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Covidien plc Message Board

  • scallopshells scallopshells Jul 2, 2012 8:50 PM Flag

    Warning Letters

    I am surprized that the stock has stayed so strong despite the recent FDA criticism. One warning letter is bad enough, but to have two significant issues within the same week is alarming, may suggest, or at least plant in the minds of HCP's that there are deficiencies with their products on a larger scale.

    The DUET sold 500,000 units in 2+ years, say there is a 20% pull back on sales, at $500-$600 per unit, that is $25,000,000 to $30,000,000 loss of sales year over year on a very high margin, proprietary product. Combine that with the warning letter and J&J may be able to capitalize on a larger scale within the surgical market. Surgical pulls in what $2 billion plus per year? even a 2 to 3 percent shake could mean the loss of $500 million in sales. Not a lot in the grand scheme of the company and it hasn't shaken anyone as the stock is still soaring. However, with all of these issues stacking up the stock may be ripe for a surprize dissappointment.

    Just my humble opinions and thoughts.

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    • Despite the news it appears to be bouncing back anyway. Don, do you still consider me an idiot? My comments were basically spot on, except that they were conservative. I only predicted a 25-30 million shake in sales...

      Aug 22 (Reuters) - Covidien Plc has recalled tools used to reinforce tissues during surgery and will stop manufacturing the products, taking a hit to earnings, the company said on Tuesday.

      Covidien said all lots of its Duet TRS Universal Straight and Articulating Single-Use Loading Units are affected.

      The loss of product sales, the implementation of the recall and other costs will reduce fourth-quarter earnings per share from continuing operations by several cents, the company said in a government filing.

      For fiscal 2013, the recall is expected to cut earnings per share from continuing operations by 5 cents to 10 cents, Covidien said.

      In the nine months ended June 29, Duet net sales were less than $50 million.
      ----------

      Again, back to my previous point, was this product put into the market without proper vetting? Where was the Quality oversight on this project?

    • Despite the news it appears to be bouncing back anyway. Don, do you still consider me an idiot? My comments were basically spot on, expect that they were conservative. I only predicated a 25-30 million shake in sales...

      Aug 22 (Reuters) - Covidien Plc has recalled tools used to reinforce tissues during surgery and will stop manufacturing the products, taking a hit to earnings, the company said on Tuesday.

      Covidien said all lots of its Duet TRS Universal Straight and Articulating Single-Use Loading Units are affected.

      The loss of product sales, the implementation of the recall and other costs will reduce fourth-quarter earnings per share from continuing operations by several cents, the company said in a government filing.

      For fiscal 2013, the recall is expected to cut earnings per share from continuing operations by 5 cents to 10 cents, Covidien said.

      In the nine months ended June 29, Duet net sales were less than $50 million.
      ----------

      Again, back to my previous point, was this product put into the market without proper vetting? Where was the Quality oversight on this project?

    • When will cov start its spinoff

    • They snuck this recall announcement out on Saturday, and the recall seems to be related to the warning letter about analyzing complaints. Not sure if its a negative or a positive by working with the FDA.

      http://www.fda.gov/Safety/Recalls/ucm314472.htm

      • 1 Reply to parkerbooty
      • Every Pharma/ Device/ Healthcare company has recalls and warning letters. That is understood, but with a smaller company like COV they have much less wiggle room to absorb these types of things.

        J&J is what 6 or 7 times the size of COV based on the CAP size? So if J&J has issues in one sector like or home health care where the average consumer makes the purchase decisions (like the McNeil/ Tylenol issues) they can compensate based on their business in the Device and Pharma sectors, Where HCP's are making the purchase decisions. As well some people may not be aware of the connections between McNeil, Ethicon, etc.

        However, COV is really only selling products as decided by the physician so if their reputation struggles there they don't have the same room to compensate based on consumer based products. As well, they are all connected under the Covidien name. Thus why they rebranded to Covidien from Tyco Healthcare to begin with, because Tyco was not a well respected named in the business. But how many issues can occur before their name gets tarnished again?

        At the end of the day, has it impacted their stock or sales? not one bit, and quite the contrary, they have continued to soar. But, for their own sake, in my opinion, they have issues that they need to address before they are considered a true market leader in the minds of physicians, surgeons, PAs, NPs and Hospital Admins and not just a good stock. Again, not faulting the stock, it has been a great stock, but rather the company leadership in this facet of their operations.

    • At the end of the day COV holds 35% of the surgical market, with Ethicon/J&J primarily holding the other 65%. Those that are with COV are doing it for the cost savings. Perhaps part and parcel with that is the thought that they may be getting a lesser product....

      Pretty scary to consider from a patient/ consumer perspective.

    • They only got 1 warning letter- the other was a product alert- which is different but may tie back into the observation of the warning letter that the company doesn't do complaint investigation/ CAPA correctly. A warning letter is very significant- but the next step- a consent decree- is what would hurt the bottom line. However, if you look at a stock like BAX- who got the warning letter/ consent decree in 2006, it didn't effect the stock as much as one would expect and it has risen significanly since 2006.

    • I made a major typo, I meant to say a 2-3% loss of revenue from the surgical div would mean a $50 million loss (NOT $500 million loss).

      With just under 500 million shares $50 million less would be 10 cents per share or enough to miss estimates.

      Again, JMHO.

 
COV
89.64+1.19(+1.35%)Oct 24 4:00 PMEDT

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