Cardinal Health Inc. said Monday that Chief Executive George Barrett will step down in January after more than eight years in the post, as pricing pressure for generic drugs has weighed on the company in recent months.
Mr. Barrett, 62 years old, will remain in his role as executive chairman until the company's shareholder meeting in November 2018. Lead independent director Gregory Kenny will then become nonexecutive chairman, the company said.
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Chief Financial Officer Mike Kaufmann, 54 years old, will become the chief executive of the pharmaceutical and medical-supplies distributor on Jan. 1.
Cardinal Health also announced that Jorge Gomez, CFO of Cardinal Health's medical division, will be taking over as finance chief of the entire company.
Cardinal Health, similar to other pharmaceutical wholesalers and manufacturers, has been hurt by lower generic-drug prices, which the company said in April won't improve until the middle of 2018.
On Monday, the company said first-quarter profits in its pharmaceutical division fell 13% compared with last year, partly due to the decline in generic drug prices.
Overall profit fell 63% from a year ago to $115 million, as higher expenses also weighed on the firm. On an adjusted basis, earnings fell 13% to $346 million. Adjusted earnings per share were $1.09, beating analysts' estimates of $1.
Revenue rose 2% to $32.6 billion. Shares fell 1.7% to $60.36 in Monday trading.
Cardinal Health recently completed its $6.1 billion purchase of Medtronic PLC's patient-recovery business to bolster its portfolio of medical products. Earlier this year the company said it would explore a sale of its China distribution operations.
Cardinal Health is also facing lawsuits filed by New Mexico and dozens of counties nationwide, alleging the company contributed to widespread addiction to opioid painkillers by failing to control distribution of the drugs. In its 2017 annual report, the company said it was "vigorously defending" itself against those suits, which in part allege companies violated controlled-substance laws.
Cardinal Health announced Mr. Barrett's planned departure two days before its shareholder meeting. Last month, the International Brotherhood of Teamsters sent a letter to shareholders saying the structure of Cardinal Health's board was "inadequate" to respond to its "decadelong role in fueling the opioid crisis." The Teamsters, whose funds own over $27 million of shares of Cardinal Health, asked shareholders to vote to remove Mr. Barrett as chairman.
Ken Hall, the Teamsters' general secretary-treasurer, said Monday in a statement that the company's recent moves shows the union's message is being received. The union also wants an independent board committee to study Cardinal Health business practices and compliance programs related to opioids.
Cardinal Health said in an emailed statement that "the separation of chairman and CEO was not in response to any group."
"The board always takes into account a wide range of factors, including the current practices of others, as well as the views of shareholders," the company said. "This was a natural time to move forward with our plan."
The Teamsters' message to Cardinal Health shareholders was their most recent move against a medical company related to opioids. The labor group also prodded shareholders of McKesson Corp. to appoint an independent chairman instead of McKesson CEO John Hammergren and to vote down a proposal regarding his compensation. Shareholders ended up opposing the pay proposal in July.
McKesson said after the vote that it takes "feedback seriously and will carefully consider the input received."
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(END) Dow Jones Newswires
November 06, 2017 17:32 ET (22:32 GMT)