07.26.17
$12.4 Billion ($121.5B total)
KEY EXECUTIVES:
George S. Barrett, Chairman and CEO
Donald M. Casey Jr., CEO—Medical Segment
Jon L. Giacomin, CEO—Pharmaceutical Segment
Michael C. Kaufmann, CFO
Pamela O. Kimmet, Chief Human Resources Officer
Craig S. Morford, Chief Legal and Compliance Officer
Patricia B. Morrison, Exec. VP—Customer Support Services, and Chief Information Officer
NUMBER OF EMPLOYEES: 37,300 (total)
GLOBAL HEADQUARTERS: Dublin, Ohio
This issue of the Top Companies report may be the last time Cardinal Health comes in at No. 6 on the list. While the company has been a perennial member of the Top 10 for quite a few years, it hit No. 6 last year and tied for that position this year. After looking at recent headlines, however, it is likely the company may finally crack the Top 5 in next year’s annual analysis.
In April 2017, the company made a huge investment in the growth of its medical sector (a comparatively small contributor to the company’s overall revenue figure, which disproportionately originates from its pharmaceutical segment—$109.1 billion versus $12.4 billion). Cardinal Health announced that it was paying $6.1 billion to Medtronic for its Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses. The combined business are expected to bring annual revenues of approximately $2.3 billion.
“Not only is this portfolio complementary to our existing suite of products, it enables us to build further scale on our established global platforms,” said Cardinal Health’s Medical segment CEO, Don Casey, who will eventually oversee the new additions once the transaction is finalized. “We are familiar with the team who will be joining us and have worked closely with many of them in the past. We believe this will help us execute an efficient and seamless integration after the transaction closes. These leading products perfectly complement Cardinal Health’s position in a value-based world, bringing additional reach and breadth that build on our existing strengths.”
While not a transaction that took place in Cardinal Health’s 2016 fiscal year, it does further build on another acquisition the company made that was completed during that 12-month period. In October 2015 (Cardinal Health runs on a July-June fiscal year), the company completed the previously announced purchase of Johnson & Johnson’s Cordis business for $1.9 billion. The acquisition represents another expansion piece for the Medical segment and puts the combined total for the two purchases at just over $8 billion. Although the revenue of Cardinal Health’s Pharmaceutical segment far outpaces that of the Medical portion, it’s obvious the device aspect is still viewed as an important part of the overall company.
The Cordis portfolio of products expands Cardinal Health’s offerings within the cardiovascular, wound management, and orthopedics sectors. According to the release announcing the completion of the transaction, Cordis saw sales of $780 million in 2014. Further, Cardinal Health expects to enjoy synergies that exceed $100 million annually exiting fiscal 2018.
“I’m extremely pleased to welcome our new Cordis colleagues to Cardinal Health,” said George Barrett, chairman and CEO of Cardinal Health. “With an aging population and the accompanying demand for less invasive medical treatments, health systems around the world are searching for the best ways to ensure the highest quality care in the most cost-effective way.”
Upon closing of the deal, David J. Wilson remained as the Cordis worldwide president. Joining him were the 3,000 Cordis employees who became a part of the Cardinal Health family.
Also coming over were some key product lines with which Cardinal Health will supplement its own offerings. These included the Cordis Crossing Portfolio, which reduces the complexity of challenging cases and provides a comprehensive crossing solution of specialty and workhorse devices; and the Elitecross Support Catheter family, which provides support and pushability to help get to and through complex lesions. The combined entity had displayed these offerings, among other Cardinal Health technologies, at the Transcatheter Cardiovascular Therapeutics conference that took place just seven months following the initial announcement of the transaction.
Since the acquisition did close relatively early in Cardinal Health’s 2016 fiscal year, it is likely that the enhanced offerings from Cordis were, at least in part, responsible for the over $1 billion increase in revenues the Medical segment enjoyed between 2015 and 2016. Overall, the corporate entity was up 19 percent over the prior year, posting combined total revenues of $121.5 billion in 2016 compared to $102.5 billion in 2015. Most of that increase, however, originated from the Pharmaceutical segment. The 9 percent revenue growth in the Medical segment was a substantial increase versus the modest 4 percent growth seen in 2015.
