McKesson Corporation MCK, on Monday, inked a definitive agreement to acquire a controlling interest (representing approximately 70% ownership) in Community Oncology Revitalization Enterprise Ventures, LLC (Core Ventures), subject to customary closing conditions. Florida Cancer Specialists & Research Institute, LLC (“FCS”) physicians will retain a minority interest in Core Ventures.
Core Ventures, a business and administrative services organization, was established by FCS.
Following the completion of the transaction, Core Ventures will be part of the Oncology platform, and financial results will be reported within McKesson’s U.S. Pharmaceutical segment. This is expected to strengthen its foothold in the oncology space. The expansion in the lucrative oncology market should support its top-line growth going forward, leading to higher investor interest and driving its share price higher.
Rationale Behind McKesson’s Agreement
Per McKesson, FCS (with more than 250 physicians and 280 advanced practice providers across nearly 100 locations in Florida) will remain independently owned following the close of the transaction. FCS will also join McKesson’s The US Oncology Network (The Network), an oncology organization dedicated to advancing local and affordable cancer care and better patient outcomes.
McKesson’s management believes that the agreement is a significant step toward advancing community-based oncology care. Management expects to bring advanced treatments and improved care experiences to patients by growing the company’s Oncology platform while reducing the overall cost of care.
FCS currently conducts clinical trials through the Sarah Cannon Research Institute. By joining The Network, FCS will likely have access to McKesson’s differentiated Oncology platform, including best-in-class oncology care products and services.
FCS’ management feels that community oncology's role in increasing access to high-quality, affordable care can be boosted via the power of the combined operational expertise.
Industry Prospects for McKesson
Per a report by Precedence Research, the global oncology market size accounted for $225.01 billion in 2024 and is anticipated to reach $668.26 billion by 2034 at a CAGR of 11.5%. Factors like the rising technological advancements in the diagnostics of various cancers and the increasing prevalence of cancer are likely to drive the market.
Given the market potential, the latest agreement is expected to provide a significant boost to McKesson’s business.
Recent Developments in McKesson’s Oncology Unit
McKesson announced that Tennessee Cancer Specialists has joined The Network, effective Aug. 1, 2024.
The same month, McKesson reported first-quarter fiscal 2025 results, wherein it registered a solid uptick in its overall revenues, driven by growth in the U.S. Pharmaceutical segment. The segment’s growth resulted from increased prescription volumes, including higher volumes from specialty products, retail national account customers and GLP-1 medications.
In June, McKesson’s independent specialty pharmacy specializing in oncology and rare disease areas, Biologics by McKesson, was selected by Accord BioPharma, Inc. as an exclusive specialty pharmacy provider for CAMCEVI (leuprolide) 42mg injection emulsion for subcutaneous use.
McKesson’s Share Price Performance
Shares of the company have gained 29.3% in the past year against the industry’s 3.7% decline. The S&P 500 has witnessed 26.7% growth in the said time frame.
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Zacks Rank & Key Picks
Currently, McKesson carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space are DaVita Inc. DVA, Quest Diagnostics Incorporated DGX and Boston Scientific Corporation BSX.
DaVita, sporting a Zacks Rank #1 (Strong Buy) at present, has an estimated long-term growth rate of 17.5%. DVA’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 24.2%. You can see the complete list of today’s Zacks #1 Rank stocks here.
DaVita’s shares have gained 53.9% compared with the industry’s 22.5% rise in the past year.
Quest Diagnostics, carrying a Zacks Rank of 2 (Buy) at present, has an estimated long-term growth rate of 6.2%. DGX’s earnings surpassed estimates in each of the trailing four quarters, with the average being 3.3%.
Quest Diagnostics has gained 16.2% compared with the industry’s 22.5% rise in the past year.
Boston Scientific, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 12.6%. BSX’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 7.2%.
Boston Scientific’s shares have rallied 47.7% compared with the industry’s 13.9% rise in the past year.
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