Cardinal Health, the leading contract manufacturer for the pharmaceutical industry, has announced its plans to sell its drug manufacturing and packaging unit in order to focus on its health-care business.
The company's pharmaceutical technologies and services (PTS) division, which mainly performs contract manufacturing and packaging for oral medicines and sterile liquids, is a lucrative business generating $1.8bn (€1.3bn) in revenue.
However manufacturing problems in the PTS segment have persistently dogged Cardinal, dragging the profit of the whole company down.
The company said the decision was made to focus its capabilities and resources on its health-care provider business which offers services for hospitals and pharmacies.
"For the past five or six years, Cardinal has acquired a number of companies in order to create the world's best contract manufacturer," Troy Kirkpatrick, Cardinal's spokesperson, told In-PharmaTechnologist.com.
"However, PTS was a bit of an outlier strategically even if it was a great business."
The spokesperson said that no names of potential buyers have been revealed yet although the company is confident it will complete the sale by July next year.
One sure thing, according to Kirkpatrick, is that the segment will be sold as an enterprise, and not divided into pieces. "We want to keep it together," he said.
In addition, Cardinal said it will retain two of its businesses that support the generic pharmaceutical market, Martindale and Beckloff Associates.
Martindale develops generic intravenous medicine that is complementary to Cardinal's hospital business and generics strategy, while Beckloff provides regulatory consulting services, including for the company's generic products.
Furthermore, Cardinal said that proceeds from a sale would be used to buy back shares. Cardinal's board authorised an additional $1bn of share repurchases, bringing the total repurchase authorisation for fiscal 2007 and 2008 to $3bn.
The PTS unit has 10,000 employees at more than 30 facilities worldwide where it packages 100bn doses of medications per year for other drug makers and produces annual revenue of $1.8bn, a small fraction of Cardinal's total revenue of $81bn in the latest fiscal year.