McKesson Corporation (MCK) Earnings Call Transcript & Summary

Good morning, and thank you for joining us. My name is Lisa Gill, and I head up health care services here at JPMorgan. It is with great pleasure this morning that I introduce McKesson. Speaking for McKesson will be CEO, Brian Tyler. After that, we will have a fireside chat where Britt Vitalone, CFO, will join us. So with that, let me turn it over to Brian.

Thank you, Lisa. Good morning, everybody. On behalf of the McKesson Board of Directors and the 40-ish thousand employees of McKesson, it's my pleasure to get to share a little bit about the McKesson story and journey with you this morning. Before I do, of course, the standard cautionary statements about forward-looking comments and non-GAAP discussions. I would point everyone to the disclosure that's on the screen behind me, and you can also find more information on the McKesson website. So McKesson is a diversified health care services leader serving virtually every constituent in health care, pharmacies, providers, biopharma manufacturers, payers, patients. And we do this really off scaled and scalable platforms, whether that's the 33% of pharmaceuticals we distribute across North America every day, or it's the network connections that we have into the workflow of pharmacies and providers, over 1 million providers, 50,000 pharmacies. It's the scale through things like our USON MSO. We will touch over 20% of all cancer patients in the U.S. this year. Excuse me, it's just a little loud back there. And we do this through a deep commitment to partnership, both with our customers and the manufacturers that are upstream. We're pretty pleased with the consistency and the stability of the strategy that we've been executing now over multiple years. And that is to deliver growth against our strategic priorities in oncology, biopharma services and in our core North American distribution businesses. It's through a very disciplined approach to portfolio optimization and management. We have done both acquisitions in the past to support growth. We've done divestitures, which created a more focused, nimble company, allowing us to double down on our execution against our strategic priorities. And we're delivering superior long-term results. Our adjusted EPS CAGR for the last 5 years is 18%. So just outstanding financial performance. And doing this with a sharp lens always on capital allocation and a focus on value creation. Over the last 5 years, our ROIC has more than tripled in the business. This is kind of our story on one page about how we delivered that growth algorithm. It starts with our purpose to advance health outcomes for all, and it's founded in a core set of values in the company we call I2Care, which is to operate with integrity in an inclusive way with a customer-first lens, accountability to deliver what we say we're going to deliver, to do that in a way that is respectful and with operational excellence. And these have been our foundational principles for over 20 years. Our priorities always start with our focus on our people and our culture. We want to be the best place to work in health care. We want to attract the best talent. We want to invest in that talent to develop them to be future leaders in our industry. Our growth pillars in oncology and multi-specialty and biopharma services, I'll elaborate on in a moment. I mentioned the strength we have in North American distribution. and an intense focus on how we continually invest into the business to modernize and accelerate the performance of our businesses. So you take the organic growth we have in these markets, combine it with the operating leverage that we're able to deliver on consistently and our disciplined approach to capital allocation, it creates a long-term adjusted EPS growth targets of 13% to 16% for the enterprise. I thought it would be useful since I talked about our focus on portfolio optimization to just reflect a little bit back on the business and the way we talked about it and what the assets were in our fiscal year '20 and then where we are today. You can see we used to report in U.S. Pharmaceutical and Specialty Solutions, which included U.S. Pharma and our oncology businesses. We reported in Prescription Technology, our European Pharmaceutical segment, Medical-Surgical and then other, which included Canada and Change Healthcare. For the past several years, we've obviously exited Change Healthcare. We've made the decision to exit Europe. We have announced our intent to separate our medical business, and we will soon close the transaction with Norway, which will be the last exit in our European businesses. And what that does is give us a segment structure we announced in our Investor Day a few months ago that's very much aligned to our strategy and gives our investors great transparency in the business reporting in the North American Pharmaceutical segment, oncology, multi-specialty, prescription technology. Other will fall away with Norway and medical, we think in the back half of 2027, we will have successfully stood that business up stand-alone. So segments aligned to the strategy. And that work, that execution against that strategy that I just talked about has really delivered, in our opinion, some quite strong results. Adjusted operating profit growing at a 9% compound annual growth rate, adjusted EPS at 17%, free cash flow improving between $0.5 billion and almost $1 billion. You can see the ROIC improvement of 1,900 basis points, and we've reduced our leverage by just over -- just about half. So tremendous consistency and really, really strong financial performance. I want to reflect on our growth strategies for just a moment. I'm going to start with oncology. And you can see we've been at this for a while. It started in 2007, 2008 with the acquisition of a specialty oncology distribution company and then complementing that with some GPO services. In 2010, we got into the MSO business with the US Oncology Network. And as we got into that business and began to understand it and see the full opportunity, we started to expand our capabilities, adding a specialty oncology-focused pharmacy, get into radiation oncology. We stood up internally through internal investment, a data analytics and insight business that we call Ontada. We expanded into clinical trials business through a joint venture with SCRI and the acquisition of a company called Genospace. And then last, this past year, we were really pleased to welcome Florida Cancer Specialists to the USON network and the acquisition of Core Ventures, which gives us a great footprint in Florida and adds complementary scale to our existing network. So this is a very unique and broad set of capabilities, all focused at the oncology marketplace. What does it add up to today? 