Pharmaceutical wholesaler McKesson (NYSE: MCK) has been expanding its services through a spate of acquisition activity.
The company’s most recent deal is a $1.4 billion investment for a 49% stake in Option Care Health (NASDAQ: OPCH), which provides infusion therapy and services to patients in their homes or at its clinics. Privately-held investment firm CD&R acquired a majority interest of 51%. The total deal value is $5.8 billion including debt. Option Care Health will become a separate, private company and will keep its own management team.
McKesson CEO Brian Tyler said the acquisition is part of the company’s plan to provide a range of therapies to patients who have acute and chronic conditions, especially ones that can be administered in their homes.
“As these therapies continue to grow in importance and their delivery becomes increasingly complex, McKesson is focused on investing in areas where our capabilities can help improve access and advance care in lower-cost community settings, at or closer to home,” he said.
M&A deals expand offerings
Since 2025, McKesson has bulked up its mergers and acquisition activity to expand its portfolio and grow its margins through higher cost services such as in-home treatments, infusion clinics and clinical research and commercialization services.
Last year the company targeted service-oriented assets like Prism, which offers general ophthalmology and retina management services, and Core Ventures, which provides business and administrative services organization.
But this year McKesson’s strategy has changed to more provider-focused assets and to expand its specialty business via acquisitions such as Option Care Health and Precision Medicine Group, a deal that was announced in August, wrote Keonhee Kim, an equity analyst for Morningstar.
McKesson invested $2.25 billion to acquire Precision Medicine Group, which provides clinical research and biopharma commercialization services, and will operate under the company’s oncology and multispecialty segment.
“The acquisition aligns well with McKesson’s long-term goal of building platforms around community-based providers and pharma partners that not only strengthen customer relationships but enable further higher-margin, higher-growth services from specialty end markets,” he said.
McKesson is expected to pay for its stake in Option Care Health with cash on hand. The company has a “very strong balance sheet, ending fiscal 2026 with $4 billion in cash and net leverage of 0.3 times, and has generated over $5 billion in free cash flow in each of the last two years,” Kim wrote.
The company is estimated to generate $4.8 billion in free cash flow in fiscal 2027.
Shares of McKesson have risen by 23% during the past year.
Revenue rising from deals
These deals have contributed to McKesson’s revenue growth. Revenue in its fiscal first quarter increased by 8% to $105.38 billion, beating the $103.88 billion estimated by Wall Street analysts. Higher prescription volumes and distribution of specialty products boosted sales.
McKesson’s revenue grew by 5% in its North American pharmaceutical segment from a higher prescription volume. Revenue also increased by 33% in its oncology and multispecialty segment, 9% in its prescription technology solutions segment and 4% in its medical-surgical solutions segment.
The company reported a profit of $614 million, compared with $784 million in the same quarter a year ago. The company’s profit declined mostly due to a redemption value adjustment of $293 million that was related to redeemable non-controlling interests for the medical surgical solutions segment that was sold as a minority interest for $1.25 billion in June to Apollo affiliates.
McKesson remains the largest distributor of medications in the U.S. and relies on its 43 robust distribution centers to supply medications to people taking routine medications for high cholesterol, blood pressure, arthritis, and specialty medicines to treat cancer and GLP-1s to treat diabetes and produce weight loss to thousands of local and national pharmacies, including large ones such as CVS Health (NYSE: CVS) and Walmart (NASDAQ: WMT).
In fiscal 2025, McKesson’s revenue rose to $359.1 billion, an increase of 16%. The distributor’s rivals are much smaller — Cardinal Health (NYSE: CAH) has a market cap of $55.2 billion, while Cencora has a market cap of $14.3 billion.
McKesson’s expansion into providing different treatment options for patients such as in-home care or driving to a nearby infusion clinic will likely boost its growth and profit margins.
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