Leading distributor of pharmaceuticals and medical supplies Cardinal Health (CAH) recently revealed at the Society of Nuclear Medicine’s 59th Annual Meeting that it intends to inaugurate three cyclotrons in different states of the U.S.

Cyclotrons are vital in the production process for Positron Emission Tomography (“PET”) imaging agents. With this move, the company will grow its capability to produce molecular imaging compounds that facilitate early diagnosis of serious ailments such as cancer or heart condition.

Cardinal runs a national network of almost 40 cyclotrons. The company’s three latest cyclotrons will be based in Portland, Oregon, Chicago and Sacramento, California. The concerned cyclotrons will be the first in Illinois and Oregon while California will get its third cyclotron. The new cyclotrons will be housed close to Cardinal’s nuclear pharmacies. In addition, these cyclotrons will aid research in neighboring universities and hospitals.

The Nuclear Pharmacy Services operation of Cardinal Health runs a far flung chain of radiopharmacies. This set up is critical for enabling clinical trials.

Cardinal Health is ranked in the Fortune 500. With over $100 billion in annual sales, Cardinal Health remains one of the largest distributors of pharmaceuticals and medical supplies in the U.S., with a diversified product portfolio, which may partly insulate it from the current economic uncertainty. The company stands to gain from the gradual shift in mix from the bulk to the higher-margin non-bulk sector of the Pharmaceutical segment. It is also riding the generic wave. Overall, Cardinal is benefiting from a spate of tuck-in acquisitions and capital deployment strategies.

However, the company faces tough competition across all its business segments, which may continue to pressure pricing and margins. Its major competitors in the pharmaceutical supply chain segment include McKesson Corp. (MCK) and AmerisourceBergen Corp. (ABC). We currently have a long-term Neutral rating on Cardinal. The stock currently retains a Zacks #3 Rank, which translates into a short-term “Hold” recommendation.

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