DATE

Nov. 4, 2026

CALL PARTICIPANTS

• SVP of Corporate Finance and Investor Relations - Paula Adkison
• Chair and Chief Executive Officer - Brian S. Tyler
• Executive Vice President and Chief Financial Officer - Kenny K. Cheung

TAKEAWAYS

• Revenue -- $111.0 billion, representing 8% growth driven by volume increases in the North American Pharmaceutical and Oncology & Multispecialty segments.
• Adjusted EPS -- $11.68, an 18% increase year over year supported by operational performance and a lower share count.
• Fiscal 2027 Guidance -- Raised to a range of $45.60 to $46.40 from the previous range of $44.20 to $45.00, reflecting first-half outperformance.
• North American Pharmaceutical Revenue -- $91.4 billion, growing 6% behind higher prescription volumes for specialty products and GLP-1 medications.
• GLP-1 Medication Revenue -- $16 billion, an increase of 26% versus the prior year and 8% sequentially from the first quarter.
• North American Pharmaceutical Operating Profit -- $1 billion, up 22% due to growth in specialty distribution and health system accounts.
• Oncology & Multispecialty Revenue -- $15 billion, increasing 24% as a result of specialty distribution growth and higher provider platform volumes.
• Oncology & Multispecialty Operating Profit -- $427 million, an 8% increase reflecting growth in provider solutions and specialty volumes.
• Prescription Technology Solutions Revenue -- $1.5 billion, rising 10% driven by higher demand for access solutions and third-party logistics.
• Prescription Technology Solutions Operating Profit -- $307 million, an 18% increase supported by higher volumes for prior authorization services.
• Medical-Surgical Solutions Revenue -- $3.1 billion, growing 5% due to volume increases across extended and ambulatory care channels.
• Medical-Surgical Solutions Operating Profit -- $225 million, a 10% decline resulting from lower contributions in the ambulatory care channel due to product mix.
• Precision Medicine Group Acquisition -- Purchased for $2.25 billion in cash, with management expecting an adjusted EPS contribution of $0.10 to $0.20 in fiscal 2027.
• Precision Medicine Group Accretion -- Management estimated the acquisition will contribute $1.60 to $1.80 in adjusted EPS accretion by the end of the third year.
• Option Care Health Investment -- $1.4 billion for a 49% minority interest, intended to expand access to community-based and home infusion services.
• CVS Health Partnership -- Extended through June 2032, continuing a distribution relationship that has spanned more than 25 years.
• Free Cash Flow -- $2.9 billion for the second quarter, totaling $2.6 billion for the first six months of the fiscal year.
• Share Repurchases -- $3.4 billion of common stock repurchased during the first half of fiscal 2027 at an average price of $818 per share.
• Capital Expenditures -- $123 million invested during the quarter, focused on technology infrastructure and supply chain capabilities.
• Operating Leverage -- Improved by 141 basis points as operating expenses as a percentage of gross profit declined year over year.
• Biopharma Services Expansion -- Added 67 new programs across 58 unique brands during the quarter within the access and affordability platforms.
• Spectrum Vision Partners Addition -- Joined the Prism Vision Group, adding over 150 providers to the retina and ophthalmology platform.
• Interest Expense -- $103 million, reflecting financing activities associated with the planned separation of the Medical-Surgical Solutions segment.
• Cash and Liquidity -- $6.5 billion in cash and cash equivalents with total liquidity of $11.5 billion at the end of the quarter.

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RISKS

• Cheung noted, "Following initial strong demand, prior authorization volumes have begun to normalize, and we will continue to monitor trends as the program progresses," in reference to the CMS Medicare GLP-1 bridge program.
• Cheung reported that lower branded pharmaceutical pricing following wholesale acquisition cost decreases in January 2026 reduced North American Pharmaceutical revenue growth by approximately 4 percentage points.
• Management noted that Medical-Surgical Solutions operating profit decreased 10% to $225 million, reflecting a less favorable product mix in the ambulatory care channel.

SUMMARY

McKesson Corporation (NYSE:MCK) reported revenue growth across all four of its operating segments and increased its full-year earnings guidance based on operational momentum in the first half of the fiscal year. Management highlighted the completion of the Precision Medicine Group acquisition and a new strategic investment in Option Care Health as key milestones in expanding the company's oncology, multispecialty, and biopharma services platforms. The company also secured a long-term contract extension with CVS Health and continued its program of returning capital to shareholders through significant share repurchases. Financial results were characterized by expansion in specialty drug distribution and health system accounts, which offset pricing headwinds in branded pharmaceuticals and shifts in product mix within the medical-surgical business.

• Tyler stated, "Our acquisition of Precision Medicine Group, which we closed this week... builds on this foundation adding complementary clinical research expertise in oncology, rare and orphan diseases, and cell and gene therapies."
• The company expects the Precision Medicine Group transaction to be accretive in fiscal 2027, with earnings contributions weighted toward the fourth quarter.
• Management is monitoring potential 340B rebate model implementations in Jan. 2027, with Tyler noting that the company is "represented in all channels" to support script volume regardless of policy outcomes.
• Cheung indicated that the raised adjusted EPS outlook of $45.60 to $46.40 implies growth of 19% to 21% when excluding specific prior-year gains and divestitures, which is above the company's long-term target of 13% to 16%.
• The company added 67 new biopharma programs this quarter, with Tyler noting that automated solutions, such as medical prior authorization capabilities, are seeing increased provider adoption.
• Management confirmed that the separation of the Medical-Surgical Solutions segment remains a priority, with interest expense reflecting financing activities specifically supporting that planned transaction.

