Filed by Syncor International Corporation
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12 under
the Securities Exchange Act of 1934
Subject Company: Syncor International Corporation
Commission File No. 0-8640
FOLLOWING IS A TRANSCRIPT OF AN ANALYST CONFERENCE CALL:
CARDINAL HEALTH IR
Moderator: Steve Fischbach
June 14, 2002
1:00 pm ET
Operator: Good afternoon my name is (Brenda) and I will be your
conference facilitator today. At this time I would
like to welcome everyone to the to the Cardinal and
Syncor conference call.
All lines have been placed on mute to prevent any
background noise. After the speakers' remarks there
will be a question and answer period. If you would
like to ask a question during this time simply press
star then the 1 on your telephone keypad.
If you would like to withdraw your question press the
pound key. Thank you. Mr. Steve Fischbach you may
begin your conference.
Steve Fischbach: Thank you. Good afternoon and thanks for joining us
today. For the next few minutes we'll discuss today's
announcement that Cardinal Health will acquire Syncor
International Corporation.
If any of you do not have a copy of the related press
release you may access it over the Internet at
Cardinal Health investor center at www.cardinal.com
or you can request a fax copy of the release by
dialing 614-757-7211.
On our call today we have Bob Walter, Chairman and
Chief Executive Officer of Cardinal Health and Robert
Funari, President and Chief Executive Officer of
Syncor International.
During the Q&A session we ask that you limit yourself
to one question so that we can include as many
questioners as possible within the time period
allotted. If you have any additional questions please
reenter the queue.
Before we begin I would like to remind everyone that
some of the information discussed on today's call may
include forward looking statements which are subject
to risks and uncertainties which could cause actual
results to differ materially from those projected or
implied.
The most significant of those uncertainties are
described in Cardinal Health's and Syncor's SEC
filings. Neither Cardinal nor Syncor undertakes an
obligation to update or revise any forward looking
statements.
In addition you are referred to the disclosure at the
end of the press release about where you can get more
information regarding Cardinal and Syncor and the
proposed transaction.
Recording and or rebroadcast of this call is
expressly prohibited. At this time I would like to
introduce Bob Walter to begin today's discussion.
Bob Walter:
Good afternoon. Cardinal Health is very excited about
the acquisition of Syncor International, a leading
provider of nuclear pharmacy services. This
combination will create substantial value for
shareholders of both companies as well as the health
care provider and supplier customers.
First I'd like to review the terms of the
transaction. Syncor will become a wholly owned
subsidiary of Cardinal Health to a stock-for-stock
transaction. The value of this deal is approximately
$1.1 billion.
The terms of our definitive agreement call for Syncor
shareholders to receive .52 Cardinal Health common
shares for each outstanding share of Syncor common
stock.
For the holders of Syncor common stock the
transaction is intended to be cash free. Cardinal
Health will assume Syncor's net debt which is -
Syncor's net debt which totals $202 million as of
March 31.
The acquisition is expected to be completed by the
end of 2002 subject to regulatory compliance,
approval by Syncor shareholders and other customary
conditions.
Cardinal Health expects the transaction to be
accretive to our earnings within the first year.
While Syncor's primary business focus is on nuclear
pharmacy it also operates a profitable imaging
business and some other smaller ventures. I will not
discuss these on this call as Cardinal and Syncor
fully intend to exit these businesses in the most
profitable and expeditious way.
This overall transaction has been structured in a way
that contemplates the sale of those operations and is
priced based upon the expected sales proceeds.
For those of you who aren't familiar with nuclear
pharmacy let me briefly explain this exciting
business. Nuclear medicines also known as
radiopharmaceuticals are radioactive compounds that
are ingested by or injected into patients and
concentrate in specific human organs or tissues.
These medicines allow physicians to investigate the
function of various organs and treat illness without
the risk or expense of surgery by passing the patient
through a nuclear imaging machine and observing the
reaction of the pharmaceutical.
Given the short life of these compounds, they must be
mixed and dispensed on an as needed, real time basis
specific to the patient and specific to the doctor.
The pharmaceuticals business - the
radiopharmaceuticals business is growing at
approximately a rate similar to our overall pharmacy
business.
Syncor has been a leader in this business since it
pioneered the concept of centralized nuclear pharmacy
services in 1974 and has grown at a pace faster than
the overall market. It operates a network of 140
nuclear pharmacies - I'm sorry a 130 nuclear
pharmacies throughout the country.
Syncor has an entrepreneurial culture similar to
ours. Its sales were $775 million last year, a 23%
increase over prior year.
As you know, Cardinal already has a presence in the
nuclear pharmacy business through its acquisition of
Central Pharmacy Services, a network of 40 operations
in complimentary markets.
