Further restructuring at Cardinal?
The move, which was floated by company CEO R Kerry Clark at the firm’s annual results presentation earlier this month, would hive off its clinical and medical products division, which generated revenues of $5.6bn (€3.8bn) in fiscal 08.
Such a move would be in keeping Cardinal’s recent efforts to shed non-core assets, begun with the divestiture of its pharmaceutical manufacturing division as Catalent Pharma in 2007. It would also enable the Ohio-based healthcare giant to focus on its distribution business, which is responsible for supplying around 17 per cent of all drugs currently prescribed in the US.
Clark said that: “For two years, we have been taking steps to sharpen our focus on health care supply chain services and clinical and medical products, culminating with our announcement in July to operate these businesses in two distinct segments that reflect the unique characteristics and requirements of each.”
Although Cardinal said that it plans to make its final decision by October, among analysts the feeling is that it would be a positive step. Many suggest that it will refocus investor attention on to the performance of the firm’s supply chain operations, which generated turnover of $79.3bn in fiscal 08.
Lehman Brothers’ Lawrence Marsh said that: “we cannot think of any reason why a split would not move ahead this fiscal year,” in an interview with Columbus Business First.
Tentative deal with US DEA
In related news, Cardinal said it has come to an oral agreement with the US Drug Enforcement Administration (DEA) regarding several license suspensions that the agency put in place late last year.
The suspensions cover the shipping of controlled-substances from three of its distribution facilities and, according to comments made by the firm during its most recent financial report, have cost it around $1bn in annual revenue.
In a filing with the Securities and Exchange Commission Cardinal said that its agreement with the DEA is “subject to the completion of definitive documentation as well as approval by the DEA Administrator and the US Department of Justice.” The firm, which has set aside a $34m cash reserve to resolve the issue, said that it expects the suspension to be lifted during the quarter ended December 31.
