Summary
Cardinal Health, Inc. (CAH) filed an 8-K on July 31, 2012, reporting a significant development concerning its pharmaceutical distribution business. Express Scripts, Inc. has notified Cardinal Health that it will not renew its pharmaceutical distribution agreement, which is set to expire on September 30, 2012. This agreement has been a substantial revenue driver for Cardinal Health, contributing approximately $9 billion in annual revenue, all classified as bulk sales. This non-renewal represents a material event for Cardinal Health, as it directly impacts a significant portion of its revenue. The company is likely to face a substantial revenue shortfall and will need to address the implications of losing this key customer, which is a consequence of Express Scripts' merger with Medco Health Solutions, Inc. Investors should monitor how Cardinal Health plans to mitigate this revenue loss and the potential impact on its financial performance and strategic direction.
Key Highlights
- 1Express Scripts, Inc. will not renew its pharmaceutical distribution agreement with Cardinal Health.
- 2The agreement is set to expire on September 30, 2012.
- 3The expiring agreement contributed approximately $9 billion in annual revenue to Cardinal Health.
- 4All revenue from this agreement is classified as bulk sales.
- 5The decision by Express Scripts is related to its merger with Medco Health Solutions, Inc.
- 6This event triggers a material impact on Cardinal Health's revenue streams.