INDUSTRY GLOSSARY

• WAC (Wholesale Acquisition Cost): The manufacturer's list price for a drug to wholesalers or direct purchasers, not including discounts or rebates.
• 340B (340B Drug Pricing Program): A U.S. federal program that requires drug manufacturers to provide outpatient drugs to eligible healthcare organizations and covered entities at significantly reduced prices.
• GLP-1 (Glucagon-like peptide-1): A class of medications used to treat type 2 diabetes and obesity that have seen significant market demand.
• GPO (Group Purchasing Organization): An entity that helps healthcare providers realize savings and efficiencies by aggregating purchasing volume and using that leverage to negotiate discounts with manufacturers.
• RxTS (Prescription Technology Solutions): McKesson's business segment that connects pharmacies, providers, and biopharma companies to improve medication access and adherence.
• SCRI (Sarah Cannon Research Institute): A clinical research organization focused on community-based clinical trials, part of a joint venture with McKesson.
• CRO (Contract Research Organization): A company that provides support to the pharmaceutical, biotechnology, and medical device industries in the form of research services outsourced on a contract basis.

Full Conference Call Transcript

Operator: Please standby. Welcome to McKesson's Second Quarter Fiscal 27 Earnings Conference Call. Please be advised that today's conference is being recorded. At this time, I would like to turn the call over to Paula Adkison, SVP of Corporate Finance and Investor Relations. Please go ahead.

Paula Adkison: Thank you, operator. Good afternoon, and welcome, everyone, to McKesson's second quarter Fiscal 27 Earnings Call. Today, I am joined by Brian S. Tyler, our Chair and Chief Executive Officer; and Kenny K. Cheung, our chief financial officer. Brian will lead off, followed by Kenny, and then we will move to a question and answer session. Today's discussion will include forward looking statements such as forecasts about McKesson's operations and future results. Please refer to the cautionary statements in today's earnings release and presentation slides available on our website at investor.mckesson.com. And to the Risk Factors section of our most recent annual and periodic SEC filings.

For additional information concerning risk factors that could cause our actual results to materially differ from those in our forward looking statements. Information about non GAAP financial measures that we will discuss during this webcast including a reconciliation of those measures to GAAP results can be found in today's earnings release and presentation slides. The presentation slides also include a summary of our results for the quarter and guidance assumptions. With that, let me turn it over to Brian.

Brian S. Tyler: Good afternoon, everyone. Thank you for joining our call. Today, we reported another strong quarter. Reflecting continued momentum across our business, and disciplined execution against our strategic priorities. Second quarter revenues increased 8% with growth across all segments. While adjusted earnings per diluted share increased 18% year over year. These results demonstrate the strength and resilience of McKesson's operating model, the momentum across our diversified healthcare platform, and our continued focus on delivering sustainable long term value for our customers and partners and importantly for our shareholders.

As a result of our strong performance and our confidence in the outlook for our business, we are raising our fiscal 27 adjusted earnings per diluted share guidance to $45.60 to $46.40 from the previous range of $44.20 to $45. Our results continue to demonstrate the benefits of our strategic focus differentiated capabilities, and disciplined capital deployment. Across the enterprise, we remain focused on advancing our mission of improving health outcomes for all while executing against the strategic priorities that we believe will drive long term sustainable growth. Now let's discuss how we are translating these priorities into actions across the enterprise. I will start with our people and culture, which remain foundation to everything we do.

We continue to invest in experiences and programs that strengthen our culture and support engagement, development, and well-being. Recently, we launched Family Forward, a new employee resource group that fosters connections and supports employees with caregiving responsibilities at every stage of life. We now have 12 employee led resource groups across the company and I am proud of how these groups enrich our culture and advance inclusion for all members of team McKesson. Our annual impact report published in July highlights additional examples of the progress we are making to advance health outcomes by supporting our communities developing our people, and enabling our partners to improve care for patients.

Building on a strong commitment to our mission and purpose we continue to accelerate our enterprise strategy with a focus on strengthening our North American distribution business, and advancing our growth platforms in oncology, multispecialty, and biopharma services. During the quarter, we were pleased to announce a strategic transaction that directly supports these priorities. Our acquisition of Precision Medicine Group, which we closed this week, We are pleased to welcome PMG to McKesson, as we advance our shared commitment to accelerating innovation and improving patient access to care. Expanding access to clinical trials is an important element of our oncology strategy, connecting innovation and drug development with community based practices where patients receive care.

In 2022, we established our joint venture with SCRI, bringing together the US Oncology Network's provider reach and practice management expertise with SCRI's research infrastructure and clinical trial expertise to support these practices Precision Medicine Group builds on this foundation adding complementary clinical research expertise in oncology, rare and orphan diseases, and cell and gene therapies. Its global footprint and experience conducting late stage clinical trials broaden our ability to support clinical, development and expand patient access to innovative therapies. The acquisition also advances our biopharma services strategy. Precision Medicines Group market access and commercialization services complement our existing access and affordability solutions.

Broadening the support we can provide to biopharma partners as they bring their therapies to market, In addition, last month, we signed a definitive agreement to make a strategic investment in Option Care Health the nation's largest independent provider of home and alternate site infusion services. As specialty therapies grow in importance and complexity, this transaction reflects our conviction that care will increasingly be delivered in lower cost community settings at or closer to home. McKesson knows this shift well. For over 25 years, we have supported the US Network and over 3.4 thousand providers in delivering connected, high quality care in the community.

