Medtronic Halts Distribution of Defibrillation Leads

-Bloomberg

10/15/07-Medtronic Inc., the world's largest maker of electronic heart devices, withdrew wires that connect implantable defibrillators to the heart and projected lower revenue. The stock fell the most in a year.

Medtronic suspended sales of the devices worldwide, saying they may have caused five deaths. Medtronic dropped $5.47, or 9.7 percent, to $50.86 at 9:32 a.m. in New York Stock Exchange composite trading. The company's Sprint Fidelis leads may break or erode and shouldn't be used, the Minneapolis-based company said today in a statement.

Revenue this quarter will be reduced by $250 million, or more than 7 percent based on the average analyst's estimate. The recall is another setback for the $5.6 billion implantable defibrillators market. Sales of the devices shrank after Medtronic and its biggest competitors recalled faulty products in 2005. The withdrawn wires have been used in more than a quarter-million people.

``Given the number of patients with Sprint Fidelis leads that will have to be checked and possibly reprogrammed, we believe the adverse publicity will be significant,'' said Timothy Nelson, an analyst at Piper Jaffray & Co. in Minneapolis, in a note to investors. He said the number of patients is about the same as those affected by defibrillator recalls in 2005 by Guidant Corp., now a unit of Boston Scientific Corp.

The leads deliver electrical jolts from stopwatch-sized defibrillators implanted in the chest to regulate a faltering heartbeat. The devices are used in people at risk of cardiac arrest, the biggest killer in the U.S.

Five Deaths

Precautionary replacement isn't recommended because the danger of removal outweighs risks of a wire failure, Medtronic said. The company already faces more than 900 lawsuits over defibrillators, some of which quit working without warning, customers have claimed.

Medtronic said it identified five patient deaths ``in which a Sprint Fidelis lead fracture may have been a possible or likely contributing factor.''

Medtronic captures about half the defibrillator market worldwide, said Rob Clark, a company spokesman, in a telephone interview today. Its largest rivals are Guidant, acquired by Natick, Massachusetts-based Boston Scientific in 2006 for $27.5 billion, and St. Jude Medical Inc., based in St. Paul, Minnesota.

Fracture Rate

The fracture rate on the Sprint Fidelis wires is 2.3 percent at 30 months, compared with 1 percent on average for other Medtronic leads, Piper Jaffray's Nelson wrote. Depending on location, a break can result in failure to shock or pace the heart, or battery failure, he said.

Fractures in the Sprint Fidelis leads may lead to audible alerts, inappropriate shocks and the loss of output, Medtronic said. Pacemaker patients aren't affected by the suspension, the company said.

Medtronic said it wrote to 13,000 doctors worldwide and made ``direct outreach'' with updated information on management of the leads in patients who have them. The recommendations include reprogramming instructions to ensure the defibrillator better monitors for potential problems.

``We take all matters of product quality very seriously and believe this action is the right thing to do, given currently available information,'' Bill Hawkins, Medtronic's chief executive officer, said in a statement.

An elevated fracture rate in the lead was first announced in March, he said.

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