We have often spoke of the high growth and high
returns produced by our Central Pharmacy Service
business. Incidentally, their three year growth rate
has been in excess of 30%.
We view Syncor and Central Pharmacy Services as
having both unique and complimentary capabilities and
we intend to preserve the best of both.
In addition to the core nuclear pharmacy services I
also view these specialized pharmacies as a very
promising distribution channel for complex
pharmaceutical compounds that need special handling
or need to be very close to the customer and the
patient.
A distribution business that I believe will grow
tremendously as larger molecules and very patient
specific products begin to the hit the market over
the next several years.
Cardinal Health's expansion in the nuclear pharmacy
services through the Syncor acquisition makes
tremendous strategic sense on multiple levels.
Cardinal Health has long been committed to building
both scale and breadth of product and service
offerings for both the healthcare provider and the
manufacturer. The addition of Syncor's nuclear
pharmacy services advances that strategy.
The largest customer base for nuclear pharmacy is
Acute Care Hospital, a group that Cardinal knows
extremely well through our relationships on the
pharmaceutical distribution, the Medical-Surgical and
Pyxis sides of our business.
The Syncor acquisition also continues our follow
investment philosophy that we have been executing for
years. In 1995 or since 1995 I've been describing our
role as a distributor of services both to the
provider downstream and to the manufacturer upstream.
In this instance, provider downstream is the hospital
or the clinic and upstream in this instance is the
maker of the radiopharmaceutical products to be
compounded. Both need our services.
Syncor and Central Pharmacy Services provides a
network of 170 locally operated pharmacies with the
unique ability to compound and dispense these
products.
This capability requires high quality and difficult
regulatory compliance in a timeframe that is
extremely tight. This two to four hour timeframe
cannot be met by distributors outside the local
markets.
These pharmacies are operated by a troop of nuclear
pharmacists that are in extremely short supply and
require extensive technical training. It is the
collection of these unique capabilities across a
broad geographic markets, again size and scale that
we are acquiring and combining with our own
capability.
This capability combined with other capabilities of
the broader Cardinal as we service both the
manufacturer and the downstream provider. It's these
capabilities that will allow us to define new
services for both the provider and the manufacturer.
Let me shift now to a description of the nuclear
pharmacy business as focusing on the perspective of
the manufacturer. We will be offering a better
selection to meet the complicated needs of bringing
product and complimentary services to the hospital
and the cardiology and oncology clinics.
Today both operations market, compound and dispense a
variety of manufactured products. Syncor obviously
adds to the growth models that we've articulated to
the market over the past several months.
I would remind everyone that this week at our recent
investors' conference I stated that Cardinal was on
track for at least a 20% earnings growth in this
quarter as well as for fiscal '03.
I also talked about Cardinal's legacy which is
setting aggressive goals and standards and performing
to our commitments. I also talked about our
credibility in the market. And if you make promises
you make sure you don't surprise the market and you
meet those promises.
We have lived up to our commitments for over 20 years
and no matter what we commit to the market now or in
the future we will deliver on those commitments.
Despite all the noise and misinterpretations about
what I said at the conference I am very confident in
our revenue and earnings outlook of 20% earnings
growth. Our annual earnings per share growth of 20%
is built upon consistent organic, internally
generated growth.
With that said, acquisitions such as Syncor are an
important part of our long term business plan. They
allow us to add even further to our organic growth
and expand the growth potential of both companies by
offering more to our respective customers.
When the Syncor acquisition is complete the strategic
synergies to be realized across the various Cardinal
businesses are substantial. Increased visibility and
access to our respective clients will only benefit
our combined efforts.
For example, our pharmaceutical services and
technology segment can work with Syncor's nuclear
pharmacy customers to develop, package, manufacture
and market new radiopharmaceutical products.
Our pharmaceutical distribution provider service
segment will be able to realize operational
efficiencies and gain new customers by leveraging the
distribution of radiopharmaceuticals.
Our hospital pharmacy outsourcing business formerly
known as (OHN) will also benefit from the expanded
nuclear pharmacy product offerings that Syncor
represents.
These are just a few of the great cross selling
opportunities we will be fully exploiting going
forward.
The entrepreneurial culture and management strengths
of Syncor are highly complimentary with Cardinal.
Both of our companies are dedicated in providing
superior service and value to our customers.
Innovation, hard work and constant improvements are
in both our corporate DNA.
I'm happy to announce that the senior leadership team
at Syncor will be an important part of Cardinal's
management after the acquisition. To date both
companies have completed extensive due diligence and
we are confident that the integration of our two
companies will proceed smoothly and quickly.
We expect the transaction to be accretive to Cardinal
Health's financial bottom line within the first year
before considering any synergies. Again this
announcement is a big win for Cardinal and for
Syncor's associates, customers, both the provider and
the manufacturer.
