Medical-device maker Medtronic Tuesday reported sharply lower earnings for its third quarter, in large part thanks to problems in its renal denervation business.
Medtronic reported in January that its Symplicity technology, used for renal denervation procedures, did not meet clinical trial efficacy objectives. The company took impairment charges in the quarter totaling $204 million as a result.
“We have convened an independent panel of experts to review the data and provide us additional insights of potential next steps for this business,” Omar Ishrak, chairman and CEO, said in a call with financial analysts Tuesday.
“It is important to note that while we are still in the process of evaluating potential next steps for our renal denervation business, an accounting impairment charge was deemed necessary as the majority of the value of the renal denervation intangible assets were tied to the timing of U.S. approval,” added Chief Financial Officer Gary Ellis.
Since Medtronic's January announcement, Covidien, a competitor, has reported it is pulling out of the renal denervation market while Boston Scientific Corp. and St. Jude Medical continue to seek approvals in that area.
Medtronic had acquired the technology in its 2010 purchase of Ardian, hoping the $800 million buy would move it into a new segment with significant revenue potential.
Medtronic reported third-quarter earnings of $762 million, a 23% drop from $988 million reported in the same period in its prior fiscal year. Third-quarter revenue hit $4.2 billion, 4% above the same period last year. The Minneapolis-based company continues to forecast revenue growth of 3% to 4% for its fourth quarter and full fiscal year while trimming earnings growth projections to $3.81 to $3.83 a share from a previous prediction of $3.80 to $3.85 per share for the full fiscal year.
Looking at specific business segments, the company's cardiac and vascular group saw quarterly sales of $2.1 billion, a 2% increase in constant currency and 1% as reported. The restorative therapies group recorded revenue of $1.6 billion worldwide for the quarter, a 5% rise in constant dollars and 4% in reported dollars. Medtronic's diabetes group reported quarterly revenue of $436 million, a 16% jump in constant and reported dollars. Diabetes group revenue growth was partially attributable to the ongoing launch of the company's MiniMed 530G with Enlite continuous glucose monitoring sensor, which was approved late in its second quarter.
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