INDUSTRY OVERVIEW

The healthcare industry is a aggregation and Integration of sectors within the economic system that
provides goods and services to treat patients with curative, preventive, rehabilitative and comforting
care, it includes the generation and commercialization of goods and services lending themselves to
maintaining and re-establishing health. The modern healthcare industry is divided into various segments

And depends on the interdisciplinary teams of trained professionals and paraprofessionals to meet the
health needs of individuals and populations.

The healthcare industry is one of the of the world largest and fastest-growing industries. Consuming
over 10 % of gross domestic product (GDP) of most developed nations, healthcare can form an
enormous part of a country’s economy.

INTRODUCTION
Cardinal health Inc. is a global integrated healthcare services and products company, providing
customized solutions for hospitals, health systems, Pharmacies, ambulatory surgery centers clinical
laboratories and physician office s worldwide.

The company provide clinically-proven medical products and and cost-effective solutions that enhance
supply chain efficiency from hospital to home. Cardinal Healthcare connects patients, providers,
manufacturers and Pharmacists for integrated care coordination and better patient management.
Backed by nearly 100 years of experience with approximately 50000 employees in 46 countries, Cardinal
health ranks among top 25 on the fortune 500.

Cardinal health is more than a business, more than a partner, more than a hard worker. Its wings, its
unrivaled scale and focused approach lead to better solutions. The company’s strength flows from four
areas of expertise, logistics, product, business and patients’ solutions. Cardinal Health welcome new
challenges, anticipate trends and as wings bring support speed and mile High vision to all customer.

Financial Issues
Cardinal Health Inc periodical revenue missed analyst’s expectation as inventory and cost
issues hurt its cordis medical device unit and the U.S drug distributor said it saw prices of
generic drugs fall more than expected.

The company’s shares fell 18.8% to touch a additional 4 and a half year low of $ 52.93, and
Cardinal’s commentary on generic drug prices dragged down rivals McKesson Corp and
AmerisourceBergen Corp.
The company highlighted ongoing operational problems regarding inventory at its Cordis
business, which it bought for $ 1.9 billion in 2015 from Johnson & Johnson to increase its
medical device contributions and “build. an ex-U.S. infrastructure.

Supply chain cost rank second only to repayment problems as the issue top of mind for hospital
executives today, according to a new national survey commissioned by healthcare services
company Cardinal Health.

The supply chain is the second largest expense for healthcare providers, according to Cardinal
Health, which also estimates $5 billion of annual waste in high-value medical devices alone.

Shares of Cardinal Health fell over 13% last month, according to data provided by S&P Global
Market Cleverness, after the global healthcare services and products company reported fiscal
third-quarter 2019 operating results. While income clambered 5% from the year ago period,
operating income tumbled 21%. Both the company’s business segments—pharmaceuticals and
medical—reported sharply lower sectors.

If investors had to narrow down the poor performance to just the most important factor, then it
would be continued headwinds facing generic pharmaceuticals. Cardinal Health is not involved
in the sweeping litigation brought by attorneys general from 44 different states against generic-
drug manufacturers, but rather faces pricing and supply chain issues related to increased
competition and degrading market dynamics.

Cardinal Health's fiscal third-quarter 2019 operational results tell the story pretty well. Consider
how the most recent numbers mound up against the year-ago performance:

Metric Fiscal Q3 2019 Fiscal Q3 2018 Change (YOY)

Pharmaceutical revenue $31.4 billion $29.7 billion 6%
Medical revenue $3.87 billion $3.92 billion (1%)
Total revenue $35.2 billion $33.6 billion 5%
Pharmaceutical segment profit $536 million $596 million (10%)
Medical segment profit $155 million $199 million (22%)
Operating Income $432 million $546 million (21%)

The one silver lining for Cardinal Health was the strength of its specialty pharmaceutical
products, which allowed its largest business segment to grow revenue and offset persistent
weakness from generic-drug products. But Wall street remains concerned with shrinking
margins, which has everything to do with the stock's 45% decline in last three years.

Investors might be drawn to Cardinal Health for its healthy 4.6% annual dividend yield, but the
headwinds facing the generic portfolio cannot be ignored. Management said it expects to
provide more details on its outlook for the market when fiscal 2019 operating results are
announced in August. Analysts and investor are awaiting that update, but the stock’s slide
doesn’t suggest there’s much optimism for the business right now.

Estimate Std. Error t value Pr(>|t|)

mu 0.000358 0.000181 1.9801 0.047697
ar1 -0.029113 0.013451 -2.1643 0.030438
omega 0.000003 0.000001 3.1381 0.001700
alpha1 0.033281 0.002309 14.4149 0.000000
beta1 0.958701 0.001516 632.4068 0.000000
shape 4.265017 0.285977 14.9138 0.000000

Robust Standard Errors:

Estimate Std. Error t value Pr(>|t|)
mu 0.000358 0.000163 2.1997 0.027827
ar1 -0.029113 0.014157 -2.0564 0.039740
omega 0.000003 0.000002 1.1605 0.245830
alpha1 0.033281 0.002299 14.4737 0.000000
beta1 0.958701 0.001659 577.9434 0.000000
shape 4.265017 0.442432 9.6399 0.000000

---------------------------------*
* GARCH Model Fit *
*---------------------------------*

Conditional Variance Dynamics

-----------------------------------
GARCH Model : sGARCH(1,1)
Mean Model : ARFIMA(1,0,0)
Distribution : std