At this time I'd like to turn the call over to Bob
Funari who will give you his perspective.
Bob Funari: Thank you Bob and let me begin by saying that we're
delighted to be joining the Cardinal family of
businesses and look forward to many exciting
developments as we work together in some very
interesting opportunity areas.
I want to expand a little bit on some of the points
that Bob mentioned in his comments. First on the
radiopharmacy market itself and what has driven
radiopharmaceutical growth over the course of the
last 10 years.
That growth has principally been a function of the
use of nuclear medicine in diagnosing heart disease.
And that growth trend has been very strong indeed.
But looking ahead we see not only continued strength
in cardiology but we see growing use of nuclear
medicine in the diagnosis and treatment of cancer.
Specific examples would include PET and the first of
the (radioimmuna) therapeutics Zevalin. Bob touched
on the unique strengths of the distribution model at
Syncor and I just want to highlight a few of those
points.
Responsiveness and speed is certainly one of those
points. The ability to get a dose from the time we
get the order to the time that it's ready to be
administered to the patient within a 30-90 minute
window.
Scope of coverage, the ability to reach 90% of the
nuclear medicine procedures that are performed in
this country every year. Precision and accuracy in
dispensing. Last year we had seven defects per a
million doses dispensed out of our pharmacies.
Delivery to point of procedure or point of care, very
important in dealing with these critical drugs.
And finally as Bob mentioned, the ability to tailor
the product to meet the individual needs of each
patient.
To sum it up, it's essentially a model that delivers
the right drug to the right patient at the right
location, right now.
So how does Cardinal enhance this position that we
built over the last 28 years? I think both Bob and I
see nuclear medicine or radiopharmaceuticals as an
important part of the broader, complex pharmaceutical
market.
We believe that the experience and skills that we've
demonstrated in nuclear pharmacy combined with the
relationships, resources and competencies that have
been a part of Cardinal will allow us to bring to the
submerging market the ability to provide customers
with unique and comprehensive services that can take
product all the way from molecule to the point of
care.
Bob also touched on the medical imaging and overseas
businesses and I want to expand a little bit on that
scene.
Recently within Syncor we've been conducting a
comprehensive review of our strategy in our business
operations in an effort to make sure that we're
making the very best use of our company's resources.
We concluded that the long term objective of
profitable growth could be best achieved by focusing
our efforts and our resources on the two emerging
growth opportunities within our pharmacy services
business, specifically complex pharmaceuticals and
nuclear oncology.
The merger with Cardinal Health will allow Syncor to
accelerate the pace with which we can pursue these
opportunities.
We're currently in discussions with a number of
potential buyers who've expressed interest in
acquiring the medical imaging business. And we will
be exiting several non-strategic and unprofitable
international businesses and markets in the near
future.
Finally I want to close with a few comments about
people. Both companies are recognized leaders in
their respective fields because both companies have
values that attract people who have a desire to win.
There is a significant competition for talent today
and we'll be focusing our efforts on retaining talent
as we begin the process of integrating Syncor into
Cardinal.
Both companies also believe in continuously raising
the bar with respect to performance and we will be
looking for ways to put the best practices in place
across both companies. Bob.
Bob Walter: Okay can we open it up to any questions from the
audience.
Operator: At this time I would like to remind everyone in order
to ask a question please press star then the 1 on
your telephone keypad. We'll pause for just a moment
to compile the Q&A roster.
Your first question comes from (David Lyzinger).
(David Lyzinger): Thanks very much. First of all actually I wanted to
congratulate you on the transaction. I think it's a
perfect fit for both companies. So congrats. My
question is for Bob Walter.
Bob if you could tell us what you've assumed for the
renegotiation of the Cardiolite distribution fee
that's paid to Syncor since that's upcoming here and
that has not yet been finalized.
Could you tell us whether in your due diligence and
in your financial assessment you have assumed that
Cardiolite maintains the existing profit margin or
whether it goes down or whether it goes up?
Bob Walter: Dave thanks. I think I'd like to not answer it quite
that simply. Let me kind of broaden the discussion of
Cardiolite. First of all, we have had discussions
with Bristol Myers and of course obviously Syncor has
had discussions with Bristol Myers.
We're very aware of the long standing and successful
relationship for both parties over probably eight or
nine years. Bristol Myers and Syncor around
Cardiolite. We're obviously aware of that and we're
aware of the importance of Cardiolite in the past to
Syncor.
And I would also - I'm just giving you a lot of
background here. Obviously Cardinal as the company
has an extensive relationship with Bristol Myers as a
distributor in the packaging area, the area around
Magellan. And with use of Pyxis in their oncology
area.
So we have in depth relationships and I'm pleased to
say they are very strong and good relationships.
