07.24.12
25. CareFusion
$3.5 Billion
KEY EXECUTIVES:
Kieran Gallahue, Chairman & CEO
Jim Hinrichs, Chief Financial Officer
Don Abbey, Sr. VP of Quality & Regulatory Affairs
Tom Leonard, President, Medical Systems
Mike Martino, Sr. VP of Innovation, Business Development & Strategy
NO. OF EMPLOYEES: 14,000
GLOBAL HEADQUARTERS: San Diego, Calif.
With nearly three fiscal years under its belt (FY 2012 was drawing to a close at press time), CareFusion, a spinoff of Cardinal Health, continues to shape itself as an independent medtech firm.
“Growth in our Infusion, Dispensing and Infection Prevention businesses, gross margin expansion and the benefit of strong spending controls drove double-digit improvements in our adjusted operating earnings for the quarter and for the year,” said Kieran Gallahue, chairman and CEO. “We continue to make progress in optimizing our product portfolio and expanding our geographical footprint.”
Revenue for fiscal 2011 (ended June 30, 2011) increased 2 percent to $3.5 billion. (Results from the company's International Surgical Products business, which had been included in its Medical Technologies and Services segment and was divested in April 2011, were classified as “discontinued operations” in the company’s end-of-year financials. Reported results and comparisons to prior periods exclude the historical results of the ISP business. That’s why the company is reporting an increase in revenue when reported revenue last year was $3.9 billion.) Operating income increased to $496 million and income from continuing operations increased to $291 million, or $1.29 per diluted share. Excluding nonrecurring items, adjusted operating income increased $87 million to $602 million and adjusted income from continuing operations increased $70 million to $371 million, or $1.65 per diluted share.
Revenue for the Critical Care Technologies (infusion, dispensing and respiratory care businesses that develop capital equipment and related dedicated and non-dedicated disposables) segment increased 3 percent to $2.7 billion. Segment profit increased 10 percent to $434 million, and adjusted segment profit increased 14 percent to $511 million. Revenue for the Medical Technologies and Services segment (infection prevention and medical specialties products and services businesses that develop single-use, disposable products and reusable surgical instruments) decreased 4 percent to $799 million. Segment profit increased 17 percent to $49 million, and adjusted segment profit increased 40 percent to $91 million.
R&D investments totaled $155 million for FY11, a drop from $159 million in 2010.
Important changes at the top kicked off FY11.
Kieran T. Gallahue was named chairman and CEO, succeeding David L. Schlotterbeck, who retired as the company’s inaugural chief executive. Gallahue previously 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.
James F. Hinrichs was promoted to chief financial officer (CFO), replacing Edward Borkowski who left the company. As the former CFO of Cardinal Health’s Clinical and Medical Products segment, Hinrichs led the CareFusion financial organization prior to the hiring of Borkowski in May 2009 and continued as controller until he was named senior vice president of Global Customer Support in January. The Cardinal Health Clinical and Medical Products segment became the foundation of CareFusion following its spinoff on Sept. 1, 2009. Prior to his role as CFO of the Clinical and Medical Products segment of Cardinal Health, Hinrichs served as executive vice president and controller of Cardinal Health and the CFO of Cardinal Health’s Healthcare Supply Chain Services segment. He joined Cardinal Health in February 2004 following 12 years of finance and marketing roles at Merck & Co. He holds undergraduate and graduate degrees in Business from Carnegie Mellon University.
Carlos M. Nunez, M.D., was named CareFusion’s chief medical officer (CMO). Nunez is an anesthesiologist, intensivist and hospitalist. He received his medical degree from the University of Miami School of Medicine, where he also completed his post-graduate training in anesthesiology and critical care medicine.
Chief Operating Officer Dwight Winstead stepped down in June 2011 after more than 40 years in healthcare. He joined Cardinal Health in 1997 and held a variety of positions including president of the Clinical Technologies and Services business and group president for Cardinal Health’s Automation and Information Services segment.
The company was prolific throughout the fiscal year with new products launched.
The AVAmax vertebral balloon was introduced early in the fiscal year. It is a minimally invasive device for use during kyphoplasty, a procedure for treating spinal compression fractures, which often is caused by osteoporosis. AVAmax is part of an all-in-one system that includes an eight-gauge or 10-gauge needle, bone cement and delivery instruments for kyphoplasty or vertebroplasty, an alternate procedure to treat compression fractures. The all-in-one system gives doctors the choice and flexibility to perform either procedure at the time of patient care. CareFusion established a dedicated sales force to sell the device in order to drive product adoption and market penetration in the United States. The global kyphoplasty procedure health care segment is currently estimated to represent approximately $600 million in sales. Approximately 50 percent of U.S. women and 25 percent of men older than the age of 50 will experience an osteoporosis fracture in their lifetime.
