Analysts: Recall of St. Jude Medical’s Durata not likely, despite problems

St. Jude Medical's Durata pacemaker lead

St. Jude Medical (NYSE:STJ) isn’t likely to recall its next-generation Durata pacemaker leads despite a warning from the FDA, but the situation with the medical device company’s flagship product could change any day, according to Wall Street analysts.

Although investors have already baked the downside from the warning into the share price, meaning some potential upside for STJ shares once the problems flagged in the watchdog agency’s Form 483 warning are fixed, analysts from Leerink Swann and Jefferies & Co. told MassDevice.com today that the Durata situation is still fluid.

"The likelihood of a recall, based on what we know today, is fairly small," Leerink Swann’s Danielle Antalffy told us. "Until the device actually starts failing in a real way, like what we saw with Riata, Durata is not going get pulled."

"If one’s being intellectually honest, the probability is still quite low, given what we know," agreed Jefferies analyst Raj Denhoy. "There are a lot of reasons to believe we could see something, some problem, down the road, but clinically the product is still performing quite well. The question is, will the FDA do something despite the clinical data being quite good?"

At least 1 other analyst thinks a recall is more likely, if not downright probable. Last month, analysts at Citigroup built the potential for a recall into their model, leading to a downgrade for St. Jude and upgrades for rivals Boston Scientific (NYSE:BSX) and Medtronic (NYSE:MDT).

St. Paul-based St. Jude could see its earnings per share lose $1.27 if it’s compelled to yank the beleaguered Durata leads, the medical device company’s next-generation series of wires that are threaded through blood vessels and into the heart.

Also in November, the FDA released a report slamming St. Jude for multiple problems at its Durata plant in Sylmar, Calif., driving STJ shares to a 52-week low of $30.25 before closing at $31.76, down 7.1%.

Antalffy and Denhoy also agreed that St. Jude faces other headwinds, including the general cardiac rhythm management slump that’s affected the entire sector and a diminished confidence in its pipeline of future products. Both analysts cited the failure of a clinical trial for STJ’s Amplatzer heart implant as a factor in The Street’s perception of the pipeline.

"The bigger issue is that their reputation for a robust pipeline has suffered," Denhoy said. "It has become a story that’s been tethered to this Riata/Durata issue."

"I still believe in the pipeline story, but obviously with the Respect trial not living up to expectations, that’s a potentially a pipeline product that goes away. I still tend to think it might get approved, but even with approval adoption is an issue," Antalffy noted.

Another red flag is the deteriorating relationship between CEO Daniel Starks and the investment community, she said.

"Management’s communication with The Street has been poor the last 2 quarters," Antalffy said. "We’ll get a lot of answers at the Feb. 1 analysts’ meeting. I’m not sure what to expect."

On the positive side for investors, she added, is a $1 billion stock buyback that’s already under way and a promising outlook for St. Jude’s fractional flow reserve technology, called PressureWire.

"FFR is definitely viewed favorably, as a potentially sustainable double-digit growth market with Fame 2 results now in hand and the increasing need to document and justify procedures," Antalffy told us.

