-pay assistance and prior

authorization Technology Solutions

Optimization and Clinical Services

Value-added solutions for authorization, claims editing, Star Rating performance

and automated co-pay assistance

• Adherence support for >100 brands

• Prevent >20K potential errors per week

Enabling Rx Connectivity And Value-Added Solutions With RelayHealth Pharmacy

Pharmacy Network

Nation’s largest pharmacy network connects pharmacies, pharmaceutical manufacturers, prescribers and payers

• >50K pharmacy locations

• 17B transactions annually

CASE STUDY Risk Evaluation and Mitigation Strategies (REMS)

FDA-approved REMS platform supporting safe dispensation of designated high-risk medications at 35K+ pharmacies

• Enables appropriate dispensation of 500K+ REMS prescriptions annually • Class-wide REMS platform covering brands and generics


Leading The Industry Towards A Vision Of Person-Centered Interoperability

Data valid as of April 1, 2015

A not-for-profit trade association of health IT companies working to create

universal access to healthcare data

McKesson’s RelayHealth is the nationwide service provider

>60 provider sites live across 15 states

Expected to enable at least 5,000 sites by the end of 2015

Members represent 70% of the acute care EHR market and 24% of the

ambulatory care EHR market


Providing The Information Fabric To Enable Better Business And Better Health

Connecting the Healthcare

Economy

Focusing Ahead to Manage the Shift to Value

Expanding Margin


Financial Update

James Beer

Executive Vice President, Chief Financial Officer

Drivers Of Value Creation

Segment Financial Review Distribution Solutions


Financial Flexibility And Capital Deployment

Track Record Of Financial Performance

Agenda

Financial Update

McKesson Drives Sustained Value Creation

•  Public policy agenda supports greater access and improved efficiency •  Demographics drive long-term demand in North America and Europe

Portfolio approach to

CAPITAL DEPLOYMENT

Well-positioned businesses with margin expansion opportunities •  Market-leading positions

and scale •  Global sourcing expertise •  Operational excellence

Experienced and tenured management team with a steady track record of delivering results

Value-creating M&A

Attractive Healthcare Market

Financial Update

Financial Update


Scaled and Diversified Portfolio with a Focus on High-Growth Areas and Margin Expansion

Distribution Solutions: Organic Revenue Growth, Bolstered By Acquisitions…

FY09 FY10 FY11 FY12 FY13 FY14 FY15

9% CAGR ($ Billions)

$104

$176

Financial Update

…Driving Sustained Adjusted Operating Profit Growth



$1.7

$4.2

($ Billions)

Financial Update

Driving Long-Term Adjusted Operating Margin

Long-term adjusted operating margin goal of 250–300 bps

Investing in our people

Driving continuous process and productivity improvement

Innovating to address customer and supplier needs

Managing working capital and operating cash flows

Making investments to drive future growth

a scaled and diversified business portfolio

Leveraging

Financial Update

Distribution Solutions FY16 Outlook

Revenue will expand by a high-

single-digit percentage versus

Fiscal 2015

Revenue expected to increase by a mid-

single-digit percentage over

prior year

Revenue to grow in the mid-single-digit percentage range

over prior year

Revenue to remain approximately flat

on a constant currency basis year-

over-year

North America Pharmaceutical


Medical-Surgical


International Pharmaceutical



Financial Update

•  Differentiated global sourcing expertise and programs

•  Contribution from acquisition synergy case •  Scaled leadership positions across a broad portfolio of

products and services

•  Growth in gross profit from both generic and branded drugs, reflecting volume and pricing trends

•  Focus on higher margin, higher-growth areas – including specialty distribution and services, medical-surgical distribution and services and retail pharmacy solutions

•  Operational excellence

FY16 Distribution Solutions Financial Drivers

Financial Update

Financial Update

Technology Solutions Diversified Portfolio With Improved Margin and Recurring Profit Streams

Sources of Operating Profit McKesson Technology Solutions

Reflects Technology Solutions Adjusted Operating Profit for FY15 allocated by Operating Profit streams.