Option Care Health's clinical model and national infusion footprint across home and ambulatory sites are well aligned with these priorities. As a strategic investor, we look forward to bringing our specialty expertise to help to broaden access to complex therapies to support its continued growth. And we are pleased to partner with CD&R which brings a strong track record of supporting companies and creating long term value. CD&R will own a majority interest in Option Care Health at closing. The transaction is subject customary closing conditions, including approval by Option Care Health stockholders and the receipt of required regulatory approvals. In our oncology and multispecialty platform, we are encouraged by strong market trends supported by drug innovation, and stable utilization.

As new therapies come to market, our deep expertise in specialty distribution and specialty pharmacy, together with our strong connections across community based care, position us well to enable access to these medications. Within the oncology platform, we continue to reinforce our value to community based providers by bringing together complementary capabilities which include community based practice management experience, clinical research expertise, and data enabled capabilities. As we welcome Precision Medicine Group, we are excited to build on this foundation and accelerate our strategy. Within our retina and ophthalmology platform, we welcome Spectrum Vision Partners and its over 150 providers to the Prism Vision Group. Further expanding its footprint. This is another meaningful addition to our platform.

We are encouraged by its continued strong performance, which demonstrates its compelling value proposition to providers and their patients. Across oncology and other specialty areas, our distribution capabilities data enabled insights, clinical expertise, and experienced supporting providers allow us to create value for customers and improve patient access to care. Within our 96% of US prescription volume. This connectivity enables us to simplify administrative processes and address financial barriers at scale. Helping patients start and stay on therapy, while supporting biopharma partners across their product life cycle. The momentum across our biopharma services platforms continues to be broad based. During the quarter, we added 67 new programs across 58 unique brands.

Representing a diversified portfolio of therapeutic areas in both access and affordability. We expanded connectivity with providers, with more of them exploring our automated solutions including our recently introduced medical prior authorization capabilities. We also saw growth in services that provide dedicated reimbursement specialists to help providers navigate insurance coverage and reimbursement challenges. Reinforcing the value of hands on expertise alongside our automated solutions. Looking ahead, we remain focused on leveraging technology and automation to enhance functionality of our solutions and streamline workflows.

By simplifying routine processes and complementing them with specialized expertise where greater support is needed, we can address a broad range of access and affordability barriers and strengthen the value we deliver to biopharma partners, providers, and patients. Let's turn to North American distribution. Our pharmaceutical distribution business continues to perform well, supported by stable market fundamentals operational excellence, and our differentiated customer value proposition. Recently, we announced an extension of our pharmaceutical distribution relationship with CVS Health. This agreement reflects the strength of our long standing partnership more than 25 years, the value of our distribution capabilities, and our ability to support customers at scale reliability, efficiency, and service excellence.

We value our relationship with customers across the health care ecosystem remain focused on supporting their growth through consistent execution and the highest levels of service. Across this segment, we continue to see strong momentum reflecting our unwavering commitment to customers the consistent delivery of high quality service and a disciplined focus on operational excellence. This performance enables us to reinvest in the business including our distribution network, supply chain capabilities and technology infrastructure, which further strengthen the reliability, efficiency, and scale of our platform and position us to deliver sustainable long term growth. The strength of our business, and our diversified capabilities position us well to drive continued growth amid evolving industry trends and a dynamic policy environment.

We are committed to working closely with policymakers to advance thoughtful reforms that support patient and providers expand access to care, and improve health outcomes. In closing, our strong second quarter results build on a strong record of execution and growth. We are pleased with the momentum of the underlying business, reinforcing our commitment to our strategic priorities. The Precision Medicine Group acquisition and our proposed investment in Option Care Health represents significant progress in expanding our capabilities and investing in areas of compelling long term opportunity. Looking ahead, we are confident in our ability to deliver sustainable growth and long term shareholder value. With that, let me turn it over to Kenny.

Kenny K. Cheung: Thank you, Brian. Good afternoon, everyone. We delivered a strong second quarter, Supported by broad based growth across the enterprise. This quarter's performance builds on the momentum from last quarter resulting in a strong first half of fiscal 27 and reinforcing our confidence in the opportunities ahead. Before I turn to our adjusted results, I want to highlight the 2 important transactions we announced recently. As Brian mentioned in his opening remarks, we are pleased to have completed the acquisition of Precision Medicine Group for approximately $2.25 billion. The business will report within our oncology and multispecialty segment, further expanding the breadth of solutions we provide across our oncology, multispecialty, and biopharma services.

We expect the transaction to be accretive and reinforce our long term growth profile. We estimate the acquisition will contribute approximately $0.10 to $0.20 of adjusted earnings per diluted share in fiscal 2027 with contributions more heavily weighted towards the fourth quarter. By the end of year 3, we estimate accretion of approximately $1.60 to $1.80 We funded this transaction with cash, reflecting the strength and flexibility of our balance sheet. Additionally, we announced that we have entered into a definitive agreement to invest approximately $1.4 billion for a 49% minority interest in Option Care Health. The transaction aligns with our strategy to expand access to innovative therapies and our commitment to advance care in lower cost community settings.

