Cardinal to Sell $1.8 Billion Contract Services Unit

Dublin, OH (Nov. 30)-Cardinal Health (www.cardinal.com) has announced plans to divest its Pharmaceutical Technologies and Services (PTS) segment, “a business that manufactures or packages 100 billion doses of medication every year for pharmaceutical and biotech firms, employs approximately 10,000 at more than 30 facilities worldwide and generates $1.8 billion in revenue,” according to a company statement.

The portion of PTS slated for sale develops and manufactures oral and sterile medication in nearly all dosage forms, and holds patents for softgel and “Zydis” fast-dissolve technologies.  The business “is also the largest contract packager of pharmaceuticals,” according to Cardinal.  The spun-out business should generate more than $300 million in earnings before interest, taxes, depreciation and amortization, according to Cardinal's estimates.

Cardinal will retain PTS's Martindale and Beckloff Associates groups, “two businesses that support the generic pharmaceutical market.”  Martindale develops generic, intravenous medicines, supporting Cardinal's hospital business, and  Beckloff provides regulatory consulting services, including for generic products.  Combined, the retained businesses have approximately 400 employees in the US and UK.

The sale will help Cardinal focus on serving health-care provider customers, such as hospitals and pharmacies, and on its generics business.

In a Nov. 30 conference call, Cardinal CEO R. Kerry Clark said that the company hopes to close the sale around the middle of 2007. He declined to say whether the company was currently in discussions with a potential buyer.

“In the coming years, Cardinal Health will focus more on our products and services that help providers improve the safety and productivity of health care,” said Clark in the prepared statement.  “While synergies clearly 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.  These segments align with our core competencies and customers, and we see significant opportunities for future growth and improved return on capital.”

The company expects to use proceeds of the sale to repurchase Cardinal Health shares.