St. Jude Shares Fall on Safety Concerns

-Houston Chronicle

11/12/2007- Shares of medical device maker St. Jude Medical Inc. fell Monday on concerns about the potential for lead wires on its Riata implantable defibrillators to puncture the hearts of cardiac patients.

An editorial published Monday in the medical journal PACE details four accounts of the leads, which connect the heart to the defibrillator and help maintain a proper heart rhythm, poked holes through patients' hearts rather than remaining attached to the heart wall.

The stock fell $1.89, or 4.8 percent, to $37.13 Monday on greater than average volume. Shares have ranged between $32.40 and $48.10 over the last 52 weeks.

In response, St. Jude on Monday touted an article expected to be published in PACE's December issue which reaffirmed Riata's performance and safety. The company said the rate of perforation with Riata is below or at the low end of what has been reported in clinical literature.

In October, rival medical device maker Medtronic Inc. recalled its Sprint Fidelis lead wires after conceding that the device broke more often than expected and may have contributed to five deaths.

Lazard Capital Markets analyst Dr. Alex Arrow reaffirmed a "Buy" rating with a $40 price target on St. Jude's stock, but said the safety issues raised over Riata could turn out to be worse for the company than Medtronic's recent recall was for that firm.

"In St. Jude's case, the lead problem of reportedly puncturing holes in cardiac tissue, instead of shorting out like Medtronic's, has the potential to be worse because it could cause damage to a patient, rather than just failing to prevent it like the Medtronic problem," he wrote in a note to investors Monday.

Wachovia Capital Markets analyst Larry Biegelsen reaffirmed an "Outperform" rating, however, saying the issue is not new and can be resolved.

"So far, the perforation issue with the Riata lead does not appear to be hampering St. Jude's ability to capture share," he wrote in a note to clients.

The overall implantable cardiac defibrillator market appeared to remain stable in October, despite concerns following the Medtronic recall. St. Jude Medical will have to walk a fine line, however, in order not to upset physicians by focusing too much of the blame on implant techniques but still maintain market share as competitors jostle to position their products as safer alternatives.

Biegelsen also noted that increased awareness of the perforation issue will likely lead to a higher rate of incident reports.

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