St. Jude defends Durata amid FDA warning at manufacturing facility

St. Jude Medical CEO Daniel Starks

St. Jude Medical‘s (NYSE:STJ) implanted cardiac device market share is in great shape despite ongoing issues with its high-voltage defibrillator leads, CEO Daniel Starks told an audience at the J.P. Morgan healthcare conference last night.

Starks spent a substantial portion his presentation and the subsequent breakout session explaining why the Durata line was a sure thing, and why the Riata lead recall and FDA warnings related to a St. Jude manufacturing plant were no threat to the company’s hold on the larger ICD market.

The medical device company also released its preliminary results for fiscal 2012, beating analysts’ expectations on an expected $1.37 billion in sales for the 4th quarter, including a 2% slide in ICD revenue. Starks was tight-lipped about any solid projections for 2013, as the company plans to release its formal earnings guidance later this month.

St. Jude has devoted a lot of time in recent months to recovering from the high-profile recall of its Riata line of defibrillator leads and the negative halo effect on the company’s next-generation Durata line, which has come under increased scrutiny from the FDA as well as from some analysts.

The FDA most recently published the results of an inspection it conducted at 1 of St. Jude’s plants in Sylmar, Calif., where the agency said it found 11 problems, including multiple issues with the Durata leads’ process validation protocol.

Starks maintained that the issues with the plant are not an indication of issues with the Durata leads, and said the company is taking steps to address each of the observed violations.

"None of these observations identified any issue regarding quality and safety or performance of the Durata high-voltage leads or any other St. Jude Medical device," Starks said. "We are giving the highest priority and strongest urgency to fully remediate these observations in a very intensive way at the earliest time possible."

In a November letter from St. Jude, revealed this week, the company accepted the results of the inspection and vowed to address all of the agency’s concerns.

Starks insisted this week that the public foofaraw had not left a large footprint on the company’s standing in the market.

"We expect to have the same questions regarding stability of market share in 2012 as we expect to have in 2013," Starks said. "In spite of the amount of focus to this topic, we clearly at least held or gained ICD market share on a total global basis."

"We estimate the market itself declined about 3%," he added, nothing that that estimate may change as other big players in the segment report their financial results. "Our revenue, as you can see from our earnings release after the market close today, represents, on a constant currency basis, about a 2% decline."

Starks further emphasized the relatively small effect the high-voltage lead market has on St. Jude’s larger businesses. High-voltage leads, such as the Durata, represent less than 4% of the company’s global sales, he said.

"In 2012 we lost some share in the high-voltage lead segment of the ICD market, but quickly gained share in the CRT-D segment of the ICD market and in replacements," Starks said. "You can see from our results in 2012 and from the confidence I’m expressing regarding our expectations of continued hold or gain in the ICD market in 2013 that high-voltage lead is only 1 of a number of factors that bear on ICD market share."

In a breakout session following St. Jude’s presentation Starks addressed questions about the company’s share performance and how he might address trepidation from potential investors who are shying away because of the spotlight on the company’s lead issues.

"Our agenda is not selling stock," Starks replied. "Our agenda is continuing to build a business and to do that successfully."

"It’s not my agenda or the agenda of the organization to try to encourage people to jump in where you’re not comfortable," he added.

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