St. Jude struggles with its image after Durata concerns
St. Jude Medical ($STJ) has some ground to make up. After months of alarming news and growing worry over its Durata defibrillator leads, the onus falls on the Minnesota devicemaker to defend itself from competitors, analysts and researchers who have called its products into question.
As Executive Vice President John Heinmiller told the Star-Tribune, St. Jude is well aware of the hum of controversy that has surrounded it of late, but the company is fighting back, pointing out that Durata has a 5-year survival rate of 98.7% and has thus far avoided the lead erosion that led to a recall of its predecessor, Riata.
"It really is a matter of making sure we can get the facts out, and continue to point to the facts supported by data that indicate that this lead is performing very well," Heinmiller told the newspaper. "The point is, there's not anything in the actual performance that would indicate there is some other shoe to drop."
Much of St. Jude's Durata pride comes from the device's reformulated insulation, called Optim, which the company says keeps it safe from the wear and tear that plagued Riata. However, in a new study sponsored by Medtronic ($MDT), researchers cast doubt on the polymer's shelf life, concluding that the insulation can break down in the body after 6 years, leaving patients at risk.
St. Jude disputes both the methodology and the result, saying the way the researchers simulated the passage of time calls the study's science into question, and countering that, in all the post-market clinical data it has on Durata, the company has never found anything suggesting that Optim would crumble so easily.
Of course, the concerns are hardly without precedent. The FDA has rebuked St. Jude over how it tests and manufactures Durata leads at a California plant, and while the company disclosed the agency's concerns to investors, it redacted any mention of the devices from its public statements, leading to a fair amount of investor ire and panicky trading once the facts came to light. Since then, more than one analyst has speculated that Durata could get yanked off the market next year.
In an effort to stop the bleeding, St. Jude announced a $1 billion stock buyback program--a sort of gesture of self-confidence--but, as a Leerink Swann analyst told the Star-Tribune, the only way to quell market concern is to start trumpeting some good news for a change.
- read the Star-Tribune feature