April 16 (Bloomberg) -- U.S. regulators cleared Boston Scientific Corp. to propose new electronic heart devices, removing penalties imposed in 2005 after defects linked to seven deaths led to recalls. The stock rose the most in a year.

Boston Scientific's Guidant unit also can resume exports of defibrillators and pacemakers from a factory in St. Paul, Minnesota. The Food and Drug Administration lifted the restrictions after re-inspecting the plant and accepting quality- system improvements, the company said today in a statement.

The end of the sanctions removes a competitive handicap. Boston Scientific, based in Natick, Massachusetts, acquired the unit a year ago for $27.5 billion after a bidding war with Johnson & Johnson. Boston Scientific is the second-biggest producer in the $10 billion-a-year global market for implanted devices that regulate heart rhythms, behind Medtronic Inc.

``Boston Scientific can operate at full capacity, and all the development programs can go full-steam ahead,'' said Daniel Owczarski, an analyst with Soleil-Belmont Harbor Research in Chicago, in a telephone interview. ``They can get back to business.''

Guidant had to recall 109,000 defibrillators to correct electrical and battery defects.

Boston Scientific shares rose 99 cents, or 6.6 percent, to $16 at 4:17 p.m. in New York Stock Exchange composite trading. The gain was the biggest one-day percentage increase since February 2005. The stock has fallen 26 percent in the last 12 months.

Quality Control

Defibrillators and pacemakers cost $20,000 to $30,000 each. The biggest maker of the devices, Medtronic, accounts for more than half of worldwide sales. Boston Scientific has about a quarter of the market for defibrillators, which automatically shock stopped hearts back into normal rhythm. Pacemakers speed up hearts that beat too slowly.

Cardiologists who implant the devices ``should feel comfortable that the FDA has signed off,'' said Dhulsini de Zoysa, an analyst with Cowen & Co., in a telephone interview from Minneapolis. ``There are some who were waiting for this signal.''

FDA officials cited breakdowns in quality control after inspecting the St. Paul plant in September 2005, three months after the defibrillator recalls began.

Failures

Loose particles inside crystal components caused 35 confirmed failures of the Insignia line of pacemakers, regulators said. Patients weren't informed of the potential for Insignia pacemakers to fail for various reasons, the FDA said. The agency cited a total of 49 Insignia failures.

The company also didn't quickly warn doctors of software glitches that caused some pacemakers to quit, the FDA said. The agency said Guidant lacked an effective quality-control system at all levels and its record-keeping was poor, with little accountability for errors.

FDA inspectors also cited incomplete procedures for conducting quality audits and a failure to take all necessary steps to prevent continuing quality problems.

The removal of the sanctions allowed the FDA today to approve four software upgrades to existing implantable devices and authorize a new supplier for a manufacturing component, Boston Scientific spokesman Paul Donovan said in an interview.

To contact the reporter on this story: Avram Goldstein in Washington at agoldstein1@bloomberg.net.

Last Updated: April 16, 2007 16:31 EDT