St. Jude Medical (NYSE:STJ) shares closed down 6% after a single incident of wire externalization in 1 of its next-generation Durata defibrillator leads – the same issue the launched the high-profile recall of the company’s Riata leads.
A voluntary physician report submitted to the FDA’s adverse events database said that the Durata’s lead wires wore through their insulation and became exposed. The leads were explanted from the patient.
The defect was discovered during an examination and later confirmed after explantation, according to the report.
"Non-invasive programmed stimulation of ICD, revealed undersensing of ventricular fibrillation after induction," according to the report. "Fluoroscopy of lead revealed externalization of conductors. The externalization was confirmed at lead extraction."
STJ shares closed at $36.24 today off by 6.0%, even as Wall Street analysts warned that the sell-off might be premature. David Roman at Goldman Sachs also questioned the validity of the adverse event report in the FDA’s MAUDE database, given the lack of details such as the physician’s name and hospital, Reuters reported.
"This raises questions about the credibility of the physician report," Roman wrote in a note to investors. "The sharp negative reaction in the stock reflects the fear factor of a product recall that we ultimately do not think will materialize."
He added that the mass sell-off might be a good buying opportunity for savvy investors and maintained a "buy" rating on STJ shares.
St. Jude representatives noted that no incidents had been reported to the company and no defects had been reported anywhere before now. The MAUDE report contained no device serial number and the defective product as not returned to the company.
"We will make every effort to learn more about the report as quickly as possible," St. Jude spokeswoman Amy Jo Meyer told the news service. "To date, there have been no instances of externalized conductors on a Durata lead reported to St. Jude Medical."
The Street’s knee-jerk reaction highlights investors’ sensitivities to St. Jude lead problems in light of the ongoing recall of the Durata’s predecessor Riata leads, Canaccord Genuity analyst Jason Mills told Reuters.
The Riata affair began last September with a small Irish study reporting that revision surgeries for the Riata lead were higher than previously reported. A month later, Starks took to the airwaves to inveigh against arch-rival Medtronic (NYSE:MDT) and its alleged attempts to prejudice the market against St. Jude.
Little more than a month after Starks’ diatribe, however, the company was forced to concede that the Riata revision rates were higher than previously reported, and in December 2011 St. Jude yanked the Riata leads off the market, a move the FDA slapped with Class I recall status.
Then, with the online publication in the Heart Rhythm Society’s journal of a study by a prominent cardiologist linking Riata with 22 deaths, things began to get interesting. By late March, St. Jude was disputing the findings of the study, which was conducted by Dr. Robert Hauser. On Friday, April 6, the company asked that the journal retract the story (a request that was summarily rebuffed), and over the course of the following weekend Starks reiterated his accusation that cross-town rival Medtronic was behind a "whisper campaign" against St. Jude.
Medtronic then released its own analysis confirming Hauser’s count of the number of deaths attributable to its own Quattro leads, engendering a swift and unusual response from St. Jude, which published its own tally of the Quattro deaths.
"I can’t recall seeing a more contentious and open dispute between medical device companies in my 19 years working in this field," Ohio cardiologist Dr. Edward Schloss, director of cardiac electrophysiology at the Christ Hospital in Cincinnati, told MassDevice.com.
St. Jude has been busy ever since calming fears about the next-generation Durata leads. The company hosted several events at the Heart Rhythm Society meeting in Boston last month, distancing the Durata leads from their troubled forebears.
In a special, highly attended talk entitled "Should we trust Durata?" Dr. Chuck Love told listeners that "Durata is 85% different from Riata," noting that the Durata device has a more robust coating in place of the Riata’s silicone insulation.
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