Covidien: Nuclear Medicine Reactor Could Be Down Until May
January 26 2009 - 10:52AM
Dow Jones News
Covidien Ltd. (COV) expects that a key reactor in the
Netherlands that produces a product used in nuclear medicine will
remain down until May, stretching out an already months-long outage
that has hurt Covidien's imaging business, officials said
Monday.
Some analysts had on Friday suggested a quicker restart, perhaps
in February as previously hoped, based on a press release from the
reactor operator saying it was seeking permission from authorities
to restart the facility. But the Nuclear Research & Consultancy
Group, or NRG, did not say when the reactor is likely to restart,
and Covidien officials suggested it could take longer.
Covidien based its estimate on a prior release from NRG, in
early December, that projected "a further delay of a few months" to
complete repairs.
"We've heard nothing to indicate at this point it will be sooner
than that," said Covidien spokesman Bruce Farmer. The new release
is a positive development, however, he added.
Covidien on Monday reported fiscal first-quarter results that
included sales slightly ahead of Wall Street estimates and
per-share earnings that also topped projections. A lower tax rate
and stronger-than-expected sales of a generic pain drug helped, and
shares were recently up 5.8% to $37.01.
The company's imaging business was a dark spot, however, with
sales in the quarter ended Dec. 26 falling 9%, or 5% excluding the
negative impact of foreign currency. The reactor outage is part of
the problem.
The outage "is causing a short-term drag on our
radiopharmaceutical business," Richard J. Meelia, Covidien's
chairman and chief executive, said on a call with analysts.
The "Petten" reactor makes a product called molybdenum-99, which
decays into an isotope called technetium-99m that is injected into
patients to create a traceable signal for medical scans.
There are no U.S. reactors producing this material - which has a
very short half life - despite heavy use in this country. Meantime,
shutdowns of the relatively few, aging production sites around the
world have triggered supply-chain headaches before, including in
2007 when a Canadian reactor outage caused major interruptions.
With an eye on this problem, Covidien also announced on Monday
that it's planning a long-term solution: a U.S. source for
molybdenum-99. The company and Babcock & Wilcox announced plans
to develop a U.S. source for the material. It will likely take
several years, but could eventually address ongoing supply problems
triggered by international outages.
B&W is a unit of McDermott International Inc. (MDR).
Covidien maintained its prior fiscal 2009 guidance on Monday
amid expectations higher-than-expected sales of generic OxyContin
will balance out the imaging slowdown.
-By Jon Kamp, Dow Jones Newswires; 617-654-6728;
jon.kamp@dowjones.com
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