November 6, 2017 / 12:00 PM / 2 years ago

Cardinal Health misses revenue estimates; names new CEO

(Reuters) - U.S. drug distributor Cardinal Health Inc’s (CAH.N) quarterly revenue fell short of analysts’ forecasts, as prices for generic drugs remained stubbornly low, sending the company’s shares down to a four-year low on Monday.

Cardinal also named Chief Financial Officer Mike Kaufmann as its next CEO, replacing George Barrett, who will step down after eight years at the helm.

The executive shuffle comes at a time when Cardinal, like drugmakers and other drug wholesalers, battles low prices for generic drugs amid a push by U.S. health regulators to approve these drugs at a faster rate than before.

However, some drug distributors have partnered with big U.S. retailers, helping blunt some of the impact of lower prices.

Cardinal’s rival McKesson Corp (MCK.N) reported strong results last week as it was able to buy generic drugs at cheaper prices, thanks to a sourcing agreement with Wal-Mart (WMT.N).

For Cardinal, however, the benefit from its joint venture with CVS Health Corp (CVS.N) did not offset the price slump, and profits at its pharmaceutical business fell 13 percent in the quarter ended Sept. 30.

The pharmaceutical business, which distributes branded and generic medicines, contributes nearly 90 percent to Cardinal’s overall revenue.

But generic drug prices were falling as expected, and the decline was “less dramatic” compared with last year, Barrett said on a call with analysts.

Cardinal had in August forecast a mid-single digit percentage decline in generics prices for the year ending June 2018.

Barrett’s remarks echoed those of Cardinal’s peers, suggesting that prices may soon stabilize.

The possibility of Inc (AMZN.O) entering the industry, as reports suggest, has compounded worries at drug distributors and weighed on their stock prices in recent weeks.

“We never dismiss any competitor, or potential competitor. It’s something that we take seriously,” said Barrett, who will remain CEO until Jan. 1.

Dublin, Ohio-based Cardinal Health’s revenue rose 2 percent to $32.64 billion in the latest quarter, but lagged analysts’ estimates of $33.48 billion, according to Thomson Reuters I/B/E/S.

Net earnings attributable to the company fell nearly 63 percent to $115 million or 36 cents per share. Excluding one-time items, Cardinal earned $1.09 per share, topping analysts’ forecasts by 9 cents.

Cardinal’s stock, which has slipped nearly 15 percent this year, was down 1.4 percent at $60.51 in afternoon trading.

Jorge Gomez, the finance chief of Cardinal’s medical equipment business, will succeed Kaufmann as CFO.

Reporting by Manas Mishra in Bengaluru; Editing by Sai Sachin Ravikumar

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