Covidien plc (NYSE:COV) might want to think about putting all its bets on the strongest horse in its stable, the medical devices division.
The Mansfield, Mass.-based medical products conglomerate managed to generate a significant second-quarter boost to its bottom line, despite a 5 percent slide in its top line, mostly on the strength of vigorous growth for its largest segment.
Covidien posted sales of $2.66 billion for the three months ended March 26, down 4.8 percent compared with $2.80 billion during the same period last year. Net income was $413 million, or 82 cents per diluted share, up 125 percent compared with net income of $184 million (36 cents per diluted share) during Q2 2009.
The sales slide reflects the loss of $258 million in sales of oxycodone hydrochloride extended-release tablets, a generic Oxycontin equivalent that Covidien agreed to stop selling per the settlement of a patent infringement lawsuit with Perdue Pharma LP, according to a press release. That made for a rough quarterly comparison for the pharmaceuticals division, which logged sales of $619 million for the quarter, down 30 percent compared with $889 million during the 2009 second quarter. Better things might be in store for the division during the second half of the year, however, now that the Food & Drug Administration cleared Covidien’s Exalgo extended-release hydromorphone pain drug.
Covidien’s medical supplies segment had Q2 sales of $421 million, down 5 percent compared with $445 million during Q2 2009.
Medical devices, on the other hand, provided a boon that more than offset the smaller divisions’ declines. Sales for that segment reached $1.62 billion for the quarter, up 10.8 percent compared with $1.46 billion during Q2 2009. Sales in the U.S. surged 13 percent to $669 million, while overseas sales rose 7.7 percent to $953 million. Here’s how the sales broke down within the division:
|Q2 2010 ($m)||Q2 2009 ($m)||% change|
|Soft Tissue Repair Products||$213||$198||7.6%|
|Oximetry & Monitoring Products||$194||$167||16.2%|
|Airway & Ventilation Products||$198||$184||7.6%|
Covidien said the surge in vascular product sales was paced by products it acquired via the May 2009 buyout of VNUS Medical Technologies Inc. and its purchase of Bacchus Vascular Inc. in March of that year.
Its energy and oximetry lines were again boosted by " a sharp rise in sales of vessel sealing products" and the $210 million acquisition of Aspect Medical Systems in November 2009.
The company lowered its outlook for the rest of fiscal 2010, estimating sales growth of between 5 percent and 8 percent, down compared with previous guidance of 6 percent to 9 percent growth for the full year. Covidien said the downgrade reflects "the recent strengthening of the U.S. dollar against most currencies, the approval of Exalgo, the sale of the U.S. nuclear pharmacies, coupled with weakness in certain product lines."
The company said it expects sales for the medical devices division to grow between 9 percent and 12 percent during fiscal 2010.