The transaction is expected to close during the first half of calendar year 27, subject to customary closing conditions. Including approval by Option Care Health shareholders and the receipt of required regulatory approvals. Our current outlook does not contemplate contributions from Option Care Health. Together, these investments reinforce our disciplined approach to capital deployment. First, we prioritize growth opportunities that align with our strategy complement our portfolio, and meet our financial criteria for attractive returns and long term value creation. Second, we remain committed to returning capital to shareholders through a combination of share repurchases and a growing dividend. Lastly, we maintain a strong balance sheet supported by robust free cash flow generation and liquidity.

This enables us to continue investing in and growing the business. Unless otherwise noted, my comments today will refer to our adjusted results. Let me turn to our second quarter consolidated performance. Revenues increased 8% to $111 billion, with growth across all 4 operating segments. Growth was driven by higher subscription volumes in North American pharmaceutical and continued strength in oncology and multispecialty. This was partially offset by lower contributions from branded pharmaceuticals and continued branded to generic conversions. Gross profit increased 10% to $3.9 billion driven by growth in North American pharmaceutical, oncology and multispecialty, and prescription technology solutions. The increase reflects higher prescription volumes and continued strength in specialty as we leverage our scale and distribution capabilities.

Operating expenses increased 8% to $2.1 billion reflecting higher expenses to support growth across the business. We remain focused on driving productivity and strengthening our network while maintaining expense discipline and investing to enhance how we serve our customers and drive future growth. We demonstrated strong operating leverage during the quarter with operating expenses as a percentage of gross profit improving by approximately 141 basis points year over year. Operating profit increased 13% to $1.9 billion driven by North American pharmaceutical, prescription technology solutions, and oncology and multispecialty. Interest expense was $103 million reflecting financing activities completed in support of the plan medical surgical solution separation.

The effective tax rate for the second quarter was 17.8% which included net discrete tax benefits of $105 million. As a reminder, our effective tax rate can vary quarter to quarter driven by timing and the amount of discrete tax items. Diluted weighted average shares were 116.7 million, a decrease of 6% reflecting continued share repurchase activity. Adjusted earnings per diluted share increased 18% to $11.68 driven by strong operating performance across North American pharmaceutical, oncology and multispecialty, and prescription technology solutions segment. And the benefit of a lower share count.

Excluding the prior year contribution from the $25 million Norway divestiture, and the net gains of $51 million from the sale of an equity investment and market positions within The U.S. Oncology Network adjusted earnings per diluted share increased 24%. Let me now turn to our segment results. Starting with the North American Pharmaceuticals segment. Revenues were $91.4 billion an increase of 6% driven by higher prescription volumes including growth in specialty products, and GLP-1 medications. This was partially offset by lower contributions from branded pharmaceuticals and continued branded-to-generic conversions. Lower branded pharmaceutical pricing as a result of wholesale acquisition cost decreases in January 2026 reduced year over year revenue growth by approximately 4%.

Consistent with prior periods, these pricing changes did not have a meaningful impact on the segment operating profits. Revenues from GLP-1 medication distribution were $16 billion in the quarter an increase of approximately $3 billion or 26% versus the prior year. Sequentially, GLP-1 revenues increased 8%. Demand and volumes across the category remained strong, with quarter to quarter variability based on payer dynamics and patient utilization. Operating profit increased 22% to $1 billion Growth was driven by specialty distribution, including health system and strategic accounts. Our health distribution platforms support a broad and evolving portfolio of products, including increasingly complex therapies. Our reach and expertise allows us to effectively support these products as demand continues to grow.

Turning to oncology and multispecialty. Revenues were $15 billion an increase of 24% driven by growth from specialty product distribution and higher volumes across our provider platforms. We saw strong utilization within provider solutions including distribution of oncology and multispecialty products. Operating profit increased 8% to $427 million. As a reminder, the prior year period included net gains of $51 million within The U.S. Oncology Network Excluding the net gains, operating profit increased by 23%. Growth was driven by Provider Solutions businesses, including GPO services and higher specialty distribution volumes. We expanded our provider platforms through growth within existing practice and new provider additions.

Utilization trends remain solid, with the same store patient visits reaching their highest level in recent quarters across our networks. In prescription technology solutions, revenues were $1.5 billion, an increase of 10% driven by higher prescription volume and third party logistics and access solutions. This was partially offset by lower contributions from hub dispensing services. Operating profit increased 18% to $307 million driven by higher demand across our access solutions including prior authorization services. We continue to see volume growth across services for both GLP-1 and non-GLP-1 medications. Including contributions from the CMS Medicare GLP-1s Bridge program which started on July 1.

We also saw solid performance across other therapeutic categories as we added new brands and expanded existing programs across the platform. Our solutions support biopharma partners across the life cycle of a product. As therapies move from launch to broader adoption and maturity, our platform is well positioned to support the evolving need for access, affordability, and adherence solutions. Turning to medical surgical solutions. Revenues were $3.1 billion an increase of 5%, driven by growth across extended and ambulatory care channels. This represents continued sequential improvement in revenue growth trends supported by higher volumes across multiple product categories including specialty pharmaceuticals.

Operating profit decreased 10% to $225 million driven by lower contributions from the ambulatory care channel due to product mix partially offset by growth in the extended care channel. We are pleased with the growth in the extended care channel supported by higher demand across several product categories. Wrapping up our review with corporate. Corporate expenses were $147 million a decrease of 3%, reflecting disciplined expense management, partially offset by continued investment in technology capabilities to support the business. Let me turn to cash and capital allocation. We ended the quarter with $6.5 billion in cash equivalents and total liquidity of approximately $11.5 billion, which is above minimum threshold.

