A halted clinical trial for a therapy many believed would lower chronic high blood pressure took a sizable bite out of Medtronic Inc.'s earnings in its fiscal third quarter, the company reported Tuesday.
Counting $200 million in charges for its stalled renal denervation program, Medtronic's net earnings for the quarter were 23 percent lower than at the same time last year — about 75 cents a share. Medtronic officials on Tuesday said the charges are a one-time hit, however, and the company's earnings would otherwise have been more in line with what Wall Street expected.
"We believe this will be it," said Gary Ellis, Medtronic senior vice president and chief financial officer.
The treatment is the result of Medtronic's 2010 acquisition of Ardian Inc. A panel of experts is reviewing the study results for the hypertension treatment, a device designed to reduce blood pressure by searing nerves that contribute to its rise, said Chief Executive Omar Ishrak. A recommendation on whether to keep developing the technology may come when the study is presented at the American College of Cardiology meeting in D.C. next month, Ellis said. The Fridley-based company continues to sell the technology in Europe.
Ishrak said on a conference call Tuesday that Medtronic's eight main business units either saw growth or were stable during the quarter.
"That is our goal: consistent, reliable performance both on top line and bottom line," he said. The company's strategy of innovation, globalization and providing value "give[s] us a pretty good diversified business platform through which we can expect mid-single digit growth, and expect that growth for the coming years."
Analyst Jeff Windau of Edward Jones Investments said most analysts were not put off by the one-time hit from renal denervation.
"In the big picture, it's a little bit disappointing," he said of the suspended trials. "The technology had a lot of promise and growth potential. It's not out of the picture yet, so we may still see it coming down the pipeline."
Several other analysts, in notes to investors, said Medtronic's earnings and revenue numbers were in line with or slightly better than expectations.
Windau said that was because "growth in their biggest groups was pretty well flat. I think, overall, the quarter was very neutral for the company."
Medtronic reported total revenue for the third fiscal quarter of $4.16 billion, an increase of 3 percent over the same quarter a year ago, and up 4 percent when accounting for differences in foreign currency. In the third quarter, "our overall organization once again delivered balanced growth, with strong performances in some areas offsetting challenges in other parts of our business," Ishrak said. "We remain focused on building a track record of operational execution to deliver consistent and reliable results."
Medtronic officials said they expect revenue growth in the range of 3 to 4 percent for the full fiscal year, as well as the fourth quarter. The company now expects fiscal year 2014 earnings per share in the range of $3.81 to $3.83.
Bloomberg News contributed to this report.