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”) and received the European CE approval for its ShockGuard technology, geared to reduce the occurrence of inappropriate and unnecessary shocks to patients with implantable cardioverter defibrillators (ICDs).

The ShockGuard technology can be used with the Minnesota-based company’s existing and new Unify cardiac resynchronization therapy defibrillators (CRT-Ds) and Fortify ICDs.

ICDs treat abnormally fast heartbeats, which can lead to sudden cardiac arrest. CRT-Ds resynchronize the beating of the heart’s lower chambers that often beat abnormally in patients with heart failure. However, many patients with ICDs experience high-voltage shocks (a traumatic event often described as “a swift kick in the chest”) which can considerably diminish their quality of life.

The ShockGuard technology features DecisionTx programming which distinguish rhythms that require defibrillation and those that do not. Together, they offer an advanced sensing technology which avoids sensing unwanted signals and the need for high voltage shocks.   

The ShockGuard technology has demonstrated the ability to reduce inappropriate defibrillation. A study revealed that 98.5% of patients with this breakthrough technology (and DecisionTx programming) did not experience inappropriate shocks following one year of the implant.

St. Jude’s Fortify and Unify devices (approved in the U.S. in May 2010) are already gaining notable traction. These devices constituted as much as 95% of the company’s ICD/CRT-D mix in the U.S. in fourth-quarter 2010. St. Jude is poised to expand its global ICD market share with a strong pipeline of new ICD devices (including the quadripolar CRT systems) scheduled for launch in the U.S. in 2011.

St. Jude’s bigger rival Medtronic (MDT) is the incumbent leader in the global ICD market. The company’s new Protecta line of defibrillators, designed for minimizing inappropriate shocks to patients, received FDA approval in March 2011. These devices are equipped with Medtronic’s SmartShock technology.

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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