Our balance sheet remains robust and provides ample capacity to support our strategic priorities. During the second quarter, we delivered free cash flow of $2.9 billion including $123 million in capital expenditures. Our strong cash generation capacity to reinvest in the business including technology, infrastructure, and operational capabilities. We also maintain flexibility to continue to execute our capital allocation priorities including share repurchases. During the quarter, we returned $990 million to shareholders through a combination of share repurchases and dividend payments. We remain disciplined in deploying capital towards opportunities that offer attractive returns and long term shareholder value. Turning now to our fiscal 27 outlook.

We delivered strong results through the first half of the year including second quarter performance that exceeded our expectations. Based on these results, our outlook for the remainder of the year, we are raising our fiscal 27 adjusted earnings per diluted share outlook of $45.60 to $46.40. We enter the second half with confidence in the fundamentals of our business and our ability to execute against our priorities. Our updated outlook implies adjusted EPS growth of 17% to 19%, excluding the impact of the Norway divestiture and the net gains within the U.S.

Oncology Network in fiscal 2026, our outlook implies adjusted EPS growth of 19% to 21% which is well above our long term growth target of 13% to 16%. For fiscal 27, we anticipate revenue growth of 6% to 10% and operating profit growth of 12% to 16%. Let me provide additional context. On our segment outlook. In North American pharmaceutical, we anticipate revenue growth of 5% to 9% and operating profit growth of 14% to 18%. The outlook reflects broad based strength across the business. Including strong performance in the second quarter.

We anticipate the momentum will be supported by stable market trends including growth prescription volume, increasing demand for specialty and branded medications, including GLP-1s, and benefits of improved productivity driving operational leverage underpinned by disciplined execution across sourcing and distribution. The outlook also contemplates continued impact on segment revenue from lower branded pharmaceutical pricing following wholesale acquisition cost decreases. Looking ahead to the second half of fiscal year, we anticipate accelerated investments focused on enhancing our capabilities and supporting business growth. Additionally, the outlook reflects our continued strong relationship with customers, including customer wins, and renewals of existing relationships. Turning to oncology and multispecialty. We anticipate revenue growth of 20% to 24% and operating profit growth of 18% to 22%.

Excluding the net gains of $51 million in fiscal 2026, our outlook implies operating profit growth of 22% to 26%. The outlook is supported by provider solutions, including specialty distribution and GPO services and our broader portfolio of oncology and multi specialty offerings We continue to see expansion across our provider platform through both new additions growth within existing practices. Within our retina and ophthalmology platform, Prism Vision Group recently welcomed Spectrum Vision Partners further strengthening its presence in the Mid Atlantic region. We anticipate some variability from quarter to quarter, including weighted towards the earlier part of the second half.

In prescription technology solutions, we anticipate revenue growth of 2.5% to 6.5% and operating profit growth of 11% to 15%. We expect continued growth in access and affordability solutions supported by demand across GLP-1 medications and other therapeutic categories. As products move through their life cycle, the type and level of support required can change. This creates opportunities for onboarding of new programs and expanding the services provided existing relationships. These dynamics can also create quarterly variability based on utilization, product launch timing, shift and payer landscape, and changes in program requirements. For example, we are in the early phases of supporting the CMS Medicare GLP-1 bridge program.

Following initial strong demand, prior authorization volumes have begun to normalize, and we will continue to monitor trends as the program progresses. Looking to the second half, the fourth quarter historically benefits from contribution from annual recertification programs we anticipate a similar cadence this year. Moving now to MedSurg, We anticipate revenue growth of 1% to 6% and operating profit to range from a 4% decline to flat. Our outlook reflects the breadth of the business across alternate sites of care, including ambulatory and extended care, consumer health, and at home care. To support future growth, we implemented initiatives across the business. Focused on driving growth opportunities building the commercial pipeline, and driving operating efficiency.

We expect the initiatives implemented during the first half to support growth and performance through the remainder of the year. Our second half results can also be impacted by the annual illness season As a reminder, each illness season is unique. The timing severity, and duration can vary from year to year. In corporate, anticipate expenses at the high end of the $580 million to $640 million range. As a reminder, we completed our exit from Norway in January. In fiscal 26, the Norway business contributed $74 million of operating profit including $28 million in the fiscal third quarter. Turning now to items below the line.

We expect interest expense to be on the high end of $380 million to $420 million reflecting higher borrowing rates associated with financing activities. We expect income attributable to noncontrolling interest of $290 million to $320 million which includes the minority ownership interest by Apollo in our MedSurg business. We anticipate the full year effective tax rate of 18% to 19%. We expect quarterly tax rate phasing to be broadly similar to fiscal 2026 with a higher tax rate in the third quarter than the fourth quarter due to the timing of discrete tax items.

Wrapping up our outlook with cash flow and capital deployment, We anticipate free cash flow of approximately $4.5 billion to $4.9 billion As a reminder, cash flow can vary from quarter to quarter based on timing, including the day of the week a quarter ends. We remain disciplined on capital allocation. We expect to repurchase approximately $5 billion of shares during fiscal 27. Through the first half, we purchased approximately $3.4 billion of shares at an average price of approximately $818 per share completing a significant portion of our planned full year share repurchases. We estimate diluted weighted average shares outstanding to be in the range of 115.5 million to 117.5 million.

