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Sterile manufacturing holds back Cardinal Health in 3Q

02-May-2005

Cardinal Health saw a double-digit hike in fiscal third quarter revenues mirrored by a decline in operating earnings, as gains in its drug distribution and medical products businesses were offset by lower profits in sterile manufacturing and healthcare automation unit Pyxis.

Group revenues rose 17 percent over the prior year to $19.1 billion (€14.8bn), while earnings from continuing operations declined 15 per cent to $368 million, or $0.84 per share.

Cardinal's Pharmaceutical Technologies and Services business - which has activities spanning drug development, manufacturing, packaging and commercialisation - saw revenues increase 3 per cent during the quarter to $729 million, but operating earnings declined 28 per cent to $82 million.

 

The company said its Oral Technologies and Nuclear Pharmacy Services businesses both increased earnings over the prior year, but were held back by earnings declines in sterile manufacturing, the result of costs associated with delays in opening new facilities and from existing facilities operating below their planned capacity.

 

Positive developments at the division during the quarter included an increase in sales of softgel products, particularly Wyeth's Advil (ibuprofen) and Abbott's HIV treatment Kaletra (lopinavir). There was strong demand at the company's sterile manufacturing facility in Albuquerque, and the division also benefited from the launch of branded pharmaceuticals using Cardinal Health's Zydis quick dissolve formulation, as well as ongoing productivity improvements.

 

Cardinal said it had decided to discontinue pharmaceutical manufacturing in Humacao, Puerto Rico, as part of its previously announced company-wide restructuring programme. These operations have under-performed relative to company expectations, due in part to continued regulatory issues at the facility, and Cardinal is now switching projects to other manufacturing sites.

 

The group's largest business - pharmaceutical distribution - saw an 18 per cent rise in revenues to $15.6bn, while operating earnings rose more slowly (8 per cent) to $344m. Meanwhile, medical products and services put in a 7 per cent hike in sales to $2.47bn, with earnings up 3 per cent to $200m, and the group's clinical division grew revenues 32 per cent to $522m, with earnings down 25 per cent to $65m.

 

Robert Walter, chairman and chief executive officer of Cardinal Health, said he expected full-year EPS to be in line with previously issued guidance, in the range of $3.10 to $3.20.

 

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