3,300 providers in our network supporting over 1.4 million patients on the oncology side. And the PRISM in retina and ophthalmology, 200 providers growing. And I think the real key here is that each of these components of our business, take oncology, for example, complement each other. As we add scale through like a Florida cancer or organic growth, it creates more data in our iKnowMed EMR, which is a leading EMR in all our practices operate. That creates more data, allows us to create more insights, allows us to enroll more patients into clinical trials in the community. And so each of these business, we think, is highly complementary and additive to each of the other components. The market is large, growing and complicated. I guess the bad news is on the left side of the slide, 2-plus million people will be diagnosed with cancer this year, and there are 18 million people currently living with cancer. The good news is on the right side of the page, through the amazing clinical and scientific work that biopharma does, there are over 425 therapies on market today. And we are able to treat cancer patients and deliver outcomes in a way that is just stunning compared to 15 years ago when we got into this business. And the good news is that innovation is continuing. 41% of all clinical trials today are focused on oncology. So there is more innovation and growth coming, and we project that the oncology drug spend will grow by 60% in the next 5 years. So a very healthy, large and growing market. In terms of the size of the markets we play, it's over $100 billion. We would characterize it as roughly $115 billion. We have leading positions in each one of these components of the market. And you can see our margin goes from lower to higher as we move up the value chain, scaling from distribution all the way up to clinical research. So a very, very broad and differentiated portfolio of capabilities at McKesson. The second business -- growth business I want to talk about quickly is biopharma services. And you can see a similar journey here in how we have systematically built up the capabilities and components of this business to help biopharma solve problems of access, adherence and affordability. The RelayHealth network is connected to over 50,000 pharmacies, really focuses on our affordability solutions. In 2017, we added CoverMyMeds, which gave us connectivity into the provider space, helping us scale affordability, helping us expand into access and really creating a unique differentiation in our connectivity to over 1 million providers and 50,000 pharmacies right in the workflow. In 2020, we took an important step of putting this into a combined or a unified business as opposed to thinking of it as point solutions. We think about it as a single technology-focused business oriented at breaking down the barriers that prevent people from getting on therapy and staying on therapy and living better lives. So what does that really mean? This past year, we helped enable patients access their medications more than 100 million times. Through the support of our biopharma partners, we were able to provide $10 billion of out-of-pocket savings for the patients that we jointly serve. And 12 million times, we help people get on a prescription that otherwise would have been abandoned. This all in support of enabling better health outcomes for the customers and patients we serve. So if you step back, we think both of these platforms are scaled, very differentiated in their capability and playing in markets that are large and growing quickly. And this is the performance that this strategy has turned into. You can see from our fiscal '21 to our fiscal '26, we will more than double our adjusted EPS growing at a compound annual growth rate of 18%. We have provided an adjusted EPS outlook for this fiscal year of $38.35 to $38.85. We anticipate adjusted operating profit growth will be 12% to 16% and that adjusted earnings per diluted share guidance will be between 16% and 18% compared to the prior year. I did want to pause for a moment and just reflect on capital deployment. We anticipate approximately $2.5 billion in share repurchases in our fiscal '26. We have over $6 billion of authorization as of September 25 still. And we will continue to follow the disciplined capital allocation strategy that we have long abided by. And that is to, first and foremost, look to invest in the future growth of the business, but to be good stewards of the capital and to consistently return capital through a dividend that grows in line with our earnings and to return share -- return value through share repurchases. So if I wrap all that up, the strategy, the capital allocation framework, the differentiated scaled platforms, this is what we think our long-term financial growth targets look like. 5% to 8% in North America, 13% to 16% in oncology and multi-specialty, 10% to 13%. And then with this disciplined capital employment that we just discussed and our really, really strong balance sheet, we expect long-term growth targets of adjusted EPS to be 13% to 16%. So that's a little bit of the McKesson story, a quick introduction to a business I'm really, really proud to be a part of. I think you can see we have consistently delivered on our financial performance. We think it's distinctive. We have continued to stick to our strategy in a very disciplined way, deploying capital internally to extend our capabilities in these markets and extend our differentiated portfolio and growth products. We have been rigorous in our evaluation of the businesses that we are in and continue to take an ongoing look to make sure our businesses are positioned in markets where we have the capability and the opportunity to win. And we believe McKesson is a compelling value creation opportunity for you all. So with that, thank you for your time and attention this morning. We'll go to the fireside chat.

