News Feature | August 10, 2015

Cardinal Health Wins $1B Contract To Provide Med Devices To U.S. Military

By Jof Enriquez,
Follow me on Twitter @jofenriq


DoD  also awards $240 million contract to Owens and Minor Distribution Inc. for medical and surgical supplies.

Cardinal Health has secured a $1 billion contract with the United States Department of Defense (DoD) to provide medical devices and supplies to U.S. military services and federal civilian agencies.

A DoD press release states that Cardinal Health "has been awarded a maximum $1,019,313,488 modification (P00055) exercising the second 20-month option period of a 20-month base contract (SPM2DV-11-D-0001) with two 20-month option periods, which makes medical and surgical supplies available for purchase in various TRICARE regions throughout the U.S."

The contract runs from fiscal year 2015 through 2016, and covers the Army, Navy, Air Force, and the Marine Corps, as well as federal civilian agencies in the U.S. states of Illinois, Massachusetts, Maine, New Jersey, New York, Pennsylvania, Maryland, North Carolina, Georgia, Florida, Alabama, Missouri, Kentucky, Ohio, Indiana, Michigan, Minnesota, Mississippi, Kansas, Nebraska, Louisiana, Texas, Colorado, Utah, Arizona, California, Hawaii, Washington, and Alaska.

The same release states that DoD has also awarded Owens and Minor Distribution Inc. a $240,332,793 contract, with two 20-month option periods, to provide medical and surgical supplies to military services and federal civilian agencies. Owens and Minor is a leading provider of healthcare supply-chain management solutions, with a distribution network of 1,400 suppliers and 4,100 facilities across the U.S., according to the company's website.

Cardinal Health's deal with DoD comes on the heels of strong earnings growth for fiscal year 2015. The company reported in a recent news release that fourth-quarter fiscal year 2015 revenues increased 20 percent to $27.5 billion, and fiscal year 2015 revenues increased 13 percent to $102.5 billion.

George Barrett, chairman and CEO of Cardinal Health, touted in the announcement a series of "meaningful strategic initiatives" in the past year as responsible for strong revenue growth this past year, and the reason for an optimistic outlook for fiscal year 2016. Among these initiatives were the recent acquisitions of several medical device companies, which significantly expand Cardinal Health's portfolio.

"The move to expand our position in cardiology with products offered by Cordis and AccessClosure, in wound management with Innovative Therapies, and then trauma with Emerge all align perfectly with these developments," Barrett said in the fourth quarter earnings call transcript provided by Seeking Alpha. "Our ability to serve these bundles with products and innovative services now across multiple therapeutic areas is a key differentiator; highly valuable to our provider partners and will be key driver of growth for us."

Cardinal Health executives are particularly bullish on Cordis as a growth driver and as a solid, new platform to enhance the company's product line.

As announced in March, Cardinal Health is acquiring Cordis, a manufacturer of drug-coated cardiac stents and catheters, from Johnson & Johnson, for $1.94 billion in cash. At that time, the transaction was expected to close by the end of calendar 2015. However, Barrett said in the recent earnings call that the deal will close sometime during the second quarter of 2016.