St. Jude Medical Inc. (STJ) will exercise an option to buy closely held CardioMEMS after U.S. regulators approved the company’s remote heart-failure monitoring system.
The CardioMEMS HF System is a miniature sensor that’s threaded into the pulmonary artery to track the level of pressure borne by heart-failure patients. The implanted device enables doctors to monitor pressure changes in real time that may signal a decline in health, allowing them to tailor care before the patient needs hospitalization. Pressure readings are currently taken in the hospital after patients worsen.
St. Jude, based in St. Paul, Minnesota, said it would exercise its right to purchase the 81 percent of Atlanta-based CardioMEMS that it doesn’t already own for $375 million. The monitoring system should generate $15 million to $20 million in sales in 2014, St. Jude Chief Executive Officer Dan Starks said after releasing fourth-quarter earnings in January.
“We are bullish on this opportunity because 1) reimbursement is favorable: 2) hospitals are penalized for heart failure readmissions: 3) CardioMEMS provides a solution to reduce readmissions,” Lawrence Biegelsen, an analyst at Wells Fargo in New York, wrote in a note to investors today. He estimated the device will generate $259 million in 2018.
St. Jude rose 2.5 percent to $65.76 at the close in New York. The shares have gained 48 percent in the past 12 months.
The CardioMEMS system was approved for patients with Class III heart failure who had been hospitalized within the past year. About 5.9 million Americans have heart failure, when an enlarged and weakened heart is unable to pump enough blood to fuel the body. The level of pressure in the pulmonary artery can rise as a patient worsens.
The CardioMEMS system is designed to detect the signal of rising pressure when it first appears. Wirelessly transmitting the readings to the doctor is intended to give time to adjust the patient’s medications and other treatments to avoid a crisis that leads to hospitalization.
“The goal of this first-of-its-kind implantable wireless device with remote monitoring of pulmonary artery pressure is to reduce heart failure-related hospitalizations,” said Christy Foreman, director of the Office of Device Evaluation in the FDA’s Center for Devices and Radiological Health. “Heart failure is one of the most common reasons for hospitalizations for people aged 65 and older.”
St. Jude initially took a 19 percent stake and the option to buy the remainder of CardioMEMS for $60 million in September 2010.
The U.S. Food and Drug Administration approved CardioMEMS’ HF System based on a study that found monitoring the amount of pressure in the pulmonary artery via the implanted device lowered hospitalizations for heart failure by 28 percent after six months and 37 percent after an average of 15 months.
The approval wasn’t guaranteed. CardioMEMS failed to win the backing of a panel of FDA advisers in 2011, who said benefits seen in the company’s study may have been the result of bias. A second panel hearing in October 2013 yielded a split vote, with advisers ultimately saying the benefits outweighed any risks.
The FDA said there is a “reasonable assurance” the device is safe and effective for heart failure management. The agency will require the company to conduct a thorough post-approval study to ensure no unexpected risks or performance problems emerge when the device is used outside of a clinical trial.
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