By Tess Stynes
Medtronic Inc. said its fiscal third-quarter earnings fell 23%
on a big write-down related to the medical-device maker's
renal-denervation program, masking improved sales in product lines,
such as for diabetes treatment.
In January, Medtronic reported that its Symplicity technology,
used for renal-denervation procedures to treat difficult cases of
hypertension, failed to meet its primary goal for efficacy in a
U.S. clinical trial. Medtronic acquired the technology, which sends
electrical impulses to nerves in the kidneys to help lower high
blood pressure, with its 2010 acquisition of Ardian Inc., for $800
million in cash and additional milestone payments.
Medtronic had seen the renal-denervation technology as a
potential new source of revenue growth amid sluggish sales for some
of its mature product lines like implantable pacemakers and
defibrillators. The company had previously expected the device to
be approved at the end of its 2015 fiscal year, and that sales
would start picking up in its 2016 fiscal year. With last month's
clinical trial disappointment, the company says it is still
evaluating the product's future. If Medtronic does ultimately win
U.S. regulatory approval, the company doesn't expect a significant
sales uptick before its fiscal year 2019, Chief Financial Officer
Gary Ellis said in an interview Tuesday.
The Minneapolis-based company recorded a pretax impairment
charge of $236 million related to the Ardian assets. However, the
company also received a tax benefit of $32 million from the
write-down, in addition to an increase in net income of $39 million
from lower anticipated milestone payments to Ardian shareholders,
the company said. In all, after-tax charges related to the Ardian
assets totaled $165 million.
"We expected a certain uptake in U.S. sales in a certain time
frame and we're not going to meet that," Medtronic Chairman and
Chief Executive Omar Ishrak said in an interview. "It's too early
to conclude exactly what we're going to do with" the technology, he
said.
Medtronic will present more detailed study data from the U.S.
trial at a medical meeting in March. The presentation will be
closely watched by competitors like St. Jude Medical Inc. and
Boston Scientific Corp., which are also developing
renal-denervation products.
For fiscal year 2014, the company narrowed its per-share
earnings estimate to $3.81 to $3.83, from its previous estimate for
$3.80 to 3.85.
In the period ending Jan. 24, Medtronic reported a profit of
$762 million, or 75 cents a share, down from $988 million, or 97
cents a share, a year earlier. The year-earlier period included a
tax benefit of three cents a share.
Revenue increased 3.4% to $4.16 billion, up from $4.02 billion a
year earlier. Excluding currency fluctuations, revenue rose 4%.
Sales in the quarter were helped by Medtronic's diabetes unit,
which reported revenue of $436 million, up 15.6% from $377 million
a year earlier. The sales growth was driven by sales of a new
insulin pump product, the company said.
Defibrillation systems revenue, representing 15.7% of total
sales, was relatively flat in the quarter at $655 million, compared
to $654 million a year earlier. Sales of defibrillators, which
shock hearts to stop potentially deadly rhythm distortions, have
long been under pressure from government scrutiny of implant
practices in the U.S., austerity measures in Europe and general
economic uncertainty.
Tess Stynes contributed to this article.
Write to Joseph Walker at joseph.walker@wsj.com
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