Tennessee's Wright Medical Group ($WMGI) saw net sales decline to $118.2 million during the third quarter--a 3% decrease versus the same period last year. The decline was due in part to the implementation of the company's compliance processes, according to a statement.
Net loss for the quarter was $16 million, compared with net income of $4.7 million during the same period last year. The company also is updating its 2011 net sales outlook to $505 million to $509 million, representing annualized growth expectations of -3% to -2% versus 2010.
This has been a year of shake-ups for the company, which agreed in 2010 to pay $7.9 million for allegedly conspiring to violate anti-kickback laws by paying consulting fees to convince orthopedic surgeons to use certain Wright products from 2002 through 2007. Back in May, Wright announced the receipt of a letter from the U.S. Attorney stating the company "has knowingly and willfully committed at least two breaches of material provisions" of a deferred prosecution agreement. The company then reached an agreement to extend a deferred prosecution deal by a year. The DPA will now expire Sept. 29, 2012, and Wright will be under the surveillance of a federal monitor until that time.
The company also announced its cost restructuring plan this year. As a result of the plan, Wright will reduce its workforce by approximately 80 employees, or 6%. In addition, Wright has also seen a number of top officials go, including CEO Gary Henley and CTO Frank Bono, as well as three others who left the company "without good reason."
"As anticipated, these challenges have resulted in a slowdown in medical education and research and development projects," the company says in a statement. But Wright hopes to reverse this in coming quarters.
The earnings call was led by Wright's recently installed president and CEO Robert Palmisano as president and CEO. Palmisano was most recently president and CEO of ev3, which was bought by Covidien ($COV) last year. During the call, he emphasized the potential of the company's foot and ankle business, which has launched a number of new products. The unit will see more new products coming out this year and in 2012, he added.
Palmisano also stressed the company is working "as hard as humanly possible" to implement an outstanding compliance system. Once the DPA ends and the monitors leave, the company wants to have a "state-of-the-art" system.
When asked what his vision for the future of Wright, Palmisano emphasized the importance of its extremities business, what he calls the company's "growth driver." He also said the company could do a better job of managing its balance sheet.
- see the Wright Medical release