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St. Jude Rises as Defibrillator Technology Contracts Surge

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Jan. 25 (Bloomberg) -- St. Jude Medical Inc., a maker of devices to treat irregular heartbeats, rose 4.5 percent after the company said there is strong demand for its new cardiac defibrillator technology.

St. Jude gained $1.74 to close at $40.30 in New York. Shares of the St. Paul, Minnesota-based company have fallen 5.4 percent in the past 12 months.

The device maker has 150 new customer contracts signed for its Quadripolar technology, just eight weeks after receiving U.S. Food and Drug Administration approval for the system that gives doctors flexibility when implanting devices used to shock a stopped heart. The four-electrode wire allows physicians to adjust electrical impulses without surgically moving the wires.

“Each contract reflects an expected gain in market share in 2012 in the hospital or health-care system covered by the contract,” Chief Executive Officer Daniel Starks said today on a conference call with analysts and investors. “It’s already in hand. That, as a start, gives us a very high confidence that as all the dynamics net against each other, we will gain market share here in 2012.”

Fourth-Quarter Earnings

Fourth-quarter earnings excluding one-time items rose 9.2 percent to $274.3 million, or 86 cents a share, from $251.1 million, or 75 cents, a year earlier, the company said. The earnings exceeded the 84 cent average of 24 analyst estimates compiled by Bloomberg. Revenue rose 4 percent to $1.41 billion.

St. Jude forecast 2012 profit of $3.43 to $3.48 a share, with currency exchange rates shaving $130 million to $175 million from sales during the year, Chief Financial Officer John Heinmiller said.

The Quadripolar system has a higher average sales price than older models and is attracting new physicians to St. Jude, Heinmiller said in a telephone interview. Those who have used it say it’s easier and faster to implant, and exposes patients to less radiation, he said.

“With that kind of reaction, the word gets around and maybe people we don’t have as close relationship with would want to try it,” he said. “It gets a foot in the door.”

St. Jude has become a referendum on the $6.7 billion global market for implanted defibrillators, said Raj Denhoy, an analyst for Jefferies & Co. in New York, in a telephone interview.

Doctor Unease

There may be lingering unease among doctors about using the company’s defibrillator leads, Denhoy said. While there haven’t been insulation issues with the company’s newer Durata leads, St. Jude was forced to recall the older Riata device in December because of higher-than-expected failure rates.

There are about 80,000 Riata leads still implanted in patients, Denhoy said. Extracting them after the wires have penetrated the insulation and may not work properly is difficult, he said. As many as 4,000 or 5,000 patients may need them removed if the situation worsens, which may lead some clinicians to avoid St. Jude devices, he said.

The company’s sales target is a bet that the sluggish market is going to bottom out and start to improve, Denhoy said.

“It’s an evolving situation,” he said. “I’m a little skeptical.”

To contact the reporter on this story: 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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