Covidien profit down in Q1

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Covidien reported a drop in net income, with a 9 percent decrease in imaging solutions net sales, for the first quarter of fiscal 2009, which ended Dec. 31, 2008.

The Hamilton, Bermuda-based company reported net income of $386 million for the first quarter, lower than $420 million in the prior-year quarter.

Results for the quarter include $22 million of legal settlements and $7 million of tax gains, while the prior-year quarter results primarily included $172 million of tax gains.

Net sales rose 6 percent to $2.5 billion from $2.3 billion a year ago, which the company attributed to “strong growth in pharmaceutical products and continued strength in medical devices and medical supplies.” The pharmaceutical segment saw a 50 percent increase in sales for the quarter, from $221 million last year to $331 million this year, dues to higher sales in Dosage pharmaceuticals, the company said.

However, its imaging solutions segment saw first-quarter sales decline 9 percent to $265 million from $291 million a year ago. Unfavorable foreign exchange was responsible for 4 percentage points of the decline. Radiopharmaceuticals sales were lower than those of the year before, chiefly due to molybdenum supply constraints. First-quarter sales of contrast products also were below year-ago levels, reflecting lower volume and continued pricing pressures in the United States, according to Covidien.

Medical devices sales of $1.63 billion in the first quarter were up 3 percent from $1.59 billion in the comparable quarter of last year. Sales in Endomechanical were above those of a year ago, led by sharply higher sales of laparoscopic instruments. All three product lines--Endomechanical, Energy and Soft Tissue Repair--registered double-digit operational growth.

“Our imaging segment again posted disappointing results, however, and we are executing on our plan to improve its performance going forward. We will continue to make the investments that will drive our business growth in 2009 and beyond, including our strong, ongoing commitment to increasing R &D spending to competitive levels,” said Chairman, President and CEO Richard J. Meelia.

Research and development expense in the quarter climbed 18 percent from $78 million the prior year to $92 million in 2009, representing 3.7 percent of sales.