St. Jude Medical (NYSE:STJ) CEO Daniel Starks said there’s no evidence to suggest the global cardiac rhythm management market has hit bottom yet, which could mean more bad news for some of the biggest medical device companies.
"Some people might have thought we would talk about the [CRM] market having bottomed out in second quarter," Starks told analysts in a conference call this morning. "I can’t say we’ve seen the bottom yet."
Earlier today, St. Jude cut its earnings outlook for 2012, a move that sent STJ shares spiraling down on Wall Street.
Starks said several factors led St. Jude to trim its forecast, including an "across-the-board" slowdown in recession-ravaged Europe and "signs of softness" in all of its major markets.
"It seems every day there’s new volatility in all of the European Union dynamics," he said. "We haven’t experienced this kind of environment before that we’re experiencing in the EU today. … Trends are all on the downside."
Those dynamics, plus the continued slowdown in St. Jude’s CRM business, led officials at the St. Paul, Minn.-based device maker to adopt a more conservative posture for its signature business going forward.
Starks said that although the CRM industry has seen negative growth for 3 years now, St. Jude was able to weather the initial storm but is now looking at 2 straight years of pullback.
"If you ask me for a level of proof that the CRM market is near point of stabilization, I can’t give it to you. We have regularly been overly optimistic," Starks said. "Because we have not been able to predict the bottom of the market on a frequent basis, we’re determined to be conservative in outlook."
St. Jude’s CRM business suffered during the 2nd quarter, with global sales dropping 6% to $746 million, compared to $768 million for the same period last year. Domestic CRM sales dropped 4% to $384 million, compared to $401 million during Q2 2011. Global pacemaker sales were off by 9% to $287 million, compared to $315 million.
Those numbers led Starks and the rest of STJ team to surmise that the CRM market has yet to hit bottom.
"We’d like to see a no-growth [quarter]," Starks said when asked to set a benchmark.
St. Jude shares a leadership position in the CRM market with med-tech titans Boston Scientific (NYSE:BSX) and Medtronic (NYSE:MDT), which have also experienced non-growth pains in the CRM space.
Boston Scientific, which reports its 2nd-quarter earnings on July 26, saw its CRM business drop 10% in Q1.
Medtronic, which is still finishing up the 1st quarter of fiscal 2013, saw its CRM business fall 10% during the previous year and 2% during its fiscal 4th quarter.