Now, the reason I want to go through all that is not
to just focus on a negotiation over the individual
price model but to say that that is a broad
relationship.
And for example, whenever I talk about an acquisition
with someone I try to talk about what is the full
total value offering so it's a win/win opportunity in
the negotiation.
In this instance we will have conversations with
Bristol Myers about the value of not only the Syncor
but the Syncor combined with the CPSI network in
capabilities.
It's one of the reasons that I wanted to talk about
what it is we're acquiring. What it is we're
acquiring is a unique capability to compound, to
dispense size, scale, A collection of talented and
trained technically trained pharmacists, quality,
regulatory compliance. All of those things adding on
to that the broad capability of Cardinal.
And so the discussions that we would intend to have
with Bristol Myers would be of a different nature
that would be additive to what Syncor has talked in
the past. And that would be to talk about the broader
Cardinal relationship and how does that fit into
that.
From our perspective, you know, we've pointed out
that Cardinal - that our management and Syncor's
management has additionally had conversation - has
talked with both the other two manufacturers in this
field about our capabilities.
And at this point, you know, there are no commitments
on a go forward basis about how we will broaden the
offerings to any one of those three.
But the confidence that Cardinal has is in the value
of what we're acquiring, the importance of that
network in the local markets and how valuable that is
not only to the provider but to one or all three of
these manufacturers.
So I think it's way premature to talk about exactly
how we'll price any one of these services because I
believe that we'll have a combination of services
that will serve us well.
And so, you know, as we don't know exactly on drug
distribution side. We talked about generics for
example, exactly how the pricing or margins will
develop two and three years out on generics. We're
confident about what we bring to market for the
generic manufacturers to know that the profitability
model will be strong for us.
So, you know, I know (David) that was a long winded
answer, it was a question that clearly I expected
should be on the table here and I've tried to answer
it broadly because it - right now there will be broad
discussions and I think the important thing are the
combination of these companies and probably it's why
you said it is the right combination.
Is that we bring, you know, we're all around each
other's space and we bring real unique things to the
market for both the provider ad the manufacturer.
So I think that's the best way I can express it. I'm
very confident about the business model, I mean the
economic model the ability to deliver long into the
future the kind of returns out of this investment.
(David Lyzinger): That's very helpful thanks for the explanation.
Bob Walter: Okay thanks (David). Next question.
Operator: Your next question comes from (Larry Marsh).
(Larry Marsh): Thanks and I just echo what (David) said.
Congratulations on what should be a great
combination. I guess Bob just to clarify maybe what
you're communicating in terms of the renegotiation.
Are you saying we really shouldn't hold combined
organization to kind of a year end goal of
renegotiating that I know you Bob Funari talked about
having to want to do. Or should we think of that as,
you know, it may not be completed by year end. Or
should we not think of that in the timetable.
Bob Walter: Well I'll answer it from my perspective and, you
know, I guess that exact question Bob and I didn't
rehearse but I'll give a (unintelligible).
I think that Syncor by itself has a lot to offer in
broadening services and understand the nature of the
discussions that have been going on with Bristol
Myers and their franchise.
I understand that we are in the front end of being
able to talk about the broader relationship that
Cardinal has to offer. I'm frankly not in any big
hurry because I don't mean to sound egotistical about
this. I frankly believe we have so much to offer it
is in our best interest to take our time to craft the
offering for as I said one or all three of the
manufacturing partners.
And this is - and so we need to find our way through
this, how to do it. So I'm not fearful of not
reaching some agreement quickly. On the other hand,
you all know how Cardinal moves. We're certainly in a
position to reach conclusions quickly.
Bob Funari and I understand well how we can link
businesses together. You know, think what - we
understand well our respective capabilities.
Secondly, we understand well how we can link
businesses together to create even more value.
Frankly I think that all three of the manufacturers
of the product would be interested in hearing about
that. I'm not here to kind of tee up a competitive
situation but we currently - these two organizations
are currently offering services to all three of the
manufacturers meaning (Niko Med) Bristol Myers and
(Meloncrat).
And so we will have discussions with all three of
them and hopefully come out with an outcome that, you
know, very confident will be positive to Cardinal.
And certainly because I'm comfortable about the
quality of the service, the combined service we can
offer I'm sure it will be well desired and welcomed
by these manufacturers.
And, you know, but right now to get into what is our
strategy and how we mix and match and all the rest of
that stuff it doesn't make any sense. But from a time
standpoint I'm under no pressure to reach a
conclusion by this calendar year end. Bob do want to
add anything to that?
Bob Funari: Bob I think you've covered most of the points that I
would have brought forward. Maybe just as a point of
reinforcement (Larry) I think that clearly the
combined capabilities of these two organizations
opens potential opportunities that I would never have
been able to talk about with (Don) or the other folks
at BMS.