ANALYST INSIGHTS: Due to pricing pressure in its Pharma Business, Cardinal needs Medical Devices more than ever before. This lead to its recent acquisition of key device product lines from Medtronic. Cardinal has a difficult balancing act as it continues to adapt its portfolio while also managing its debt burden. More strategic moves need to be made—can they afford to make them?
But the Cordis deal wasn’t the only transaction that made an impact on Cardinal Health in its fiscal 2016. In August 2015, the company announced it was acquiring 71 percent of naviHealth for $290 million (making the full purchase of the business within four years). While substantially smaller than the Cordis deal, the naviHealth buy was targeted toward having the ability to serve in the post-acute care space. The company is also involved with the management of bundled payment programs, a direction more of the healthcare industry will undoubtedly be headed toward.
“Discharge and post-acute care coordination is critical for both hospital CEOs and their patients, as care is increasingly delivered in alternative sites and payment models shift the focus to patient outcomes rather than activity,” said Michael Petras, president of Cardinal Health at Home. “The acquisition of naviHealth aligns with Cardinal Health’s strategic priority of offering the most complete and integrated suite of services to meet the needs of our Integrated Delivery Network, hospital, and other customers.”
In addition to the aforementioned device and service offerings, Cardinal Health offers a branded line of higher margin products, such as single-use surgical drapes, gowns, and apparel; exam and surgical gloves; and fluid suction and collection systems. The company, however, is also seeking to resolve hospital supply chain challenges.
Commissioning a survey that queried 150 hospital decision makers on supply chain issues, Cardinal Health found that reimbursement and the increasingly high cost of supplies represented the two biggest issues these professionals face. The survey also found that few decision makers were confident in the effectiveness of their supply chains. Further, two-thirds of participants indicated they “strongly agree” that improving the effectiveness of their supply chain will reduce overall costs, increase revenue, and lead to better quality of care.
“This is an exciting time for healthcare supply chain management. We’re seeing executives take action to improve and demand more value from their supply chain. They recognize that maintaining status quo in their systems is no longer sufficient due to the ever-increasing cost pressures in the industry,” said Tony Vahedian, senior vice president and general manager, Medical Services and Solutions, Cardinal Health. “We believe hospital decision makers understand that the supply chain can be a strategic asset if the industry collaborates to improve its effectiveness and unlock data within it.”
With this in mind, the company launched Inventory Management Solutions OR workflow modules to remove cost from the operating room supply chain. These offerings are intended to be used for biological implants, sutures, and trauma and spine implants. The modules were developed to increase visibility to product demand and consumption, while reducing the waste incurred during manual processes.
“The intricacy of managing inventory for biological implants, sutures, and trauma and spine implants is demanding, so we designed a simplified solution to reduce non-value-added activities and tedious manual tasks that can lead to human error,” said Jean-Claude Saghbini, vice president and general manager of Cardinal Health Inventory Management Solutions. “Driving out inventory waste is a priority, but more importantly, we’re supporting our customers in their mission to ensure better, cost-effective patient care.”
A month before closing out fiscal 2016, the company’s Cordis business announced that it was making a return to the drug-eluting stent (DES) market. Cardinal Health had entered into a distribution agreement with Biosensors to sell its coronary stent portfolio in Europe, Middle East, Africa, Australia, and New Zealand. Biosensors’ product offering includes the BioFreedom polymer-free drug-coated stent, the BioMatrix NeoFlex DES, BioMatrix Alpha cobalt chromium DES, and Chroma cobalt chromium bare metal stent.
“We are very excited about this DES agreement with Biosensors, because it represents our commitment to expand our product portfolio to support the demands in cardiovascular care today,” said David Wilson, president of Cordis. “While Cordis is known for developing product innovations, partnerships like this provide an opportunity to rapidly expand our portfolio and deliver increased value to customers and the patients they serve.”
