Deal Overview
On May 8, 2025, McKesson Corporation (NYSE: MCK, $682.28, Market Capitalization: $85.4 billion), a diversified healthcare services company, announced its intention to separate its Medical-Surgical Solutions segment into an independent company (NewCo) (for more information, visit spinoffresearch.com). McKesson is committed to exploring all opportunities to execute a separation in a manner that maximizes shareholder value and anticipates providing more information as appropriate on the form and timing as the process progresses. On May 1, 2025, the Board of Directors of McKesson Corporation declared a regular dividend of 71 cents per share of common stock. The dividend will be payable on July 1, 2025, to stockholders of record on June 2, 2025.
Deal Rationale
McKesson’s strategic focus on disciplined portfolio management involves continuous evaluation of its business segments to ensure alignment with its growth priorities and optimize capital allocation. This strategic approach has previously led to transformative actions such as the divestiture of Change Healthcare in 2020 and the divestiture of its European and Canadian retail businesses, which have unlocked considerable value for shareholders. Moreover, Change Healthcare was fully acquired by UnitedHealth in 2022. As a continuation of this strategy, McKesson has announced its intent to separate the Medical-Surgical segment into an independent company. McKesson believes a separation of the Medical-Surgical Solutions business will further enhance the strategic opportunity and operational focus of both companies and unlock value for McKesson shareholders. A separation would result in two well-capitalized, world-class companies, well-positioned to pursue their respective strategic growth priorities. The separation advances McKesson and NewCo’s ability to create value for customers, partners, patients, and shareholders with increased investment and dedicated capital allocation.
Post-spin-off, McKesson will continue to focus on its capital deployment priorities on opportunities that best align with its long-term enterprise strategies. McKesson will advance its portfolio to focus investment on higher growth, higher margin opportunities in Oncology and Biopharma Solutions, unlocking substantial value for stakeholders. In order to strengthen its core operations, McKesson acquired Rx Savings Solutions in late 2022 to enhance biopharma and payer connectivity with patients and formed SCRI Oncology with HCA Healthcare to expand access to cancer clinical trials. McKesson holds a 51% controlling interest in SCRI, reported under its U.S. Pharmaceutical segment. Additionally, the company announced plans to acquire a controlling stake in Core Ventures, a business services organization established by Florida Cancer Specialists, with the deal expected to close on June 2, 2025.
Moreover, the Medical-Surgical Solutions segment, which represents only 3.2% of the total company’s revenue, has seen sluggish growth since 2020 due to a shift in demand, lower volumes, supply chain disruption and also due to post-pandemic normalization. Post-separation, the new Medical-Surgical Solutions company (NewCo) would be a differentiated medical surgical supply and solutions company with a compelling leadership position, attractive margins, and potential for growth acceleration across all the alternate sites of care markets. With FY25 revenue of around $11.4 billion, the spin off is designed to sharpen McKesson’s focus on pharmaceutical and specialty services, especially in high-growth areas like oncology, while allowing both entities to pursue tailored growth strategies.
McKesson Corporation, founded in 1833, is headquartered in Irving, Texas. With a legacy spanning over 190 years, McKesson plays a critical role in delivering pharmaceuticals, medical supplies, and health IT solutions across North America and selected international markets. Under the leadership of CEO Brian S. Tyler, the company trades on the NYSE under the ticker symbol MCK. The company operates through three key business segments: U.S. Pharmaceutical, Prescription Technology Solutions, Medical-Surgical Solutions, and International.
U.S. Pharmaceutical Segment (91.3% of FY25 sales)
U.S. Pharmaceutical segment distributes branded, generic, specialty, biosimilar and over-the-counter (OTC) pharmaceutical drugs, and other healthcare-related products in the United States (U.S.). This segment also provides practice management, technology, clinical support, and business solutions to community-based oncology and other specialty practices. In addition, the segment sells financial, operational, and clinical solutions to pharmacies (retail, hospital, and alternate sites) and provides consulting, outsourcing, technological, and other services.
Prescription Technology Solutions Segment (1.5% of FY25 sales)
Prescription Technology Solutions (RxTS) connects patients, pharmacies, providers, health plans, pharmacy benefit managers, and biopharma companies to improve medication access across the healthcare system. Integrated with most EHRs, 50,000+ pharmacies, 950,000 providers, and supporting 650+ biopharma brands, RxTS offers end-to-end solutions from prescription to therapy. Its services include affordability support, price transparency, benefit insights, dispensing support, logistics, and distribution. In the past year, RxTS saved patients over $10 billion, prevented 12 million abandoned prescriptions, and enabled medication access over 100 million times, reinforcing its vital healthcare role.
Medical-Surgical Solutions (to be spun-off) (3.2% of FY25 sales)
The Medical-Surgical Solutions segment provides medical-surgical supply distribution,
logistics, and other services to healthcare providers, including physician offices, surgery
centres, nursing homes, hospital reference labs, and home health care agencies. The
segment offers more than 245,000 national brand medical-surgical products as well as
McKesson’s line of high-quality products through a network of distribution centres in
the U.S. With FY25 revenue of around $11.4 billion, the spin-off is designed to sharpen
McKesson’s focus on pharmaceutical and specialty services, especially in high-growth
areas like oncology, while allowing both entities to pursue tailored growth strategies.
International segment (4.0% of FY25 sales)
McKesson’s International segment includes operations in Canada and Norway. McKesson Canada is one of the country’s largest pharmaceutical wholesale and retail distributors, serving pharmacies, hospitals, long-term care centres, and clinics through a national distribution network. Beyond logistics, it offers automation and technology solutions to retail and hospital clients. McKesson Canada also delivers specialty health services and biopharma support, including personalized patient programs and a national network of specialty pharmacies. It operates INVIVA, Canada’s first and largest accredited private infusion clinic network, and owns PDCI, the country’s leading market access consultancy. These services help biopharma manufacturers introduce new products to market while enhancing patient care and access across Canada’s healthcare system.
