Invacare briefs shareholders on FDA, earnings
ELYRIA, Ohio – Invacare expects to engage a third-party to audit its compliance with U.S. Food and Drug Administration (FDA) regulations in the fourth quarter of this year, company officials said during a conference call this week to discuss first quarter earnings.
Invacare and the FDA still haven’t finalized an agreement to address the agency’s concerns at the company’s corporate headquarters and wheelchair manufacturing facility here, but the company has been working toward a resolution since, at least, late last year.
“We’re very confident we know exactly what needs to be done,” said Gerald Blouch, president and CEO of Invacare, during the call.
Invacare announced in December that it would work with the FDA to negotiate an agreement. This was after the company received word that the FDA wanted it to suspend certain operations at the two facilities.
A resolution can’t come soon enough for Invacare. Due to costs related to its compliance efforts, the company reported that adjusted earnings per share decreased 22% in the first quarter of 2012 compared to the same period last year. Additionally, Invacare has diverted internal resources away from launching new products and globalizing its existing products to work on improving compliance.
“Clearly, there will be an ongoing expense (related to improving compliance), but how much, we’re uncertain,” Blouch said. “We expect a slight, continued increase (in costs), then as we move past process design and training and implementation—we don’t expect the verification process to be as vigorous—(there should be) a drop off in the fourth quarter.”
Invacare reported net sales of $433.6 million for the first quarter of 2012 compared to $428.5 million for the same period last year. It reported net earnings of $8.2million vs. $7.45 million.
For North American HME, Invacare reported net sales of $176.1 million for the first quarter compared to $181.1 million for the same period last year, a 3.1% decrease. It reported earnings of $7.7 million, excluding restructuring charges of $100,000, vs. $13.2 million.
Invacare blamed decreases in North American HME on: costs related to its compliance efforts, unfavorable product mix away from higher margin products, unfavorable sales mix favoring lower margin customers, volume declines and warranty expense.
For Invacare Supply Group, Invacare reported net sales of $78.5 million for the first quarter of 2012 compared to $74 million for the same period last year, a 6% increase. It reported that earnings for the quarter stayed the same this year compared to last year at $1.2 million.
During the call, Blouch also addressed:
Making acquisitions: In a nutshell, Invacare officials, their hands full improving compliance, don’t plan to make a move anytime soon. “It would have to be extraordinary for us to gamble on our remediation efforts, which we don’t want to do,” Blouch said. “Right now, there are few parts of the organization that aren’t involved in remediation. It wouldn’t be wise at the moment.”
Dealing with competitive bidding: Invacare officials concede that getting rid of the program or replacing it with the industry’s market-pricing program will be an “uphill battle,” mainly because CMS has its PR machine working overtime to promoting the savings associated with the program. “Once something is scored and it’s worth so much money, any change has to step over that hurdle,” Blouch said. “We’re working hard, and we’re planning for the worst and hoping for the best.”
Securing a role for HME in health care’s future: Despite uncertainty due to healthcare reform and competitive bidding, Blouch calls home care “one of the killers to the cost of health care.” “We’ll get through those things,” he said. “The demographics are unassailably true and when you couple that with patient preferred and cost effective, it’s going to be—and this is acknowledged by government officials—a pillar of the healthcare continuum. The future is good. How long it’s going to take (to get there) is anyone’s guess.”
ResMed reports double-digit growth
SAN DIEGO – ResMed last week reported revenue of $329.1 million for the quarter ended March 31, 2012, an 11% increase compared to the same period in 2011. Net income was $64.6 million, an increase of 21%. ResMed reported revenue of $996.6 million for the nine months ended March 31, 2012, an 11% increase compared to the same period in 2011. Net income was $178 million, a 6% increase.