Optimal Parameters
------------------------------------
Estimate Std. Error t value Pr(>|t|)
mu 0.000358 0.000181 1.9801 0.047697
ar1 -0.029113 0.013451 -2.1643 0.030438
omega 0.000003 0.000001 3.1381 0.001700
alpha1 0.033281 0.002309 14.4149 0.000000
beta1 0.958701 0.001516 632.4068 0.000000
shape 4.265017 0.285977 14.9138 0.000000

Robust Standard Errors:

Estimate Std. Error t value Pr(>|t|)
mu 0.000358 0.000163 2.1997 0.027827
ar1 -0.029113 0.014157 -2.0564 0.039740
omega 0.000003 0.000002 1.1605 0.245830
alpha1 0.033281 0.002299 14.4737 0.000000
beta1 0.958701 0.001659 577.9434 0.000000
shape 4.265017 0.442432 9.6399 0.000000

LogLikelihood : 13682.43

Information Criteria
------------------------------------

Akaike -5.5325
Bayes -5.5246
Shibata -5.5325
Hannan-Quinn -5.5298

Weighted Ljung-Box Test on Standardized Residuals

------------------------------------
statistic p-value
Lag[1] 0.06873 0.7932
Lag[2*(p+q)+(p+q)-1][2] 0.98202 0.7507
Lag[4*(p+q)+(p+q)-1][5] 2.02853 0.7031
d.o.f=1
H0 : No serial correlation

Weighted Ljung-Box Test on Standardized Squared Residuals

------------------------------------
statistic p-value
Lag[1] 1.168 0.2798
Lag[2*(p+q)+(p+q)-1][5] 1.431 0.7569
Lag[4*(p+q)+(p+q)-1][9] 1.830 0.9243
d.o.f=2

Weighted ARCH LM Tests

------------------------------------
Statistic Shape Scale P-Value
ARCH Lag[3] 0.01564 0.500 2.000 0.9005
ARCH Lag[5] 0.37948 1.440 1.667 0.9185
ARCH Lag[7] 0.49628 2.315 1.543 0.9787

Nyblom stability test

------------------------------------
Joint Statistic: 140.4222
Individual Statistics:
mu 0.1333
ar1 0.5620
omega 10.5596
alpha1 1.2544
beta1 0.9590
shape 2.2707

Asymptotic Critical Values (10% 5% 1%)

Joint Statistic: 1.49 1.68 2.12
Individual Statistic: 0.35 0.47 0.75

Sign Bias Test

------------------------------------
t-value prob sig
Sign Bias 0.1555 0.876458
Negative Sign Bias 2.9811 0.002886 ***
Positive Sign Bias 0.1579 0.874541
Joint Effect 11.5388 0.009142 ***

Adjusted Pearson Goodness-of-Fit Test:

------------------------------------
group statistic p-value(g-1)
1 20 19.79 0.4075
2 30 27.38 0.5510
3 40 35.45 0.6326
4 50 43.10 0.7103

Elapsed time : 1.330619

> now we see if the model is fit in symmetric model(serial correllation test)
Error: unexpected symbol in "now we"
> std_res_1=as.numeric(residuals(garchfit1,standardize=TRUE))
> Box.test(std_res_1,lag = 10,type = "Ljung")# residuals should be white nois
e for the model to be fit.

Box-Ljung test

data: std_res_1
X-squared = 8.2751, df = 10, p-value = 0.602

> ArchTest(std_res_1,lags = 10)#null accepted which means all the volatility

clustering is captured by the model and now can be used for forecast.

ARCH LM-test; Null hypothesis: no ARCH effects

data: std_res_1
Chi-squared = 2.8288, df = 10, p-value = 0.9852

> plot(garchfit1)

Make a plot selection (or 0 to exit):

1: Series with 2 Conditional SD Superimposed

2: Series with 1% VaR Limits
3: Conditional SD (vs |returns|)
4: ACF of Observations
5: ACF of Squared Observations
6: ACF of Absolute Observations
7: Cross Correlation
8: Empirical Density of Standardized Residuals
9: QQ-Plot of Standardized Residuals
10: ACF of Standardized Residuals
11: ACF of Squared Standardized Residuals
12: News-Impact Curve

Selection: 12#We see no leverage effect

Make a plot selection (or 0 to exit):

1: Series with 2 Conditional SD Superimposed

2: Series with 1% VaR Limits
3: Conditional SD (vs |returns|)
4: ACF of Observations
5: ACF of Squared Observations
6: ACF of Absolute Observations
7: Cross Correlation
8: Empirical Density of Standardized Residuals
9: QQ-Plot of Standardized Residuals
10: ACF of Standardized Residuals
11: ACF of Squared Standardized Residuals
12: News-Impact Curve

Selection: 3 #IF YOU MODEL IS GOOD CAUSE THE BLUE LINE(PREDICTED STDEV)IS WIT
H IN THE GREY SHADE( ACTUAL STDEV) I.E. NOT TOO HIGH

Make a plot selection (or 0 to exit):

1: Series with 2 Conditional SD Superimposed

2: Series with 1% VaR Limits
3: Conditional SD (vs |returns|)
4: ACF of Observations
5: ACF of Squared Observations
6: ACF of Absolute Observations
7: Cross Correlation
8: Empirical Density of Standardized Residuals
9: QQ-Plot of Standardized Residuals
10: ACF of Standardized Residuals
11: ACF of Squared Standardized Residuals
12: News-Impact Curve