Shares of Covidien plc (COV) fell 1.7% after the market closed last Friday following the company's announcement of recalling some of its Pipeline and Alligator brain embolism devices after internal product testing revealed a serious problem with their delivery wire. However, the company has not yet received any reports of patient injuries related to the problem.
Covidien mentioned that polytetrafluoroethylene (:PTFE) coating applied to the delivery wire of certain lots of its Pipeline Embolization and Alligator Retrieval devices could delaminate and detach from them.
PTFE coating is used to lessen friction between devices and ease navigation through the vasculature. Delamination of the PTFE coating could potentially lead to embolic occlusion in the cerebral vasculature leading to the risk of stroke or even death.
As many as 32 Pipeline Embolization Devices and 621 Alligator Retrieval Devices are affected by this recall. These devices were manufactured and distributed from May 2013 to March 2014.
The affected Pipeline Embolization Device was sold in the U.S., Australia, France, Germany and U.K., and the affected Alligator Retrieval Device was sold in the U.S., Australia, Canada, Europe and Latin America.
Covidien's Pipeline Embolization Device is used for the endovascular treatment of adults with large or giant wide-necked intracranial aneurysms in the internal carotid artery from the petrous to the superior hypophyseal segments. On the other hand, the Alligator Retrieval Device is meant for use in the peripheral and neuro-vasculature for foreign body retrieval.
Covidien alerted customers about the recall by letter on April 1, 2014, and decided to replace the recalled products. The company has also notified the U.S. Food and Drug Administration (:FDA) and other regulatory bodies about the recall.
Covidien posted a 3.1% rise in first-quarter fiscal 2014 adjusted earnings per share to $1.00, which beat the Zacks Consensus Estimate by 6 cents. Despite facing headwinds from foreign exchange movements, the medical device excise tax and incremental investments in emerging markets, the company managed to deliver a positive earnings surprise in the quarter.
Revenues in the quarter grew 2.8% (up 5% in constant currency) to $2,639 million, exceeding the Zacks Consensus Estimate by 1.4%. On a geographic basis, revenues in the U.S. market increased 3.0% to $1,307 million while international revenues increased 2.6% to $1,332 million, driven by 11.5% growth in emerging markets.
Covidien reiterated its outlook for fiscal 2014. The company expects revenues to grow 2.5% year over year at constant exchange rate for fiscal 2014.
Currently, Covidien retains a Zacks Rank #2 (Buy). Other players in the medical products industry that are currently worth a look include Enzymotec Ltd. (ENZY), St. Jude Medical Inc. (STJ), and William Demant Holding A/S (WILYY). Enzymotec carries a Zacks Rank #1 (Strong Buy), while both St. Jude Medical and William Demant Holding retain a Zacks Rank #2 (Buy).
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