California-based CareFusion (NYSE:CFN) posted a strong 3rd quarter and narrowed its full-year sales outlook, touting strong sales growth, even for its controversial ChloraPrep surgical wipes.
The company paid $41 million in January to settle a high-profile federal inquiry into marketing practices for ChloraPrep, but that didn’t put much of a damper on the product line. CareFusion credited ChloraPrep sales for helping drive its Procedural Solutions segment, which saw a 25% boost in Q3.
The organic growth helped CareFusion post a 21.4% increase to its bottom line on 7.4% growth in sales for the quarter.
In total CareFusion posted profits of $102 million, or 48¢ per diluted share, on sales of $968 million during the 3 months ended March 31. That compared with profits of $84 million, or 37¢ per share, on sales of $901 million during the same period last year.
Adjusted earnings of 60¢ per share fell 2¢ shy of analysts’ expectations for Q3, but CareFusion narrowed its revenue outlook to 5-7% for the year, locking in on the upper range of previous projections that put sales growth at 4-7%.
The ChloraPrep wipes were at the center of a 2-year federal probe and the very public outing of conflicts of interest at a prominent patient safety advocacy group
The San Diego-based medical device company received a U.S. Justice Dept. subpoena in April 2011, seeking information related to its relationships with healthcare professionals. Two more subpoenas connected to the case were issued in September 2011 and August 2012.
CareFusion and the Justice Dept. initially agreed to a settlement in April 2013, with CareFusion completing its last payment at the beginning of this year.
The ChloraPrep product was once endorsed by the influential National Quality Forum until its leadership found uncomfortable ties between one of its committee members and CareFusion. The U.S. Justice Dept. claimed in a Jan. 9 press release that CareFusion paid $11.6 million to get doctors to "recommend, promote and arrange for the purchase" of its ChloraPrep wipes to healthcare providers. Among those on CareFusion’s payroll was Dr. Charles Denham, who was co-chairman of the Safe Practices Committee at the National Quality Forum at the time of the alleged payments.
In 2010, the NQF’s Safe Practices Committee briefly recommended ChloraPrep for skin preparation prior to surgery to reduce surgical-site infections. The NQF told MassDevice.com earlier this year that it pulled the ChloraPrep recommendation before issuing its final 2010 report. The NQF said that it asked Denham to step away from his role as co-chair of the Safe Practices Committee 2 years ahead of the federal probe because officials at the forum were uncomfortable with his "inordinate interest" in including CareFusion’s ChloraPrep skin wipe in national standards.
The flap drew the attention of the New England Journal of Medicine, which ultimately backed the ChloraPrep product.
"We have made significant investments during the past several years to improve our quality and compliance systems, including our sales and marketing practices, and will continue to do so as part of our commitment to adhering to the highest standards and aligning with best global practices," CareFusion chairman & CEO Kieran Gallahue said following the January settlement. "We are pleased to resolve this matter and are confident we have strong practices, processes and controls in place."
ChloraPrep remains one of the key products in CareFusion’s infection prevention catalog.
CFN shares didn’t move much on the company’s earnings news, closing last night at $39.40, up 1 penny on the day. The stock is down 1.2% since the start of the year.
