Cardinal Health (Dublin, Ohio) said it plans to sell its Pharmaceutical Technologies and Services (PTS) segment, a business that makes or packages 100 billion doses of medication every year for pharmaceutical and biotech firms. The PTS unit has roughly 10,000 employees at more than 30 facilities worldwide and generates $1.8 billion in revenue annually. Financial terms were not disclosed.

The company hosted a teleconference about the decision yesterday, during which Kerry Clark, president/CEO of Cardinal, told listeners that its decision to divest its PTS segment is a “strategic commitment to the provider market.”

Cardinal plans to focus its resources on better serving healthcare provider customers, such as hospitals and pharmacies, Clark said.

“While synergies exist between PTS and our other businesses, we believe there is greater customer and shareholder value in the expansion of our supply-chain and medical and clinical products businesses domestically and internationally,” Clark said. “These segments align with our core competencies and customers, and we see significant opportunities for future growth and improved return on capital.”

Clark also told teleconference listeners that Cardinal’s goal is to divest the PTS segment in a single transaction but that the company is open to selling it in other segments if that would maximize its value.

The company declined comment on any discussions with potential buyers.

Cardinal said it expects to close the transaction around December 2007.

It said it plans to use the proceeds to repurchase Cardinal Health shares. In anticipation, Clark said the board has initially authorized an additional $1 billion, bringing the company’s total repurchase authorization to $3 billion for fiscal 2007 and 2008.

To date in FY07, the company has bought about $500 million in shares and plans to complete a total of $1.5 billion by the end of FY07. Cardinal also will continue to invest in organic growth and tuck-in acquisitions to strengthen its existing product and service offerings, Clark said.

Clark added: “We will retain Martindale and Beckloff Associates, two businesses that support the generic pharmaceutical market.”

Martindale develops generic, intravenous medicine that is complementary to Cardinal Health’s hospital business and generics strategy. Beckloff provides regulatory consulting services, including for Cardinal Health generic products. Combined, these businesses have around 400 employees at two locations in the U.S. and UK.

Cardinal calls PTS the leading contract manufacturing and service provider for the pharmaceutical industry. As a stand-alone company excluding Martindale and Beckloff, Cardinal estimates the business would generate more than $300 million in earnings before interest, taxes, depreciation and amortization.

Among its core offerings, it makes oral and sterile medication in nearly all dosage forms, and holds patents for softgel and Zydis fast-dissolve technologies used in many popular prescription and over-the-counter medicine. The segment is also the largest contract packager of pharmaceuticals.

Clark said there would have been no change to its FY07 earnings per share (EPS) guidance had it not made the decision to sell PTS. However, based on the decision, results for PTS will be treated as discontinued operations in its financial statements, and the company issued new, consolidated EPS guidance for FY07. Non-GAAP diluted EPS from continuing operations for fiscal 2007 are now expected to be in the range of $3.25 to $3.40. All growth goals for the four remaining segments are unchanged from previous communications, he said.

Excluding the impact of any proceeds from the PTS divestiture, Clark also emphasized Cardinal’s long-term financial goal of 12% to 15% growth in non-GAAP diluted EPS from continuing operations, and expects to be within that range for fiscal 2008.

Depending on the timing of the sale, the company expects proceeds from the transaction should further add materially to fiscal 2008 EPS growth.

Cardinal company makes pharmaceuticals and medical supplies, offers a range of clinical services and develops automation products designed to improve the management and delivery of supplies and medication for hospitals, physician offices and pharmacies.

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