Medtronic Records a Big Drop in Q3 Profits

Despite a 12% spike in revenue, Medtronic recorded a fiscal third-quarter earnings drop to 7 cents a share as a result of acquisitions, research and development costs, and legal fees. Net income for the three months ended Jan. 25 fell to $77 million, a significant slide from $710 million, or 61 cents, in the year-ago period.

Revenue was $3.4 billion for the third quarter, due in large part to strong international sales, which grew 20%.

Excluding the charges, Medtronic would have earned $713 million, or 63 cents per share—2 cents better than analysts’ estimates. Charges included $275 million for the settlement of lawsuits stemming from its recalled Marquis line of implantable defibrillators and a stent patent infringement case by Cordis, a subsidiary of Johnson & Johnson.

“Our quarterly performance reflected the double-digit growth in our Neuromodulation, Diabetes, Spinal and ENT businesses and the successful close of the Kyphon acquisition,” said Bill Hawkins, president and CEO of Medtronic.

Spinal revenue of $808 million grew 35%, driven by $147 million in revenue from Kyphon. Excluding Kyphon, revenue grew 11% with strong double-digit performance in worldwide Biologics and strong growth in spinal sales outside the United States, the company said.

The deal for spinal device company Kyphon closed in November. With its $4.2 billion acquisition of Kyphon, Medtronic hopes to significantly expand its spinal surgery business and boost its international presence. At present, Medtronic specializes in devices for young patients with scoliosis and degenerative disc disease. By contrast, Kyphon focuses on older patients with vertebral compression fractures and spinal stenosis.

Wright Posts Q4 Sales Gains as Income Slides

Wright Medical Group, Inc. of Arlington, TN reported net sales of $103 million during the fourth quarter of 2007 (ended Dec. 31), a 19% increase compared to the same period last year, which the company said is a record level.

Net income, however, dropped to $1.4 million, or 4 cents per share, compared to $5.7 million, or 16 cents per diluted share. Wright attributed the slide to after-tax effects of $4.4 million for restructuring charges related to the closure of its operation in Toulon, France; $4.1 million for non-cash stock-based compensation expenses; $3.9 million for charges related to an unfavorable arbitration ruling with a consultant; and $109,000 for acquisition-related costs.

Excluding those costs, adjusted fourth-quarter net income increased 35% to $10 million.

For the quarter, artificial hip sales grew 9% to $34.4 million; artificial knees increased $27.3 million, up 19%; biologics increased 13.5% to $19.9 million; and extremities products surged 61% to $19 million.

“This quarter’s sales results were driven by an outstanding 61% global extremities growth rate as well as by solid performances in our large-joint reconstructive and biologics product lines,” said Gary Henley, president and CEO. “The combination of our excellent portfolio of internally developed products, our sales force specialization efforts and our external business development activities is proving to be a powerful growth driver, evidenced by our 19% global sales growth this quarter.”

Wright anticipates total sales for fiscal 2008 in the range of $430 million to $440 million. Expected sales for the first quarter of 2008 are $106 million to $109 million, representing 12% to 16% growth.

Symmetry Reports Initial Results for Q4

Warsaw, IN-based Symmetry Medical Inc. reported preliminary fourth-quarter 2007 revenue of $79.1 million, which was slightly below analysts’ estimates of $79.6 million. Reported earnings for the same period a year ago were $58.5 million.

As of press time, the company had not reported additional results for the quarter, ended Dec. 31. For full-year 2008, the company said it expects revenue to be in the range of $350 million to $360 million. The company also said a review of accounting irregularities at its Sheffield operation in the United Kingdom is ongoing. It added that the review is substantially complete and has not shown evidence that people outside the unit were aware of any irregularities or revealed errors at other divisions to date. Symmetry said it plans to file its fiscal 2007 results, including restatements for fiscal 2005 and 2006, with the Securities and Exchange Commission in March.

“We continue to be encouraged by the overall strength of the orthopedic markets and the uptake in orders across our global network,” said Brian Moore, president and CEO. “Our recent acquisition of DePuy’s orthopedic instrument facility further expands our capacity and will benefit all of our customers by adding another first-class manufacturing facility to the group. Progress at our recently opened Malaysian manufacturing facility is on schedule with case production established. We also have an engineering and sales capability in place staffed by local specialists trained in the US. These are major steps towards our goal of establishing a full-service Symmetry facility in Malaysia to serve the Asian market.”

Fourth Quarter Is Mixed Bag for Orthofix

Despite an increase in revenue from to $129 million from $116 million, Orthofix International NV reported a loss of $10.5 million, or 62 cents per share, for the fourth quarter of 2007 (ended Dec. 31), compared to a profit of $7.4 million a year ago. During the most recent quarter, the company recorded a $21 million impairment of certain intangible assets.

Adjusted earnings, excluding the write-down of certain intangible assets and other items, totaled $7.6 million, or 45 cents per share. Analysts had expected profits of 62 cents per share on revenue of $129.9 million.

“In a quarter with mixed results, we were disappointed with our fourth-quarter earnings. However, we were pleased with the balanced revenue growth across each of our core business units in the fourth quarter and during the full year of 2007,” said CEO Alan Milinazzo.

Revenue for full-year 2007 was $490 million, which was an increase of 34% compared to 2006. Reported earnings for 2007 were $11 million, or 64 cents per diluted share.

Orthofix, with US headquarters outside Charlotte, NC, also announced it is exploring the divestiture of its orthopedic fixation assets.

Osiris Losses Nearly Double in Q4

Columbia, MD-based Osiris Therapeutics Inc. said net loss almost doubled in the fourth quarter due to increased clinical trial expenses.

The stem cell therapy company posted a net loss of $21.6 million in the fourth quarter, compared to a loss of $12.7 million in the same period in 2006. Sales, however, surged 125% to $7.2 million, compared to $3.2 million in 2006. Sales of Osteocel, a treatment for regenerating bones in patients with orthopedic conditions, doubled from $3 million to $6 million.

Costs associated with producing Prochymal (a drug developed to treat autoimmune diseases in patients with bone marrow transplants) for clinical trials the company is conducting hurt earnings, according to company officials. Osiris launched its Phase III trial of the drug in October.

For 2007 overall, the company posted a net loss of $53.9 million on sales of $17.3 million, compared to a 2006 net loss of $45 million on revenue of $9.5 million.