Medtronic plc MDT recently announced that it has initiated a voluntary global recall of certain batches of its neonatal and pediatric Shiley tracheostomy tubes, manufactured by its recently acquired Irish counterpart Covidien. The recall includes specific lots from eight product lines of this device, which were manufactured after Nov 29, 2012.
This comes as a big blow to the long-earned reputation of a renowned medical technology giant like Medtronic. Naturally, the 1.7% drop observed in the company’s stock price, post release of this news, is no surprise.
Patients having trouble in breathing properly due to either some obstruction or some secretion in their airways, are often recommended a tracheostomy procedure, wherein a tracheostomy tube is inserted in a patient’s trachea to facilitate improved breathing.
Medtronic’s Shiley tracheostomy tube is no exception to a standard tracheostomy tube. However, the Shiley tracheostomy tubes manufactured after Nov 29, 2012 had a wider-angle bend than standard models, which caused discomfort in some patients and ultimately led to the recall.
According to management, Medtronic initiated the recall program on May 8, 2015 after receiving complaints from a few customers who faced difficulty in breathing when using the Shiley tubes. Unfortunately, of these customers, 12 patients reportedly suffered serious health hazards, which included impacted oxygen levels.
However, much to the relief of management, these patients after being treated with Shiley tracheostomy tubes manufactured prior to Nov 29, 2012, have largely benefited from the same.
Currently, Medtronic is leaving no stone unturned to resolve this issue as soon as possible, so that it can win back the trust of its loyal customers. With this aim, management has begun notifying hospitals and distributors across the globe, requesting them to quarantine and discontinue use of all potentially affected tubes and return the affected product to Medtronic as early as possible for credit. Once the defective products are received, management will replace them with those manufactured before Nov 29, 2012.
Medtronic has also taken the necessary steps to prevent future shipments of the recalled products, by notifying regulatory agencies around the world.
Safety recalls of medical devices have become a major issue in the U.S. in recent years. In Oct 2014, Covidien had to recall the Nellcor Puritan Bennett 980 Ventilator System, as the ventilation support system was found with some cracks in its circuit board. Likewise, in Sep 2014, recall of the Esprit V1000 and V200 Ventilators of Phillips Healthcare was initiated after problems related to the devices’ power supply functioning were discovered.
Coming back to Medtronic, although this product recall news is a disappointing one for investors, we must nevertheless consider the two key FDA approvals that the company has secured this week itself- for the CoreValve Evolut R and the Advisa SR MRI SureScan Pacing System. Moreover, several other positive developments at the company, related to its diverse product portfolio, we believe, will play a crucial role in maintaining the high esteem that Medtronic enjoys in the U.S. medical devices market.
Currently, Medtronic carries a Zacks Rank #3 (Hold). Some better-ranked medical product stocks are Bio-Rad Laboratories, Inc. BIO, Hospira Inc. HSP and INSYS Therapeutics, Inc. INSY. All the three stocks sport a Zacks Rank #1 (Strong Buy).
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