Cardinal Health CEO to Step Down -- WSJ
07 November 2017 - 7:02PM
Dow Jones News
Move comes as lower generics prices squeeze profits, and company
faces suits over opioids
By Allison Prang
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (November 7, 2017).
Cardinal Health Inc. said Monday that Chief Executive George
Barrett will step down in January after more than eight years in
the post, as pricing pressure for generic drugs has weighed on the
company in recent months.
Mr. Barrett, 62 years old, will remain in his role as executive
chairman until the company's shareholder meeting in November 2018.
Lead independent director Gregory Kenny will then become
nonexecutive chairman, the company said.
Chief Financial Officer Mike Kaufmann, 54 years old, will become
the chief executive of the pharmaceutical and medical-supplies
distributor on Jan. 1.
Cardinal Health also announced that Jorge Gomez, CFO of Cardinal
Health's medical division, will be taking over as finance chief of
the entire company.
Cardinal Health, similar to other pharmaceutical wholesalers and
manufacturers, has been hurt by lower generic-drug prices, which
the company said in April won't improve until the middle of
2018.
On Monday, the company said first-quarter profits in its
pharmaceutical division fell 13% compared with last year, partly
due to the decline in generic drug prices.
Overall profit fell 63% from a year ago to $115 million, as
higher expenses also weighed on the firm. On an adjusted basis,
earnings fell 13% to $346 million. Adjusted earnings per share were
$1.09, beating analysts' estimates of $1.
Revenue rose 2% to $32.6 billion. Shares fell 1.7% to $60.36 in
Monday trading.
Cardinal Health recently completed its $6.1 billion purchase of
Medtronic PLC's patient-recovery business to bolster its portfolio
of medical products. Earlier this year the company said it would
explore a sale of its China distribution operations.
Cardinal Health is also facing lawsuits filed by New Mexico and
dozens of counties nationwide, alleging the company contributed to
widespread addiction to opioid painkillers by failing to control
distribution of the drugs. In its 2017 annual report, the company
said it was "vigorously defending" itself against those suits,
which in part allege companies violated controlled-substance
laws.
Cardinal Health announced Mr. Barrett's planned departure two
days before its shareholder meeting. Last month, the International
Brotherhood of Teamsters sent a letter to shareholders saying the
structure of Cardinal Health's board was "inadequate" to respond to
its "decadelong role in fueling the opioid crisis." The Teamsters,
whose funds own over $27 million of shares of Cardinal Health,
asked shareholders to vote to remove Mr. Barrett as chairman.
Ken Hall, the Teamsters' general secretary-treasurer, said
Monday in a statement that the company's recent moves shows the
union's message is being received. The union also wants an
independent board committee to study Cardinal Health business
practices and compliance programs related to opioids.
Cardinal Health said in an emailed statement that "the
separation of chairman and CEO was not in response to any
group."
"The board always takes into account a wide range of factors,
including the current practices of others, as well as the views of
shareholders," the company said. "This was a natural time to move
forward with our plan."
The Teamsters' message to Cardinal Health shareholders was their
most recent move against a medical company related to opioids. The
labor group also prodded shareholders of McKesson Corp. to appoint
an independent chairman instead of McKesson CEO John Hammergren and
to vote down a proposal regarding his compensation. Shareholders
ended up opposing the pay proposal in July.
McKesson said after the vote that it takes "feedback seriously
and will carefully consider the input received."
Write to Allison Prang at allison.prang@wsj.com
(END) Dow Jones Newswires
November 07, 2017 02:47 ET (07:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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