When a medical device company put the kibosh on one of its business ventures earlier this summer, it announced the decision as a cost-saving measure. But for now, the decision is costing Kensey Nash Corp. in severance outlays, contract-cancellation expenses, and material asset impairment charges totaling $5.3 million.
Exton, Pa.-based Kensey Nash has stopped working on its embolic-protection products to focus on its endovascular and biomaterials businesses. This means that the company is holding off on two of its product lines: TriActiv FX and ProGuard, and their corresponding clinical trial, marketing, and research and development work. Kensey Nash, which reported $60.4 million in revenue last year, terminated 10 employees in July, and has recorded a subsequent $200,000 in severance costs.
The company will also be hit by non-cash asset impairment charges for letting go of its inventory and equipment related to the embolic business. For its fourth quarter financial statements, released on Monday, Kensey Nash recorded $1.3 million in pre-tax charges for abandoning machinery and equipment; $3 million in inventory and related charges; and $300,000 in assets realized through its ProGuard clinical trials.
Kensey Nash will record some of the costs related to dropping the products during the next fiscal year. These include pre-tax charges for terminating contracts of about $400,000, half that coming from clinical-trial cancellation fees.
The company says it expects to realize annual savings of about $3.6 million and a one-time cost-savings of $4 million for eliminating the ProGuard clinical trials.
Kensey Nash based its decision to eliminate its embolic protection product lines on several factors, including the dominance of filter devices in its market. The company uses balloon-based devices. “Unfortunately our efforts in the embolic protection markets have not been commercially successful despite good clinical data and we needed to make this decision,” president and CEO Joe Kaufmann said in July.