Analyst: study shows new St. Jude wire problems

Associated Press

NEW YORK (AP) — A Jefferies & Co. analyst said Tuesday that a study appears to show new problems with the wires in St. Jude Medical Inc.'s implantable heart devices.

THE OPINION: Analyst Ray Denhoy said a study published in the journal Macromolecules suggests that the company's Optim insulation could erode more quickly than physicians expect. Denhoy said he still believes physicians will begin using other companies' products because of increasing concerns about the design and performance of St. Jude's leads, including its Durata wires, which are coated with the Optim material.

"The paper is sure to draw criticism for its methods and conclusion, but the publication in a peer-reviewed journal and the potentially damning conclusions lead us to believe it will find an audience," he wrote. Denhoy maintained a "Hold" rating on St. Jude shares and lowered his price target to $34 per share from $40.

In recent years St. Jude has withdrawn several types of leads, or wires that are used to attach a defibrillator to a patient's heart, because of concerns the silicone insulation on the wire could erode, increasing the risk of a malfunction.

Defibrillators are lifesaving devices implanted in the chest to correct dangerous heart rhythms, monitoring the heart for irregular beats and occasionally triggering electrical shocks that correct the problem.

The problems have already hurt sales of heart devices for St. Jude, and some analysts think the problems will spread to Durata, a newer wire with a different type of insulation. The insulation is called Optim, and St. Jude says the material "fuses the best attributes of silicone and polyurethane." The St. Paul, Minn.-based company has not disclosed any insulation problems with Durata.

The Food and Drug Administration has ordered St. Jude to collect data on patients implanted with Durata wires and Optim insulation.

On Friday a Citi Investment Research analyst cut his price target on St. Jude shares to $32 from $39, saying study data on safety of the two of the withdrawn leads is getting worse and the risk that St. Jude will also have to pull Durata off the market is growing.

THE STOCK: Shares of St. Jude Medical lost 18 cents to $36.20 in afternoon trading. The stock has lost 15.3 percent of its value since St. Jude reported its third-quarter results on Oct. 17.