So I think Bob's quite correct that we almost have to
step back and kind of rethink how we come at these
discussions because they can be a lot deeper and more
profound.
Bob Walter: (Larry) I think, you know, this is not a new
concept for Cardinal, the concept of bundling
services together. I don't mean for - to, you know,
for a pricing reason just how do you improve the
value of one service by adding it to another service
and, you know, the concept of cross selling.
It's not unique, we've talked for a long time about
how we do that on the provider side particularly at
the hospital level. And we've reported to the market,
you know, where we're making gains, combined gains.
We also are talking about it much more often about -
at the provider I'm sorry at the pharmaceutical
technology area towards the manufacturer. I've talked
and I said in my talk here that I've viewed ourselves
and as I've been talking since '95 that yes we are a
middleman.
And as the middleman we provide services to the
provider whether it's hospital, retail, clinics
downstream or to the manufacturer upstream and those
services are needed by both.
And you have to have a cohesive business strategy
but, you know, we broaden our service offerings both
downstream and upstream. I view this as a broadening
of service offerings. In one transaction a broadening
of service offerings both downstream and upstream.
So to try and talk through, you know, how do we
service any one manufacturer different than the
other. I think that would be inappropriate and
disrespectful of our relationships with our existing
relationships with those two manufacturers.
And frankly it's up to our creativity to figure out
how to add additional value. But, you know, said as
strongly as I can I'm very comfortable about the
unique capability that Syncor has and Syncor and CPS
combined bring. And then bring that all together with
what Cardinal has. I'm very comfortable about what is
the value we can deliver.
And so timing wise we can move quickly but I don't
believe we're in a hurry. There's no pressure to move
quickly. Can we take another question?
Operator: Your next question comes from (Robert Willoughby).
(Robert Willoughby): (Sean Harrington) in for (Robert Willoughby) thank
you. I guess this question is for Bob Walter. Could
you compare and contrast the profitability of the
Syncor operations and your internal capability and
what you think the combined entity might look like?
Bob Walter: Well Bob the combined operations we - let's see where
I can start. First of all, I'm going to focus just on
nuclear pharmacy operations because as I've said we
don't intend to be in the other businesses though
Syncor has other businesses that are profitable and
we do - but I'll lead. So we're just compare apples
to apples nuclear pharmacy operations.
(Robert Willoughby): Exactly.
Bob Walter: Their models of delivery service are slightly
different. The returns on sales frankly, the returns
on sales at CPSI that had been reported earlier are
slightly higher than the return on sales at Syncor.
We're still studying why is that and, you know, then
we got the other issues whether unique services at
Syncor provides and we want to make sure we
understand, you know, what are those costs and what
are the applications of those services into some of
our existing pharmacies.
So I'd say, you know, we start with saying there is
some difference to profitability, it is not dramatic
difference in profitability at the pharmacy level.
The next thing is, is what's the profitability in the
combination and we believe that there are a number of
synergies that will - operational synergies now we're
not talking about revenue generation of synergy. I'm
talking about operational synergies.
As I've said before this would - transaction would be
accretive to us without consideration for any of
these synergies but we have a long list that was
developed by both Cardinal corporate people, CPSI and
Syncor people.
And reached agreement, okay when are - where are the
opportunities here and we think there's a big
opportunity for both parties to get more productive
and improve our return on sales.
With regard to capital, our use of capital the - you
know I know that this is an area that Bob you pay a
lot of attention to. As we break the businesses at
Syncor apart the capital usage in the nuclear
business is significantly - has significantly a
higher turnover than capital use in their other
businesses.
So they already generate a very high return on
capital. Could we get better? Sure. The return on
capital at CPSI is also very high. The combined
return on capital as they stand today in these two
businesses would be the highest return on capital of
anything that Cardinal has.
So now can we improve on that? Yes probably in some
areas as we continue to work hard on the accounts
receivable area. But because frankly inventory turns
over so fast, it sits there for about a minute but
so, you know, hopefully that gives you some idea of
what the opportunities are without getting too much
into the numbers.
(Robert Willoughby): Very helpful thank you and especially for the return
comments.
Bob Walter: Other questions?
Operator: Your next question comes from (Len Yappi).
(Len Yappi): Okay the old HIPA recently has come out and commented
that diagnostic imaging procedures are the fastest
growing service expense they're seeing just about
PET. And I was wondering...
Bob Walter: (Len) it's hard to hear you right now. You have to
speak up a little bit.
(Len Yappi): Okay I was - can you hear me now?
Bob Walter: Yes sir.
(Len Yappi): Okay the old HIPA, the center for Medicare,
Medicaid has recently come out and stated that
diagnostic imaging procedures are amongst the fastest
growing services that they're seeing bills for
especially PET which is growing at a very rapid rate.