>65% More predictable transaction and subscription-based revenue streams have grown to drive a majority of segment operating profits Transaction and

subscription-based

Financial Update

Technology Solutions Financial Drivers

Financial Update

Long-term adjusted operating margin goal of “high teens”

Increasing demand for technology driven by industry and regulatory dynamics, particularly around connectivity solutions

Expense management and portfolio optimization to focus on higher growth areas and drive long-term margin expansion

Scaled leadership positions for the future Our Relay connectivity, payer, imaging and revenue cycle management solutions are positioned to drive steady long-term growth

Hospital software platform and certain portfolio restructuring activities will contribute to revenue declines in FY16

Driven by Portfolio Optimization and Expense Management

12.6%

15.8%

FY13 FY15

Expanding Adjusted Operating Margin

Adjusted Operating Margin Growth

Financial Update

•  Optimizing portfolio

•  Investing in higher growth areas

•  Managing operating expenses

Margin Drivers

Financial Update

Financial Flexibility And Capital Deployment

Strong Cash Flow and a Portfolio Approach to Capital Allocation Lead to Value Creation

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0


Our Operating Cash Flows Have Steadily Increased

7-Year Moving Average

Financial Update

OCF ($ Billions)

We Remain Committed To Our Historical Portfolio Approach To Capital Deployment…

Nearly $24 Billion of Capital Deployed from FY09–FY15

FY09–FY15 ($ Billions)

$13.2

$6.5

Acquisitions

Share Repurchases

Dividends $2.9

$1.2

Internal Capital Spending

Financial Update

Retail Pharmacy

Technology Infrastructure

Supply Chain Optimization

…And Maintaining Investment Grade Ratings As We Delever in FY16

Investing in the Business Addressing $1.5B in

Debt Maturities During FY16

Historical Approach to Capital Deployment

Unchanged Considering Value Creating M&A

Financial Update

•  Planning ahead for upcoming debt maturities

•  Continuing our portfolio approach to capital deployment –  Internal capital investments

–  Flexibility to pursue M&A opportunities

–  Dividend payments

–  WASO assumption of 236M

•  Put option available to Celesio’s non-controlling shareholders

Capital Deployment Priorities

Financial Update

Financial Update

How Does It All Add Up? Steady Track Record of Strong Results

$106

$179


We Have A Track Record Of Steady Revenue Growth… ($ Billions)

9% CAGR

Financial Update

$4.27 $4.70 $5.19 $6.35 $6.45 $8.60

$11.11

FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16

…That We Have Leveraged Into Higher Adjusted EPS Growth

17% CAGR

FY16 Guidance: $12.20–$12.70


Financial Update

•  Furthering our global scale and sourcing capabilities with Celesio

•  Continuing to grow our generics business

•  Benefiting from generic and branded drug economics, including generic drug launches

•  Executing on Celesio and PSS synergies

•  Growing our U.S. and Canadian Specialty distribution and services businesses

•  Furthering organic growth in our Medical-Surgical business at higher margins

•  Delivering growth from our Relay connectivity, payer-facing, revenue cycle management and imaging solutions

•  Providing value-added products and services across both segments

Drivers Of FY16 Earnings Outlook

Financial Update

FY16 Adjusted EPS Guidance of $12.20–$12.70 Driving Adjusted EPS Performance

Financial Update

Considerations Currency exposure

Nature of generic launches

Regulatory environment

Pharmaceutical reimbursement environment in Canada and Europe

Weaker economic growth in France

Competitive market for hospital software

Opportunities Favorable industry demographics

Synergy case execution – Celesio and PSS

Procurement scale

Expanding book of business with existing customers

Growth in Specialty and strong market position

Branded and generic pricing trends

Innovative products and services


In Business For Better Health Pharmaceutical

Distribution

Technology

Global Reach

Specialty

Medical-Surgical Supplies

Financial Update

Retail

Wrap-Up Q&A And Summary

The Fiscal 2016 outlook is based on the following key assumptions and is also subject to the Risk Factors outlined below: •  Distribution Solutions revenue growth is expected to increase by mid-single digits driven by market growth. •  We expect North America pharmaceutical distribution and services will deliver high-single digit revenue growth in Fiscal 2016 compared

to Fiscal 2015. •  International pharmaceutical and distribution services revenues are expected to be flat year-over-year on a constant currency basis. •  Medical-Surgical distribution and services is expected to deliver mid-single digit revenue growth in Fiscal 2016 compared to Fiscal

