Medtronic (NYSE:MDT) saw its fiscal 3rd-quarter profits slide nearly 23% after it took a more than $200 million writedown on the renal denervation assets it acquired along with Ardian in 2010 and tightened its earnings outlook for the rest of fiscal 2014.
The Fridley, Minn.-based medical device company reported profits of $762 million, or 75¢ per share, on sales of $4.16 billion for the 3 months ended Jan. 24, for a profit decline of 22.9% on sales growth of 3.4%. Adjusted to exclude 1-time items, including the $204 million after-tax charge on the Ardian hypertension assets, profits were $916 million, or 91¢ per share, in line with analysts expectations but still lower than fiscal Q3 2013 earnings.
Earlier this year, Medtronic shocked the medtech world with the announcement that its Symplicity HTN-3 clinical trial failed to meet its efficacy endpoint, dashing hopes for U.S. approval this year. The news prompted Boston Scientific (NYSE:BSX) to suspend its own renal denervation program and pushed Covidien (NYSE:COV) to spike its program altogether.
"While the company is still in the process of evaluating the long-term strategy for its renal denervation program, an impairment charge was deemed necessary as a majority of the value of the renal denervation intangible assets were tied to U.S. approval," the company said today in a press release.
"In Q3, our overall organization once again delivered balanced growth, with strong performances in some areas offsetting challenges in other parts of our business," chairman & CEO Omar Ishrak said in prepared remarks. "The U.S. approvals of CoreValve and the MiniMed 530G System marked important milestones and are part of an ongoing product launch cadence of innovative therapies," said Ishrak. "In addition, Medtronic is uniquely positioned to lead the shift to value-based healthcare, directing our products and solutions to help providers, payers, and governments achieve their goals in driving more value into healthcare systems around the world. We are seeing promising results from our early efforts, including both our Cath Lab Managed Services and Cardiocom businesses, and we believe that we have significant opportunities ahead as we transform our company from being primarily a device provider today into the premier global medical technology solutions partner of tomorrow."
Medtronic affirmed its sales outlook for the rest of fiscal 2014, at constant-currency growth of 3%-4% for both the fiscal 4th quarter and fiscal 2014, but narrowed its earnings outlook from $3.80 – $3.85 to $3.81 – $3.83 or adjusted EPS growth of 6%.