Yes, sounds great. So Brian, thank you so much for that. If I look back over 2025, you upped your long-term targets. You integrated several large new deals on the MSO side. Can you talk about, especially on the MSO side, how you feel that you're positioned competitively?

Sure. Well, look, it has been a very active year and candidly, all pretty active years. Yes, as it relates to the MSO business, we're very pleased this past year to add Florida Cancer and Core Ventures to the portfolio. That -- Florida is a great market. They have a great footprint. But more importantly, they practice oncology very consistent and aligned to the way we practice oncology in USON. And so we've taken that first step and the first immediate step is obviously to move them on to our distribution and GPO platforms to leverage off that scale. I think our MSO is quite unique. I mean, a, we've been at it for a long time. So we well understand this market. And we have proven that we can continue to expand the services that we provide to create a more attractive value proposition for oncologists to want to join our network. And you think about the uniqueness of our scale, you think about the industry-leading EMR in iKnowMed, you think about Sarah Cannon, the premier brand in community-based clinical trials. I mean, so we think we're very well differentiated by scale and capability.

You touched on Florida Cancer Specialists. Can you talk about how that integration has progressed? And has there been anything that surprised you? And I guess then we can ask Britt, if we're running along the time line of the 3-year accretion that you had anticipated?

I couldn't be more pleased and more proud of the teams on the integration. We've obviously done many of these over the years. And the important -- most important part of integration actually happens in the diligence process upfront, where the planning happens, where you know you've got connectivity. But I'd say both the leadership of Florida Cancer and U.S. Oncology has been amazing in their collaboration and coordination. In the early days, it's a lot of mechanics, right? You got to shift over the distribution. You got to get on the GPO contracts. You've got to do the kind of boring stuff, but like platform them on McKesson kind of technologies and then get into the more exciting things about synergies and sharing of best practices across the platforms. But I would say, if I was surprised by anything, I'm pleasantly surprised how smoothly it's gone.

Yes. I would echo that. And I would say that to Brian's point, we have shifted the distribution over. We've begun to execute on the GPO capabilities and opportunities for providers. Certainly, as time goes on, there's opportunities to continue to add providers to that platform as well as continue to see growth in not only data and analytics services. But to Brian's point, providers will continue to accrue patients on to clinical trials. There will be other opportunities for clinical services in addition to that. So we're right on the pace that we anticipated. Our year 1 accretion was estimated around $0.40 to $0.60, and we feel that we're right on pace for that. And then over time, as we continue to add capabilities as volume continues to grow and some of these other services that we would get to $1.40 to $1.60 at the end of the third year. So we feel very good about where we're at so far.

