Cardinal Health (NYSE: CAH) is scaling back the number of countries it operates in to focus on opportunities in the United States, particularly with home diabetes solutions and specialty physician support.
“The number of countries in which we operate has reduced by more than 50% over the last several years because, frankly, we’re excited and pleased with the prospects within our home country here, and we see less opportunity for scale going across the borders,” Cardinal Health CEO Jason Hollar said Tuesday during the J.P. Morgan Healthcare Conference.
Cardinal Health anticipates generating more than $20 billion in revenue this fiscal year, with more than 99% coming from the U.S., Hollar said.
“This market is clearly a $1 trillion-plus type of market opportunity, and we’ll continue to look for opportunities to participate within that in different ways, but that will be our priority,” he said.
Cardinal Health’s at-Home solutions is a key driver of profitability and growth, attributing 17% of enterprise profits to this segment, despite it accounting for only 2% of total revenue, Hollar said.
“I often refer to [at-Home solutions] as small but mighty,” Hollar said.
Cardinal Health has begun constructing a 340,000-square-foot distribution center in Fort Worth, Texas, to support its at-Home solutions business, which will consolidate two existing warehouses, adding 74,000 square feet of inventory capacity and shipping 10,000 packages daily to patients nationwide, according to the company.
Diabetes-related products like continuous glucose monitors (CGMs) are a particular growth area, with Cardinal Health’s acquisition of Advanced Diabetes Supply Group (ADSG), a national distributor of durable medical equipment, specializing in diabetes supplies.
The acquisition will add approximately $1 billion in incremental revenue to Cardinal Health’s at-Home solutions business, while requiring just 2% of the company’s distribution capacity, Hollar said.
“So we anticipate that that double-digit growth rate will continue for the next several years,” he said.
The acquisition also complements Cardinal Health’s existing strengths, merging ADSG’s Medicare expertise with Cardinal Health’s commercial payer relationships, he added.
“What neither of us do is actually go into the home,” Hollar said. “We don’t have our own people that go into the home. We don’t have our own equipment, capital, rent, or leasing type of models. … It’s very much a capital-light model, just like our own model, leveraging complex logistics capabilities.”
Cardinal Health is also doubling down on specialty physician support through targeted acquisitions, including GI Alliance and Integrated Oncology Network, Hollar said.
“Our aim is to empower specialty physicians to focus on patient care while leveraging Cardinal Health’s scale and technology to manage the business aspects,” Hollar said.
GLP-1 medications are also a part of the company’s growth strategy, despite lower operating profit margins, Hollar said. While GLP-1s require resource-intensive logistics, such as refrigeration and specialized handling, their high volume enhances the company’s operational efficiency, Hollar said.
And future developments, like oral GLP-1 formulations, could simplify distribution and reduce costs further, he added.
“What comes with [oral GLP-1s] is a simplified, more simplified distribution process, which I would expect would be better for us, so we could use that refrigeration capacity for other products and have less investments,” he said.
