St. Jude Medical Inc.
) has won the U.S. Food and Drug Administration (FDA) approval
for its Ellipse and SJM Assura portfolio of implantable
cardioverter defibrillators (ICDs) and cardiac resynchronization
therapy defibrillators (CRT-Ds). The devices received CE Mark
approval in May 2013.
The advanced devices from the company's Cardiac Rhythm
Management (CRM) business incorporate unique features that are
capable of delivering high-voltage treatment to patients with
heart failure. St. Jude is a pioneer in providing a low-friction
coating on the ICD device instead of the lead, that helps lower
the risk of lead-to-can abrasion.
According to the American Heart Association, there are about 5
million heart failure patients in America, with 550,000 new cases
diagnosed every year. ICDs are used to treat abnormal heart
rates, which might lead to sudden cardiac deaths (SCD). In the
U.S., roughly 325,000 die due to SCD, annually. The CRT-D device
is used to resynchronize heartbeat in patients with heart failure
and provide back up support for SCD.
CRM Under Scrutiny
St. Jude's core CRM division is still underperforming.
Revenues from the CRM division fell 8% year over year in the
first quarter of 2013. The beleaguered ICD market, as reflected
by sustained implant volume pressure, continues to hurt CRM
results. ICD sales declined 5% in the first quarter but we
believe that market trends will stabilize soon.
St. Jude is currently trying to solve manufacturing and
quality systems-related problems at its Sylmar facility, which
manufactures the highly controversial Riata ST Optim and Durata
leads. The company received a warning letter from the FDA in Jan
2013. The FDA is concerned that the newer generation high-voltage
Durata leads might face the same problem as the Riata leads,
which the company recalled in 2011 due to potential risk of
serious injury or deaths.
However, a recent research conducted by renowned health
science research institute Population Health Research Institute
(PHRI) demonstrated that St. Jude's Durata and Riata ST Optim ICD
leads are safe and reliable.
Amid several downsides, the approval from the U.S. regulatory
body should further boost physician confidence in St. Jude's
technologically advanced product portfolio. New products from the
CRM division should drive top-line growth for St. Jude, once the
issue regarding the warning letter is resolved.
St. Jude has a Zacks Rank #3 (Hold). Other medical stocks such
) warrant a look. HAE carries a Zacks Rank #1 (Strong Buy), while
the other two carry a Zacks Rank #2 (Buy).
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