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CareFusion Takes the Public Stage With a Wealth of Experience

CareFusion Corp.

Chairman and CEO: Kieran Gallahue.

Revenue: $3.9 billion in 2010; $3.6 billion in 2009.

Net income: $194 million in 2010; $568 million in 2009.

No. of local employees: 1,800.

Headquarters: Carmel Valley.

Year founded: 2009.

Stock symbol and exchange: CFN; NYSE

Company description: In 2009, Cardinal Health spun off CareFusion which provides products and services to manage patient care and reduce infection.

Keys to success: Focuses on key areas in the field of health care delivery, delivering products and services that help hospitals improve patient well-being while lowering costs.

“It’s something old, but something new.”

That’s a good way of describing public company CareFusion Corp., a provider of equipment used to reduce infections, manage medications in hospitals while preventing medication errors.

The company has a history, but not on Wall Street.

It is not only one of the largest companies by market cap, but one of the newest San Diego-based companies trading on Wall Street.

“We’re a global medical technology company, and the products that we make are very important to hospitals worldwide,” said Jim Mazzola, senior vice president for corporate marketing and communications. “We make products designed to help improve the safety of patients at lower cost, which are two really important things in health care right now. Hospitals are under increasing pressure to improve the outcomes while reducing the costs. And the products we make are designed to do just that.”

In the Beginning

The business has been around for a long time with its start as Pyxis back in the 1990s.

Drug distribution giant Cardinal Health purchased the business in 1996, and then spun off the unit as part of a stock offering in September 2009.

With a year-end 2010 market cap of $5.7 billion dollars, CareFusion ranks No. 5 on San Diego Business Journal’s list of Largest Public Companies.

The recently minted public company helps to underscore the region’s strength in the health care sector.

The share price has been trading close to its recent 52-week high of $29.97 compared to its 52-week low of $20.63.

Recently the company made a strategic move in its top executive ranks, and has been expanding the product lines through acquisitions to hone in on its business focus.

In February, the company hired well-known executive Kieran Gallahue as chairman and CEO, replacing the retiring David Schlotterbeck.

Gallahue had previously been president and CEO of medical device maker San Diego-based ResMed Inc., which is No. 6 on the list of Largest Public Companies. A 20-year veteran of the industry, Gallahue knows his way around the world of medical devices.

Even before his arrival, the business had been shedding units not directly related to its core strengths.

In January, the company sold its medical instrument repair services to a Seattle private equity firm. And in February, the company sold its international medical products distribution unit to a Swiss-based company for $130 million.

Then, in April, CareFusion made what it considers a key acquisition.

Adding to the Portfolio

The company paid $17 million for Vestara, an Irvine concern with new technology that automatically sorts and separates hazardous and nonhazardous pharmaceutical waste for disposal.

The disposal of pharmaceutical waste is approaching frightening levels, given that U.S. hospitals purchase 4 billion-plus ampules, bottles and vials which create more than 84,000 tons of hazardous waste.

“The things we manufacture — fusion pumps and ventilators — are highly valued by our customers,” said Mazzola. “We do have very strong core businesses, products that are market leaders in their respective categories, so it is a great foundation. But we’re always looking for opportunities to extend into adjacent areas to improve that foundation by making small acquisitions, or providing new products and services that are adjacent to our existent offerings.”

Duane Roth, the chief executive officer of Connect, the trade group promoting entrepreneurial activity in the region, notes that CareFusion traces its lineage all the way back to the earliest days of the biotech revolution which began with medical devices, which were made possible because of the talent in the fields of engineering and medicine. “There was a lot of mechanical engineering talent in the region,” Roth said, due to the defense and aerospace industries presence in the area.

He said CareFusion has been able to build on its past successes of its core products.

“A lot of that early talent came out of the military … Then Pyxis (automated drug dispensing devices company) happened, which became part of CareFusion, all because people were looking to solve problems in medicine.”

“They have a phenomenal story to tell,” Roth said.

Tom York is a contributing editor for the San Diego Business Journal.

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