On January 1, we saw some changes because of the IRA around WAC pricing. Can you just talk about the impact on your business and your ability to go back and renegotiate with the manufacturers? And should we assume that you've been able to do that and there won't be an impact?

So we've known this was coming for multiple years. And in many ways, this is just part of the way our business always runs. We are always in partnership and discussion with our manufacturers on how we support them, and they understand the critical role we play and how they need to support us. So it's -- in my mind, it's just like we always do. We sit down, we talk about the services we provide, the essential services we provide, how we get fairly compensated for that. And I would say that the rollout on January 1 has gone exactly in line with how we thought it would.

When I think about GLP-1s, we've talked a lot about GLP-1s over the last few years and a little bit of a headwind because of the special handling. When we think about the oral GLP-1s potentially coming to market in 2026, one, there is an anticipation that perhaps we even see more utilization. So if you can talk about that from each side of your business. And then secondly, talk about the potential margin impact as we shift away from that higher cost injectable to the oral product.

So I would say this, Lisa, clearly, an oral product that's ambient will flow through our network in a much more natural way. And we already have the embedded scale. I wouldn't see the need for incremental investment. And so it will be lower cost to serve. But that said, it remains to be determined how is an oral adopted? What is the uptake? How does it impact the injectable? Do I switch from injectable to oral? Does it actually just open up a new market for people that are fearful of an injectable. And the product has been out for like, I don't know, what, 10 days. So I mean, it's a little bit early. In terms of the [ CoverMyMeds ] the Rx Technology Solutions business, much like the injectable, it's going to really depend on how payers choose to manage the utilization and the accessibility and the decisions that employers make in terms of how they want to avail this. And so that's going to take a few months to play out as these products go through the normal cycle being reviewed.

I think there is some expectation, Brian, in the market that it does open a new channel, right, that maybe perhaps people and previously that didn't want to do an injectable are willing to do the oral. The other thing that we've heard is around pricing that perhaps as pricing comes down, we'll see more utilization. But it may be early before we see that. And then on the flip side, I was on a panel yesterday where someone in the consulting business said that they're seeing 15% of their employers drop coverage in '26 because of the cost. And therefore, you're starting to see more activity going through private pay, whether it's LillyDirect, et cetera. Does that have any impact on your business?

Well, look, we've seen good growth to this point in time. And I got something in my throat. But those...

Do you have water?

Yes. Do you want to answer this one?

Yes. I guess I should have jumped in a little sooner. I think we continue to see good growth quarter-to-quarter. Year-over-year growth is still over 26% in the third quarter. So I think over time, we'll kind of see how this plays out. But I think at this point in time, we see this continue to be additive to our business.

We touched on your oncology and multi-specialty business a little bit, but you clearly are the industry leader from an oncology perspective. And it's always been a significant growth driver. You talked about 13% to 16% growth within that business. Can you remind investors how you benefit from adding providers to the US Oncology Network, whether it's the traditional distribution, as you talked about with Florida, increase in GPO volume, expanding the offering like iKnowMed, et cetera. Like so if you can walk us through how to think about that?

Sure. First, we grow the network a couple of ways. I mean, where we have a practice and a presence, we think we have a strong value proposition based on all those services, and I'll walk through them in a minute, that can attract independent physicians into our -- to join our network to benefit themselves from all those capabilities. So that's how we organically grow and expand. And obviously, over the years, we've been an active acquirer of practices. Where we think that practice fits with USON culturally, clinically, they want to practice medicine as part of a network and benefit from the scale that network brings and meets our financial thresholds, we can grow the network inorganically. And as we grow, we grow distribution scale and volume, which makes us more relevant. We grow GPO scale and volume, which makes us more relevant. They migrate on to iKnowMed, our EMR, which gives us more data, more patient records, more insight into how things actually work on the ground in community oncology. It allows us to identify and enroll more patients in clinical trials. And so -- and as we enroll more patients in clinical trials, we become more relevant to biopharma that wants to think about how they move those trials into quick commercial adoption. And the other focus we have that we should talk about is because it's equally important to us is how we invest in our tools and technologies to enable our physicians to spend more time with patients, delivering more care and growing the patient flow through our clinics. And just a recent great example, I'll say it because it's trendy with AI going on everything, like 75% of our practice is now using ambient scribing. And the uplift in their time savings that we've seen, that's how you keep a value proposition to attract oncologists to want to join your network.

