Cardinal Health Spinoff Signals New Direction

MATTHEW PERRONE

WASHINGTON (AP) — Drug and medical supplies distributor Cardinal Health will spin off its medical device division this week, streamlining operations after more than a decade of diversified growth, a strategy which analysts say never quite panned out.

Beginning Tuesday, Cardinal's medical technology division will begin operating as a separate company called Carefusion, containing nearly two dozen device businesses that were acquired since the mid-1990s.

Wall Street analysts have almost unanimously approved of the plan, predicting both companies will report higher earnings after working through initial reorganization.

"Fundamentally, distributing pharmaceuticals and medical supplies is a completely different business from developing medical technology," said David Schlotterbeck, newly appointed chief of Carefusion. "We really felt that because these two businesses are so different, they could each thrive more productively on their own."

Carefusion's business, which had a fiscal 2009 profit of $448 million, focuses on drug infusion pumps, respiratory equipment and medication dispensing systems. The new company will be headquartered in San Diego.

The spinoff marks the end of Cardinal's long-term strategy of using cash from its core business to expand into faster growing health care segments — a strategy that has challenged other competitors in the drug distribution field.