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Cardinal Health revenue misses on generic drug pricing pressure
February 7, 2017 / 12:18 PM / 7 months ago

Cardinal Health revenue misses on generic drug pricing pressure

(Reuters) - Drug distributor Cardinal Health Inc (CAH.N) reported lower-than-expected quarterly revenue on Tuesday, hurt in part by pricing pressure for generic drugs, and cut its full-year adjusted earnings forecast for the second straight quarter.

Rival McKesson Corp (MCK.N) slashed its fiscal year earnings forecast in October as it raised concerns about aggressive pricing tactics from competitors and the moderating pace of branded drug price increases.

McKesson’s comments sparked fear of a pricing war rippling through the pharmaceutical supply chain.

Drug pricing has become a lightning rod for criticism with several drugmakers coming under federal investigations.

Cardinal Health’s quarterly revenue came in at $33.15 billion, missing analysts’ average estimate of $33.55 billion, according to Thomson Reuters I/B/E/S.

“While management tends to be conservative, we suspect that price competition will have a negative impact on margins over the coming quarters,” William Blair analysts wrote in a client note.

Cardinal Health, which also makes surgical apparel and gloves, cut its 2017 forecast for adjusted earnings from continuing operations to $5.35-$5.50 per share from $5.40-$5.60.

Analysts had expected 2017 earnings of $5.44 per share.

“Pricing in the generic pharmaceutical market was a significant headwind for our pharmaceutical segment profit,” George Barrett, CEO of Cardinal Health said.

The pharmaceutical unit’s profit fell 14 percent to $537 million, due to generic pharmaceutical pricing and loss of a large pharmaceutical distribution customer.

“Pharmaceutical headwinds are more pronounced than previously thought and ultimately carry more bottom-line influence,” Baird analyst Eric Coldwell wrote in a note.

Net income attributable to the company fell to $324 million, or $1.02 per share, for the second quarter ended Dec. 31, compared with $326 million, or 98 cents per share, a year earlier.

Excluding items, Cardinal Health earned $1.34 per share, beating the estimates of $1.23.

(This version of the story corrects analysts’ revenue estimate in paragraph 5 to $33.55 billion from $31.04 billion; the story was earlier corrected to fix analysts EPS estimate to $1.23 from $1.21. Both errors occurred in an earlier version of the story)

Reporting by Dipika Jain in Bengaluru; Editing by Anil D'Silva and Shounak Dasgupta

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