Cardinal's Pharmaceutical Technologies and Services unit (PTS), which develops, manufactures and packages drugs and other products for drug and biotech firms, has been a drag on recent
quarters as it struggled with manufacturing issues.
The company on Nov. 30 said it would divest the segment to focus on its four remaining segments serving health-care provider customers, such as hospitals and pharmacies.
Cardinal's quarterly profit, reported earlier on Thursday, already reflected the impact of the transaction, with profit from continuing operations rising 10% on double-digit growth in
its core businesses, beating analyst expectations.
Earnings from continuing operations rose to $316 million, or 77 cents a share, in the compared with $286 million, or 66 cents a share, a year earlier.
Excluding special items but including options expenses, earnings from continuing operations were 83 cents a share, beating the average analyst estimate for a profit of 78 cents a share, according to Reuters Estimates.
Net profit rose to $739.3 million, or $1.80 a share, compared with a profit of $304 million, or 70 cents a share, a year earlier. The results were boosted by a $425 million tax credit associated with the sale of its PTS unit.
Cardinal also announced a deal to buy SpecialtyScripts Pharmacy for an undisclosed price, signaling its intent to expand its efforts in the fast-growing market for specialty drugs.
Revenue rose 13% to $21.8 billion, with the lion's share of that generated in its drug distribution business.
That unit saw revenue rise 13% to $19.2 billion helped by strong generic sales and cost controls. Operating earnings in the distribution segment rose 19% to $328 million. That growth that was offset in part lower prices demanded by several large retail customers to renew their contracts.
"Strong generic sales, expense controls, and acquisition synergies drove a 19% increase in earnings despite pricing pressure in several recent renewals," said Morgan Stanley analyst David Veal in a note to clients.
Cardinal's other units include medical equipment wholesaling, medical products manufacturing and automated drug delivery products like intravenous drug pumps.
Cardinal Health backed its fiscal 2007 outlook in the range $3.25 to $3.40 for non-GAAP diluted EPS from continuing operations, which excludes the impact of proceeds from the planned sale of its PTS business.
Cardinal Health the sale of the PTS unit is expected to generate about $3.1 billion in after-tax proceeds, which the company will use to for share repurchases.
Separately, Equity Office PropertiesTrust said on Thursday it agreed to sweetened takeover offer from a Blackstone-led group of $54 a share in cash, or $38.3 billion.