Kieran Gallahue, Chairman & CEO
Jim Hinrichs, Chief Financial Officer
Don Abbey, Sr. VP of Quality & Regulatory Affairs
Tom Leonard, President, Medical Systems
Vivek Jain, President, Procedural Solutions
Mike Martino, Sr. VP of Innovation, Business Development & Strategy
Ron Frisbie, Exec. VP, Global Operations
No. of Employees: 15,000
Global Headquarters: San Diego, Calif.
CareFusion, once a part of Cardinal Health, continues to make gains as a standalone medical technology company. Revenue for fiscal 2012 (ended June 30, 2012) increased 5 percent to $3.6 billion. Operating income increased 19 percent to $590 million, from $497 million in fiscal 2011. Excluding nonrecurring items, adjusted operating income rose 4 percent to $627 million.
Sales within the Medical Systems division (medication dispensing, infusion pumps and respiratory technology) increased 11 percent to $2.32 billion for fiscal 2012. The company reported strong sales across most product categories. Segment profit increased 28 percent from the prior year to $481 million, an increase of 14 percent to $502 million on an adjusted basis.
Revenue for the Procedural Solutions segment (infection prevention technology, surgical instruments and catheter-based technology) decreased 5 percent from the prior year to $1.28 billion. The decrease was driven by declines in the company’s Specialty Disposables business and the loss of sales from divesting the company’s OnSite Services business in March 2011. Segment profit was even with the prior year at $109 million and decreased 23 percent to $125 million on an adjusted basis. Overall, net income increased 24 percent from $244 million in fiscal 2011 to $303 million in 2012.
Notably, the company increased its research and development spending in FY12 by 12 percent to $164 million.
In April last year, as part of the company’s continued restructuring and reshaping post-Cardinal, CareFusion sold its Nicolet business to San Carlos, Calif.-based Natus Medical Inc. for $58 million in cash. Based in Madison, Wis., the Nicolet division developed clinically differentiated neurodiagnostic and monitoring products, including a portfolio of electroencephalography and electromyography systems, as well as vascular and obstetric doppler sensors and connectivity products. At the time of the acquisition, the division employed more than 400 people worldwide and generated sales of approximately $95 million in 2011.
Natus Medical specializes in devices 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.
In June, just before the close of fiscal 2012, CareFusion forged ahead with its fifth acquisition since its 2009 spinoff, buying U.K. Medical Ltd., a distributor of medical products to the National Health Service (NHS) in the United Kingdom. Among the company’s acquisitions include PHACTS LLC, a Seattle, Wash.-based hospital services company, and Germany-based Rowa, which provides medical storage and retrieval services for hospitals. Terms of the deal were not disclosed.
The acquisition of Sheffield, England-based U.K. Medical is part of CareFusion’s growth strategy of establishing infrastructure and a local presence in key markets—the company recently has been active in the Middle East, notably opening an office in Dubai in January of this year. CareFusion already had a working relationship with U.K. Medical—the company is the sole U.K. distributor of CareFusion’s interventional technologies portfolio, including soft-tissue and bone marrow biopsy needles, the AVAmax advanced vertebral augmentation system and the PleurX peritoneal catheter drainage system.
U.K. Medical focuses on distribution of clinically differentiated interventional and implantable single-use medical products for biopsy, cardiac, drainage, obstetrics and gynecology, non-vascular stenting, surgery and vertebroplasty primarily for the NHS.
Continuing its acquisitions, at the beginning of fiscal 2013 in October 2012 CareFusion purchased Intermed Equipamento Medico Hospitalar Ltda., a privately held respiratory technologies company based in São Paulo, Brazil.
Financial terms of the agreement were not disclosed, but the move expands CareFusion’s reach into one of the world’s largest emerging markets.
Intermed makes ventilators and respiratory care devices for infant, pediatric and adult patients that are used in hospitals in Brazil and across Latin America. Brazil, which has the world’s sixth-largest economy and fifth-largest population, is experiencing growth in its healthcare sector through government investments, growth within the middle class and an increase in formal employment that provides greater access to healthcare services.
“The acquisition of Intermed complements our global respiratory product platform and advances our strategy to expand outside of the U.S. through investments that build scale and local capabilities in high-value markets,” said Kieran Gallahue, chairman and CEO of CareFusion. “Intermed brings a strong distributor network, local manufacturing capabilities and a new product portfolio that we believe can serve as a base for CareFusion to continue our global expansion efforts in Latin America.”
Despite strong financial performance, infusion pump recalls continued to plague the company in 2012, mostly toward the beginning of fiscal 2013. In August, the U.S. Food and Drug Administration (FDA) announced a Class I recall of CareFusion’s Alaris pump module Model 8100, saying a potential keypad malfunction in the infusion pump could cause serious injury or death.
The FDA said the affected pump modules, used for delivering a variety of fluids, drugs and blood products to patients, were manufactured between October 2011 and February 2012. According to the recall notice, CareFusion identified a potential problem whereby the overlay on the pump module’s keypad could detach, possibly allowing for fluid ingress into the assembly that could cause infusion to stop. The FDA classified the action as a Class I recall on its website, meaning that the defective units could cause serious harm to a patient’s health.
Also in August, the FDA announced a Class I recall of the Alaris PC unit Model 8015, citing a malfunction in its power supply board.
In addition, the company initiated a voluntary recall of its EnVe ventilators and AirLife Infant Breathing Circuit in July and May 2012, respectively.
Incidentally, in April of this year, the FDA issued a Class I recall of CareFusion’s Alaris PC unit (model 8015 yet again) with software version 9.12. The Alaris PC unit is the central programming, monitoring, and power supply component of the Alaris electronic infusion pump system.
Amid safety concerns and manufacturing defects associated with its products, concerns about CareFusion’s production capabilities also have grown. Unresolved, these matters can lead to a loss in consumer confidence. The costs associated with the recalls and remediation plans also are a matter of concern for the company.
For the first nine months of fiscal 2013 (ended March 31), revenue was nearly even with FY12 at $2.65 billion. Within the Medical Systems segment, revenue decreased 2 percent from the prior year period to $1.74 billion. Segment profit increased 10 percent to $347 million. Revenue for the Procedural Solutions segment increased 5 percent from the prior year period to $910 million.
Segment profit increased 38 percent to $143 million. The company is expecting little to flat growth for fiscal 2013 with end-of-year results on par with 2012.