2015. •  Fiscal 2016 branded drug price trends in the U.S. market are expected to be similar to those we experienced in Fiscal 2015. •  Price trends on generic drugs outside an exclusivity period, in the U.S. market, are expected to be slightly below those we experienced

in Fiscal 2015. •  We expect the profit contribution from the launch of new oral generic pharmaceuticals in the U.S. market will decrease year-over-year. •  Technology Solutions revenue is expected to decline mid-single digits year-over-year driven by an anticipated revenue decline in our

hospital software business and the pending sale of a business line during Fiscal 2016. •  The guidance range assumes a full-year adjusted tax rate of approximately 31.5%, which may vary from quarter to quarter. •  Property acquisitions and capitalized software expenditures should be between $600 million and $650 million. •  We assume that our ownership position in Celesio will be approximately 76% for Fiscal 2016. •  The guidance range assumes an exchange rate of $1.10 per Euro. •  Weighted average diluted shares used in the calculation of earnings per share are expected to be approximately 236 million for the

year. •  Cash flow from operations is expected to be approximately $3 billion. •  Based on acquisitions announced as of March 31, 2015:

•  We expect amortization of acquisition-related intangible assets of approximately $1.23 per diluted share. •  We expect acquisition expenses and related adjustments of 29 cents per diluted share. •  We expect LIFO inventory-related charges of 86 cents per diluted share.

•  The Fiscal 2016 guidance range does not include any potential claim or litigation reserve adjustments, or the impact of any potential new acquisitions and divestitures, and impairments or material restructurings.

We Expect Fiscal 2016 Adjusted Earnings Per Diluted Share Of $12.20 - $12.70

(a) Certain computations may reflect rounding adjustments

As Reported (GAAP)

Amortizationof Acquisition-

Related Intangibles

AcquisitionExpenses and

RelatedAdjustments

Claim and Litigation Reserve

AdjustmentsLIFO-Related Adjustments

AdjustedEarnings

(Non-GAAP)

Revenues 179,045$ -$ -$ -$ -$ 179,045$

Gross profit 11,411$ 9$ 1$ -$ 337$ 11,758$ Operating expenses (8,443) 483 223 150 - (7,587) Other income, net 63 2 - - - 65 Impairment of equity investment - - - - - - Interest expense (374) - - - - (374)

2,657 494 224 150 337 3,862 Income tax expense (815) (157) (78) - (131) (1,181)

1,842 337 146 150 206 2,681 (67) - - - - (67)

1,775$ 337$ 146$ 150$ 206$ 2,614$

7.54$ 1.43$ 0.63$ 0.64$ 0.87$ 11.11$ Diluted weighted average common shares 235 235 235 235 235 235

As Reported (GAAP)


Related Intangibles


RelatedAdjustments



AdjustedEarnings

(Non-GAAP)

Revenues 137,392$ # -$ -$ -$ -$ 137,392$

Gross profit 8,352$ # 11$ 3$ # -$ 311$ 8,677$ Operating expenses (5,913) 308 155 68 - (5,382) Other income, net 32 - 14 - - 46 Impairment of equity investment - - - - - - Interest expense (300) - 46 - - (254)

2,171 319 218 68 311 3,087 Income tax expense (757) (115) (69) (15) (121) (1,077)

1,414 204 149 53 190 2,010 5 (7) (2) - - (4)

1,419$ 197$ 147$ 53$ 190$ 2,006$


(in millions, except per share amounts)

Income from continuing operations, net of tax, attributable to McKesson Corporation

Year Ended March 31, 2015

Income from continuing operations before income taxes

Income from continuing operations after taxNet income attributable to noncontrolling interest


Diluted earnings per common share from continuing operations, net of tax, attributable to McKesson Corporation (a)


RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS (NON-GAAP)FOR FISCAL 2015 - 2009

(unaudited)





As Reported (GAAP)


Related Intangibles


RelatedAdjustments



AdjustedEarnings

(Non-GAAP)

Revenues 122,196$ -$ -$ -$ -$ 122,196$

Gross profit 6,881$ 13$ -$ -$ 13$ 6,907$ Operating expenses (4,534) 196 (10) 72 - (4,276) Other income, net 34 - - - - 34 Impairment of equity investment (191) - - - - (191) Interest expense (240) - 11 - - (229)

1,950 209 1 72 13 2,245 Income tax expense (587) (76) (6) (27) (5) (701)

1,363 133 (5) 45 8 1,544 - - - - - -

1,363$ 133$ (5)$ 45$ 8$ 1,544$

5.69$ 0.56$ (0.02)$ 0.19$ 0.03$ 6.45$ Diluted weighted average common shares 239 239 239 239 239 239

As Reported (GAAP)


