The medical device company took a $129 million pre-tax non-cash impairment of goodwill charge related to the Lotus valve system, which BSX acquired when it bought Sadra Medical for $450 million in November, 2010.
The charge was rolled into a massive $3.43 billion non-cash impairment of goodwill BSX took to its bottom line this week, swinging the company to a $3.40 billion net loss on $1.82 billion in sales for the 3-month period ended June 30, compared to a $146 million profit on $1.98 in sales during the same period last year. Excluding those charges the company said it would have posted a $239 million profit for the quarter.
In a separate filing with federal regulators, company officials said the company took the extra impairment charge over Sadra because of "revised expectations of the required effort, time and cost involved in completing the in-process projects and bringing the related products to market."
BSX CFO Jeffrey Capello said in a conference call with investors that the change in expectations was related to the regulatory environment.
"As you look at other people that have come into the U.S. market with clinical programs, clearly, the FDA has been more specific and more expansive in terms of their expectation of clinical programs," he said. "And so we are kind of reading that signal and adjusting our expectations accordingly in terms of our expected spend."
In the fall of 2011, Edwards Lifesciences (NYSE:EW) received FDA pre-market approval for its Sapien transcatheter device, following an arduous approval process that saw the company wait four months between a positive panel vote and a final decision.
BSX implanted the 1st 11 patients with its Lotus TAVI system in Australia in the Reprise I trial, which was unveiled earlier this year, and the Reprise II trial, which will be used to support a bid for CE Mark approval, should close enrollment in the 1st half of 2013.
Capello remained bullish on the company’s offering in the estimated $3 billion transcatheter valve replacement market.
"Feedback we’ve received from implanting physicians supports our belief that the Lotus valve offers a true second-generation set of features, including the valve being preloaded on the delivery system; valve function very early in the deployment process, which makes precise placement a less stressful proposition; and the ability to fully recapture and reposition the device, if needed," he said. "We continue to believe that the unique technology required through the Sadra acquisition represents a significant opportunity for us in the structural heart market."