Covidien’s (NYSE:COV) biologic hernia mesh product has hit a "brick wall," according to CFO Charles Dockendorff, but does that mean the company is looking to move on from the product it dropped more than $80 million to acquire?
Dockendorff, responding to a question from CitiGroup analyst Matthew Dodds at the investment bank’s recent investor’s conference, sounded downbeat about the fate of the product compared to the company’s synthetic mesh.
"Hernia has been very, very interesting because we continue to have a lot of success in the synthetic mesh market. I don’t see that as changing," he said. "In fact, we are launching small interactive new products there that you’re going to be seeing throughout the year. The other 2 components of hernia, though, have been really interesting. So biological mesh has just hit a brick wall for a lot of different reasons," he said.
Dockendorff said the company has experienced push back on the high price of its Permacol biologic mesh, a porcine dermal collagen implant for hernia and abdominal wall repair, which the company acquired in its 2008 buyout of Andover, Mass.-based Tissue Science Labs. The company paid some $80 million for the company.
"While there was a case to be made when people were using them in highly infected tissue patients, without that claim and without that marketing behind it, that market has just collapsed across-the-board," he said.
However, Dockendorff didn’t sound like the company was looking to move on from the product just yet.
"We’re going to continue to have a nice business there. It’s not going away anytime soon, but it certainly not going to be growing significantly," he said. "You’re not going to see a lot of R&D there, and that really is one-off product sort of situation there. And without the promise for continued growth in the market … there are better opportunities elsewhere."
Covidien’s hernia repair business is wrapped up in the company’s soft tissue repair business line, which posted about $1 billion last year, according to regulatory documents.