St. Jude Medical, Inc. (STJ)

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St. Jude Medical, Inc. (STJ)

May 29, 2013 10:00 am ET

Executives

John C. Heinmiller - Executive Vice President

Rachel H. Ellingson - Vice President of Corporate Relations

Analysts

Kristen M. Stewart - Deutsche Bank AG, Research Division

Presentation

Kristen M. Stewart - Deutsche Bank AG, Research Division

All right. Thank you again for joining us for this session. So I am Kristen Stewart, medical supply and device analyst at Deutsche Bank. Just as a reminder, you can submit questions to the Yorn app. It's yorn.com/db. We also have a mike in the room. So if you have any questions, just feel free to raise your hand and we'd just ask you to wait for the mic so that everything can be properly webcasted.

I am pleased to introduce St. Jude Medical here with us today. We have John Heinmiller, who's the Executive VP. John was also part of that as the CFO of the company. And Rachel Ellingson as well, who is Vice President of Corporate Relations and who also can offer her views on a lot of different topics as well from that perspective.

Question-and-Answer Session

Kristen M. Stewart - Deutsche Bank AG, Research Division

So I guess just kind of kicking off things, John, I just wanted to take a step back and just kind of get your initial impression just on the broader CRM market, especially in light of Medtronic who reported last week, kind of how do you think about how the market trends are from a U.S., Europe and maybe Japan perspective because there seems like there's a couple of different things going on there between ICDs and pacemakers. And then also just kind of how you're thinking about market share. I mean, Medtronic definitely highlighted their view. And it seems, certainly just looking at the quarter in isolation, making share in both ICDs and pacemakers. So maybe just kind of give an update on how you're thinking about things at this stage.

John C. Heinmiller

Sure. I would -- again, thanks, Kristen for inviting us, and Rachel and I are pleased to be with you today. I would -- before I would make any comments, just reference the typical forward-looking statement qualifications that anything that we say of a forward-looking nature is subject to the risk factors that you'll find in our '34 Act filings with the SEC. And also really nothing that we would say today would -- you should construe as changing any of the guidance that we've given. We really give our guidance on a quarterly basis in connection with our earnings calls, and we're comfortable that, that's the right way, stick with how our guidance works. And so anything we would say today wouldn't change that. So with respect to the market and now that Medtronic has reported their results for their April fiscal quarter and those results get added into people's first quarter results on a calendar basis, the first thing you'd keep in mind is that typically where you would have a first quarter calendar results that include the month of January and now you've got a fiscal quarter that includes April, that, that makes a difference in terms of the business from a seasonality point of view, which is typically stronger in April than it would be in January. And I think that when we think about it and we've made this comment before, that it's hard to get too much insight out of one particular quarter, and that it's -- a person is maybe better served by looking at results over a couple of quarters. And I think that if you look at the constant currency market performance over the 6-month period, which would include the fourth quarter of last year and the first quarter of this year, the market declined in total CRM in our -- the way we model it out about 2% on a constant currency basis, and that's probably a little better than what we saw in calendar 2012. For example, the market declined in the 3% to 4% range on a constant currency basis. So definitely a positive trend being signaled by the results over the last 6 months, which I think is a real favorable reading for all the people that are participating in the cardiac rhythm management space. I think then, Kristen, you asked about market share and our own position. And you would think about that in the context of the different product cycles that the companies are in and what those product cycles are tending to influence in specific geographies. And so we look at that 6 -- that same 6-month period of time, for example, in U.S. ICDs and are comfortable that we're holding share during that period in the U.S. market for ICDs. That really is in spite of the headwinds that we're facing with our high-voltage lead share, but being more than offset by the benefits that we have from having the quadripolar CRT-D functionality in our device. So again, you would look through product line by product line and geography by geography and see little differences, where one company may have a product flow advantage in the cycle versus another, just as we do right now with the worldwide availability of our quadripole left ventricular lead with our CRT-D system, and we're in the process of bringing that out in a pacemaker configuration here in 2013. And we'll have a next-generation CRT-D with quadripolar lead capabilities available in CE Mark as well this year. So again, different geographies, different circumstances. A big product for us will be the MRI compatible or MRI pacemaker in Japan that currently is a disadvantage for us, and our market share has reflected that in that particular geography. But we expect by the middle of 2013, so really shortly, we will have that device in -- available to the Japan market and will allow us then to compete on a level basis in that particular market. And so again, lots of dynamics going on there, but I think the takeaway that the overall global CRM market is a little healthier during this last 6-month period than it was in calendar 2012 is definitely a positive.

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