Later in the year, CareFusion launched an 11-gauge vertebral balloon for use in the spinal fracture treatment market. The small-sized balloon allows interventional radiologists and spine surgeons to repair vertebral compression fractures that historically have been more difficult to treat due to their size and location in the spinal column, including smaller vertebra. The device is inserted through a cannula that is 17 percent smaller and a balloon shaft that is 25 percent smaller than any other vertebral balloon on the market, according to the company. This design miniaturization helps make the procedure less invasive for patients without compromising the clinical efficacy of the device since it still meets the pressure and volume requirements of legacy vertebral balloons. For clinicians, the tungsten radiopaque tip enables visibility under imaging, helping to ensure safe deployment of the balloon in the vertebral body.
CareFusion also released SentrySuite, the next-generation clinical diagnostics software for the Jaeger and SensorMedics Pulmonary Diagnostics and CardioPulmonary Diagnostics instruments. SentrySuite is a set of software applications to assist with clinically intelligent diagnostics to improve the quality of patient data. The application focuses on data, organization, workflow and connectivity so physicians can focus more time on patient care.
But growth doesn’t just come from new technology. Key acquisitions and streamlining for more efficient operations also can fuel a firm’s expansion. CareFusion wasn’t shy with either approach.
Midway through the fiscal year, CareFusion sold its Onsite Services instrument management and repair business to Frazier Healthcare. Financial terms of the agreement were not disclosed. OnSite Services provides repair specialists and service technicians who can perform preventative maintenance and instrument repairs at a hospital facility or in a national repair center. Revenue from OnSite Services in fiscal year 2010 was approximately $50 million. OnSite Services includes national repair centers in Highland and Sterling Heights, Mich., with a workforce of approximately 240 employees.
In July last year, CareFusion inked a deal to acquire Rowa, a Germany-based company specializing in robotic medication storage and retrieval systems for retail and hospital pharmacies, for approximately $150 million. Rowa’s core products enable high-density, high-speed storage and retrieval of pre-packaged pharmaceutical inventory. With more than 3,500 installations in 30 countries, these automated systems are designed to reduce costs and improve workflow while addressing the unique pharmacy operations requirements outside of the U.S. CareFusion plans to continue Rowa’s focus on retail pharmacy customers, while also targeting accelerated expansion within its core hospital customers. Rowa has more than 300 employees and is headquartered in Kelberg, Germany, with operations in Italy, the Netherlands, Denmark and Sweden.
During the current fiscal year, CareFusion also divested its neurodiagnostic Nicolet business to San Carlos, Calif.-based Natus Medical for $58 million in cash. Based in Madison, Wis., the business employed more than 400 people worldwide and generated sales of approximately $95 million in 2011. Natus provides products used for the screening, detection, treatment, monitoring and tracking of common medical ailments in newborn care, hearing impairment, neurological dysfunction, epilepsy, sleep disorders, and balance and mobility disorders. The Nicolet business develops clinically differentiated neurodiagnostic and monitoring products, including a portfolio of electroencephalography and electromyography systems and related accessories, as well as vascular and obstetric doppler sensors and connectivity products. “The decision to divest the Nicolet business is in line with our strategy to simplify and focus our operations and prioritize our investments to profitably grow over the long term,” said Gallahue “We have a dedicated team in the Nicolet business that will have greater scale and access to broader market opportunities as part of Natus. More than 50 percent of the Nicolet business is in markets outside of the United States.”
Since its spinoff from Cardinal Health in 2009, CareFusion has simplified its portfolio by divesting five non-strategic businesses and has completed four acquisitions.
The company continued to deal with infusion pump recall issues throughout the year. Class I (the most serious) recalls were issued for Alaris infusion pumps and AVEA ventilators. The company moved to correct the hardware problems. No deaths or injuries were reported. Both recalls affected parts that no longer were manufactured by the company at the time of each recall.
At press time, however, just shy of the end of CareFusion’s 2012 fiscal year, another recall was issued for its AirLife Infant Breathing Circuit products because regulatory officials said they could develop cracks during use, causing a leak in the closed ventilation system. About 280,000 of the disposable products being recalled were manufactured between June 1, 2010 and Feb. 3, 2012, according to CareFusion. There were no reports of patient harm associated with the products, the company said.
CareFusion has since improved its manufacturing process and is making a stronger component for its new breathing circuit products, which attach to a mechanical ventilator. The company notified hospitals in late May that it was removing the AirLife products from the market and advised them to destroy whatever remained in their inventory. The U.S. Food and Drug Administration classified the action as a Class I recall on its website on June 29, meaning the defective units could cause serious harm to a patient’s health. The company increased its recall reserve fund by $7 million.