Related Intangibles


RelatedAdjustments



AdjustedEarnings

(Non-GAAP)

Revenues 122,453$ -$ -$ -$ -$ 122,453$

Gross profit 6,435$ 17$ -$ -$ 11$ 6,463$ Operating expenses (4,289) 167 26 149 - (3,947) Other income, net 20 - - - - 20 Impairment of equity investment - - - - - - Interest expense (251) - - - - (251)


1,394 113 16 60 7 1,590 - - - - - -

1,394$ 113$ 16$ 60$ 7$ 1,590$


Net income attributable to noncontrolling interest



(unaudited)(in millions, except per share amounts)







Income from continuing operations after tax




As Reported (GAAP)


Related Intangibles


RelatedAdjustments



AdjustedEarnings

(Non-GAAP)

Revenues 111,804$ -$ -$ -$ -$ 111,804$

Gross profit 5,828$ 16$ -$ -$ 3$ 5,847$ Operating expenses (4,041) 115 43 213 - (3,670) Other income, net 35 - (16) - - 19 Impairment of equity investment - - - - - - Interest expense (222) - 25 - - (197)


1,097 80 36 149 2 1,364 - - - - - -

1,097$ 80$ 36$ 149$ 2$ 1,364$


As Reported (GAAP)


Related Intangibles


RelatedAdjustments



AdjustedEarnings

(Non-GAAP)

Revenues 108,425$ -$ -$ -$ -$ 108,425$

Gross profit 5,527$ 21$ -$ -$ 8$ 5,556$ Operating expenses (3,558) 97 - (20) - (3,481) Other income, net 43 - - - - 43 Impairment of equity investment - - - - - - Interest expense (187) - - - - (187)

1,825 118 - (20) 8 1,931 Income tax expense (605) (46) - 8 (3) (646)

1,220 72 - (12) 5 1,285 - - - - - -

1,220$ 72$ -$ (12)$ 5$ 1,285$

4.46$ 0.26$ -$ (0.04)$ 0.02$ 4.70$ Diluted weighted average common shares 273 273 - 273 273 273














As Reported (GAAP)


Related Intangibles


RelatedAdjustments



AdjustedEarnings

(Non-GAAP)

Revenues 106,376$ -$ -$ -$ -$ 106,376$

Gross profit 5,251$ 29$ -$ -$ 8$ 5,288$ Operating expenses (4,080) 97 - 493 - (3,490) Other income, net 74 - - - - 74 Impairment of equity investment (63) - - - - (63) Interest expense (144) - - - - (144)

1,038 126 - 493 8 1,665 Income tax expense (240) (49) - (182) (3) (474)

798 77 - 311 5 1,191 - - - - - -

798$ 77$ -$ 311$ 5$ 1,191$

2.86$ 0.28$ -$ 1.11$ 0.02$ 4.27$ Diluted weighted average common shares 279 279 - 279 279 279

Net income attributable to noncontrolling interestIncome from continuing operations, net of tax, attributable to McKesson Corporation






Income from continuing operations after tax




Corporate & Interest

Expense TotalDistribution Solutions









Expense TotalAs Reported (GAAP):Revenues 175,976$ 3,069$ -$ 179,045$ 134,062$ 3,330$ -$ 137,392$ 119,046$ 3,150$ -$ 122,196$ 119,424$ 3,029$ -$ 122,453$

Gross profit 9,937$ 1,474$ -$ 11,411$ 6,745$ 1,607$ -$ 8,352$ 5,435$ 1,446$ -$ 6,881$ 5,057$ 1,378$ -$ 6,435$ Operating expenses (6,938) (1,039) (466) (8,443) (4,301) (1,161) (451) (5,913) (3,068) (1,120) (346) (4,534) (2,854) (1,022) (413) (4,289) Other income, net 48 3 12 63 28 2 2 32 19 4 11 34 16 4 - 20

- - - - - - - - (191) - - (191) - - - - Income from continuing operations before interest expense and income taxes 3,047 438 (454) 3,031 2,472 448 (449) 2,471 2,195 330 (335) 2,190 2,219 360 (413) 2,166 Interest expense - - (374) (374) - - (300) (300) - - (240) (240) - - (251) (251) Income from continuing operations before income taxes 3,047$ 438$ (828)$ 2,657$ 2,472$ 448$ (749)$ 2,171$ 2,195$ 330$ (575)$ 1,950$ 2,219$ 360$ (664)$ 1,915$

