Shares of medical devices giant,
St. Jude Medical Inc.
), rose 3.1% to $52.52 on Sep 6, following Fitch's re-affirmation
of the company's debt ratings as well as the U.S. Food and Drug
Administration's (FDA) decision to review a new product. The
stock price is very close to the 52-week high of $54.06 on Aug 9.
Credit rating agency Fitch has reiterated STJ's Issuer Default
Rating (IDR) at 'A' and said that Rating Outlook is 'Stable'
based on the company's outstanding debt of $3.61 billion as of
Jun 30, 2013. The agency is confident that the company will
successfully de-leverage in the next 18 months, on the back of
modest volume growth and improving margins, along with a decent
Additionally, on the same day, an FDA committee announced that on
Oct 9, 2013, it will discuss information related to the
pre-market approval application for privately-held cardiac
devices company CardioMEMS' Champion Hear Failure (HF) Monitoring
device. St. Jude has a 19% stake in the company and has agreed to
acquire it on successful completion of a significant milestone.
In 2011, the Champion HF device failed to win regulatory approval
due to lack of convincing clinical research support. However, in
the beginning of 2013, in an effort to strengthen its relation
with CardioMEMS, St. Jude had announced that it will provide $28
million in debt financing to gain an FDA approval for this
The CardioMEMS HF System is a permanently implantable pressure
measurement system designed to provide daily pulmonary arterial
pressure measurements including systolic, diastolic, and mean
pulmonary arterial (PA) pressure. These measurements are used to
guide treatment of congestive heart failure. U.S. FDA approval of
this new offering should significantly boost the company's
dwindling top line growth.
The two back-to-back good news regarding St. Jude has bolstered
investor confidence, leading to a hike in stock price. Currently,
the stock has a Zacks Rank #3 (Hold). Although the company is
managing to grow its bottom line on the back of an improving
operating margin, STJ's sluggish top line growth remains an area
of concern amid the difficult MedTech industry environment.
Other medical stocks worth considering include
), carrying a Zacks Rank #1 (Strong Buy), as well as
), both carrying a Zacks Rank #2 (Buy).
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