Pharma tech shines at Cardinal Health

Cardinal Health posted higher earnings in the first quarter of fiscal 2004, on the back of increased demand in its prescription drug wholesale business but also some impressive gains at its pharmaceutical technologies activities.

Net income came in at $328.6 million, or $0.74 per share, a rise of 14 per cent over the year-earlier figure of $288.3 million or $0.64 a share. The company said that it expects EPS to continue to grow in the mid-teens for the remainder of the fiscal year.

Revenues were up nearly 17 per cent to $13.3 billion in the first quarter, and as usual the wholesaling business made up the lion's share of that total at $10.8 billion, up 16 per cent. However, operating profit at the division did not match this performance, coming in up 2 per cent at $266 million. Cardinal​ said the reasons for this were less favourable terms with drug vendors, who are feeling the pinch at present, as well as a decline in sales to other wholesalers.

Pharma tech surges​

The pharmaceutical technology and services business put in a hefty 57 per cent revenue hike to $606 million, helped by the addition of the Syncor nuclear pharmacy business, while operating profit at the division rose 47 per cent to $107 million. The latter was driven by increased capacity utilization, integration efficiencies from nuclear pharmacy operations and tight expense control, said the company.

Cardinal's chief executive Robert Walter said that pharma tech "will be our fastest growing segment for the full year."​ The company's oral drug manufacturing business was a key contributor, and revenue gains were particularly strong for Eli Lilly's Zyprexa Zydis (olanzapine) for schizophrenia, and Mylan's Amnesteem (isotretinoin), a dermatology product

The group's packaging services division also experienced strong gains, driven by the launch of AstraZeneca's new cholesterol-lowering medication Crestor (rosuvastatin), which has already captured a 2 per cent share of the statin market since its launch last month and has been tipped by some analysts as being a drug with $3 billion sales potential at peak.

Cardinal's automation and information business posted a 7 per cent increase in revenue to $143 million and a 15 per cent rise in operating profit, which did not quite meet expectations. The timing of orders due to computer virus problems at potential customers and Hurricane Isabel affected results. Meanwhile, medical products and services revenue rose 9 percent to $1.7 billion.

Walker told a conference call that Cardinal Health generated an increase of more than $300 million in operating cash flow during the quarter and expects to generate approximately $1.3 billion in operating cash flow for the year. In addition, the company has completed a $1 billion stock buy back program that represented the repurchase of over 17 million shares.