Gross profit margin 5.65% 48.03% - 6.37% 5.03% 48.26% - 6.08% 4.57% 45.90% - 5.63% 4.23% 45.49% - 5.26%Operating expenses as a % of revenues 3.94% 33.85% - 4.72% 3.21% 34.86% - 4.30% 2.58% 35.56% - 3.71% 2.39% 33.74% - 3.50%Operating pre-tax profit as a % of 1.73% 14.27% - 1.69% 1.84% 13.45% - 1.80% 1.84% 10.48% - 1.79% 1.86% 11.89% - 1.77%

Pre-Tax Adjustments:Gross profit 1$ 8$ -$ 9$ 1$ 10$ -$ 11$ 2$ 11$ -$ 13$ 1$ 16$ - 17 Operating expenses 442 40 1 483 255 52 1 308 146 49 1 196 120 47 - 167 Other income, net 2 - - 2 - - - - - - - - - - - - Amortization of acquisition-related intangibles

445 48 1 494 256 62 1 319 148 60 1 209 121 63 - 184

Gross profit 1 - - 1 - 3 - 3 - - - - - - - - Operating expenses 211 - 12 223 120 15 20 155 47 7 (64) (10) 24 1 1 26 Other income, net - - - - - - 14 14 - - - - - - - - Interest expense - - - - - - 46 46 - - 11 11 - - - - Acquisition expenses and related adjustments 212 - 12 224 120 18 80 218 47 7 (53) 1 24 1 1 26

Operating expenses - Litigation reserve adjustments 150 - - 150 68 - - 68 72 - - 72 149 - - 149

Gross profit - LIFO-related adjustments 337 - - 337 311 - - 311 13 - - 13 11 - - 11

Total pre-tax adjustments 1,144$ 48$ 13$ # 1,205$ 755$ 80$ 81$ # 916$ 280$ 67$ (52)$ # 295$ 305$ 64$ 1$ # 370$

Adjusted Earnings (Non-GAAP): Revenues 175,976$ 3,069$ -$ 179,045$ # 134,062$ 3,330$ -$ 137,392$ 119,046$ 3,150$ -$ 122,196$ 119,424$ 3,029$ -$ 122,453$

Gross profit 10,276$ 1,482$ -$ 11,758$ 7,057$ 1,620$ -$ 8,677$ 5,450$ 1,457$ -$ 6,907$ 5,069$ 1,394$ -$ 6,463$ Operating expenses (6,135) (999) (453) (7,587) (3,858) (1,094) (430) (5,382) (2,803) (1,064) (409) (4,276) (2,561) (974) (412) (3,947) Other income, net 50 3 12 65 28 2 16 46 19 4 11 34 16 4 - 20

- - - - - - - - (191) - - (191) - - - - Income from continuing operations before interest expense and income taxes 4,191 486 (441) 4,236 3,227 528 (414) 3,341 2,475 397 (398) 2,474 2,524 424 (412) 2,536 Interest expense - # - # (374) # (374) - # - # (254) # (254) - # - # (229) # (229) - # - # (251) # (251) Income from continuing operations before income taxes 4,191$ 486$ (815)$ 3,862$ 3,227$ 528$ (668)$ 3,087$ 2,475$ 397$ (627)$ 2,245$ 2,524$ 424$ (663)$ 2,285$

Gross profit margin 5.84% 48.29% - 6.57% 5.26% 48.65% - 6.32% 4.58% 46.25% - 5.65% 4.24% 46.02% - 5.28%Operating expenses as a % of revenues 3.49% 32.55% - 4.24% 2.88% 32.85% - 3.92% 2.35% 33.78% - 3.50% 2.14% 32.16% - 3.22%Operating pre-tax profit as a % of 2.38% 15.84% - 2.37% 2.41% 15.86% - 2.43% 2.08% 12.60% - 2.02% 2.11% 14.00% - 2.07%

RECONCILIATION OF GAAP SEGMENT FINANCIAL RESULTS TO ADJUSTED EARNINGS (NON-GAAP)FOR FISCAL 2015 - 2009

(unaudited)(in millions)

Year Ended March 31, 2012Year Ended March 31, 2015 Year Ended March 31, 2014 Year Ended March 31, 2013

Impairment of equity investment












Expense TotalAs Reported (GAAP):Revenues 108,889$ 2,915$ -$ 111,804$ 105,578$ 2,847$ -$ 108,425$ 103,568$ 2,808$ -$ 106,376$

