Did St. Jude Medical (NYSE:STJ) finally feel the curse of JAMA, as competitors had predicted?
During the three month period ended July 2, the St. Paul, Minn.-based device maker said its U.S. cardiac rhythm management business was essentially flat compared to the same period last year, a sign that the domestic slowdown in pacemakers and implantable cardiac defibrillators has finally come to STJ’s door.
“U.S. CRM sales fell into a pot hole,” Dan Starks, president & CEO of St. Jude Medical, said in a conference call with investors Wednesday.
Global CRM sales, which make up about a third of the company’s total sales came in at $793 million, a 5 percent increase compared to $752 million from last year. During the second quarter of 2010, STJ got a big boost in sales when Boston Scientific Corp. (NYSE:BSX) was forced to halt shipments of ICD and CRT devices due to a snafu with the FDA.
U.S. sales accounted for just over $401 million of that total, a 2 percent drop from the $409 million the company posted last year. The slowdown is the latest sign that a massive study released in January by the Journal of the American Medical Assn., which showed that doctors implant defibrillators in thousands of patients who don’t need them, continues to hurt the industry.
In April, Starks sounded a little dismissive of the long term impact of study on the industry, saying it had “little effect” on the global ICD market.
“When you look closely at the percent of the available population that is potentially impacted by the JAMA article, it amounted to just a very small percent of the total opportunity and really was not material on a total global basis when we look at the anticipated growth rate of the global CRM market,” Starks said.
He reiterated that point slightly in remarks this quarter, admitting that the market slowdown was impacting STJ’s U.S. ICD sales , but adding that international sales “represent the majority of our business,” in prepared remarks.
Overall, St. Jude reported a $241 million profit on about $1.44 billion in sales during the quarter, a 5.5 percent drop from the $254 million profit the company made on $1.31 million during the same period last year.
Included in the company’s earnings was a $32 million restructuring charge related to the shuttering of a Swedish manufacturing facility for CRM products in favor of more affordable locations in Puerto Rico and Malaysia, which will result in the loss of about 450 workers.