Did you have initial pushback in some of our other meetings when we talk about ambient prescribing -- transcribing, that there's maybe some of the physicians initially push back and then ultimately, they're hearing from others that it frees up the practice time and you really start to get momentum within the physician.

Physicians are people, too, right? We're all a little bit resistant to have to change our process. There's always, though, the forward-leaning early adopters, and it's one of the great things in a network effect, so to speak, because it's exactly that. We don't roll it out full scale. We'll pilot it with willing early adopters who then prove it and then have the credibility with their colleagues, it's to say, hey, this works and this is the impact it had on me, and then we see uplift incredibly quickly.

Is there any issue from a HIPAA perspective or anything else? Because I -- for example, my medical practice uses it, and I remember signing the waiver the first time I went to see my primary care doc.

Look, we're -- the first step in every process we roll out for a new technology or a change is compliance, regulatory compliance. It's essential. That obviously includes HIPAA.

Outside of oncology, you've invested in retina with PRISM. What are the key specialty areas that you're really focused on as far as that long-term growth target?

I'll start, and Britt can add on to this. You've asked us many times over the years what the next ology would be. And now we can answer it. I mean the first most important thing is we want to find markets that we can add value to. That value can come through aggregation. It could come from scaling up a GPO and leveraging the healthy drug pipeline innovation that we see coming. And it comes from providing kind of simplification in back-office functions that scale delivers real benefit. So we've been looking on and off for years at this, and we think retinology and ophthalmology finally met that threshold mainly because the drug innovation pipeline has really deepened. And so we continue to look at other ologies, but they're going to have to meet those criteria. We have to be convinced there's a network effect that there's adjacencies and ancillary services we can invest in and develop then that basically continue to extend the growth trajectory of being in that space.

How important is the drug component? And I think you were going to answer something around that, Britt. But how important is the drug component when you think about that ology? And we think about retinol and other areas where -- and especially in oncology, where we have a number of biosimilars that are coming to market. And again, when you think about that flywheel effect that you talked about, as you become larger, your GPO becomes larger, your ability to purchase at a better price, et cetera, how much of that goes into your thought process when you're making these acquisitions?

I think it's a starting point. And to Brian's point, where we build platforms, and I'll parse this into 2 different answers. Where we build platforms, we're certainly looking where there is the innovation, there's the investment and then you can build a group of services around that. And certainly, the drug innovation is the starting point, but it's not the end point. It's all the innovation leads to other capabilities and services that we can provide. I would also point out that outside of the platforms that we've been building, where we have this breadth of services, we do support lots of multi-specialty providers in other ologies. They're a big part of our distribution services that we provide. Where we focus to build the platforms is where that innovation is. And I think Brian's slide that showed in oncology, what percentage of new innovation, new drug trials are focused on oncology, and now we see that happening in retina and ophthalmology. That lends to the platform, but it is important to know that we have a thriving multi-specialty business that provides a lot of logistics services to many providers.

Just shifting a little bit to one of the other growth areas of your business, and that's Prescription Technology Solutions. Broadly, you've had a variety of compelling assets within Prescription Technology Solutions. When we think about the longer term, much of this segment's growth has come from prior authorization. You've broken out for us, particularly in GLP-1s. How do we think about the future of that business and where we could see the growth?

