Covidien Recalls Syringes

Covidien (COV) has started recalling 14 lots of Monoject prefill flush syringes as these syringes are filled with non-sterilized water, which if administered could lead to fatal infections in the blood stream. These syringes were being sold in the U.S. and Bermuda.

The syringes, which are designed to inject saline or heparin drug, have wrong tip cap, labeling, volume and wrapper. Moreover, the heparin lock flush syringe with only water could clot catheters.

The announcement of the manufacturing flaws cast a negative shadow over Covidien, a renowned producer of cutting-edge medical devices. The recall is likely to have an adverse material impact on the business, results of operations, financial conditions and cash flow.

In fiscal 2012, Covidien had voluntarily recalled Duet TRS Universal Straight and Articulating Single Use Loading Units (Duet), which resulted in an $85 million decline in net sales for the product line. It was a key endomechanical product under the company’s Medical Device segment. The recalls also led to the discontinuance of the product, resulting in $18 million of inventory and capital equipment impairments.

Further, in Aug 2012, Covidien had also initiated the voluntary recall of specific manufactured lots of the DGPHP Radiofrequency Ablation (RFA) High-Power Single Use Grounding Pads and Cool-tip RFA Electrode Kits that include the DGPHP RFA High-Power Single Use Grounding Pads. According to reports, this device had induced four burn injuries due to the degeneration of the foil within the DGPHP grounding pad.

COV also recalled a particular model of its cuffed Shiley tracheostomy tubes after receiving reports of product complications during mechanical ventilation. The product was a part of the Airway Management segment under the company’s Respiratory and Monitoring Products business.

If such a trend continues and similar product recalls follow in the future, COV’s goodwill will be adversely affected. However, this will be beneficial for its peers such as Becton Dickinson (BDX), C.R. Bard (BCR) and CareFusion (CFN).

Covidien has a Zacks Rank #3 (Hold).