St. Jude Readies For Acquisition By Abbott, CEO Confident In Future Growth
On the verge of acquisition by Abbott at the end of this year, St. Jude Medical announced that the company has met analysts’ performance estimates and achieved double digit sales growth, attributed by senior leadership to significant gains in its heart failure division. As in previous quarters, CEO Mike Rousseau noted that St. Jude’s cardiac rhythm management (CRM) business continues to be “challenged.”
St. Jude reported net sales of $1.56 billion, an 11 percent increase, which included double-digit gains in Atrial Fibrillation (AF), Neuromodulation devices, and heart failure (HF) — offsetting another 8 percent dip in CRM, according to a press release. The company’s HF business grew by 48 percent, due in large part to the integration of Thoratec, which St. Jude acquired last year for $3.4 billion.
“We continue to build momentum during our second quarter by bringing innovative products to our global markets,” said Rousseau during an earnings call. “The strong performance in our international sales gives us confidence that where we have a full portfolio, we can deliver top tier growth.”
In the call, Rousseau highlighted St. Jude’s recent successes, including the European launch of AF therapy EnSite Precision, and the imminent launch in the U.S., Europe, and Japan of the company’s SyncAV CRT therapy. Rousseau also discussed a recent panel convened by the FDA to discuss St. Jude’s Amplatzer PFO Occluder device, intended to prevent recurrent ischemic stroke. The panel’s favorable vote, said Rousseau, is an important step toward approval, expected later this year.
Over the past two sales quarters, CRM business has lagged due to delays with MRI-conditional labeling for St. Jude’s leadless pacing and ICD devices. Rousseau remarked that the business is “challenged” by product gaps but added that the issue is “transient” and will resolve with FDA approvals expected in late 2016 and early 2017, respectively.
Though he did not give many details, Rousseau touched on the $25 billion acquisition deal with Abbott Laboratories that was announced in April, saying that the companies are excited to embrace increased competition in the market with their combined portfolios, and that an integration team has been formed.
Together, the companies expect to hold number one or two positions in the cardiovascular device markets, with St. Jude’s devices for heart failure, CRM, AF, and structural heart disease, combined with Abbott’s portfolio of coronary stents, transcatheter mitral valve repair therapies, and products for peripheral artery disease — a $30 billion market opportunity, according to a press release.
Anaylsts speculated to the Star Tribune that competitors like Boston Scientific and Medtronic are “licking their lips” over the market share that may “come up for grabs” once Abbott’s acquisition of St. Jude is complete. While some analysts doubt that Abbott will retain St. Jude senior executives to run the combined device business, Piper Jaffray analyst Brooks Ray commended St. Jude’s leadership through rough waters.
“These guys have really been able to hold it together through some storms,” West said, “If those guys were to leave, that would be a question mark. Or a red flag.”