Wilson Greatbatch, the self-professed "humble tinkerer" and a
trailblazer in medical technology, invented the first implantable
cardiac pacemaker in 1958 which kept the rhythm of millions of
heartbeats and preserved countless lives across the planet.
A couple of decades later, the first patient received an
implantable defibrillator, the brainchild of Dr. Michel Mirowski,
in 1980. But that took place decades ago and we have come a long
way since then. Medical technology has advanced by leaps and
bounds, revolutionizing the way medicine is practiced, in a hi-tech
And what is more quintessential in this Faustian quest for good,
and even better health, than taking care of the heart? There is a
Chinese proverb that goes: "If you keep a green bough in your
heart, the singing bird will come."
Heart failure, in a nutshell, is the inability of the heart to
pump enough blood. It is a leading cause of death in the U.S. and
one leading medical device company,
), is committed to revolutionize the treatment of patients, with
this fatal condition with a ground-breaking device.
CRT - An Effective Treatment
As per data from the National Heart, Lung, and Blood Institute
("NHLBI"), roughly 5.7 million people are afflicted by heart
failure in the U.S. alone. Around 60 million Americans are at
high-risk to develop heart failure every year. Needless to say, it
is among the leading causes of hospitalization in the nation with
roughly 1 million hospitalizations annually. When it comes to
economic burden, an estimated $38 billion is spent every year in
direct and indirect costs for heart failure.
Cardiac resynchronization therapy ("CRT"), delivered through
implantable cardioverter defibrillator ("ICD") or a pacemaker,
resynchronizes the beating of the heart's lower chambers that often
beat abnormally in patients with heart failure. CRT has been found
to be effective in improving the quality of life in many patients
with heart failure.
St. Jude's Gift
The U.S. Food and Drug Administration ("FDA") has finally
cleared the industry's first quadripolar pacing system,
representing one of the most significant landmarks in the MedTech
firmament in recent times.
The regulator has given its green signal to St. Jude's
much-awaited "Unify Quadra" cardiac resynchronization therapy
defibrillator ("CRT-D"), representing a key milestone for the St.
Paul, Minnesota-based medical devices major. The device was
originally expected to reach the U.S. market in mid-2011, but was
eventually delayed to year end due to technical reasons.
The news provided a much needed boost to St. Jude's shares,
which jumped $2.75 (or 7.71%) to $38.44 on Wednesday, the highest
spurt since March 2010. The company's shares have lost nearly 30%
of its value since May 2011, given the current deceleration in the
St. Jude said that it will start shipping the first-of-its-kind
device shortly. Besides Unify Quadra, the FDA has also approved the
company's "Quartet" left ventricular ("LV") pacing lead (flexible
wire) which is used by the novel pacing device. The approval came
at a time when St. Jude warned physicians that its controversial
Riata defibrillator leads have a greater failure rate than reported
Unify Quadra: A Game Changer?
St. Jude debuted with the so-called quadripolar technology with
the launch of "Promote Quadra" CRT-D in Europe in 2010. Promote
Quadra coalesces multiple pacing configuration, features and
programming options, allowing surgeons to optimize the system at
implant to better manage common pacing complications such as
phrenic nerve or diaphragmatic stimulation, which can occur in
patients implanted with a CRT system.
Phrenic nerve or diaphragmatic stimulation takes place when an
electrical output from a CRT device unintentionally activates the
diaphragm muscle, resulting in major discomfort for patients. The
complication generally occurs due to the location of the LV pacing
Unify Quadra is a small quadripolar pacing system which enables
physicians to more effectively manage the pacing needs of patients
with heart failure. The LV lead in Unify Quadra contains two
additional electrodes (electrical conductor) vis-à-vis the legacy
bipolar leads. Unify Quadra landed in Europe in September 2011 and
has been well-received in the continent.
Unify Quadra represents an advancement over Promote Quadra,
offering all the benefits of quadripolar technology in a device
with the smallest footprint in the industry. The narrower shape
allows surgeons to implant the device through a minute incision,
leading to reduced time in closing the incision and a smaller scar
for the patient.
Unify Quadra uses the "Quartet" LV pacing lead, the first lead
to feature four pacing electrodes, which can be used in up to ten
pacing configurations. This provides surgeons with a greater number
of options to place the lead in the most stable position and manage
implant complications, resulting in improved patient outcome. Since
the surgeon can adjust pacing locations or configurations, the
technology has the potential to reduce the need for multiple
A still choppy CRM market remains an overhang on St. Jude and
). Prevailing macroeconomic conditions, pricing pressure, austerity
measures, the impact of healthcare reform and Europe's sovereign
debt plight are expected to weigh on the roughly $12 billion CRM
market. Implant volume growth has been encumbered by a number of
factors including the U.S. Department of Justice's investigation
into hospitals' implant practices and concerns of overuse.
The core CRM business remains St. Jude's Achilles' heel with
revenues growing at a sluggish clip, impacted by the beleaguered
U.S. defibrillator market. On the contrary, its smaller segments
such as Atrial Fibrillation, Neuromodulation and Cardiovascular
continue to grow at a torrid pace and remain the bastions of the
company's growth story.
Nevertheless, with Unify Quadra to hit the U.S. market shortly,
we envisage that St. Jude is now strongly placed to savor
incremental opportunities in CRM having the distinction of being
the only company to offer quadripolar pacing technology globally.
This avant-garde pacing technology is expected to set a new
standard of care in cardiac treatment.
Such sophisticated treatment would also come at a premium price
tag helping St. Jude to win ground in the roughly $6.5 billion U.S.
defibrillator space. However, the company should also brace itself
for reignited competition in a soft ICD market.
We stay tuned to see the response of the other big Kahunas of
the MedTech world, Medtronic and Boston Scientific, as they look to
level the playing field. While both these entities have quadrapolar
leads in their pipeline, it will take a while (at least a year)
before they hit the U.S. market, giving St. Jude a clear lead.
Our long-term Neutral recommendation on St. Jude is in agreement
with a Zacks #3 Rank (Hold) retained by the stock. We are also
Neutral on Medtronic and Boston Scientific, both of which carry
short-term Zacks #3 ranks.
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