McKesson Confident FY2014 Will See Revenue Growth

12-May-2013 - Last updated on 05-Dec-2023 at 15:01 GMT

Brand-to-generic conversions have been blamed for “somewhat softer than expected” financial results at McKesson, though significant FY2014 direct revenue growth has been predicted.

Ross Muken, an analyst from ISI Group, described the healthcare services company’s overall results for FY2013 as “a little noisy,” as total operating income for the year rose 8% to $2.3bn (€1.8bn) on 2012, whilst sales remained stagnant at $122bn and net income was down 5% to $1.3bn.

The figures came in slightly lower than analyst expectations though Muken said in his notes he has “increased confidence in the trajectory of the core distribution business” for the following twelve months as the McKesson Corporation attempts to rebound against such revenue muting factors as what it said was a record number of brand-to-generic conversions occurring in the last year.

Generic conversions “had an outsized impact on revenue growth”, according to Muken, and directly affected warehouse sales which dropped by 26%.

In last week’s conference call with stakeholders, John Hammergren, the company’s Chairman, CEO and President, said in light of “this unprecedented year,” he was “proud” of the performance by McKesson’s US pharmaceutical business with a series of business expansions and contract renewals for both its branded and generic customers.

Also discussing results was CFO Jeffrey Campbell who said he expects “a significant pivot because of the steep decline in brand-to-generic conversions in FY2014.”

He continued, adding: “Through the combination of this sizable slowdown in generic launches and our recent acquisitions, we expect to see significant revenue growth return.”

McKesson is in the early stages of integrating PSS World Medical which it purchased for $2.1bn in February as an extension to its distribution and technology capabilities.

Into Canada, Out of Mexico

Though revenue from McKesson’s operations in Canada fell 2% for the year and 5% for the quarter, the company attributed much of this to changes in exchange rates.

Distribution services in Canada were deemed solid by the company who has also launched its own private label generics into the market.

However, whilst the company made roads North of the border, in Mexico McKesson pulled out of its minority investment in Nadro, a privately held pharmaceutical distributor.

When asked about McKesson’s global policy, Hammergren remained coy. “I think that we generally don't comment on our market expansion plans, and we have and will continue to consider many strategic options, both within and outside the United States.”