Well, the business is really focused on leveraging technology to break down the friction from patients transitioning from getting a script to actually starting and getting on that script, being able to afford that prescription and then staying on that prescription. And so this business has a broad set of capabilities. It's not just prior authorization. We've got a hub service. We've got co-pay. We've got messaging and workflow, all oriented to help bear this out. So we grow the business by convincing more brands that we can help them solve these access, affordability and adherence programs. And we do that with an array of products that really follow through the life cycle. So when a product launches, it's going to have a specific set of services, lots of times focused around access to get it going. But then you transition as it matures into affordability and how do I extend the life and how do I make sure I'm getting all of the people that are eligible to be on product on my product. And so we grow it through expanding -- we may have a relationship with the biopharma today, and we can expand to additional brands. There may be a biopharma that has yet to benefit from our solutions. We can expand that way. And then we continually invest in this business to innovate better, quicker tools that make them more attractive. So in prior auth, for example, we, this past year, created a pathway for a patient to see what the status of their prior auth is. That was long a frustration. I got a prior auth, but I don't know when it's going to get approved. So we're trying to give insight in that, which makes the patient experience better, which makes the biopharma services experience better.

And then if I think about that business, you also come at prior authorization from the other side, working with employers and health plans around prior authorization. Are you seeing any changes in that marketplace? I mean I know a lot of employers are struggling with pharmacy costs, trying to -- are they lessening the barriers around prior authorization, increasing the barriers around prior authorization -- bigger business...

I mean honestly -- I think in aggregate, it feels pretty stable. I mean there are -- it does depend on decisions employers make, and it depends on decisions payers make. And we've seen both happen. We've seen expansion and we've seen contraction. And it's really localized decision. But overall, you've seen the growth and the results we have in the business. It's a very healthy business.

Just maybe one other thing to say about this segment. I think what's very supportive for the solutions that we're developing is you are seeing specialty still being the highest growth area within pharmaceuticals and the investment in innovation. And that's supportive of the programs and services that we have today and that we're building to support those drugs as they launch. So I think that that's another aspect that's supportive of the growth of that segment.

Last year, you announced that you would look at separating the Medical-Surgical business, since then, you talked about a potential for a spin of that business at some point. Can you just maybe walk us through kind of the thought process of why this is the right time to separate that business? Will there be stranded costs as we think about this? And anything else that we should think about as you move down the road towards separating from the medical supply business?

I think it starts with strategy. And it's -- and our capital allocation follows our strategy very closely. And then Brian talked about the evolution of our portfolio over time, which is really following that strategy, very clear pillars of where we want to grow. And the medical business is a great business. It has grown very well historically. It's well positioned. It has a broad set of solutions and products to offer. But from a strategy perspective of where we're going to allocate growth capital, it doesn't fit that. We believe that the business is well positioned for further growth, better for that growth outside of McKesson, where it can attract its own capital and approach its own strategies in that way, and McKesson can continue to grow the portfolio evolution that we laid out here that Brian talked about. So the time really is right to follow our strategy, follow our capital allocation strategy. We thought that, that time was now. We believe that we have been very effective at doing this historically. We have a playbook to do that. We think that this business is well positioned for an IPO second half of calendar '27. We've done a lot of work internally to set this business up in an independent way. We crossed some important milestones here recently where we've completed all the TSA work inside the company. That's an important mechanical aspect of this. And the business is now operationally and legally independent inside and consolidated within McKesson, but it's an important milestone to have the business prepared and ready for its independent operations. So we're well along the way and along the path that we've set out for this business. We think that it's going to help propel growth in both businesses in a separate way. And we're excited about the opportunities in front of the medical business.

We touched on a lot of different things we started by talking about the IRA WAC changes. But when I think about drug distribution in general, we generally hear around what happened with price increases on the branded side here in the first weeks of January. We always have conversations around what's happening with generic pricing. Maybe we can just spend a few minutes there. So my understanding, and please correct me if I'm not correct, is that we've seen price increases from manufacturers roughly in line with what we've seen in the last few years, kind of a mid-single-digit range. And that generics feel like it's a pretty stable business right now. Are you seeing anything different or anything on the horizon on either side for branded or generic?

