Cardinal Health ($CAH) snagged a $1 billion contract with the U.S. Department of Defense to provide its medical devices for the DOD's military and federal civilian agencies, a feather in the company's cap as it rides high off promising year-end numbers and prepares to close its deal for Johnson & Johnson's ($JNJ) Cordis vascular device unit.
The DOD contract includes two 20-month option periods, making Cardinal's medical and surgical products available for purchase in various TRICARE regions throughout the U.S. States covered in the contract include Illinois, Massachusetts, Michigan, Texas, Hawaii and Alaska. The contract will run through the agency's fiscal 2016 year, according to the DOD statement, giving military services such as Army, Air Force, Marine Corps and federal civilian agencies access to the company's devices.
The contract could mean big things for Cardinal as it continues to chart growth. The company recently raised its projections for fiscal 2016 on the heels of positive Q4 and year-end sales. In July, Cardinal reported Q4 revenues of $27.5 billion, a 20% jump, and fiscal year revenues of $102.5 billion, a 13% hop year over year.
|Cardinal Health CEO George Barrett|
Part of that success comes from a "year of meaningful strategic initiatives," CEO George Barrett said in the company's earnings release, including its $1.9 billion purchase of J&J's Cordis unit in March. The deal was meant to boost Cardinal's medical device business, allowing the company to harness Cordis' cardiology and endovascular sales prowess to expand its portfolio.
"With an aging population and the accompanying demand for less invasive medical treatments, health systems around the world are searching for the best way to bring quality care to their patients in the most cost-effective way," Barrett said at the time of the deal. "The acquisition of Cordis reinforces our strategic position to address this need and strengthens an important growth driver in the Cardinal Health portfolio."
And Cardinal is counting on its Cordis deal to pay off. The company said it expects revenues to grow "mid- to high-single digits" in fiscal 2016, driven by brand product growth from acquisitions such as Cordis, according to a Seeking Alpha transcript. If all goes to plan Cardinal will close the Cordis deal in Q2 2016, Barrett said during the call.