Tag: McKesson Corporation (MCK)

Inexpensive Stocks: Pharmaceutical Supply Chain Cohort

Posted on by Noah Kiedrowski

The entire pharmaceutical supply chain cohort, specifically, McKesson (MCK), Cardinal Health (CAH), CVS Health (CVS) and Walgreens Boots Alliance (WBA) are all near multi-year lows despite still posting growth albeit slow with healthy balance sheets and growing dividends. This cohort has been faced with several headwinds that have negatively impacted the growth, and the changing marketplace conditions have plagued these stocks. The political backdrop has been a major headwind for the entire pharmaceutical supply chain including drug manufacturers, pharmaceutical wholesalers, and pharmacies/pharmacy benefit managers. Compounding the political climate, the drug pricing debate continues to rage on throughout political and social media circles weighing on the overarching sector. This backdrop erodes the pricing power of drugs that ultimately move from drug manufacturers to patients with insurers and other middlemen playing roles in the supply chain web.

In an effort to address these headwinds and restore growth, companies within this cohort have made bold moves such as CVS acquiring Aetna (AET) to form a colossus bumper-to-bumper healthcare company. Cardinal Health shelled out $6.1 billion to acquire Medtronic's Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency business. McKesson has made a string of acquisitions over the past two years deploying $1.2 billion for Biologics, $2.1 billion for Rexall and $525 million for Vantage Oncology in 2016. This was followed by a $1.1 billion acquisition of CoverMyMeds, undisclosed acquisition costs for RxCrossroads and Well.ca in 2017. Thus far in 2018, McKesson acquired Medical Specialty Distributors. Continue reading "Inexpensive Stocks: Pharmaceutical Supply Chain Cohort" →

McKesson Pressured Over Drug Pricing Concerns

Posted on by Noah Kiedrowski

Noah Kiedrowski - INO.com Contributor - Biotech


Introduction

McKesson Corporation (NYSE:MCK) along with other pharmaceutical distribution companies such as Cardinal Health and AmerisourceBergen have been under tremendous pressure as of late due to political pressures regarding the pharmaceutical supply chain and drug pricing concerns. I recently wrote an article “McKesson Jumps 34% Off Lows – Now What” stating that the easy money had been made from the ~$150 level to the roughly ~$200 level. I also pointed out that greater than 98% of McKesson’s revenues come from pharmaceutical distribution and services domestically and abroad. Thus any impact to this business model will likely have direct negative implications with regard to revenues and EPS. At the closing of that article I stated that currently, McKesson’s P/E ratio sits at the top of its peer cohort and considering the stock has risen over 34% along with the potential erosion of the middle model, I’d be cautious buying at these levels despite additional upside based on its 52-week high of $240. Now enter the latest EpiPen fiasco and subsequent drug price scrutiny being thrusted into the spotlight. Due to a Tweet by Hillary Clinton regarding her distain for Mylan’s price increase, McKesson saw a $7 per share drop or roughly 4% drop in that same session. Since any disruption in this business model will negatively impact McKesson disproportionally compared to the insurance, pharmacy and pharmacy benefit manager (PBM) companies, I’d avoid McKesson especially after the ~30% move to the upside.

McKesson - Pharmaceutical Supply Chain Complexities

The interplay within pharmaceutical supply chain players can be a challenging dynamic to grasp. McKesson positions itself on the distribution side of the network, essentially serving as an intermediary between the drug manufacturer and the pharmacy. McKesson and other middlemen such as Cardinal Health and AmerisourceBergen purchase drugs directly from the manufacturer and then sell them to the pharmacy and capture the spread between the price they pay (to the drug marker) and the price they sell (to the pharmacy) the drugs. Below is a step-by-step breakdown of the pharmaceutical supply chain steps (Figure 1): Continue reading "McKesson Pressured Over Drug Pricing Concerns" →