RSS From Medical Design & Outsourcing

  • BRILAMET research project brought to successful conclusion: Precision laser-cutting technique optimized for thick metal sheets
    Using lasers to cut sheet metal is something that has typically been handled in the realm of CO₂ and fiber lasers, although this may not be the case for much longer. Diode lasers are increasingly emerging as the light source of choice for a large number of applications, as can be seen from the BRILAMET […]
  • Mobidiag and Unilabs enter into agreement over use of Amplidiag product line for molecular gastrointestinal diagnostics
    Mobidiag, a Finnish molecular diagnostics company specialized in the development of innovative diagnostics solutions for infectious diseases, and Unilabs, a diagnostics service provider, announced an agreement covering the supply of Amplidiag products over the next four years for Unilabs in Sweden and Norway. The Amplidiag product line covers six diagnostic products for various gastrointestinal infections, […]
  • Quick work keeps dental implants in place among women with osteoporosis
    As natural as aging is, it can tend to feel like a downward spiral. As the years increase, bone mass and strength decrease. Teeth can fall out, and the drugs and surgery designed to return things to normal may actually make bone related issues worse. Osteoporosis is a common problem for women who have gone […]
  • Cyberdyne CEO has severed spines on his agenda
    Editor’s Note: This article is from Bloomberg.com‘s Natasha Khan. Cyberdyne Inc.’s CEO, Yoshiyuki Sankai, is researching ways to repair damaged body tissue. The 57-year-old scientist’s vision: to treat patients with spinal injuries by using stem-cell related technology to repair nerve connections and robotic suits that aid movement. Sankai’s company is setting its sights on better […]
  • Teknor Apex to showcase wide range of PVC compounds for medical devices at Medtec China
    Building on its international leadership role as a supplier of medical-grade PVC compounds, Teknor Apex Company has developed flexible and rigid formulations that address the special needs of device manufacturers. The company will highlight these capabilities at Medtec China 2015. “Teknor Apex produces or markets medical-grade PVC compounds in China, Singapore, Europe, and the United […]
  • The Raspberry Pi eco-system goes interstellar with the new Raspberry Pi Sense HAT
    Newark element14 has globally launched the latest addition to the expanding ecosystem of Raspberry Pi accessories, the Raspberry Pi Sense HAT, as featured in the ‘Astro Pi’ space mission. The Sense HAT will enable enthusiasts to control the same hardware used in space. The Sense HAT attaches to the Raspberry Pi board, and can be […]
  • CommScope completes acquisition of TE Connectivity’s Telecom
    CommScope Holding Company, has completed its previously announced acquisition of TE Connectivity’s Telecom, Enterprise and Wireless businesses, a leader in fiber optic connectivity for wireline and wireless networks. The all-cash transaction, valued at approximately $3 billion, strengthens CommScope’s position as a leading communications infrastructure provider with deeper resources to meet the world’s growing demand for network […]
  • SPI awards IKO Prosthetic Creative System the Student Design International Design Excellence Award
    SPI: The Plastics Industry Trade Association congratulated IKO Prosthetic Creative System for winning the SPI Student Design Award, part of the Industrial Designers Society of America’s (IDSA’s) International Design Excellence Awards (IDEA) program. The award was presented to IKO, an innovative, youth-focused prosthetic design company led by Chicago-based designer Carlos Torres, by SPI’s Senior Director of […]
  • New assay could revolutionize diagnosis and treatment of life-threatening disease
    Invasive Fungal Disease (IFD) is an emerging global health problem associated with high mortality rates in severely immunocompromised patients, such as those undergoing intensive chemotherapy or stem cell transplantation, and in patients suffering immune compromising conditions such as AIDS. The most common causative agents of this disease have been identified as Candida and Aspergillus species, […]
  • Molex delivers ISO 13485-compliant, medical-grade surgical cables from its class 100,000 clean room facility
    Molex, LLC operates a fully ISO 146441-1:1999 Class 8-certified clean room, satisfying strict particulate contamination levels specified by ISO-compliant requirements. Located in Thailand, the facility has less than 100,000 particulates (≥0.5µm) per cubic foot of air and manufactures a variety of ISO 13485-compliant medical cables and surgical cables used in operating theatres, hospitals, laboratories and […]
  • Swept-Source OCT: Patent license agreement between Massachusetts General Hospital and Heidelberg Engineering
    Heidelberg Engineering has entered into a patent license agreement with Massachusetts General Hospital (MGH) in Boston. The agreement grants global and exclusive rights to 77 basic patents and patent applications which relate to swept-source OCT technology and its application in ophthalmology. Spectral domain OCT has become indispensable to eye care professionals worldwide to diagnose and […]

Leave a Reply