No, I think you answered your question in your question. We're seeing in early January is exactly consistent with what we expected and frankly, what we experienced in multiple prior years. And the generics market is very stable and very consistent. It's -- this business is very important to McKesson. But as McKesson has grown over the decades, it's not as impactful as it once was, but it is healthy and it is important, and we do focus on it because it's important to our customers as well. And so I don't know, Britt, do you want to talk about our sourcing strategy at all, but...

Yes. I think it's important to note that we're almost 10 years into our ClarusONE launch, and we believe that we source as well and as effectively as anybody. Certainly, as Brian talked about, it's very important to our customers. And our sourcing engine provides the lowest cost available to our customers with the highest surety of supply. And the stability that we've seen now for many years in this particular environment is supportive of that and supportive of bringing better cost opportunities to our customers. So we feel very well positioned to continue to source effectively for our customers.

I know almost every year, we talk about the independent pharmacy market, and we look at this, you have Health Mart, there's a number, whether it's the GPO, et cetera. I know Britt doesn't like to talk about the fact that you had a customer that went bankrupt. But I will note as the analyst that we never saw it in the numbers. So when I think about the independent pharmacy and I think about some of your other customers, is it that some of those other customers were able to absorb some of the volume and you just didn't really miss a beat. Is it that perhaps the independents are becoming a little bit healthier than what we've seen historically? Maybe just talk for a minute because I think the independents are important and the fact that they've remained as resilient as they have has been always a little surprising.

Yes. Brian, do you want to talk about the independents in a second?

Well, look, Lisa likes to share the story that when she was early in her career, she did a report that projected independent pharmacies would go from 20,000 to...

About 5,000.

About 5,000 in the next few years. And today, there's still roughly 20,000.

And I'll remind you that was 1998 when I wrote my McKesson initiation report.

Excellent. Well, so the point is they are incredibly resilient. And they -- and we support them in that resilience by helping them figure out how to attract patient flow locally, the network with physicians, where the prescriptions generate from, how to operate both behind in the pharmacy and if they -- and some have front shops, some don't. But -- they choose to how they optimize that. So we continually invest in those tools. If you look at the bulk of the pharmacy closures over the last 5 years, they've mostly been big chains. That's not to say they don't have pressure, but that's our job is to help them figure out how to navigate those pressures because they are essential to providing care in so many communities. And we're very optimistic and continue to advocate that there are more that independent pharmacy could do that they could bill for services that they could provide in those local communities.

Yes. And just the economics on the specific customer you're talking about, very consistent with what we've talked about really for the last year that from a materiality perspective, that particular closure was not going to have an impact on our business. The customers that were part of that particular customer of McKesson still have scripts that are in the environment today. And the breadth of our customer base, the breadth of our independent base captured a lot of those customers.

We only have about 90 seconds left here. Britt, is there anything I need to think about as we think about the cadence for the last half of your fiscal year? Anything that you would call out that perhaps you feel like people mismodeled or don't understand?

Well, I would just start with where Brian started. This is another year of very strong performance for the business, and we expect 16% to 18% adjusted EPS growth. Within that, as a business of our size and the segments that we have, from quarter-to-quarter, there will be things that will happen from a cadence perspective. I maybe call out 2 things. Last year, in the second half of the year, we announced the divestiture of an asset in Canada, and we had some held-for-sale benefits last year. That is within our North American Pharmaceutical business last year, not this year. And I think the other 2 things I would call out is we expect to continue to invest in our RxTS business in the second half to continue to build capabilities and extensions of our product base. And then from a tax rate perspective, we are looking at 18% to 19% for the full year effective tax rate. That's very consistent with what we've communicated all year. However, quarterly cadence, we would anticipate that the third quarter would be closer to 23% to 25%. So those are the 3 things that I would call out. But when you look at our performance annually, very consistent growth year-to-year.

I think we had covered all that in our model. So with that, I want to thank you guys very much today. Thank you, everyone, for participating.

Thank you.