McKesson Has Hit A 52-Week Low - Buying Opportunity

Posted on by Noah Kiedrowski

Noah Kiedrowski - INO.com Contributor - Biotech


Introduction

As the political cycle unfolds into 2016, the entire healthcare cohort has posted shape declines, this was particularly true for McKesson (MCK). This shape decline coincided with heated political rhetoric aimed at the collective cohort of healthcare and more specifically biotech related companies. The cynical sentiment by political frontrunners was largely rooted in the pricing of drugs and cost effective medical access. As candidate threats via legislative action geared towards reining in the costs of drugs unfolded, these actions negatively reverberated through healthcare and biotech stocks alike. The political posturing surrounding potential plans to reign in drug costs are now largely priced into many stocks within the healthcare umbrella. I contend that after the recent sell-off, many healthcare stocks look attractive at these levels, specifically McKesson. Once the political cycle is complete in 2016, these stocks will likely benefit from the mere absence of political headwinds. McKesson has now hit a 52-week low and boasts a P/E of 16 and a PEG of 1.46. McKesson appears very attractive considering its EPS growth, dividend payout, acquisitive mindset and share buyback program. Continue reading "McKesson Has Hit A 52-Week Low - Buying Opportunity" →

McKesson Delivers Another Steller Quarterly Report

Posted on by Noah Kiedrowski

Noah Kiedrowski - INO.com Contributor - Biotech


Introduction

McKesson Corporation (MCK) reported quarterly results last week and beat on both the top and bottom line while raising guidance and announcing a massive $2 billion share buyback program. The stock responded with a yawn and now sets around $180 per share. MCK presents a compelling investment opportunity in the healthcare space, particularly after the recent sell-off from $243 to $180 per share. This downward movement was flanked by great earnings reports, increased dividend and additional share buybacks. MCK continues to become cheaper and cheaper as each earnings report is announced and the company continues to purchase additional shares. McKesson looks to be undervalued given its growth rate, acquisitive mindset, attractive P/E, dividend and share buyback program. I previously wrote an article outlining my bull case for McKesson and since then the stock has only become cheaper. I feel McKesson is a buy below $200 per share.

McKesson's Blowout Quarterly Results

McKesson reported revenue of $58.8 billion which translates into a 10% increase from the prior fiscal year quarter. On top of this revenue growth, earnings per share increased 19%, cash, and cash equivalents reached $5.2 billion, the company initiated a $2 billion share buyback program and raised guidance from $12.36-$12.86 to $12.50-$13.00 per share. All of these attributes bode well for investors, and now McKesson has a trailing 12 month EPS of $8.26 and with a current price of $179 this translates into a P/E of 21.7. This is an attractive P/E given its shareholder-friendly capital return plan via dividends and share buybacks along with its growth. Continue reading "McKesson Delivers Another Steller Quarterly Report" →

McKesson Corporation Presents A Compelling Investment Opportunity

Posted on by Noah Kiedrowski

Noah Kiedrowski - INO.com Contributor - Biotech


Introduction

McKesson Corporation (MCK) presents a compelling investment opportunity in the healthcare space, particularly after the recent sell-off from $243 to below $200 per share. In brief, McKesson Corporation delivers pharmaceuticals, medical supplies and healthcare information technology. The Company operates in two segments. The McKesson Distribution Solutions segment distributes drugs, equipment and health and beauty care products domestically and internationally. This segment provides pharmaceutical solutions for biotech and pharmaceutical manufacturers, and practice management, technology, clinical support and business solutions to oncology and other specialty practices operating in the community setting. The McKesson Technology Solutions segment includes McKesson Health Solutions, which includes clinical solutions, claims payment solutions and network performance tools. This segment delivers enterprise-wide clinical, patient care, financial, supply chain, strategic management software solutions, as well as connectivity, outsourcing and other services.

McKesson is driving growth via acquisitions and partnerships

MCK recently acquired the pharmaceutical distribution division of UDG Healthcare plc for €408 million in cash. This acquisition will add a leader in pharmaceutical distribution across the Republic of Ireland and Northern Ireland to McKesson's European business. Marc Owen, Chairman of the Management Board at Celesio AG, said: "The acquisition of UDG's pharmaceutical distribution, home and travel healthcare businesses in Ireland and the UK, will strengthen our position in the industry. We have made this investment as part of our growth strategy which leverages the positive trajectory of the wider healthcare sector in Europe. This acquisition will also complement our broader portfolio of assets in both Ireland and the United Kingdom. We look forward to continuing UDG's tradition of excellent customer service and to working with the UDG team." Continue reading "McKesson Corporation Presents A Compelling Investment Opportunity" →