I was wondering if you're seeing that reflected
especially in Syncor's business if you could comment
and specifically on PET, if that's the case what do
you think is driving it?
Bob Walter: Okay I'm going to ask Bob Funari if he would
handle that and, you know, we are in both sides CPSI
and Syncor are in PET and in the same similar areas
but Bob's got a much better handle on the weekly and
daily and monthly dynamics of the industry. So Bob
what's your view on that?
Bob Funari: Yeah (Len) let me kind of give you kind of
summary here. We see some very exciting dynamics in
PET today. Fifty three percent of the cancers that
are diagnosed every year now have some form of
favorable reimbursement or approval for use in PET.
As we look at our own trends in terms of dose volumes
going out of our pharmacies to support PET imaging
procedures we see numbers that are up in the 25%-35%
range in terms of month over month kind of growth
rates.
So it's clearly a very steep curve that we're riding
at this point in time. There is a lot of fixed cost
leverage in this business if you're in the isotope
production end of the process.
Typically a cyclotron has a breakeven point today
somewhere between 16-18 doses per day and a capacity
that's somewhere between 75%-80%.
So there's a substantial amount of fixed expense
leverage in this business as you begin to move over
the breakeven point on a cyclotron and generate those
on incremental doses.
But clearly its' the applications and diagnosis of
cancer today that are driving PET and the utilization
of FDG. I would expect to see additional proprietary
PET (unintelligible) coming to the marketplace in the
years ahead and an expansion of the use of this tool
to begin covering other diseases as well.
(Len Yappi): Great thank you very much.
Bob Funari: Your welcome.
Bob Walter: Next question please.
Operator: Your next question comes from (Chris McFadden).
(Chris McFadden): Thank you, good afternoon and let me add my
congratulations to a very smart deal. Could you talk
a little Bob in terms of the combination, you know,
sensitive to the (Zygris) Syncor relationship and
what that's meant in terms of opening up some new
potential paths for growth for the nuclear pharmacy
business in light of the recent investment in TTS.
Can you talk about where you see longer term points
of connection between those two businesses? Thanks.
Bob Walter: Okay thanks (Chris). We actually - you kind of
preempted some things that I was thinking about
saying to close up a little bit. The lines are
blurring between manufacturer and distributor to
provider to patient.
They're blurring as manufacturers or providers are
trying to achieve efficiency. They're blurring where
unique services have to be developed by somebody and
there's not unique capability at some level.
They're blurring because products are changing,
there's more specialized products that has to be
handled in unique ways. And this whole demand for
specialized pharmaceuticals and the needs of biotech
and how you handle that - we've been talking about
how important that is.
We know in our stomachs that that's going to develop
and so we're looking - this is a broader discussion,
we're looking for ways to have more importance in
this category.
I view Syncor as a step and what I've said is - as
I've said to our people internally that I view Syncor
as a very important step, to accommodate Syncor with
our CPSI and broadening that capability is a very
important step, something that will be very
profitable to us.
But that Syncor - that this move by itself while it
will be profitable and good is a lead into a lot of
other capabilities and that's the homerun for us.
Now I want to make a point that when I talk about
these lines blurring we will not compete with our
customers. Our customer is a manufacturer upstream
and the provider downstream. We view ourselves as
service providers to them to improve what they do.
We've talked about the - some of these trends and as
(Chris) brings up, you know, our whole - some of the
recent initiatives in our PTS, pharmaceutical
technology area is focused on that, you know, the
ability to, you know, the capacity for
(lyothalization) or sterile capabilities.
And - because we recognizing that there's going to be
strong growth and we're experiencing it. You know
sold out capacity in some of our facilities and
strong demand.
So while I can't give you each piece of the puzzle,
you know, for one I don't want everybody to know what
else we might do next. But while I can't give you
each piece of the puzzle my intuition about where we
need to move and how to keep filling this puzzle up
tells me that this is an important growth area for
Cardinal in the future.
So that's kind of how we see this broadly. Bob Funari
is, you know, I know you have a similar vantage point
or view point. Anything you want to say about that?
Bob Funari: I again I think anything that I said or would
say Bob would certainly be complimentary to your
thinking here. I believe I think as you do that the
era that we're entering into is going to be
characterized by much more difficult, challenging and
complicated products.
And that we're going to need new skills and new
capabilities to be able to get those products to the
providers and to point of care. I would agree I think
that pharmacy and the pharmacy capabilities that
Syncor has built over the last 28 years are going to
play a very important role in finding solutions for
getting those products to where they need to get to.
But it's not the only piece in the puzzle and like
yourself we've recognized that it is a continuum
going all the way from the molecule out to the
patient. And that there are many pieces in that
continuum that need to be well articulated and work
well with each other in order to really have a
successful solution.
