* Higher generic drug sales boost 4th-qtr profit
* Revenue flat as more brands convert to generics
* Fiscal 2013 guidance lower than expected
* Shares fall 2.1 percent
By Toni Clarke
Aug 2 Drug wholesaler Cardinal Health Inc
said on Thursday its fiscal fourth-quarter earnings rose
16 percent, driven by strong sales of generic drugs and
increased business from new and existing customers.
But the company issued a profit forecast for fiscal 2013
that was below analysts' expectations, due in part to the loss
of business from pharmacy benefits manager Express Scripts
Holding Co. Cardinal shares were down 2.1 percent.
Express Scripts is replacing Cardinal with rival wholesaler
AmerisourceBergen Corp at the beginning of October.
Net profit in the fourth quarter, ended June 30, rose to
$236 million, or 68 cents a share, from $202.7 million, or 57
cents a share, a year earlier. An accounting change during the
year means the year-ago figure was restated to 58 cents a share,
the company said.
Earnings from continuing operations, excluding one-time
items, were 73 cents a share, a penny higher than the average
estimate of analysts polled by Thomson Reuters I/B/E/S.
Revenue was unchanged at $26.8 billion as increased sales of
medical products were offset by decreased revenue from its
pharmaceuticals business. Analysts were expecting $27.3 billion.
Revenue was flat because a large number of branded
pharmaceuticals lost patent protection and were launched as
generics. Generic drugs sell for less but are more profitable.
As a result, overall profit in the pharmaceuticals business
rose 15 percent, even as revenue fell 1 percent.
In the coming year, the company said it expects revenue to
fall 7 percent, due in part to the loss of Express Scripts and
in part to the fact that more drugs are expected to lose patent
On a conference call with analysts, Cardinal said it does
not expect as much of a profit "uplift" in fiscal 2013 as in
2012 but still expects the pharmaceutical segment to grow and
margins to increase.
The Dublin, Ohio-based company forecast earnings for fiscal
2013, excluding one-time items, of $3.35 to $3.50 a share.
Analysts were expecting $3.54 a share, on revenue of $105.8
Analysts estimate the loss of Express Scripts' business will
reduce Cardinal's earnings by 2 to 4 cents a share in fiscal
Cardinal's contract with pharmacy chain Walgreen Co
expires at the end of August 2012, and its contract with CVS
Caremark Corp expires at the end of June 2012.
George Barrett, the company's chief executive, declined in
an interview to say whether the company would be aggressive in
its bidding for new Walgreen and Caremark contracts, but said
Cardinal is "extremely efficient."
"We've been serving these customers for many years, we're
attuned to their needs and complexity, and we offer them a broad
range of services," he said.
In the medical segments business, which includes the sale of
medical, surgical and laboratory products such as surgical
gowns, vials, plastic gloves and instruments, fourth-quarter
profit rose 2 percent while revenue rose 5 percent.
Cardinal shares were down 90 cents to $41.63 in morning
trading on the New York Stock Exchange.