| 2016-10-11 09:57:08|
STJ, ABT 09:57 10/11 10/11/16
St. Jude drops after warning defibrillator patients about battery risks
Shares of St. Jude Medical (STJ) slipped in morning trading after the medical device maker warned about premature battery depletion of some of its defibrillators, an issue which has been linked to two deaths. ST. JUDE WARNING: St. Jude Medical warned in a statement this morning that some of its implanted heart devices were at risk of premature battery depletion, a condition it said had been linked to two deaths. In an "Important Medical Device Advisory" posted to its website, St. Jude stated that "On October 11, we issued a field advisory related to premature battery depletion associated with lithium deposits in a subset of our ICD and CRT-D devices manufactured before May 23, 2015. While it is a rare occurrence - 0.21%- we want to ensure we are providing the information physicians need to best care for their patients." St. Jude said it has consulted with its medical advisory board, as well as other experts and regulatory agencies worldwide on the matter. Two people died after their devices failed to work correctly because of the drained battery, while 47 others reported dizziness or fainting. WHAT'S NOTABLE: The warning from St. Jude Medical, which is in the process of being acquired by Abbott Laboratories (ABT) for $25B, comes as the device maker looks to defend unrelated allegations from Muddy Waters and MedSec Holdings that its heart devices have defects that make them vulnerable to cyber attacks. Despite today's news, a spokesperson for Abbott told Reuters and Bloomberg that the drugmaker still expects to close the St. Jude deal by the end of the year. FDA RECOMMENDS CONTINUED MONITORING: In its own statement, the Food and Drug Administration said this morning that its investigation into the cyber security vulnerabilities of St. Jude devices, including the [email protected] monitoring system, continues. "Despite the allegations, at this time, the FDA strongly recommends that the [email protected] device be used to monitor the battery for these affected devices because the benefits of continued patient monitoring and the life-saving therapy these devices provide greatly outweighs any potential cybersecurity vulnerabilities," the FDA said. ANALYST SAYS ADVISORY 'COMMON' IN CRM INDUSTRY: In early September, Jefferies analyst Raj Denhoy told investors in a note that after meeting with a MedSec medical advisor, he believed that "more is still to come" in St. Jude's saga related to the safety of its pacemakers and defibrillators as additional data is expected from the cybersecurity start-up and its partner, short-selling research firm Muddy Waters. At the time, Denhoy said that Hemal Nayak, a medical advisor on the board of MedSec, was confident in the findings that St. Jude Medical's devices are "inherently less secure" than other companies' and that they are vulnerable across the entire communication ecosystem. In a note to clients this morning, Cowen analyst Joshua Jennings said that "Dear Doctor" letters are never positive, but St. Jude's advisory is common in the Cardiac Rhythm Management industry and sees limited risk to the company's franchise. Additionally, Jennings, who kept an Outperform rating on St. Jude with an $85 price target, still believes the Abbott takeover will close by the end of the year. PRICE ACTION: Shares of St. Jude Medical are down 2.7% to $79.10 in morning trading, while Abbott has fallen 3.5% to $41.98 per share.