$3.5 Billion
KEY EXECUTIVES:
Kieran Gallahue, Chairman & CEO
Jim Hinrichs, Chief Financial Officer
Don Abbey, Sr. VP of Quality & Regulatory Affairs
Tom Leonard, President, Medical Systems
Mike Martino, Sr. VP of Innovation, Business Development & Strategy
NO. OF EMPLOYEES: 14,000
GLOBAL HEADQUARTERS: San Diego, Calif.
With nearly three fiscal years under its belt (FY 2012 was drawing to a close at press time), CareFusion, a spinoff of Cardinal Health, continues to shape itself as an independent medtech firm.
“Growth in our Infusion, Dispensing and Infection Prevention businesses, gross margin expansion and the benefit of strong spending controls drove double-digit improvements in our adjusted operating earnings for the quarter and for the year,” said Kieran Gallahue, chairman and CEO. “We continue to make progress in optimizing our product portfolio and expanding our geographical footprint.”
Revenue for fiscal 2011 (ended June 30, 2011) increased 2 percent to $3.5 billion. (Results from the company's International Surgical Products business, which had been included in its Medical Technologies and Services segment and was divested in April 2011, were classified as “discontinued operations” in the company’s end-of-year financials. Reported results and comparisons to prior periods exclude the historical results of the ISP business. That’s why the company is reporting an increase in revenue when reported revenue last year was $3.9 billion.) Operating income increased to $496 million and income from continuing operations increased to $291 million, or $1.29 per diluted share. Excluding nonrecurring items, adjusted operating income increased $87 million to $602 million and adjusted income from continuing operations increased $70 million to $371 million, or $1.65 per diluted share.
Revenue for the Critical Care Technologies (infusion, dispensing and respiratory care businesses that develop capital equipment and related dedicated and non-dedicated disposables) segment increased 3 percent to $2.7 billion. Segment profit increased 10 percent to $434 million, and adjusted segment profit increased 14 percent to $511 million. Revenue for the Medical Technologies and Services segment (infection prevention and medical specialties products and services businesses that develop single-use, disposable products and reusable surgical instruments) decreased 4 percent to $799 million. Segment profit increased 17 percent to $49 million, and adjusted segment profit increased 40 percent to $91 million.
R&D investments totaled $155 million for FY11, a drop from $159 million in 2010.
Important changes at the top kicked off FY11.
Kieran T. Gallahue was named chairman and CEO, succeeding David L. Schlotterbeck, who retired as the company’s inaugural chief executive. Gallahue previously 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.
James F. Hinrichs was promoted to chief financial officer (CFO), replacing Edward Borkowski who left the company. As the former CFO of Cardinal Health’s Clinical and Medical Products segment, Hinrichs led the CareFusion financial organization prior to the hiring of Borkowski in May 2009 and continued as controller until he was named senior vice president of Global Customer Support in January. The Cardinal Health Clinical and Medical Products segment became the foundation of CareFusion following its spinoff on Sept. 1, 2009. Prior to his role as CFO of the Clinical and Medical Products segment of Cardinal Health, Hinrichs served as executive vice president and controller of Cardinal Health and the CFO of Cardinal Health’s Healthcare Supply Chain Services segment. He joined Cardinal Health in February 2004 following 12 years of finance and marketing roles at Merck & Co. He holds undergraduate and graduate degrees in Business from Carnegie Mellon University.
Carlos M. Nunez, M.D., was named CareFusion’s chief medical officer (CMO). Nunez is an anesthesiologist, intensivist and hospitalist. He received his medical degree from the University of Miami School of Medicine, where he also completed his post-graduate training in anesthesiology and critical care medicine.
Chief Operating Officer Dwight Winstead stepped down in June 2011 after more than 40 years in healthcare. He joined Cardinal Health in 1997 and held a variety of positions including president of the Clinical Technologies and Services business and group president for Cardinal Health’s Automation and Information Services segment.
The company was prolific throughout the fiscal year with new products launched.
The AVAmax vertebral balloon was introduced early in the fiscal year. It is a minimally invasive device for use during kyphoplasty, a procedure for treating spinal compression fractures, which often is caused by osteoporosis. AVAmax is part of an all-in-one system that includes an eight-gauge or 10-gauge needle, bone cement and delivery instruments for kyphoplasty or vertebroplasty, an alternate procedure to treat compression fractures. The all-in-one system gives doctors the choice and flexibility to perform either procedure at the time of patient care. CareFusion established a dedicated sales force to sell the device in order to drive product adoption and market penetration in the United States. The global kyphoplasty procedure health care segment is currently estimated to represent approximately $600 million in sales. Approximately 50 percent of U.S. women and 25 percent of men older than the age of 50 will experience an osteoporosis fracture in their lifetime.