In closing, I am pleased with the performance through the first half of the year and the progress we are making across the business. We enter the second half with strong momentum, clear priorities and confidence. Our outlook. We remain focused on execution and delivering long term value for our shareholders. With that, let's move to Q&A.

Operator: Thank you. If you would like to signal with a question, please press 1 on your touch tone telephone. If you are joining us today using a speakerphone, please make sure the mute function is turned off, to allow your signal to reach our equipment. Again, that is 1 if you would like to ask questions. And our first question will come from Glen Santangelo with Barclays.

Glen Santangelo: Yes. Thanks for taking my questions. Just 2 quick ones for me. Brian and Kenny, I am trying to understand these 2 acquisitions you did Precision Medicine Group and Option Care Health. I am just trying to I want to make sure I am clear on how these businesses will weave through the reporting segments of the company and the potential impact that may have on your margins. And as I think to model calendar 2027, not that you want to give any forward guidance. I am just trying to think through these ancillary services that you are acquiring.

And then secondly, as we have a whole slate of biosimilars set to be launched here in the next 12 months, I am just trying to think about the puts and takes on your margins across your 2 segments, oncology and multispecialty and prescription technologies? Thanks so much.

Brian S. Tyler: Why do not I start by just maybe reviewing the strategic rationale for these? And then, Kenny, you can comment on the question about where it reports and the margin profiles. So Precision for Medicine Group, which we closed earlier this week, we are very excited about. it is really composed of 2 different business segments precision for medicine, which provides global clinical research, translational, science, and laboratory capabilities, with deep oncology experience and trials active in more than 30 countries. We really see that as being highly complementary to our oncology strategy complementing USANA, the joint venture we have with SCRI, and some of the site management and CRO light ish skills that SCR op.

SCRI had is now really accelerated with the acquisition of Precision for Medicine. And so as we think about the oncology strategy holistically, we think this was a. The this is a really, really complementary piece to the to the assets that we currently have. And then other side of precision is precision AQ. Which is a leading market access, health economics, and commercialization services platform. Which we think is highly complementary to our access and affordability capabilities and just gives us a broader portfolio or suite of solutions to support our biopharma partners as they commercialize over the life cycle of their of their products.

So was the strategic rationale. it is really anchored in our 2 core growth strategies of oncology and serving biopharma. Both of these businesses will report through the O and M segment And would you like to comment?

Kenny K. Cheung: Yeah. So for PMG, just a couple of things on this 1. So we. As Brian mentioned, we are pleased to acquire PMG. Anticipate the transaction to be accretive in the current fiscal year and beyond. Purchase price of roughly $2.25 billion From a financing source standpoint, this is all funded with cash given the strength of our balance sheet. Reporting standpoint, PMG will be reported within the ONM segment. From a financial profile standpoint, we estimate the acquisition will contribute approximately $0.10 to $0.20 of adjusted EPS in fiscal 27 And by the end of year 3, we estimate accretion of approximately $1.60. To $1.80.

So like other prior m and a, you know, the way to think about this is that we will anticipate a ramp up in synergies as we continue to integrate the business within our platform. Obviously, there will be cost synergies assumed, but Brian and I and the whole team are really excited about is the ability for us to enhance our clinical trial capabilities, serve even greater basket of biopharma companies across more stages of clinical trial being able to be being able to be part of a global platform and just overall strengthen the value proposition for a biopharma company.

Brian S. Tyler: Good. that is And then to the margin profile question, if you remember at our Investor Day a couple of years ago, we laid out kind of on the left side of the slide distribution and GPO with lower margin as you progress into data service and FCRI, those tend to be higher margin, more complement. More higher margin businesses. And we would put we would put PMG more on the right side of the chart. The second 1 you asked about was Option Care.

Kenny K. Cheung: I will go quickly just in being conscious of time. This just remind everybody is a minority investment. We really are excited about this investment for a couple of reasons. As we think about the innovation pipeline, how specialty is evolving, We want to be an important player represented in all growth segments. And so, you know, given our and scale and specialty, this made sense from that avenue.

We also have a very deep conviction about community based care and providing care close to the home, and in this case, even essentially in the home And so, with our experience managing assets that are community practice based and our experience in specialty and then the CD&R capabilities that come with it. We think this is just a good a good setup for us to complement the assets that we have. But this will be recorded under the equity method So not really in any of the segment margin profiles.

Brian S. Tyler: Yeah. To double-click on the equity method. So from a geography standpoint, this will show up as other income with an AOP. And from a BU standpoint, as Brian mentioned, not within the BU, but it will be reported within the corporate segment.

Operator: Next question, please. And next will be Brian Tanquilut with Jefferies with Jefferies.

Brian Tanquilut: Congrats on the quarter. Maybe just to follow-up on the option comments. I know you have a call option on it. To acquire the remainder of the business at some point. Maybe, Brian, as we think about the strategy there, I hear your comments on specialty. But is there an overlay there for the oncology business that you are contemplating? Or maybe a different way of asking it, strategically, other than just bringing incremental revenue and access points? I mean, how are you thinking about overlaying that potentially eventually? Thanks.

Brian S. Tyler: Well, you know, we have capabilities in McKesson. Not just in oncology, but in really all specialties and rare and orphan therapies cell and gene therapies and as we think about the future of how those markets evolve, we think having ultimately having access to our capabilities to provide those in ambulatory infusion, more community based settings, in the home is going to be a growing and increasingly important channel. And so we just view this as very complementary to the channels and assets and reach that we have today.

Operator: Next question, please. And next will be Elizabeth Anderson with Evercore.

