Covering Analyst: Cecilia Xia [email protected].
-
Upload
dortha-eleanor-wilson -
Category
Documents
-
view
217 -
download
0
Transcript of Covering Analyst: Cecilia Xia [email protected].
Covering Analyst: Cecilia [email protected]
Company Overview
Company Overview
› Oldest Healthcare Company
› Found by John McKesson and Charles Olcott in 1883
› 180 years
› Delivers Pharmaceuticals, Medical supplies and healthcare IT
› Headquartered in San Francisco
Company Overview Cont.
› Nation’s largest health-care provider
› Recognized by Fortune magazine as the #1 healthcare distributor for innovation, people management and financial soundness.
› Is ranked at 14th on the Fortune 500
Business Segments
Business Segments
› Distribution Solutions
› Technology Solutions
Revenue Segment 2012 Revenue(In Million)
2013 First Three Quarters Revenue
(In Million)
Distribution Solutions 119,424(97.30%)
89,347(97.29%)
Technology Solutions 3,310(2.70%)
2,488(2.71%)
Distribution Solutions FY12 Milestones› U.S. Pharmaceutical
– Grew Rev. 7%; Expanded Health Mart from 2,787 to 2,941 stores; Grew OneStop Generics 8%
› Specialty Health– Completed integration of US Oncology
› Canada– Grew Rev. 5%; achieved profit growth in a
difficult regulatory environment
› Medical-Surgical– Grew Rev. 8%; Pharmaceutical sales to
physician offices grew 12%
› Pharmacy Systems & Automation– Grew Rev. 22%; increased customer 23%
Market Share : Leading Market Position
Segments Market share
U.S. Pharmaceutical
#1
Specialty Health #2
Medical-Surgical #1
McKesson Canada #1
Technology Solutions› 2.7% of total revenue, 15% of the operating profit
› 45.62%, 43.97% Profit Margin in 2012, 2011
Industry Analysis
Industry Analysis› Government Spending:
– 1.2 trillion in 2013 (19.05% of GDP)– 1.1 trillion in 2012 (17.74% of GDP)
› Affordable Care Act:– 950 billion cost over 10 years – 15 % (32 million) currently uninsured
› Health Information Technology for Economic and Clinical Health Act:– Required install Healthcare Information Technology
› Brand-to-Generic– Better Profit Margin, Lag on Topline
› Generic New Approvals– More products available, Industry moving fast
Create Shareholder Value
Increasing Dividend
› FY07: $0.24
› FY12: $0.80 (233% increase)
Acquisitions
FY07-FY12:17 Acquisitions Distribution Solutions (4.1 Billion)17 Acquisitions Technology Solutions (2.2 Billion)
Share Repurchase› Since FY 07: Diluted Weighted Average Shares Outstanding
› Additional $500 million repurchase on top of $360 million this quarter
Comparable Analysis
Comparable Analysis› AmerisourceBergen Corporation – 50%
› Cardinal Health – 15%
› Owens & Minor – 15%
› Henry Schein – 10%
› Omnicare – 10%
Metrics
DCF Analysis
Revenue Model› Steady Revenue Growth – DS
› 5% CAGR
› Estimate 1.05%- 2.1% for year 2013 to 2018
Revenue Model› Steady Revenue Growth – TS
› 2% CAGR
› Estimate 1.86%-3.3% for year 2013-2018
Working Capital Model & DCF Model
› Percent of Revenue
› COGS: different than I/S
› SG&A: Grouped together in Qs
Final Valuation
Questions
Recommendation› Based on my comparable model and DCF analysis, MCK is
trading at a discount. The industry trend will provide the company more growing opportunity.
› I recommend a buy for Tall Firs and Svigals
Appendix – Brand-to-Generics
U.S. Oncology Aquisition › November 2010 mck spent $2.16 billion to buy us
oncology
› a physician practice management company for cancer doctors and with a more than 17% of all cancer patients.
› It sells lots of medical equipment and drugs to doctors’ offices. It is like a big customer plugged in as a subsidiary.
› Amerisourcebergen and cardinal health the two biggest providers of cancer drugs will no longer have the opportunity to sell to U.S. Oncology practices.
›
Reimbursement
› Reimbursement: The president and congressional republicans are still looking for common ground on fiscal cliff measures, including a postponement of scheduled Medicare payment cuts, which would result in a 27 percent reduction in reimbursement to all Medicare providers
Appendix – Profiles of MCK Distribution Solution
TS- Relayhealth
› 28,000+ healthcare transactions/minute
› 2000+ hospitals & health systems
› 80+ health information exchanges
› 200,000+ Physicians
› 1900 Payers
› 21Million + Patient records
› 50,000 + Retail Pharmacies
Appendix – Management Team (DS)
Appendix – Management Team (TS)