St. Jude Medical Inc. (NYSE:STJ) lost some love on The Street since announcing that its Riata defibrillator leads had a higher failure rate than previously estimated.
The news has doctors concerned, resulting in a downgrade to "Hold" from "Buy" from Jeffries analyst Raj Denhoy, the Associate Press reported.
Denhoy expects the now-defunct lead to have a continued negative impact on sales in 2012, according to the wire service.
The St. Paul, Minn.-based med-tech titan announced late last month that the Riata leads, which it stopped selling in 2009, failed more frequently than previously reported.
St. Jude stopped selling Riata leads last year when it found a 0.47 percent rate of "insulation abrasion" after 9 years of use. The issue, which occurs when the lead wires poke through their insulation, can cause an interruption in the cables’ ability to sense rhythm problems in the heart and could prevent needed shock therapy or even cause unwanted shocks to a patient’s heart.
The company’s latest letter to physicians warned that Riata has a 0.63 percent failure rate. The figure is based on returns and complaints about the devices over the last 9 years, a method that St. Jude acknowledged is known to underestimate the true failure rate.
At the time, Sanford C. Bernstein & Co. analyst Derrick Sung reported that 20 out of 25 doctors he surveyed expressed medium to high levels of concern regarding the news of the Riata failures and that almost half thought the problem may also apply to other St. Jude leads.
In addition to the downgrade, Denhoy lowered his price target for STJ stock to $38 from $40 in a research note to investors.
St. Jude share prices were down about 2 percent to $33.71 in afternoon trading.