Bob Walter: Our issue really internally right now in this area is
setting priorities for initiatives not trying to find
initiatives. And so could we have a - next question
please.
Operator: Your next question comes from (Andrew Speller).
(Andrew Speller): Hi guys I want to lend my congratulations as well on
the deal. I'm a little bit more concerned here Bob
with market share issues. Do you think given where
we're at here with Central Pharmacy and Syncor being
the leader, any issues there in terms of marketshare?
And who are the regulatory bodies that have to be
cleared here?
Bob Walter: Well good morning. There are a lot of regulatory
bodies mainly the SEC and certainly the FTC.
(Andrew Speller): Are there any nuclear regulatory bodies that have to
sign off per say? Nuclear regulatory commissions?
Bob Walter: Well we're, you know, we comply with all those, you
know, meaning CPSI does and Syncor does. So I, you
know, we, you know, that's not the issue. I guess
mostly what I think when you're talking about market
share you're talking about FTC issues.
And first of all, we - these transactions must clear
those regulatory approvals and - including the
expiration of any (unintelligible) waiting periods.
We think this deal is very complimentary in terms of
both product offerings and geographies.
We're in the nuclear pharmacy business to a much
lesser degree. The acquisition puts in many areas
we're not already in and it enhances our ability to
service the GPOs, the members and their customers.
And our conversations with them would tell us that
our customers would view this positively. Meaning
yes, I'm talking downstream towards the provider and
upstream towards manufacturer that our preliminary
conversations with them would tell us this is a
better offering to them.
And so not to get into anything too technical about -
around FTC discussion but, you know, we are confident
we'll be able to provide a better service and that's
something that makes the customer happy not something
it makes them want to fight.
In terms of overlaps there's more than sufficient
actual and potential competition in every area. And
in any event the companies have complimentary product
lines.
So this transaction shouldn't raise concern but we
obviously don't want to talk it through over the
airwaves. We really want to be able to put forth our
points and develop understandings with the FTC and we
certainly will respect their opinions. So that's
where we are on it. Any other questions?
(Andrew Speller): Just a quick follow up if I could. You guys
have relationships through CPSI with (Meloncrat) and
(Niko Med) with neither of you distributing that
product. Syncor has the Cardiolite product. Are there
any relationships that need to be ironed out there
prior to this deal closing to get it done?
Bob Walter: I'm not going to get into - (Andy) I'm not
going to get into details of the relationship and who
all has which relationships because the relationships
are a little more complicated than that.
What I would say to you is that each one of - that
our management has talked as recent as this morning
with each one of these manufacturers. I personally
intend to be involved in it. And the reason I want to
be involved in it is that I'm in the best spot to
present all of Cardinal's offerings and create a
value offering.
And so out of respect to the existing relationships
with each one of these manufacturers they today this
is news to them and they are not fully up to speed on
what all of our offerings are.
So it's up to us to spend time with each one of them
and have them understand what we can offer and make
sure we understand what their objectives are.
Again I go back to - I've been in the distribution
business my whole life. I have a good intuitive sense
about the strength of the distribution and when your
commodity and when you have something to offer beyond
just a commodity offering.
And I would say this - I keep using the word unique
capabilities. What that means is that you can offer
something to someone else is not able to offer in the
same way. And so we intend to put that offering
forth.
I tell you my intuition about this. And as I said
I've been in lots of distribution businesses and
talked - and have studied a lot of them. We have an
incredibly unique offering to manufacturers and to
the providers and it will be well received.
And so, you know, just allow us the time to work out
what those relationships are. This is not intended to
be- we're going to take more of the value than we
deliver. This is intended to be - we can deliver
(unintelligible) combination more value to the
manufacturer.
So, you know, let us develop that and I don't really
want to get too much in depth. We know where we're
going and how we're going, you know, what our
objectives are.
But just let us develop that and trust that we
understand the strengths of what we bring and the
value of what it can bring to the manufacturers. Next
question.
Operator: Your final question comes from (Eric Coldwell).
(Eric Coldwell): Thank you very much. Can you hear me?
Bob Walter: Yes sir.
(Eric Coldwell): Great thank you very much. I'm curious Bob
you mentioned synergies earlier in the conversation
and you've not really detailed the synergies but
expect they'll be accretive I believe I heard you say
before synergies.
I'm curious if you'll have any centers that can be
consolidate as the merger comes together. And if so,
how many? Can you kind of give a sense of type of
markets. And then conversely how many centers will
you need to add to the geography to sort of round out
the market?
Bob Walter: Okay the question is around have we studied
combining the facilities? And yes we have studied
that but we haven't reached conclusions to where
there's opportunities to combine them or where
there's opportunities to expand.
