St. Jude Medical Inc., a maker of heart rhythm devices, sank the most in three years after U.S. government inspectors criticized the company’s methods for testing its Durata cables used for defibrillators.
St. Jude fell 12 percent to $31.37 at 4 p.m. New York time, its largest decline since October 6, 2009. The shares of the St. Paul, Minnesota-based company had risen 4.1 percent this year through yesterday.
St. Jude failed to follow procedures at its Irvine, California, plant for verifying that Durata cables, called leads, worked properly and safely, the Food and Drug Administration said in an inspection report dated Sept. 25 through Oct. 17. Lawrence Biegelsen, an analyst at Wells Fargo Securities in New York, downgraded St. Jude to market perform from outperform.
“Issues raised in the FDA 483 inspection letter are likely to heighten physicians’ concerns about Durata,” Biegelsen said in a note to clients.
Each criticism in the eight-page FDA report is followed by the annotation “Promise to correct.” Biegelsen said he expects the FDA to issue St. Jude a warning letter in relation to the inspection report next year.
Durata replaced older Riata wires that St. Jude pulled off the market in 2010 after research showed that electrical wires could break through the insulation coating, potentially leading the device to give off excessive shocks or fail to work when needed. An August report found Durata’s insulation coating can fray when it rubs against another object.