Drug Distributor Cardinal Health Faces Recruitment Challenge as CFO Departs
July 08 2019 - 4:20PM
Dow Jones News
By Nina Trentmann
Pharmaceuticals distributor Cardinal Health Inc. is turning to
its chief executive to oversee the books following the departure of
its finance chief, indicating a lack of potential successors in an
industry facing declining profitability and potential settlement
costs associated with the U.S. opioid crisis.
The Dublin, Ohio-based company Monday said Chief Financial
Officer Jorge M. Gomez -- who has served in the role since Jan.
2018 -- will step down to become finance chief at Dentsply Sirona
Inc., a maker of dental products. Mr. Gomez leaves Cardinal on Aug.
9, a day after the release of the company's year-end results for
fiscal 2019.
Chief Executive Michael Kaufmann will take over as interim CFO
while
Cardinal searches for a successor. Mr. Kaufmann served as the
company's finance chief from 2014 to 2017 and was elevated to the
CEO position in Jan. 2018.
The appointment of Mr. Kaufmann as interim finance chief points
to Cardinal's lack of potential candidates to succeed Mr. Gomez,
analysts said, and suggests the company has had a challenge
attracting the right talent.
"Companies this size normally have deep benches to fill this
type of vacancies from below," said Brian Tanquilut, an analyst at
financial services advisory Jefferies LLC. Both Mr. Kaufmann and
Mr. Gomez were promoted internally for their most recent jobs.
Cardinal Chairman Gregory Kenny in an email highlighted the
strength of the firm's finance team and praised Mr. Kaufmann's
knowledge of the company.
"As a company with a rich culture that is focused on our people
and delivering value to the healthcare industry, we are looking for
a person that embodies our values and will promote career
development across the organization," Mr. Kenny said.
The vacancy in a key management position comes at a challenging
time for Cardinal.
The company has been battling with falling profitability,
specifically in its generic drugs business. Cardinal's earnings per
share slumped to 81 cents in fiscal 2018, down 80% from $4.03 per
share in fiscal 2017.
Two recent acquisitions, Cordis and Patient Recovery, so far
haven't yielded forecast returns, adding to the pressure on the
company's management, Mr. Tanquilut said.
"The loss of any executive during a key point in a turnaround is
a challenge," said Eric W. Coldwell, an analyst at financial
services firm Robert W. Baird & Co. "Cardinal seemed a bit
unprepared for Jorge's [Mr. Gomez] departure and it won't sit well
with investors that the CFO is transitioning as the company
prepares and delivers its fiscal year outlook," Mr. Coldwell
said.
Cardinal has also disclosed it is among several pharmaceutical
wholesale distributors that have been named as defendants in more
than 2,000 lawsuits related to the distribution of prescription
opioid pain medications in the U.S. More than 60 of these lawsuits
are purported class actions, according to the company's latest
regulatory filings.
The pressure on profit margins as well as potential settlement
costs associated with these lawsuits complicate Cardinal's efforts
to find a new CFO, said John Ransom, an analyst at financial
services provider Raymond James Financial Inc. "It will be tough
for them to fill the spot, " Mr. Ransom said.
As interim CFO, one of Mr. Kaufmann's tasks will be to deal with
the costs of a potential settlement, analysts said. Competitor
McKesson Corp. in May agreed to pay $37 million to resolve claims
that the company helped fuel the opioid epidemic.
"As a pharmaceutical wholesale distributor, we do not control
either the supply of, or the demand for, opioids, since we do not
manufacture medications or write prescriptions," Cardinal said on
its website.
Other companies in the space, including McKesson and
AmerisourceBergen Corp., have also suffered from executive turnover
in recent years. "The industry continues to see a lot of departures
and struggles to attract new talent," said Raymond James' Mr.
Ransom.
Write to Nina Trentmann at Nina.Trentmann@wsj.com
(END) Dow Jones Newswires
July 08, 2019 16:05 ET (20:05 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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