Kieran Gallahue, Chairman & CEO
Jim Hinrichs, Chief Financial Officer
Don Abbey, Sr. VP of Quality & Regulatory Affairs
Vivek Jain, President of Medical Technologies & Services
Tom Leonard, President of Dispensing Technologies
Mike Martino, Sr. VP of Innovation, Business Development& Strategy
NO. OF EMPLOYEES: 14,000
GLOBAL HEADQUARTERS: San Diego, Calif.
Though companies drop off MPO’s annual Top 30 list due to mergers and acquisitions, new additions aren’t as common. Billion-dollar medtech companies don’t usually come out of nowhere in a year’s time. It does help, of course, if you have a little bit of a head start. Enter CareFusion, a spinoff from venerable device company Cardinal Health, as the latest addition to our yearly roundup.
For its first year as a standalone firm (listed on the New York Stock Exchange on Sept. 1, 2009, under the ticker symbol “CFN”), management was extremely pleased with performance.
“The results we reported today (the company’s 2010 fiscal year ended June 30, 2010) reflect solid performances across our business segments in our first year as a public company. We overachieved against our original fiscal 2010 expectations with incremental positive contributions from both our Infusion and Respiratory businesses,” said David Schlotterbeck, who was chairman and CEO of CareFusion at the time. He later retired.
For fiscal 2010, revenue increased 9 percent to $3.9 billion on both a reported and constant currency basis, driven primarily by increased sales in the company’s Infusion, Respiratory and Medical Technologies and Services businesses, officials noted, whichpartially were offset by a decrease in the company’s Dispensing business. The company is comparing sales to the year it operated as a division of Cardinal Health.
The company breaks down its reporting in two segments: Critical Care Technologies (CCT) and Medical Technologies and Services (MTS). The CCT segment includes the company’s Dispensing, Infusion and Respiratory businesses and the MTS segment includes the Infection Prevention and Medical Specialties businesses. CCT reported $2.6 billion in revenue, a 9 percent increase compared with operations in 2009, and profit of $395 million, a 12 bump. MTS pulled down about $1.26 million in revenue (a 10 percent increase) and $65 million in profit, which is a loss of 28 percent as a result of discontinued businesses and product lines, according to Care Fusion officials.
Following the release of its fiscal 2010 figures, CareFusion also initiated a company-wide restructuring reducing the firm’s workforce by approximately 700 positions. According to the company, the reductions were designed to eliminate layers of management and reduce the size of the supporting infrastructure. In connection with the restructuring, CareFusion executives estimate the move will generate pre-tax cost savings in fiscal 2011 of $85 million to $95 million and for that amount to increase by an additional $25 million in fiscal 2012.
“During fiscal 2010, we evaluated our cost structure and the strategic fit of certain businesses and are now taking the necessary steps to right size our company,” Schlotterbeck said. “Our goal is to improve our competitive position, accelerate our previously announced efforts to improve our operating margins and enhance our focus on the core opportunities we have for growth.”
In addition to a new start as a public company, CareFusion also saw the end of a protracted quality issue in 2010. In February, the U.S. Food and Drug Administration (FDA) allowed the firm to resume manufacturing and marketing its Alaris SE line of infusion pumps, which had been made by the Clinical and Medical Products division of Cardinal Health. The division had been operating under a consent decree with the FDA since February 2007, which included an injunction on the manufacture and sale of the pump.
The firm also didn’t drag its feet with new product launches, making a number of releases throughout the year.
One notable new product was the AVAmax vertebral balloon, a minimally invasive device for use during kyphoplasty, a procedure for treating spinal compression fractures.Company officials claim that CareFusion is the only company in the industry to offer a full line of products that address both vertebroplasty and balloon kyphoplasty, the two primary approaches to treat spinal compression fractures by delivering bone cement into the vertebral space with specialized needles. During a kyphoplasty, a small balloon is used to create a cavity in the vertebral body and ultimately deliver bone cement in that cavity. A vertebroplasty does not include the use of a surgical balloon to deliver the bone cement.
AVAmax is part of a system that includes needles, bone cement and delivery instruments for both kyphoplasty and vertebroplasty, giving doctors the choice and flexibility to perform either procedure at the time of patient care. CareFusion established a dedicated sales force to sell this product United States, with future expansion plans in Europe in 2011. CareFusion officials estimate the global kyphoplasty market to be worth approximately $600 million.
Spinal compression fractures often are caused by osteoporosis, a disease of low bone strength that affects an estimated 10 million Americans, resulting in an estimated 700,000 case of spinal fractures.
In April last year, CareFusion initiated plans to purchase Medegen Inc., a manufacturer of clinically differentiated needleless access valves and administration sets that deliver intravenous (IV) medication to patients, for $225 million in cash. The firm was identified as a strategic fit because of the complementary nature of CareFusion’s infusion product lines and research and development activities, officials said at the time. Catheter-related blood stream infections (CRBSI) have been shown to increase a patient's hospital stay by 10 to 24 days, with approximately 25 percent of the 250,000 annual incidents resulting in death. The U.S. Centers for Medicare and Medicaid Services have identified CRBSI as a “never event” and no longer provide reimbursement for care related to these cases, which cost an average of $29,000 per patient to treat. Medegen products have been shown to contribute to reductions of up to 70 percent in these deadly infections, CareFusion officials said.
Efforts to reshape the company haven’t slowed down for fiscal 2011 so far. In February, the company sold its surgical products distribution business to Mundelein, Ill.-based Medline Industries, Inc. for $130 million. The division was based in Rolle, Switzerland, with operations in 16 European and Asian-Pacific countries and distribution and assembly facilities located in Germany, France, Spain and Australia. The business generated sales of approximately $440 million annually.
As part of the agreement, Medline will continue to distribute CareFusion products in agreed-upon geographic areas.
Also in February, Kieran T. Gallahue was named chairman and CEO, succeeding Schlotterbeck who previously announced plans to retire.
Gallahue most recently served as president and CEO of ResMed, a maker of devices for treating, diagnosing and managing sleep-related respiratory disorders. During his tenure at ResMed, the company grew revenue approximately 500 percent to $1.2 billion, while expanding operating margins and increasing net income more than 20 percent annually. He holds a Bachelor of Science degree in Economics and Accounting from Rutgers University and a master’s degree in business from Harvard Business School.
For the first nine months of fiscal 2011 (ended in March 31), revenue increased 1 percent to $2.56 billion.