Minneapolis-based Medtronic Inc., a medical-device company with about 700 workers in Orange County, says its federal tax hit from looming healthcare reforms will be $125 million to $175 million annually starting in 2013.
The company and competitors will pay a 2.3% excise tax on medical devices as part of healthcare reforms passed in 2010. The levy is intended to raise $20 billion to expand health insurance coverage for uninsured Americans.
“This [is] one of the costs we’re going to have to cover, as we put together our plans for fiscal year 2013 and as we put together our initiatives on a long-term basis,” Chief Financial Officer Gary Ellis said in a recent conference call with analysts.
Medtronic—whose fiscal year ends April 30—would pay a tax of $40 million to $60 million in a 12-month period ending April 30, 2013, based on a draft version of regulations set for implementation, Ellis estimated.
Medtronic is trying to determine how much of the tax it can pass on to its customers, he said.
Chief Executive Omar Ishrak said Medtronic also is looking for other ways to deal with the tax expense.
“We like to focus on things we can control,” Ishrak told the Bloomberg wire service. “One of our main strategies is to make sure we get our costs under control.”
Two analysts recently downgraded ratings on Medtronic shares on concerns about near-term growth prospects.
“About 60% of [Medtronic’s] current sales are declining or low growth markets … but the profitability, U.S. cash generation and associated product and customer interrelationships of these businesses make them difficult to divest,” Bruce Nudell, a New York-based analyst with Zurich, Switzerland-based Credit Suisse AG, wrote in a client note.
Medtronic makes heart valves in Orange County and soon will consolidate disparate local operations in a Santa Ana campus.
The company has been looking to its Medtronic CoreValve heart valve to stoke revenue growth. Medtronic got CoreValve in 2009, when it spent $700 million to buy Irvine startup CoreValve Inc.
CoreValve competes with Irvine-based Edwards Lifesciences Corp.’s Edwards Sapien valve overseas but is a few years away from Food and Drug Administration approval for domestic introduction.
Advisory Formed
Carol Geffner, an Orange County healthcare consultant, and two partners have opened Newpoint Healthcare Advisors LLC.
Newport will work with boards of directors and company executives to improve hospitals’ performance and address strategic growth issues.
Geffner, the firm’s president, is working out of Newpoint’s Newport Beach office. The firm is based in Denver and also has an office in Phoenix.
The trio will lead a team of a dozen people who have worked with health systems, medical groups, public and private health plans, not-for-profit hospitals, government organizations and universities.
Vessix Trial
Vessix Vascular Inc., a Laguna Hills-based startup, said a first patient was treated in an international clinical trial. Vessix is developing a catheter-based treatment for uncontrolled hypertension.
The trial is called Reduce-HTN and will examine 60 patients. It will enroll patients in Austria, Belgium, Germany, Switzerland, France, the Netherlands and Australia.
Vessix’s device works by “renal denervation,” which disrupts renal sympathetic nerves whose hyperactivity leads to abnormally high blood pressure.
The company was founded in 2003. Its backers include NeoMed Management AS of Sweden; Paris-based Edmond de Rothschild Investment Partners; and OrbiMed Advisors LLC of New York.
Bits and Pieces
Hoag Memorial Hospital Presbyterian opened a satellite location of its Hoag Imaging and Breast Center in Woodbridge in Irvine. Hoag says 3D digital breast tomosynthesis, a service it offers at the site, is promising in detecting breast cancer in young women and women of any age with dense breast tissue. … Tustin-based Epinex Diagnostics Inc. secured a patent in Hong Kong for a diabetes-monitoring index test. The patent is seen as a first step toward introducing a monthly test into the Chinese market. … UCI Medical Center in Orange is among seven academic medical centers helping to develop a scoring system for the da Vinci robotic surgery device with Mimic Technologies Inc. of Seattle. … James Corbett, chief executive of Aliso Viejo device maker Vertos Medical Inc., is set to speak at an event by booster group OCTANe on how to raise performance of startups.