Elizabeth Anderson: Hi, guys. Thanks so much for the question. Given the outperformance in North American pharma, obviously growing well in excess of the long term guide there. How do we think about the sustainability of that over the long term? it is obviously been several-- for a while now. So we think about sort of where the longer term drivers of upside to that number might be, or is this something that you think, Okay, that is great, but there are potentially some other things to think about for fiscal 28 and beyond. Thank you.

Kenny K. Cheung: Yeah. I can start. So maybe first, let me go into the drivers of Q2, help you understand, you know, what drove the 22% AOP growth, and I will talk more about how we are thinking about the rest of the year, leading into 2028 as well. So as you think about Q2, we are pleased. With strong performance of NAPD. You know, revenue grew 6%. Let me try to provide a few things. 1 is just broad based growth. Included higher prescription volume growth in specialty products, and GLP 1. Just the triple-click on GLP-1, it was roughly $16 billion of revenue for us, increased $3 billion. Or 26% year on year and 8% sequentially versus last quarter.

We did have some WAC declines in the quarter in the quarter. However, as we mentioned before, it impacts more on the on the revenue line and less on the operating profit line. Speaking of operating profit, it increased 22% driven by growth in the distribution of specialty products, the health systems, and strategic accounts. So overall, it was broad based growth. So that is the beauty of our business. When you parlay a strong, healthy, broad based growth with continued operational excellence, and productivity within our supply chain ecosystem, we saw really nice operating leverage close to a 150 bps, which was led by our North America pharmaceutical business.

So overall, we are really pleased with the growth the momentum, and the durable profile of this business. As I think through the second half of the fiscal year, the outlook reflects continued broad based strength across the business. We anticipate momentum to be supported by stable market trends, including prescription volume, increasing demand for specialty and branded medication, including GLP 1, and overall continued health of our supply chain. It also incorporates a couple other things. Investments in the second half of the year. We are continuing focus on automation, technology, and business growth. And, also, our outlook reflects continued strong relationship with our customers.

So our outlook includes wins, renewals, with existing relationship, As we mentioned earlier, we did renew our CVS contract and that term starts on October 1. It runs through June 2032. And that is also baked into our outlook guidance as well. So overall, pleased with the performance of our business.

Operator: Next question, please. And next will be Lisa Gill with JPMorgan.

Lisa Gill: Thanks very much. I just wanna follow-up on a few things here. When I think about the North American pharmaceutical performance and you highlighted the specialty health systems. 1, how are you thinking about potential changes around 340B? I know we had, you know, an election that happened yesterday and perhaps some things are off the table, but how could that potentially impact the amount of volume that you see there And it is kinda dovetailing to that. Brian, you talked about a dynamic policy environment. can you maybe just update us on any of your thoughts now, that we have an idea of what Congress is going to look like going into 2027?

Any changes that you are anticipating that could impact either side of your business?

Brian S. Tyler: Yeah. Alright. Let me start with your first question on 340B. We obviously provide distribution services to contract pharmacies. We support covered entities. We support the biopharma manufacturers. Themselves. We also, as you know, Lisa, have a range of 340B related services and including consulting and software to help manage the supply chain optimization.

As we think about the potential for January 2027 implementation, of a rebate model and the also got OPPS, You know, I think the difficult thing for us to kind of contemplate in this moment is how are these are going to be effectuated or implemented How are customers gonna think about new choices, You know, in the case of the rebate model, it is probably a cash more of a cash issue. So we will have to work with our customers as we always do. We will work with them to administratively support what we need to administratively support.

We will work with them to make sure that you know, they continue to have the success they need to have to be viable. But we really do not know what their response will be in terms of behaviorally trying to grow 340B, trying to migrate away, just some 340B scripts go to the community, or do they stay where they currently are? You know, the thing for us is we are represented in all channels, and what we know is the script will still be there, and we will be ready to receive it in support of in whatever channel we can. We are we are actively tracking this We are very engaged. You know?

Depending on where the policy ultimately lands, we will use the capabilities of our of our company to help navigate for both on behalf of the customers and on behalf of ourselves. To your bigger question of, you know, now that I have had 12 hours to absorb the election results, you know, I do not think my view of any of the policy discussion is different than it would have been last quarter. It is a dynamic environment. You know, we know that cost and quality and access and transparencies are gonna still be issues of high interest in Capitol Hill from our regulators and our legislators. And we will be part of those conversations.

Now building new educating new members, advocating on behalf of what we think is important to helping health care address the challenges that we have, advocating for community based providers and because they are affordable and more accessible. And we will continue to build those relationships. And just like we have always done, we have always worked with both sides of the house. We have always worked to try to out how we do the right thing for the health care system. that is what we will continue to do.

Kenny K. Cheung: Yeah. Just a couple things on 340 B from my end. Regardless Of How 340 B plays out, the value of our distribution services remains intact. We will continue to focus on providing our customers with the highest quality of service, and them with our products and the rest portfolio. You know? And this is an important piece. We will get fairly compensated for the sheer value of service we provide. At this time, we do not anticipate any material financial impact to our business. And as Brian said, we will watch this very, very carefully.

Operator: Next question, please. And next will be Kevin Caliendo with UBS.

