There’s no buyer’s remorse at St. Jude Medical (NYSE:STJ) when it comes to the company’s $455 million acquisition of CardioMEMS.
St. Jude CEO Dan Starks yesterday called CardioMEMS Champion HF implantable heart monitor the company’s "single most important new growth driver" and predicted the market for the product would exceed $1 billion.
"CardioMEMS’ technology is a perfect example of the right product in the right market at the right time and is expected to become a major new growth driver for St. Jude Medical in 2015 and beyond," Starks told investors during the company’s 3rd quarter earnings call. "Our starting point is that CardioMEMS represents an entirely new market, not just a new product. Our 1st priority therefore is to develop the CardioMEMS market effectively for the long-term."
St. Paul-based St. Jude reported yesterday that net profit fell 9.2% to $238 million, or 82¢ per share, for the 3rd quarter ended Sept. 27, compared with Q3 2013. Revenues rose 3% to $1.37 billion for the quarter.
Sales of CardioMEMS’s Champion HF implantable heart failure monitor contributed just $4 million to the top line during the quarter, almost all of it during September, Starks said. Champion HF is the 1st and only heart failure monitor in the U.S. with FDA approval to help reduce hospital admissions, according to St. Jude.
The company got a huge assist from the Centers for Medicare & Medicaid Services in August when it received "New Technology Add-On Payment" coverage for the CardioMEMS Champion HF implantable heart monitor. The NTAP coverage adds to normal reimbursement codes for expensive, breakthrough products that aren’t sufficiently covered under regular classifications.
Starks called the reimbursement win the company’s "most important accomplishment" in bringing the technology to life, noting that St. Jude has signed contracts with "25 customers including some of the top heart failure centers in the United States."
"We already have presented contract proposals to approximately 75 additional customers and think that momentum is beginning to build by every major metric," he said. "We expect this product line to generate sales of approximately $12 million in Q4 and well over $50 million in 2015. We will quantify our CardioMEMS revenue growth expectations for 2015 more specifically after we have completed our 2015 operating plan."
St. Jude closed the deal for CardioMEMS in June, days after the FDA approved the Champion HF device. The technology, which was developed and spun out of the Cleveland Clinic, took more than 11 years to bring to market.
