St. Jude's Bruise Should Clear Up Fast

A Pounding Pulse?
St. Jude Medical (STJ ) tumbled 2%, to 73, on May 17, after it revealed that the Food & Drug Administration had delayed for a month the approval of its new Epic CRT-defibrillator. St. Jude is a leader in cardiac rhythm-management devices, including pacemakers. These devices account for 71% of its sales.

The FDA has no issue with the product, says Tao Levy of Deutsche Bank Securities. It simply needs more time to review the filing. Some buyers, who didn't want to be named, see St. Jude as takeover bait. "St. Jude would be a prize for the likes of Boston Scientific (BSX ) and Johnson & Johnson (JNJ )," says one West Coast fund manager. Both would profit from St. Jude's products, she adds. Boston Scientific needs them to complement its coronary stents, says this pro, and J&J needs to boost its pharmaceutical business. In a buyout, St. Jude could fetch more than analysts' 12-month targets of 85 to 90, she figures. Robert Gold of Standard & Poor's (MHP ), who rates St. Jude "accumulate," sees it earning $2.25 a share in 2004 and $2.70 in 2005, vs. 2003's $1.83. J&J declined comment, and Boston Scientific did not return calls.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

By Gene G. Marcial

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