STJ ST. Jude Medical, Inc.

Medical devices major St. Jude Medical (STJ) has secured the clearance of the U.S. Food and Drug Administration (“FDA”) for its two new irrigated ablation catheters for treating cardiac arrhythmias (irregular heart-beats).

The new “Safire BLU” and “Therapy Cool Path” bi-directional ablation catheters possesses a number of new features. Its bi-directional deflection capability allows physicians access difficult-to-reach anatomic locations.

Ablation catheters are small tubes that deliver radiofrequency energy (to heat the catheter tip) to the areas of heart muscles causing arrhythmia and create lesions to ablate or interrupt the abnormal electrical signals responsible for irregular heart-beats. The Safire BLU and Therapy Cool Path catheters are designed with irrigated tip, which help reduce risk factors associated with the heat of the radiofrequency energy.  

The newly approved catheters represent a part of St. Jude’s Atrial Fibrillation (“AF”) franchise which posted double-digit growth in fourth-quarter fiscal 2010 and accounted for roughly 13.7% of its total sales for the year.

In its fourth quarter earnings call, St. Jude stated that it expects the AF business to remain on healthy growth track as it launches several news products in the U.S., including ablation catheters. St. Jude’s AF division faces competition from Biosense Webster, a unit of Johnson & Johnson (JNJ), C.R. Bard (BCR), Boston Scientific (BSX) and Medtronic (MDT).

We remain intrigued by St. Jude’s ability to deliver consistent revenue and earnings growth. Moving forward, revenue growth should be fueled by numerous product introductions. 

While we are impressed by St. Jude’s solid fundamentals, strong product mix, healthy growth trajectory and operating leverage, we remain wary about competition-driven pricing pressure and the dilutive impact of acquisitions and any unfavorable currency exchange fluctuations on the bottom line. This is reflected in our Neutral recommendation for the stock, supported by a Zacks #3 Rank (Hold).

 
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