Later in the year, CareFusion launched an 11-gauge vertebral balloon for use in the spinal fracture treatment market. The small-sized balloon allows interventional radiologists and spine surgeons to repair vertebral compression fractures that historically have been more difficult to treat due to their size and location in the spinal column, including smaller vertebra. The device is inserted through a cannula that is 17 percent smaller and a balloon shaft that is 25 percent smaller than any other vertebral balloon on the market, according to the company. This design miniaturization helps make the procedure less invasive for patients without compromising the clinical efficacy of the device since it still meets the pressure and volume requirements of legacy vertebral balloons. For clinicians, the tungsten radiopaque tip enables visibility under imaging, helping to ensure safe deployment of the balloon in the vertebral body.
CareFusion also released SentrySuite, the next-generation clinical diagnostics software for the Jaeger and SensorMedics Pulmonary Diagnostics and CardioPulmonary Diagnostics instruments. SentrySuite is a set of software applications to assist with clinically intelligent diagnostics to improve the quality of patient data. The application focuses on data, organization, workflow and connectivity so physicians can focus more time on patient care.
But growth doesn’t just come from new technology. Key acquisitions and streamlining for more efficient operations also can fuel a firm’s expansion. CareFusion wasn’t shy with either approach.
Midway through the fiscal year, CareFusion sold its Onsite Services instrument management and repair business to Frazier Healthcare. Financial terms of the agreement were not disclosed. OnSite Services provides repair specialists and service technicians who can perform preventative maintenance and instrument repairs at a hospital facility or in a national repair center. Revenue from OnSite Services in fiscal year 2010 was approximately $50 million. OnSite Services includes national repair centers in Highland and Sterling Heights, Mich., with a workforce of approximately 240 employees.
In July last year, CareFusion inked a deal to acquire Rowa, a Germany-based company specializing in robotic medication storage and retrieval systems for retail and hospital pharmacies, for approximately $150 million. Rowa’s core products enable high-density, high-speed storage and retrieval of pre-packaged pharmaceutical inventory. With more than 3,500 installations in 30 countries, these automated systems are designed to reduce costs and improve workflow while addressing the unique pharmacy operations requirements outside of the U.S. CareFusion plans to continue Rowa’s focus on retail pharmacy customers, while also targeting accelerated expansion within its core hospital customers. Rowa has more than 300 employees and is headquartered in Kelberg, Germany, with operations in Italy, the Netherlands, Denmark and Sweden.
During the current fiscal year, CareFusion also divested its neurodiagnostic Nicolet business to San Carlos, Calif.-based Natus Medical for $58 million in cash. Based in Madison, Wis., the business employed more than 400 people worldwide and generated sales of approximately $95 million in 2011. Natus provides products used for the screening, detection, treatment, monitoring and tracking of common medical ailments in newborn care, hearing impairment, neurological dysfunction, epilepsy, sleep disorders, and balance and mobility disorders. The Nicolet business develops clinically differentiated neurodiagnostic and monitoring products, including a portfolio of electroencephalography and electromyography systems and related accessories, as well as vascular and obstetric doppler sensors and connectivity products. “The decision to divest the Nicolet business is in line with our strategy to simplify and focus our operations and prioritize our investments to profitably grow over the long term,” said Gallahue “We have a dedicated team in the Nicolet business that will have greater scale and access to broader market opportunities as part of Natus. More than 50 percent of the Nicolet business is in markets outside of the United States.”
Since its spinoff from Cardinal Health in 2009, CareFusion has simplified its portfolio by divesting five non-strategic businesses and has completed four acquisitions.
The company continued to deal with infusion pump recall issues throughout the year. Class I (the most serious) recalls were issued for Alaris infusion pumps and AVEA ventilators. The company moved to correct the hardware problems. No deaths or injuries were reported. Both recalls affected parts that no longer were manufactured by the company at the time of each recall.
At press time, however, just shy of the end of CareFusion’s 2012 fiscal year, another recall was issued for its AirLife Infant Breathing Circuit products because regulatory officials said they could develop cracks during use, causing a leak in the closed ventilation system. About 280,000 of the disposable products being recalled were manufactured between June 1, 2010 and Feb. 3, 2012, according to CareFusion. There were no reports of patient harm associated with the products, the company said.
CareFusion has since improved its manufacturing process and is making a stronger component for its new breathing circuit products, which attach to a mechanical ventilator. The company notified hospitals in late May that it was removing the AirLife products from the market and advised them to destroy whatever remained in their inventory. The U.S. Food and Drug Administration classified the action as a Class I recall on its website on June 29, meaning the defective units could cause serious harm to a patient’s health. The company increased its recall reserve fund by $7 million.
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