4Q25
For 4Q25, the company recorded revenues of $90.8 billion, up by 18.9% YoY compared to $76.4 billion in 4Q24, primarily driven by growth in the U.S. Pharmaceutical segment, due to increased prescription volumes from retail national customers and growth in the distribution of specialty products, including higher volumes in oncology. Operating Income for the quarter was $1.6 billion, up by 30.8% YoY with a margin of 1.8%, up by 20 bps. Adjusted operating income was $1.5 billion, up by 23.5% YoY with a margin of 1.7%, flat as compared to the prior year. The growth in operating income benefited from growth across all operating segments, including strong oncology and other specialty provider volumes, the onboarding of a new strategic customer in 2Q, and increased demand for access solutions in the Prescription Technology Solutions segment. Net income for the period was $1.31 billion, up by 57.3% YoY, while adjusted net income was $1.27 billion, up by 56.7% YoY. Similarly, Diluted EPS on a reported basis was $10.01 per share, up by 66.3%, while adjusted diluted EPS was $10.12 per share, up by 63.8% YoY. The growth in Net income and EPS was driven by a lower effective tax rate and strong operational growth across the business.
FY25
For FY25, the company recorded revenues of $359.1 billion, up by 16.2% YoY compared to $309.0 billion in FY24, driven by broad-based operational strength across the business, including the onboarding of a new strategic customer in the U.S. Pharmaceutical segment. Operating Income for the year was $4.4 billion, up by 13.1% YoY with a margin of 1.2%, down 10 bps compared to the prior year. On the other hand, the adjusted operating income was $5.6 billion, up by 14.6% YoY with a margin of 1.6%, which was flat compared to the prior year. The growth in operating income was led by a double-digit growth in the U.S. Pharmaceutical and Prescription Technology Solutions segments and Canadian business within International. Excluding the impact of net gains related to McKesson Ventures, operating profit increased 12% YoY compared to the prior year, well above MCK’s long-range target. Net income for the period was $3.3 billion, up by 9.8% YoY, while adjusted net income was $4.2 billion, up by 15.1% YoY. Similarly, diluted EPS on a reported basis was $25.72 per share, up by 14.9%, while adjusted diluted EPS was $33.05 per share, up by 20.4% YoY. Growth in Net income and EPS was driven by strong operational growth across the business and a lower share count.
FY26 Outlook:
McKesson has issued fiscal FY26 guidance for Adjusted Earnings per Diluted Share in the range of $36.75 to $37.55, reflecting an expected growth of 11% to 14% year-over year. Excluding net gains from McKesson Ventures’ equity investments in FY25, the projected growth is expected to increase 13% to 16%. While the company does not forecast GAAP earnings per share, it has reaffirmed its long-term Adjusted EPS growth target of 12% to 14% and updated the long-term Adjusted Segment Operating Profit growth target for its U.S. Pharmaceutical segment from 5%–7% to a revised range of 6%–8%.
Long-Term Growth Targets
McKesson continues to strengthen its portfolio of differentiated assets and capabilities, advancing health outcomes for all. As a result of continued, consistent, strong execution against its strategic initiatives, McKesson is updating and reaffirming the following long-term growth targets:
• Reaffirming long-term Adjusted Earnings per Diluted Share growth target of 12% to 14%.
• Updating U.S. Pharmaceutical long-term Adjusted Segment Operating Profit growth target to 6% to 8% from the previous range of 5% to 7%.
• Reaffirming Prescription Technology Solutions long-term Adjusted Segment Operating Profit growth target of 11% to 12%.
Company Description
McKesson Corporation (Parent)
McKesson Corporation is a global leader in healthcare supply chain management solutions, retail pharmacy, community oncology and specialty care, and healthcare information solutions. The company is engaged in the distribution of pharmaceuticals and medical products, as well as providing technology enabled services that support the clinical and financial outcomes of healthcare providers and payers. McKesson operates through several business segments, including U.S. Pharmaceutical, Prescription Technology Solutions, Medical-Surgical Solutions, and International. Its extensive distribution network and logistics capabilities serve a wide array of customers, including hospitals, pharmacies, physicians’ offices, long-term care facilities, and home health agencies. McKesson’s U.S. Pharmaceutical segment distributes branded, generic, and over-the-counter drugs to retail pharmacies and institutional healthcare providers. Its international segment serves healthcare markets in Canada and Europe. The company leverages advanced analytics, automation, and digital capabilities to streamline operations and enhance healthcare delivery outcomes across geographies. McKesson has operations in more than a dozen countries and employs over 45,000 people worldwide. The company continues to invest in innovative solutions and partnerships to improve patient access, support value-based care models, and reduce the total cost of care. For FY25, McKesson reported Consolidated revenues of $359.1 billion, highlighting its scale and impact in the global healthcare ecosystem.
Medical-Surgical Solutions (Spin-Off)
The Medical-Surgical Solutions division handles the distribution of medical-surgical supplies, logistics, and related services to various healthcare providers, such as clinics, surgical centres, elder care facilities, hospital labs, and home healthcare agencies. It delivers over 245,000 branded medical-surgical products, along with McKesson’s proprietary high-quality items, through a network of U.S.-based distribution centres. On May 8, 2025, McKesson announced plans to separate this segment into a standalone company, temporarily referred to as “NewCo.” The business generated $11.4 billion in revenue during FY25.