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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