Frankly, virtually every one of the 170 facilities is
experiencing pretty strong growth. So it's not like
we're sitting around, you know, and we have no growth
in facilities with tons of excess capacity and you're
just trying to consolidate.
So, you know, that's something that we'll develop.
We've speculated on where there's way to increase our
productivity and keep in mind though this isn't just
consolidating facilities. I mean we have - one of the
really valuable assets here is a well trained,
technically trained nuclear pharmacy team.
And you take - and whether they're in one facility or
two facilities they still have to compound and
process and service the customer with advice and the
compounding process.
And so it isn't like you just put two facilities
together and get rid of some nuclear pharmacist. That
is a very valuable commodity that we work awfully
hard to keep and so, you know, whether they're in one
facility or two that's probably not the biggest -
it's not a big issue.
But, you know, there are opportunities to get
synergies out of systems, of how we buy product and
things like that. So we're outlining those, you know,
we pretty quickly identified that they could be
substantial or that they will be substantial and
right now we're not prepared to say exactly how much
that is.
(Eric Coldwell): (Unintelligible) lot of clarification as well. Did I
understand you're going to be exiting all
international operations or that some may remain
post-merger?
Bob Walter: What we said is that our focus on this transaction is
nuclear pharmacy. I think I also used words like that
we intend to exit on a profitable basis - and
expeditiously meaning quickly but all of these
non-nuclear pharmacy businesses.
On the other hand there are some that are
complimentary and that are profitable and makes sense
to keep. We're under no cash pressure to sell quickly
so therefore we should and I would also point out
that most of the assets are in the imaging centers
and they're profitable and stable.
So we're not worried that we have to exit quickly,
take a short profit. So we're not worried about that.
We have studied it in depth, as Bob also outlined
they have been studying it in depth.
So we know we will be exiting them. There's probably
some facilities that are not imaging centers. Some
businesses that we may keep but I would say relative
to overall transaction it is very, very minor. It's
really not even worth the discussion about it. So
that gives you some sense of it.
Let me wrap the call up by saying that this
transaction is one we've contemplated for a long
while. We've watched what Syncor has done and we've
admired what they've done. We also could admire it
from the vantage point of CPSI and had the chance to
admire frankly what we've been able to accomplish in
our team at CPSI.
And so we know what we're getting involved in and
know about the growth of the market that we're
entering and the strength of these two companies. We
also know about what this might become.
And I would remind everybody that in 1994 Cardinal
was a drug distribution business only and as we
started thinking about what else we might become I
would guess nobody on the phone today including
myself could have dreamt of what we've become today.
This is a new path, it's additive to what we do. It's
certainly in an area that we're familiar with and
it's an important step that will strengthen our
presence in the healthcare market and so thanks to
everybody for participating and we'll sign off.
Operator: This concludes today's Cardinal and Syncor conference
call. You may now disconnect.
END
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Information regarding the identity of the persons who may, under SEC rules,
be deemed to be participants in the solicitation of stockholders of Syncor
International Corporation ("Syncor") in connection with the proposed
merger, and their interests in the solicitation, is set forth in a Schedule
14A filed on June 14, 2002. Cardinal Health, Inc. ("Cardinal") intends to
file a registration statement on Form S-4 in connection with the
transaction, and Syncor intends to mail a proxy statement/prospectus to its
stockholders in connection with the transaction. Investors and security
holders of Syncor are urged to read the proxy statement/prospectus when it
becomes available because it will contain important information about
Cardinal, Syncor and the transaction. Investors and security holders may
obtain a free copy of the proxy statement/prospectus (when it is available)
at the SEC's web sit at www.sec.gov. A free copy of the proxy
statement/prospectus may also be obtained from Cardinal or Syncor. Cardinal
and Syncor and their respective executive officers and directors may be
deemed to be participants in the solicitation of proxies from the
stockholders of Syncor in favor of the transaction. Information regarding
the interests of Syncor's officers and directors in the transaction will be
included in the joint proxy statement/prospectus. In addition to the
registration statement on Form S-4 to be filed by Cardinal in connection
with the transaction, and the proxy statement/prospectus to be mailed to
the stockholders of Syncor in connection with the transaction, each of
Cardinal and Syncor file annual, quarterly and special reports, proxy and
information statements, and other information with the SEC. Investors may
read and copy any of these reports, statements and other information at the
SEC's public reference room located at 450 5th Street, N.W., Washington,
D.C., 20549. Investors should call the SEC at 1-800-SEC-0330 for further
information. The reports, statements and other information filed by
Cardinal and Syncor with the SEC are also available for free at the SEC's
web site at www.sec.gov. A free copy of these reports, statements and other
information may also be obtained from Cardinal or Syncor. Investors should
read the proxy statement/prospectus carefully when it becomes available
before making any voting or investment decision.
# # #