St. Jude Eliminates 300 Jobs as It Reorganizes Divisions

St. Jude Medical Inc. (STJ), a maker of heart rhythm devices, said it is firing 300 workers in a reorganization that will save $50 million to $60 million in annual pretax expenses starting next year.

St. Jude is merging its four divisions into two product operating units, the implantable electronic systems division and the cardiovascular and ablation technologies division, the St. Paul, Minnesota-based company said today in a statement. The move will allow the company to bundle support and other staff, improve efficiency and cut costs.

St. Jude said in July that its 2012 outlook is worsening as last year’s recall of Riata, a defibrillator wire, hampers sales of other products and a stronger dollar erodes overseas profit. Sales of devices that manage heart rhythms, including defibrillators to shock the heart and pacemakers to regulate it, fell 6 percent in the second quarter from a year earlier.

“This is another piece of fallout that we can attribute at least in large part to the medical device tax,” said Thomas Gunderson, senior analyst at Minneapolis-based Piper Jaffray & Co., in a telephone interview. “From a shareholder standpoint and Wall Street standpoint, it’s always good to cut expenses.”

Medical device makers will have to pay a 2.3 percent excise tax on products starting next year. The levy was designed to raise $20 billion to expand coverage of the uninsured as part of the 2010 health-care reform law.

St. Jude declined less than 1 percent to $37.80 at the close of New York trading. The company has dropped 17 percent in the past 12 months.

Sales Skid

Sales of pacemakers and defibrillators have declined among concerns about safety and overuse, even as hospitals and insurers are paying less for the potentially life-saving technology. St. Jude’s sales are expected to decline 1 percent to $5.55 billion in 2012, the first year-over-year decrease since at least 1990, according to the average estimate of 22 analysts compiled by Bloomberg.

“The reorganization we have announced today is part of a comprehensive plan to accelerate our growth,” Daniel Starks, chairman, president and chief executive officer of St. Jude, said in the statement. “We are focused on reducing costs, leveraging economies of scale, maintaining the highest level of quality, and funding our entire portfolio of new growth drivers.”

To contact the reporters on this story: Ryan Flinn in San Francisco at rflinn@bloomberg.net; Michelle Fay Cortez in Minneapolis at mcortez@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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