By Mariam Sunny
(Reuters) – Cardinal Well being mentioned on Monday that its contracts with UnitedHealth Group's OptumRx, one in every of its largest clients, won’t be renewed after they expire on the finish of June, sending shares of the drug distributor down about 6%. %.
A minimum of two analysts mentioned rival McKesson would win Optum's contracts. McKesson didn’t instantly reply to a Reuters request for remark.
The lack of the Optum contracts was an “surprising disappointment,” mentioned Leerink Companions analyst Michael Cherny, including that he expects Cardinal to make up for this loss by buybacks, offers, value cuts and new clients.
The Optum contracts, signed in 2015, contributed 16% of Cardinal's complete income in fiscal 2023, however the bulk of the shipments comprised primarily non-specialty medicine, Cardinal Well being mentioned.
Cardinal mentioned it hopes to partially offset the impression of shedding Optum contracts by including clients and rising its extra worthwhile specialty pharmacy enterprise.
It’s betting on robust gross sales of high-priced specialty medicine that deal with ailments comparable to most cancers and rheumatoid arthritis, as its medical machine distribution unit struggles with rising transportation and labor prices, in addition to limitations. of provide.
The Ohio-based drug distributor mentioned it anticipates decrease adjusted free money stream in fiscal 2025 because of the lack of contracts and reiterated its fiscal 2024 adjusted revenue forecast.
EvercoreISI analyst Elizabeth Anderson estimates the lack of Optum contracts will hit Cardinal's earnings in 2025 by 45 to 50 cents.
Nevertheless, Cardinal has not but offered steering for its 2025 fiscal 12 months, which ends in June 2025.
Cardinal declined to remark additional on the OptumRx contracts and UnitedHealth didn’t reply to Reuters' request for remark.
OptumRx is a pharmacy profit supervisor that acts as an middleman between insurers and drug producers to barter prescription drug costs.
(Reporting by Mariam Sunny in Bengaluru; Modifying by Krishna Chandra Eluri and Shinjini Ganguli)