Cardinal Health Boosts 2025 Profit Forecast on Strong Demand for Specialty Medicines

313

Cardinal Health has raised its profit forecast for 2025, banking on the continued robust demand for branded and specialty medicines in its pharmaceuticals division. The company’s outlook reflects its confidence in the growing market for specialty drugs, which are essential for treating complex conditions like cancer and rheumatoid arthritis. This positive projection comes as Cardinal Health also reports better-than-expected results for the fourth quarter, driven by strong performance in its pharmaceutical and specialty solutions unit.

The drug distribution sector, where Cardinal Health plays a key role, has been benefiting from the increasing sales of specialty medicines and biosimilars—affordable alternatives to expensive biotech drugs. This trend is emerging even as prices for generic medicines continue to drop due to fierce competition within the industry.

Elizabeth Anderson, an analyst at Evercore ISI, remarked on the positive surprise in Cardinal Health’s results and outlook, noting, “This quarter and outlook were much better than many feared.” This optimism was mirrored in the market, with Cardinal Health’s shares rising 7% to $109.85 in premarket trading following the announcement.

For fiscal year 2025, Cardinal Health now anticipates adjusted earnings per share (EPS) in the range of $7.55 to $7.70, a slight increase from its previous forecast of at least $7.50. This updated guidance is also ahead of Wall Street’s consensus estimate of $7.53 per share, according to LSEG data.

However, not all aspects of Cardinal Health’s future are entirely positive. The company expects a revenue decline of 4% to 6% in its pharmaceutical unit in fiscal 2025, primarily due to the anticipated loss of contracts with OptumRx, the pharmacy benefit management unit of UnitedHealth Group. The contracts with OptumRx, which have been in place since 2015, accounted for a significant 16% of Cardinal Health’s total revenue in the 2023 fiscal year. Despite this setback, the company’s overall outlook remains strong, particularly in the specialty medicines segment.

This upbeat forecast follows a similar move by rival Cencora, which recently raised its annual profit outlook for the fourth time this year, also driven by strong demand for high-priced specialty medications. This trend underscores the growing importance of specialty medicines in the pharmaceutical distribution industry.

Cardinal Health’s pharmaceutical and specialty solutions unit, which distributes a wide range of products including branded and generic drugs, specialty medicines, and over-the-counter healthcare items, remains the company’s primary revenue generator. In the fourth quarter, the unit reported sales of $55.61 billion, marking a 13% year-over-year increase. Overall, Cardinal Health’s total sales for the quarter reached $59.87 billion, surpassing analysts’ expectations of $58.64 billion.

On an adjusted basis, Cardinal Health reported a fourth-quarter profit of $1.84 per share, beating the consensus estimate of $1.73 per share. This strong performance, coupled with the raised profit forecast, highlights Cardinal Health’s resilience and strategic focus on high-growth areas within the pharmaceutical sector, positioning the company for continued success in the years to come.