Thomson Medical Education (TME) -- whose three businesses combined comprise the world’s largest medical-education organization -- will be sold.
Thomson announced the sale last week as it posted second-quarter earnings of $171 million, down from $301 million a year earlier when there was a big one-time tax gain, and revenues of $2.1 billion, up 7% from the prior-year period. Thomson also introduced a “business optimization” plan designed to save about $300 million from the holding company’s costs by 2009.
TME, part of the Scientific and Healthcare group, accounted for about $97 million in revenue last year and will be shed as part of a continued sale of minor businesses.
“We found that [TME] doesn’t fit well with our long-term growth strategy” of providing applications and services to healthcare professionals, insurers and employers, said Kyle Christensen, a spokesman.
Including TME and IOB, another business being sold from the legal and regulatory group, Thomson has announced the sale or planned sale of units totaling $355 million, or about 4% of revenues. Thomson holds onto the majority of its scientific and healthcare holdings, which combined amount to about $1 billion in annual revenue.
TME employs 650 employees across three main businesses: Physicians World, Gardiner-Caldwell and Scientific Connexions. The medical-education units, which derive much of their revenue from pharmaceutical company grants, have a different revenue stream than Thomson’s subscription-based businesses.
The decision to divest TME follows the departure of top executives Jeff MacDonald, former head of the med ed unit, and Marty Cearnal, its chief strategy officer. MacDonald was replaced by Dik Barsamian, division EVP, earlier this year. Kevin King, head of Thomson Healthcare, who also resigned recently, has not been replaced, Christensen said.
Thomson also announced a series of “business optimization” initiatives to take place between 2006 and 2009 designed to generate savings of $10 million, $50 million, $90 million and $150 million each year, respectively. The plan requires an investment of $250 million during the period, for a net savings of $50 million.
Thomson says the precise timing of costs and savings from the program is difficult to predict but that it will focus on procurement, supply chain management and financial reporting systems.