Kevin Caliendo: Hi. Good afternoon. Thanks for taking my question. I am gonna take Elizabeth's question and ask it a little bit differently, which is your LRP versus what you have done over the last year or 2 or so seems comically low. So maybe instead of asking what drove you to get to in this quarter north of 20% EBIT growth, Maybe what needs to happen for you to actually grow North American pharma inside the LRP? Like, what is embedded there for that versus the market growth or whatever? Because it just seems that your ability to beat that is you know, is tremendously easy.

Kenny K. Cheung: Yeah. So I can start. So when you think we refer to the LRP, obviously, we are referring to the long term targets. So I have reviewed our long term business plan. I feel confident about the business fundamentals. And our ability to execute against these long term targets. You know? For EPS, it was roughly 13 to 16%, just to remind everybody. Looking at the long term, we anticipate the growth to be driven by the strength of our leading platforms oncology, multispecialty, and biopharma solutions, supported by operating leverage and efficient capital deployment, we are well positioned to capture long term growth through disciplined execution of strategic priorities and sustainable operational momentum.

I just remind you that our long term targets are long term in nature, not an indicator of short term variations that incur that can occur within the business year to year.

Brian S. Tyler: Yeah. I just wanna reflect on, you know, I think the performance we are enjoying is a culmination of years of focus on our strategic priorities years of investment in technologies, whether that is physical, distribution or robotic process automation or now large language models in AI, they are translating from the gross profit you know, leverage ratios that Kenny reviewed. And I think it is just reflective of the great alignment and understanding of his team of you know, how we need to show up every day for our customers, how we win new customers, win customers that are winning, support those customers in a way that will enable them to be successful, which reinforces our own success.

Operator: Next question, please. And next will be Allen Lutz with Bank of America.

Allen Lutz: Good afternoon. Thanks for taking the Really appreciate the color so far. 1 for Brian on the capital deployment strategy. As we think about Precision and we think about Option Care, these are new businesses for you. Relative to what the capital allocation strategy has been around M and A adding MSO assets and even added spectrum to Prism. A few days ago. Can you talk about the relative complexity of integration of EMG and Option Care relative to what we have seen over the past couple years, growing that US oncology business growing the retina business, Is there a delta there? We love any perspective.

Brian S. Tyler: it is a really great question. First, I would say, parts of the precision from Medicine Group business are new to us. Like the CRO component. They are highly adjacent to businesses that we are already in, and they are highly relevant of their focus on oncology. To our oncology strategy. The biopharma services side of that business are natural adjacent to the businesses that we are already in. And so there is not per se there a bunch of integration as much as it is We now have more solutions that we can put in our bag to offer biopharma manufacturers.

We think we have great opportunity not gonna say, to integrate, but to complement the SCRI capabilities and the PMG capabilities to improve, reimagine, make more efficient and usable and easy the process of getting community based providers into clinical trials and then. And allowing their patients then to benefit from those therapies. So we will be very thoughtful about how we, quote, unquote, integrate the business. But these are highly complementary businesses with very little overlap. But complementarity to the assets that we have. So we are we are very excited. We think you know, I would just remind you on the Option Care side, know, we are the minority nonoperating partner.

So for years, this has really been under the stewardship of CD&R. We will bring our knowledge, expertise in specialty and just understanding of supply chain, obviously. Help that business, but we will be relying on them to run it day to day.

Kenny K. Cheung: Yeah. On Option Care, you know, CD&R is a strong operating partner. You know, we think Option Care is a platform and helps having a partner solely focused on strategic investments, and growth, and that will be beneficial for us. You know, we would clearly have a voice at the table as well. There will be proper and appropriate governance. But it really gives an opportunity to grow the business with a strong operating partner that has the wealth of experience we, at McKesson, can also focus on our own. Teaching pillars as well, oncology, multispecialty, far from a service as well. So it is really a win proposition.

Operator: Last question, please. Certainly. And that question will come from Michael Cherny with Leerink Partners.

Michael Cherny: Good afternoon. Thanks for taking the question. This is Dylan Finley on for Mike. We would love to hear you expand a bit on the Option Care deal rationale. Should we think of this as an operating partnership with CD&R where you could come in and do something on procurement and contracting and drive value? Or is this primarily an equity method investment? And are there currently any supplier arrangements between McKesson and Option Care? Would that be an opportunity for you in future years?

Brian S. Tyler: Yes. So first, the Option Care deal transaction has not closed. So we are still waiting approval from their shareholders as well as the regulatory agencies. So there are no interfaces ongoing today. We do envision this as a CD&R-run business. With the benefits of all the resources and knowledge that McKesson has and bring to bear around specialty pharmaceuticals, providing care in community based settings, etcetera. And so, we really like the future trajectory of community and home based care. We like the future trajectory of specialty. I think as Kennedy said, this allows us to germinate a business outside of the day to day operating requirements that have been delivering the results that you have seen us delivering.

And so I very much think of this as incubating future growth platforms highly adjacent to our core strategy. And supporting our long term growth algorithm well into the future.

Operator: Great questions. Appreciate everybody taking time to join us. there is a lot going on in the world today that we are all aware of. Look. I am very pleased with the results that McKesson delivered in our fiscal second quarter. They were very strong. Our strategy is working. Our execution is strong. I am confident in our ability to continue to deliver long term sustainable growth for our shareholders. This does not happen without team McKesson. So I wanna thank them for their continued dedication to advancing our mission. They are unwavering in their commitment to our customers and to our customers' patients. And to each other.

And they are the foundation for all of the success we will continue to have. So thanks, everybody. I hope you have a great night. Thank you for joining today's conference call. You may now disconnect. And have a great day.

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