STJ ST. Jude Medical, Inc.

Medical technology giant St. Jude Medical (STJ) has received clearance of the Japanese Ministry of Health, Labor and Welfare (“MHLW”) for its Fortify ST implantable cardioverter defibrillator (“ICD”) and Unify cardiac resynchronization therapy defibrillator (“CRT-D”).

The Minnesota-based company has launched these products, the smallest available in the industry, in the lucrative Japanese market.

ICDs treat abnormally fast heartbeats, which can lead to sudden cardiac arrest - a risk to life. CRT-Ds resynchronize the beating of the heart’s lower chambers that often beat abnormally in patients with heart failure.

Fortify ST ICD and Unify CRT-D feature advanced battery technology and circuitry along with more energy capacity and rapid charge times while having extended longevity. These devices also feature 40J of delivered energy, which ensures that treatment will be successful for patients requiring a higher energy shock for defibrillation. The narrower shape of these devices enables physicians to implant them using a smaller Incision.

Fortify ST, which incorporates the company’s ST segment monitoring diagnostic algorithm, continuously monitors and records for small changes in the ST segment of the electrocardiogram that can indicate the onset of serious conditions such as ischemia.

Moreover, Fortify ST and Unify feature the company’s ShockGuard technology (approved in April 2011), geared to reduce the occurrence of inappropriate and unnecessary shocks to patients. 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, which is encouraging. A study revealed that 98.5% of patients with this breakthrough technology did not experience inappropriate shocks following one year with the implant.

St. Jude’s Fortify and Unify devices (approved in the U.S. in May 2010) are already gaining notable traction and the company is poised to expand its position through increased penetration with these new devices. The company recently launched these products in India.

St. Jude is well placed to broaden 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. The company’s bigger rival Medtronic (MDT) is the undisputed leader in the global ICD market.

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 launches. 

While we are impressed by St. Jude’s solid fundamentals, strong product mix, healthy growth trajectory and operating leverage, we remain wary of competition-driven pricing pressure and a soft CRM market, which may dent future operating results. Our Neutral recommendation for the stock is in tandem with a Zacks #3 Rank (Hold).

 
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