Medtronic (NYSE:MDT) officials said today that its loss to Edwards Lifesciences (NYSE:EW) over heart valve patents cost it $245 million during its fiscal 2nd quarter, but won’t slow down the launch of its CoreValve device, which will compete with Edwards’ Sapien transcatheter aortic heart implant.
A federal appeals court recently upheld a lower court decision that the Medtronic device infringes Edwards’ intellectual property, raising the specter of a court injunction barring further infringement in the U.S.
Last week the U.S. Court of Appeals for the Federal Circuit ruled that Judge Gregory Sleet of the U.S. District Court for Delaware was right to uphold a jury’s decision that the Edwards patent is valid and infringed by the CoreValve device. The federal appeals panel also found that Sleet was right not to treble the $73.5 million in damages, even though the jury found that Medtronic’s infringement was willful. The panel also said Sleet should reconsider his decision not to grant Edwards an injunction barring further infringement by the CoreValve device.
CFO Gary Ellis told analysts during a conference call yesterday that the $245 million non-cash charge "represents our best estimate of the exposure" to the lawsuit. CEO Omar Ishrak said Medtronic is almost done moving its CoreValve manufacturing operation to Mexico to avoid a possible U.S. injunction.
"We are making good progress in shifting our manufacturing, and most of it is already complete and we intend to complete that very, very shortly. So by and large, we think we’ll get our volume outside the U.S. very shortly," Ishrak said during the call "At this stage, we’re planning U.S. launch as driven by our clinical trials. And I think it’s in … FY15 we’re planning the U.S. launch, and that is what we’re planning for. And we don’t expect this litigation to have any material impact on that."
As for the TAVI market overall, cardiac & vascular group president Michael Coyle said TAVI prices are holding up well in Europe, where CoreValve was the first TAVI device on the market.
"We’ve not seen any real pricing pressure there, it’s been more of the procedure volume pressure that we’ve seen there that has resulted in this bit of a slowdown from what we had thought at the start of the fiscal year," Coyle told the analysts.
The Fridley, Minn.-based medical device company reported its most recent quarterly results this morning, posting profits of $646 million, or 63¢ per share, on sales of $4.10 billion during the 3 months ended Oct. 26, representing a 25.8% profit slide on sales growth of 1.8%.
Excluding 1-time charges – including the hit from the loss to Edwards – adjusted earnings per share reached 88¢, as expected by the boffins on The Street.
MDT shares closed the trading day at $42.66, up 2.0%.