DUBLIN, Ohio Drug distribution and health services titan Cardinal Health on Thursday reported a modest gain in sales but slackened earnings as the company grappled with a low-inflation economy and shifts in its own business model.
For the full year, Cardinal’s sales rose 3% to $98.5 billion, but revenues in the fourth-quarter were up a more modest 0.5% versus the same period last year, to $24.5 billion. The company’s huge pharmaceutical distribution business accounted for the bulk of sales, rising 2% in fiscal 2010 to $89.8 billion but just 0.2% in the final quarter versus the same period last year, to $22.3 billion.
“I am extremely proud of the progress we made in fiscal year 2010 and the actions we took to shift our growth trajectory and position us for the coming years,” said George Barrett, Cardinal chairman and CEO.
Nevertheless, much of the momentum came from the company’s Medical segment, which grew profits by 11% for the year “while continuing to make key strategic investments,” said the chairman. By contrast, Cardinal’s massive Pharmaceutical division, beset by the lack of pricing inflation on some branded drugs, “fewer significant generic launches,” supply shortages in nuclear pharmacy and other factors, saw a 3% pullback in earnings for the year and a 17% profit decline in the fourth quarter.
Barrett acknowledged the slump in the company’s wholesale pharmaceutical segment. However, he cast the downturn in a positive light, noting that the drug distribution operation “performed considerably better than we anticipated for the full year.”
Barrett credited “execution on major initiatives, disciplined cost controls and some unplanned generic launches” for that performance. “These items largely offset the dampening effect of the actions we took to improve our strategic positioning, the negative impact from the year-over-year comparison of generic launches and the severe supply shortages in nuclear pharmacy,” he added.
“We made great strides in fiscal 2010 with key strategic priorities including our generic sales and sourcing initiatives, working capital optimization and customer-facing information technology improvements – all of which are starting to have a positive impact on the bottom line,” Barrett said. “With the recent renewals of key customers, we have stabilized our base for the next several years. In addition, our recent acquisition of Healthcare Solutions Holding will help accelerate our strategy for specialty pharmaceuticals and contribute to long-term growth for the segment.”