by
Joan Trombetti, Writer | November 19, 2008
Medtronic Inc., the world's second-largest medical device maker, dropped 13% recently in the New York Stock Exchange composite trading -- the biggest drop since February 1984. Medtronic's chief executive officer also revealed a U.S. investigation into marketing practices of the company will be underway.
Medtronic has been gaining revenue from its defibrillators and heart stents to its rivals Boston Scientific Corp., Abbott Laboratories and St. Jude Medical Inc., but recently bought spinal-device maker Kyphon Inc. to reduce dependence on its heart devices.
According to CEO William Hawkins, the company is still struggling to integrate the acquisition, while sales of the bone-healing protein it already owned, InFuse, have stalled since a September safety warning. U.S. prosecutors also have been investigating whether Medtronic promoted InFuse for uses that haven't been approved by regulators, Hawkins told analysts on a conference call.
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The company also said it expects fiscal 2009 sales to shrink by $400 million because of the dollar's rise against foreign currencies. Fiscal year revenue will be $14.6 billion to $15 billion, Medtronic said, down from $15 billion to $15.5 billion previously forecast. Earnings per share for the year will be $2.90 to $2.98, down from a $2.95 to $3.02 company projection in August.
While defibrillator sales slowed, the company's Endeavor heart stent, implanted to prop open clogged arteries, has been overtaken by Boston Scientific and Abbott's new competitor. Endeavor held about 12 percent of the $2 billion U.S. market in the second quarter, down from 18 percent in the three months before that, according to Medtronic.
The new Justice Department probe focuses on whether Medtronic marketed the InFuse bone protein for uses not approved by the FDA, Hawkins said. The company is defending three lawsuits filed by former employees who claim the company illegally promoted spine products for so-called off-label uses with the help of physicians receiving consulting fees.
Medtronic, J&J, Boston Scientific and other rivals also have received subpoenas in a separate government probe into whether they marketed liver stents for use in other parts of the body.
