A Medical Device Daily
Cardinal Health (Dublin, Ohio) said during last week's fourth-quarter earnings conference call that it is exploring the possibility of spinning off a profitable, but smaller, part of its business, which produces medical supplies and equipment.
Profit for the healthcare products and services company was down 64%, for the quarter ended June 30, to $326.6 million, or 91 cents a share, from $902.2 million, or $2.33 a share, in the year-ago period. The company attributed the decline largely to a $680 million gain in 2007 from the sale of former pharmaceutical technologies segment to the Blackstone Group for $3.3 billion (Medical Device Daily, April 11, 2007).
The clinical and medical products division, with just 6% of sales for the quarter, produced 43% of 4Q profit.
A spin-off would return Cardinal to its original business of distributing pharmaceuticals and medical supplies, which accounts for 94% of revenue and 57% of profit.
Cardinal last month consolidated its four operating units into two, and its board of directors has since supported a management recommendation to consider a tax-free spin-off of the clinical and medical products division into a separate public company, Cardinal said. The company said it will make a decision on the proposal in 60 to 90 days.
During the conference call, R. Kerry Clark, CEO and chairman of Cardinal, said, "Our goal is simple: To have two thriving businesses delivering maximum value to customers and shareholders over the long term." For the 2009 budget year, Cardinal projected revenue growth of 6% to 7% and share earnings of $3.80 to $3.95, excluding special items.
But the reason for the development of a narrower focus was seen in the current year's report: earnings were down 32% to $1.3 billion, or $3.60 a share, from $1.9 billion, or $4.77 a share, again because of the effects of the discontinued operation. Annual revenue increased 5% to $91.1 billion, from $86.9 billion.
The company expects distribution, which includes pharmaceuticals and supplies such as gloves and scalpels, to struggle for the first half of the coming fiscal year, with profit growth in distribution flat to negative for the year on a 6% increase in sales.
In contrast, the company projects 10% sales growth and 20% profit growth for clinical products.
Distribution's troubles are seen customer service issues, pressures on generic pricing, renegotiated contracts with large pharmacy chains and regulatory problems with the U.S. Drug Enforcement Administration, the company said.
In the clinical technologies sector, which makes complex hospital equipment, such as infusion pumps and computerized drug-dispensing systems, 4Q operating earnings were up 8% to $156 million on sales of $780 million. Medical products, such as gloves, surgical drapes and feeding tubes, saw profit increase 63% to $95 million on $727 million in sales, largely because of newly acquired companies.
In other dealmaking activity:
Datascope (Montvale, New Jersey) reported that it has completed the sale of its vascular closure business to St. Jude Medical (St. Paul, Minnesota), including all the assets related to its VasoSeal, On-Site, and X-Site devices and its collagen operation. Datascope will receive $21 million in cash at closing, and $3 million upon expiration of an 18 month indemnification period. The carrying value of the assets and other direct expenses related to the sale was about $23.7 million.
This transaction completes Datascope's plan to exit the vascular closure market and phase out its Interventional Products business. In February 2007, Datascope sold its ProGuide chronic dialysis catheter product line to Merit Medical Systems (South Jordan, Utah) for $3 million, plus a royalty on future ProGuide sales.
The sale of vascular closure assets to St. Jude was separate from the exploration of strategic alternatives, reported in June, being conducted by the company's financial advisor, Lehman Brothers (Medical Device Daily, June 9, 2008).
Datascope said it was approached by several parties that were considering making a bid for the company after the $202 million sale of its patient monitoring business to Mindray Medical International (Shenzhen, China) was disclosed back in March.
"We are pleased to complete this transaction, which enhances our focus on Datascope's continuing businesses, Cardiac Assist and InterVascular," said company COO, Dr. Antonino Laudani, adding, " ... we will continue our efforts to optimize Datascope's asset portfolio and drive value for our shareholders.''
Datascope develops products for interventional cardiology, cardiovascular and vascular surgery and critical care.
QLT (Vancouver, British Columbia) reported that the conditions to close on its agreement to sell the land and building comprising its corporate headquarters and an adjacent undeveloped parcel of land have been removed.
The real estate will be sold to Discovery Parks Holdings, an affiliate of Discovery Parks Trust (Vancouver), a private trust that designs and builds research facilities, for C$65.5 million. The transaction has been approved by the boards of both companies.
QLT will enter into a five-year lease with Discovery Parks for about 30% of the facility and will provide two-year 6.5% interest-only second-mortgage vendor financing of C$12 million. The transaction is expected to close at the end of this month.
"This event brings us one step closer to completing the sale of another non-core asset in connection with our strategic corporate restructuring," said Bob Butchofsky, QLT president/CEO. "We continue to work towards divesting the remainder of our non-core assets, including Atrigel and Eligard ... ."
QLT focuses its R&D on pharmaceutical development for ophthalmology and dermatology, utilizing three platforms, photodynamic therapy, Atrigel and punctal plugs with drugs, to create products such as Visudyne and Eligard.
SeniorBridge (New York), a provider of professional services for those with chronic health conditions, said it will acquire Rona Bartelstone Care Management and Home Healthcare (Ft. Lauderdale, Florida), making it "one of the largest providers of in-home chronic health in the state." Financial terms were not disclosed.
Rona Bartelstone, will join the SeniorBridge staff as a senior VP for care management.