KEY EXECUTIVES:
George S. Barrett, Chairman and CEO
Donald M. Casey Jr., CEO—Medical Segment
Jon L. Giacomin, CEO—Pharmaceutical Segment
Michael C. Kaufmann, CFO
Pamela O. Kimmet, Chief Human Resources Officer
Craig S. Morford, Chief Legal and Compliance Officer
Patricia B. Morrison, Exec. VP—Customer Support Services, and Chief Information Officer
NUMBER OF EMPLOYEES: 37,300 (total)
GLOBAL HEADQUARTERS: Dublin, Ohio
This issue of the Top Companies report may be the last time Cardinal Health comes in at No. 6 on the list. While the company has been a perennial member of the Top 10 for quite a few years, it hit No. 6 last year and tied for that position this year. After looking at recent headlines, however, it is likely the company may finally crack the Top 5 in next year’s annual analysis.
In April 2017, the company made a huge investment in the growth of its medical sector (a comparatively small contributor to the company’s overall revenue figure, which disproportionately originates from its pharmaceutical segment—$109.1 billion versus $12.4 billion). Cardinal Health announced that it was paying $6.1 billion to Medtronic for its Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses. The combined business are expected to bring annual revenues of approximately $2.3 billion.
“Not only is this portfolio complementary to our existing suite of products, it enables us to build further scale on our established global platforms,” said Cardinal Health’s Medical segment CEO, Don Casey, who will eventually oversee the new additions once the transaction is finalized. “We are familiar with the team who will be joining us and have worked closely with many of them in the past. We believe this will help us execute an efficient and seamless integration after the transaction closes. These leading products perfectly complement Cardinal Health’s position in a value-based world, bringing additional reach and breadth that build on our existing strengths.”
While not a transaction that took place in Cardinal Health’s 2016 fiscal year, it does further build on another acquisition the company made that was completed during that 12-month period. In October 2015 (Cardinal Health runs on a July-June fiscal year), the company completed the previously announced purchase of Johnson & Johnson’s Cordis business for $1.9 billion. The acquisition represents another expansion piece for the Medical segment and puts the combined total for the two purchases at just over $8 billion. Although the revenue of Cardinal Health’s Pharmaceutical segment far outpaces that of the Medical portion, it’s obvious the device aspect is still viewed as an important part of the overall company.
The Cordis portfolio of products expands Cardinal Health’s offerings within the cardiovascular, wound management, and orthopedics sectors. According to the release announcing the completion of the transaction, Cordis saw sales of $780 million in 2014. Further, Cardinal Health expects to enjoy synergies that exceed $100 million annually exiting fiscal 2018.
“I’m extremely pleased to welcome our new Cordis colleagues to Cardinal Health,” said George Barrett, chairman and CEO of Cardinal Health. “With an aging population and the accompanying demand for less invasive medical treatments, health systems around the world are searching for the best ways to ensure the highest quality care in the most cost-effective way.”
Upon closing of the deal, David J. Wilson remained as the Cordis worldwide president. Joining him were the 3,000 Cordis employees who became a part of the Cardinal Health family.
Also coming over were some key product lines with which Cardinal Health will supplement its own offerings. These included the Cordis Crossing Portfolio, which reduces the complexity of challenging cases and provides a comprehensive crossing solution of specialty and workhorse devices; and the Elitecross Support Catheter family, which provides support and pushability to help get to and through complex lesions. The combined entity had displayed these offerings, among other Cardinal Health technologies, at the Transcatheter Cardiovascular Therapeutics conference that took place just seven months following the initial announcement of the transaction.
Since the acquisition did close relatively early in Cardinal Health’s 2016 fiscal year, it is likely that the enhanced offerings from Cordis were, at least in part, responsible for the over $1 billion increase in revenues the Medical segment enjoyed between 2015 and 2016. Overall, the corporate entity was up 19 percent over the prior year, posting combined total revenues of $121.5 billion in 2016 compared to $102.5 billion in 2015. Most of that increase, however, originated from the Pharmaceutical segment. The 9 percent revenue growth in the Medical segment was a substantial increase versus the modest 4 percent growth seen in 2015.
