Isulin big Biz
Drug distributor McKesson may be the largest U.S. company that investors have never heard of. Overlooking its stock could be a big mistake.
Just what is McKesson (ticker: MCK)? It isn’t a pharmacy benefit manager like Cigna Group’s (CI) Express Scripts or UnitedHealth Group’s (UNH) OptumRx, though it is often confused with one. And it doesn’t develop and manufacture the drugs that people need, like Pfizer (PFE), Merck (MRK), or Eli Lilly (LLY). Instead, McKesson makes its money by delivering medicines to pharmacies and hospitals, and it does enough of it to have become the ninth-largest U.S. company based on revenue. Even the stock’s rally—it has gained 22% this year—hasn’t brought it much attention.
It should. From its steady-Eddie cash flows to the potential boost it might get from delivering Novo Nordisk’s (NVO) Ozempic and other weight-loss drugs, the Irving, Texas-based McKesson looks poised to keep the gains coming—all while providing a service that millions of people can’t live without.
“McKesson is showing healthy growth for a company of its size, helped by very targeted investments and strong client relationships,” says Jefferies analyst Brian Tanquilut. “That makes it a compelling fundamental story.” McKesson’s business is relatively simple. It buys drugs from manufacturers and then distributes them to pharmacies. These include mom-and-pop shops and, increasingly, big national chains such as Walmart (WMT) and CVS Health (CVS), which are among its largest clients. Yet it’s a difficult-to-replicate logistics business—one not easily done by United Parcel Service (UPS) or FedEx (FDX), given the need to securely handle medications that are tightly regulated by the government and to transport them on strict deadlines in conditions that keep them potent.
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