Orthofix deals vascular unit to Covidien for a $19 million net

March 9, 2010 by MassDevice staff

Orthofix International offloads its vascular compression products business to Covidien, saying it will net about $19 million from the deal, and boosts its full-year earnings guidance.

Orthofix International NV (NSDQ:OFIX) sold its vascular compression products business to Covidien (NYSE:COV) in a deal it said should yield about $19 million Orthofix will use to pay down its debt.

The Dutch firm, which maintains its U.S. headquarters in Boston, said the deal includes its AV-Impulse mechanical compression technology and is aimed at focusing on "strategic market segments that represent long term growth potential," CEO Alan Milinazzo said in prepared remarks.

The deal includes provisions that will see Orthofix provide "transitional services" to Covidien for up to five months and supply the Mansfield, Mass.-based medical products conglomerate with two years’ worth of the Impad consumables used with Orthofix's compression therapy devices, among other supplies it will provide for 90 days.

Orthofix upped its full-year earnings guidance as a result of the deal, saying it expects earnings per share of $2.24 to $2.28, up from its previous forecast of between $2 and $2.04 per share. But despite the $19 million it expects to land from the sale, expenses from the deal will lower first-quarter revenues by $2 million to $3 million and also take their toll on full-year sales. Orthofix lowered its 2010 revenues forecast from between $580 million and $588 million to $568 million to $576 million.

The good news is that the $19 million will cut the company's debt by about 7 percent and boost Q1 EPS by 42 cents.

In February Orthofix turned the page on a fairly disastrous 2008, swinging from a $228 million loss to a $24 million gain over the course of 2009. Sales were $144 million during the three months ended Dec. 31, 2009, an 8 percent increase from the $132 million the company reported during the same period the prior year. Big increases in sales of spinal stimulation devices and implants, which made up about half of the company's total sales during the quarter, drove growth and made up somewhat for declines in the company's biologic and sports medicine businesses, which both reported lower sales.