ANALYST INSIGHTS: Due to pricing pressure in its Pharma Business, Cardinal needs Medical Devices more than ever before. This lead to its recent acquisition of key device product lines from Medtronic. Cardinal has a difficult balancing act as it continues to adapt its portfolio while also managing its debt burden. More strategic moves need to be made—can they afford to make them?
—Dave Sheppard, Co-Founder and Principal, MedWorld Advisors
But the Cordis deal wasn’t the only transaction that made an impact on Cardinal Health in its fiscal 2016. In August 2015, the company announced it was acquiring 71 percent of naviHealth for $290 million (making the full purchase of the business within four years). While substantially smaller than the Cordis deal, the naviHealth buy was targeted toward having the ability to serve in the post-acute care space. The company is also involved with the management of bundled payment programs, a direction more of the healthcare industry will undoubtedly be headed toward.
“Discharge and post-acute care coordination is critical for both hospital CEOs and their patients, as care is increasingly delivered in alternative sites and payment models shift the focus to patient outcomes rather than activity,” said Michael Petras, president of Cardinal Health at Home. “The acquisition of naviHealth aligns with Cardinal Health’s strategic priority of offering the most complete and integrated suite of services to meet the needs of our Integrated Delivery Network, hospital, and other customers.”
In addition to the aforementioned device and service offerings, Cardinal Health offers a branded line of higher margin products, such as single-use surgical drapes, gowns, and apparel; exam and surgical gloves; and fluid suction and collection systems. The company, however, is also seeking to resolve hospital supply chain challenges.
Commissioning a survey that queried 150 hospital decision makers on supply chain issues, Cardinal Health found that reimbursement and the increasingly high cost of supplies represented the two biggest issues these professionals face. The survey also found that few decision makers were confident in the effectiveness of their supply chains. Further, two-thirds of participants indicated they “strongly agree” that improving the effectiveness of their supply chain will reduce overall costs, increase revenue, and lead to better quality of care.
“This is an exciting time for healthcare supply chain management. We’re seeing executives take action to improve and demand more value from their supply chain. They recognize that maintaining status quo in their systems is no longer sufficient due to the ever-increasing cost pressures in the industry,” said Tony Vahedian, senior vice president and general manager, Medical Services and Solutions, Cardinal Health. “We believe hospital decision makers understand that the supply chain can be a strategic asset if the industry collaborates to improve its effectiveness and unlock data within it.”
With this in mind, the company launched Inventory Management Solutions OR workflow modules to remove cost from the operating room supply chain. These offerings are intended to be used for biological implants, sutures, and trauma and spine implants. The modules were developed to increase visibility to product demand and consumption, while reducing the waste incurred during manual processes.
“The intricacy of managing inventory for biological implants, sutures, and trauma and spine implants is demanding, so we designed a simplified solution to reduce non-value-added activities and tedious manual tasks that can lead to human error,” said Jean-Claude Saghbini, vice president and general manager of Cardinal Health Inventory Management Solutions. “Driving out inventory waste is a priority, but more importantly, we’re supporting our customers in their mission to ensure better, cost-effective patient care.”
A month before closing out fiscal 2016, the company’s Cordis business announced that it was making a return to the drug-eluting stent (DES) market. Cardinal Health had entered into a distribution agreement with Biosensors to sell its coronary stent portfolio in Europe, Middle East, Africa, Australia, and New Zealand. Biosensors’ product offering includes the BioFreedom polymer-free drug-coated stent, the BioMatrix NeoFlex DES, BioMatrix Alpha cobalt chromium DES, and Chroma cobalt chromium bare metal stent.
“We are very excited about this DES agreement with Biosensors, because it represents our commitment to expand our product portfolio to support the demands in cardiovascular care today,” said David Wilson, president of Cordis. “While Cordis is known for developing product innovations, partnerships like this provide an opportunity to rapidly expand our portfolio and deliver increased value to customers and the patients they serve.”