Covidien posts Q3 sales downturn

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Covidien has reported a decline in sales for its fiscal 2009 third quarter, which ended June 30.

In the 2009 third quarter, Covidien reported operating income of $441 million, versus $545 million in the same period the year before. The Dublin, Ireland-based company said its third quarter net sales declined 3 percent to $2.5 billion from $2.6 billion a year ago, with unfavorable foreign exchange of $143 million reducing the quarterly sales growth rate by approximately 5 percentage points.

Also, the company said its medical device sales of $1.7 billion in the 2009 third quarter were 3 percent below the $1.8 billion in the comparable quarter of last year. Its imaging solutions declined 6 percent to $299 million from $319 million a year ago. Specifically, radiopharmaceuticals sales in the quarter were slightly below those of the year before, due to unfavorable foreign exchange. Pharmaceutical products sales of $245 million in the third quarter were 5 percent below those of the prior year’s $257 million, which the company attributed to unfavorable foreign exchange, contributed about 3 percentage points to the decrease.

Selling, general and administrative expenses for the third quarter of fiscal 2009 were below those of the year-ago third quarter, as planned increases in selling and marketing were more than offset by benefits from foreign exchange. Research and development (R &D) expense in the quarter climbed 53 percent from that of the prior year and represented 5.2 percent of net sales, according to the company. Third quarter R &D expenses included $30 million in licensing fees related to two previously announced transactions in the pharmaceutical products segment.

"We delivered good operational performance in line with our expectations, despite the global economic slowdown," said Richard J. Meelia, chairman, president and CEO. "Results in the pharmaceutical products segment were below our expectations, primarily reflecting significantly lower sales in our branded product portfolio, a slowdown in active pharmaceutical ingredients and the timing of orders. Over the next 18 months, we expect difficult comparisons in this business, but that should ease, starting in 2011, depending on the timing of new product approvals."