Financial News

Charges Lead to 1Q Loss at Boston Scientific

The numbers though, tell a slightly different story.

One-time charges led to a $13 million net loss in the first quarter, ended March 31. That loss—equivalent to 1 cent per share—is significant when compared with the $322 million in profit the Natick, Mass.-based firm posted in the first quarter of 2008. Revenue fell slightly (1.76 percent) to $2.01 billion, but when adjusted for the effects of the strong U.S. dollar and divestitures, it rose 4 percent.

While the numbers were down significantly from last year, Boston Scientific’s earnings were only a tad below analysts’ expectations. Analysts polled by Thomson Reuters had expected earnings of 12 cents per share on revenue of $2.02 billion.

“We are off to a good start,” Jim Tobin, Boston Scientific president and CEO, told analysts during a conference call. “I see the first quarter as a solid foundation on which we can build a very strong 2009. We have one more quarter of tough comparisons to last year, but then you’re going to see a great third quarter and even greater fourth quarter. A lot of the elements needed for a strong year are represented in the [first] quarter.”

Some of those elements included a 4 percent rise in sales of cardiac rhythm management devices (such as defibrillators and pacemakers), a 5 percent increase in urology product sales and an 8 percent jump in neuromodulation device sales. Boston Scientific reported $589 million in cardiac rhythm management sales, $104 million in urology product sales and $61 million in neuromodulation device sales, according to its latest earnings report. Sales of the company’s cardiovascular devices, which are central to its business, fell by $37 million, but were flat when adjusted for currency exchange rates. The decline includes a slight drop in sales of drug-coated stents to $489 million.

Compounding the lower sales figures during the first quarter were several one-time charges that further eroded corporate profit. Besides one-time charges for job cuts, Boston Scientific shelled out $237 million over a patent dispute with New Brunswick, N.J.-based Johnson & Johnson involving drug-coated stents, the tiny mesh tubes surgeons use to prop open blood vessels that have been cleared of plaque.

That figure represents only a fraction of the costs in store for the company for infringing upon a Johnson & Johnson patent. Though two stents made by Johnson & Johnson were found to infringe upon a Boston Scientific patent, accounting rules do not allow the company to estimate the size of any expected payments.

First-Quarter Revenue Skyrockets at Mindray Medical

When the global economy shifted into crisis mode earlier this year, executives at Mindray Medical International Limited shifted the company’s focus along with it.

Almost immediately, the company instituted measures to control product costs and reduce operating expenses—moves that executives believed would help Mindray Medical survive the economic maelstrom and lead to future growth.

“During the quarter, [we] responded quickly to the challenging market dynamics and initiated measures to effectively control product costs and reduce operating expenses to sustain operating profit growth,” said Xu Hang, Mindray chairman and co-CEO). “We are confident that Mindray will continue to outperform the market in the remainder of 2009 and beyond…”

If the rest of the year is anything like the first quarter, Mindray will easily outperform the medical device market. During the first three months of 2009, net revenue at the Shenzhen, China-based firm jumped 53.5 percent to $134.2 million, and gross profit increased 51.2 percent to $74.7 million. In addition, operating income climbed 12.6 percent to reach $34.7 million.

Much of the credit for Mindray’s impressive numbers in the first quarter goes to China, which has withstood the world’s economic doldrums better than most countries over the last nine months. According to its latest financial statement, Mindray’s domestic revenue totaled $62.4 million, a 45.8 percent increase compared with the $42.8 million the company posted in the first quarter of 2008.

International sales were just as notable, considering all of the negative forces at play during the last nine months: volatile stock markets, currency fluctuation and devaluation, and political debate in the United States about healthcare reform. Mindray managed to overcome these obstacles and generate $71.8 million in the first quarter, a 60.8 percent increase compared with the $44.6 million the firm reported during the same period last year.

One of the factors that contributed to Mindray’s profitable first quarter was robust growth in product sales. Most segments posted double-digit growth, with one area recording more than a six-fold increase in revenue.

