St. Jude Medical seesaws on FDA warning letter Wall Street Beat

A warning letter from the FDA to St. Jude Medical (NYSE:STJ) sent the St. Paul, Minn.-based medical device company’s stock on a seesaw ride yesterday and today.

STJ shares closed up 1.5% yesterday at $38.85 each after St. Jude revealed the warning letter, but closed down 1.2% today at $38.39 apiece.


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St. Jude shrugged off the formal warning letter, which followed a so-called "Form 483" from the federal watchdog agency detailing 11 problems with quality control and documentation procedures at the Sylmar facility.

"As previously disclosed by management on its 3rd-quarter earnings call on Oct. 17, 2012, this warning letter was expected," St. Jude said today in a regulatory filing. "The FDA letter notes that it will not grant requests for exportation certificates to foreign governments or approve pre-market approval applications for Class III devices to which the quality system regulation deviations are reasonably related until the violations have been corrected. The warning letter does not, however, identify any specific concerns regarding the performance of, or indicate the need for any field or other action regarding, the Riata ST Optim or Durata leads or any other St. Jude Medical product," according to the filing. "Accordingly, the Company will continue manufacturing and shipping product from the Sylmar facility and customer orders are not expected to be impacted while we work to resolve the FDA’s concerns."

Last week, CEO Daniel Starks spent considerable energy trying to reassure investors at the J.P. Morgan healthcare conference about the problems in Sylmar, 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 SEC filing made the same points, saying that St. Jude "has taken the appropriate regulatory circumstances into account in managing its business and setting investor expectations and believes the FDA’s concerns can be resolved without a material impact on the company’s financial results."

A week after Starks hipped investors to the possibility of a Form 483 in October, St. Jude revealed that the FDA came through on the threat, issuing a heavily redacted copy of the missive. A much less censored version made headlines the following month, disclosing further detail about the 11 problems found in Sylmar during FDA inspections from Sept. 25 to Oct. 17, 2012.

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 Analysts’ ups and downs

  • Abbott (NYSE:ABT): Barclays Equity Research initiates with "equal weight" rating, $35 price target.
  • Boston Scientific (NYSE:BSX): Credit Suisse upgrades from "neutral" to "outperform" rating, raises price target from $6 to $7.50.
  • C.R. Bard (NYSE:BCR): Bank of America/Merrill Lynch upgrades from "neutral" to "buy" rating, $114 price target; Leerink Swann maintains "market perform" rating, raises price target to $110-$115 from $98-$99.
  • Cerner (NSDQ:CERN): Sterne Agee Group reiterates "buy" rating, raises price target from $90 to $96.
  • Edwards Lifesciences (NYSE:EW): Zacks upgrades from “underperform” to “neutral” rating, $98 price target.
  • Haemonetics (NYSE:HAE): Zacks upgrades from "neutral" to an "outperform" rating, $50 price target.
  • Intuitive Surgical (NSDQ:ISRG): Lazard Capital upgrades from "neutral" to "buy" rating, $600 price target.
  • Medtronic (NYSE:MDT): TheStreet reaffirms "buy" rating.
  • Mindray (NYSE:MR): Goldman Sachs upgrades from “neutral” to “buy” rating.
  • NeuralStem (AMEX:CUR): Aegis Capital Corp. reiterates "buy" rating, raises price target from $3.50 to $4.
  • NxStage Medical (NSDQ:NXTM): Zacks raises from “neutral” to “outperform” rating, $14 price target.
  • Sirona Dental Systems (NSDQ:SIRO): Goldman Sachs downgrades from "buy" to "neutral" rating, $67 price target.
  • St. Jude Medical (NYSE:STJ): Barclays Equity Research reiterates"overweight/neutral" rating, $48 price target; BMO Capital Markets downgrades from "outperform" to "market perform" rating, raises price target from $38 to $40; Jefferies maintains "hold’ rating, raises price target to $39.
  • Varian Medical (NYSE:VAR): Lazard downgrades from "buy" to "neutral" rating.
  • Zimmer (NYSE:ZMH): Lazard downgrades from "buy" to "neutral" rating.

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