McKesson FY 3Q16 Earnings Call Notes

McKesson’s (MCK) CEO John Hammergren on Q3 2016 Results

Generic price inflation is modest

“I would emphasize our view around a generic price inflation was normal, so not zero, but certainly modest – certainly significantly down from when we came into this fiscal year with much higher expectations.’

Fluctuation in valuations does make some opportunities more attractive

“I would say that, the fluctuation in valuations does make some opportunities more attractive than others and clearly even some of the private companies have might have dreamed of IPOs et cetera may be more available to a conversation with us than they might have been otherwise.”

Generic inflation has been driven by a small number of molecules

“we talked about generic inflation in the past, we talked about the fact that is driven by a small number of molecules from a small number of manufactures that have inflated to very high degree and I’d say that our current experiences at some of those out layer increases have diminished significantly. But overall if you think about the portfolio overtime it has been in more of a deflationary mode”

We think we’ll retain the Rite Aid business

“I’d remind folks that on early January I’ve made a comment about this business we believe will be retained by McKesson in its current form through late in our fiscal 17 numbers. ‘

People are probably thinking twice about raising prices with the current political discourse

“I would say the political discourse that’s taking place and the congressional inquires relative to pricing practices, I think are obviously going to have people at least pausing perhaps to consider whether now is the right time to take price increase.”

Performance of branded pharma companies probably easier to forecast

“I believe the performance of branded pharmaceutical companies is probably easier to forecast give that it has been less volatile in the last decade than perhaps the generic industry we’ve seen more volatility. And that volatility certainly is partially driven by supply and disruption.”