Sales of the company’s patient monitoring and life support products experienced the greatest growth during the quarter, nearly doubling in size from the $29.7 million it reported in the first quarter of 2008. The revenue generated by these products increased 97.4 percent, reaching $58.6 million, Mindray’s first-quarter financial statement showed. Sales of patient monitoring and life support products contributed 43.7 percent to the total net revenue in the first quarter, ended March 31.

Medical imaging systems products were the next big sellers, growing 32.9 percent to $35.7 million and contributing 26.6 percent to the company’s total net revenue. The growth in sales of in-vitro diagnostic products was not as significant as the other segments but nonetheless noteworthy: Revenue jumped 8.7 percent to $32.2 million, and this segment overall contributed 24 percent to Mindray’s total net revenue.

While impressive, the revenue growth experienced by Mindray’s various product segments was modest at best when compared with the monies generated by extended warranty services and shipping and handling fees charged to customers. Revenue from the sale of extended warranty services grew a whopping 525.1 percent, going from $1.2 million in the first quarter of 2008 to $7.6 million during the first three months of 2009. This revenue contributed 5.7 percent to Mindray’s total net revenue.

Q1 Revenues Up 40 Percentat CardioNet

Randy Thurman is calling it “an inflection point.” Marty Galvan considers it a “heavy investment year.”

The terms executives are using this year to predict the financial performance of CardioNet Inc. are not as important as their underlying message: 2009 is shaping up to be a year of change at the Conshohocken, Pa.-based firm.

“We continue to view 2009 as an inflection point in our business and believe that we can achieve accelerated growth and profitability in 2010 and beyond through strategic investments in our sales organization and corporate infrastructure,” said Thurman, CardioNet’s new chairman, president and CEO. “During the quarter, we made substantial progress in the expansion of our sales force and the development of our corporate infrastructure, including enhancements to our customer service unit. We have made concrete progress in expanding our leadership position in wireless cardiac monitoring and establishing our first adjacent market business in clinical services…the future looks very promising for CardioNet.”

So does the present.

In the first quarter of 2009, ended March 31, the company reported revenue of $35.7 million, a 40.3 percent increase when compared with the $25.4 million CardioNet posted in the first quarter of 2008. Gross profit jumped 49.7 percent to $23.8 million, and net interest income climbed 5.3 percent to $118,000.

The company’s net loss, however, more than doubled. It went from $340,000 in the first quarter of 2008 to $722,000 in the same period this year. Its operating loss totaled $1.3 million, a 96.64 percent increase compared with the $684,000 operating loss CardioNet reported in the first quarter of 2008.

Operating expenses went up significantly, going from $16.6 million in the first quarter of 2008 to $25.2 million in the first three months of 2009. Galvan, CardioNet’s chief financial officer, attributed part of the increase ($3 million) to the company’s pending merger with Biotel Inc., an Eagan, Minn.-based firm that manufactures wearable diagnostic electrocardiology devices. Announced April 2, the $14 million deal will allow CardioNet to expand its position in the wireless medicine sector, executives said.

Some of the increase in operating expenses also was attributed to the expansion of CardioNet’s sales staff in the beginning of the year. Thurman said the additional 41 sales staff members will help the company gain a larger share of the cardiac arrhythmia market in the future.

Q1 Earnings, Revenue Improve at VNUS Medical Technologies

Robust sales of disposable catheters and more international deals led to a 31 percent increase in first-quarter revenue at VNUS Medical Technologies Inc.

Net revenue, including net product and royalty monies, amounted to $24.7 million. The figure represents a 31 percent increase compared with the $18.9 million the company reported during the first quarter of 2008, but a 9 percent decrease compared with the $27.2 million reported in fourth quarter of last year.

Net product revenue experienced a similar fate during the first quarter of 2009, ended March 31. Product revenue rose $4.9 million to $23.7 million, a 25.4 percent increase compared with the $18.9 million VNUS Medical reported during the same period last year. However, net product revenue fell 9 percent when compared with the $26 million the San Jose, Calif.-based firm reported in the last quarter of 2008.

Company executives attributed the rise in net product sales to higher sales of disposable catheters and an overall improvement in overseas sales

Disposable catheter and device unit sales increased in the first quarter by 33 percent compared to the comparable period last year and dropped 7 percent sequentially.