Gross profit 4,565$ 1,263$ -$ 5,828$ 4,219$ 1,308$ -$ 5,527$ 3,955$ 1,296$ -$ 5,251$ Operating expenses (2,673) (1,000) (368) (4,041) (2,260) (967) (331) (3,558) (2,777) (994) (309) (4,080) Other income, net 5 3 27 35 29 5 9 43 43 6 25 74

- - - - - - - - (63) - - (63) Income from continuing operations before interest expense and income taxes 1,897 266 (341) 1,822 1,988 346 (322) 2,012 1,158 308 (284) 1,182 Interest expense (1) - (221) (222) (2) (2) (183) (187) 2 (4) (142) (144) Income from continuing operations before income taxes 1,896$ 266$ (562)$ 1,600$ 1,986$ 344$ (505)$ 1,825$ 1,160$ 304$ (426)$ 1,038$

Gross profit margin 4.19% 43.33% - 5.21% 4.00% 45.94% - 5.10% 3.82% 46.15% - 4.94%Operating expenses as a % of revenues 2.45% 34.31% - 3.61% 2.14% 33.97% - 3.28% 2.68% 35.40% - 3.84%Operating pre-tax profit as a % of 1.74% 9.13% - 1.63% 1.88% 12.15% - 1.86% 1.12% 10.97% - 1.11%

Pre-Tax Adjustments:Gross profit -$ 16$ - 16 1$ 20$ - 21 1$ 28$ - 29 Operating expenses 70 45 - 115 50 47 - 97 50 47 - 97 Other income, net - - - - - - - - - - - - Amortization of acquisition-related intangibles

70 61 - 131 51 67 - 118 51 75 - 126

Gross profit - - - - - - - - - - - - Operating expenses 41 - 2 43 - - - - - - - - Other income, net - - (16) (16) - - - - - - - - Interest expense - - 25 25 - - - - - - - - Acquisition expenses and related adjustments 41 - 11 52 - - - - - - - -

Operating expenses - Litigation reserve adjustments 213 - - 213 - - (20) (20) 493 - - 493

Gross profit - LIFO-related adjustments 3 - - 3 8 - - 8 8 - - 8

Total pre-tax adjustments 327$ 61$ 11$ # 399$ 59$ 67$ (20)$ # 106$ 552$ 75$ -$ # 627$

Adjusted Earnings (Non-GAAP): Revenues 108,889$ 2,915$ -$ 111,804$ 105,578$ 2,847$ -$ 108,425$ 103,568$ 2,808$ -$ 106,376$

Gross profit 4,568$ 1,279$ -$ 5,847$ 4,228$ 1,328$ -$ 5,556$ 3,964$ 1,324$ -$ 5,288$ Operating expenses (2,349) (955) (366) (3,670) (2,210) (920) (351) (3,481) (2,234) (947) (309) (3,490) Other income, net 5 3 11 19 29 5 9 43 43 6 25 74 Impairment of equity investment - - - - - - - - (63) - - (63) Income from continuing operations before interest expense and income taxes 2,224 327 (355) 2,196 2,047 413 (342) 2,118 1,710 383 (284) 1,809 Interest expense (1) # - # (196) # (197) (2) # (2) # (183) # (187) 2 # (4) # (142) # (144) Income from continuing operations before income taxes 2,223$ 327$ (551)$ 1,999$ 2,045$ 411$ (525)$ 1,931$ 1,712$ 379$ (426)$ 1,665$

Gross profit margin 4.20% 43.88% - 5.23% 4.00% 46.65% - 5.12% 3.83% 47.15% - 4.97%Operating expenses as a % of revenues 2.16% 32.76% - 3.28% 2.09% 32.31% - 3.21% 2.16% 33.73% - 3.28%Operating pre-tax profit as a % of 2.04% 11.22% - 1.96% 1.94% 14.51% - 1.95% 1.65% 13.64% - 1.70%

RECONCILIATION OF GAAP SEGMENT FINANCIAL RESULTS TO ADJUSTED EARNINGS (NON-GAAP)

Year Ended March 31, 2009Year Ended March 31, 2011 Year Ended March 31, 2010


FOR FISCAL 2015 - 2009(unaudited)(in millions)

McKesson Corporation 2015 Investor Dayinvestor.mckesson.com/.../MCK_2015_Investor_Day_Final.pdf2015...

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