NEW YORK (AP) — A Citi Investment Research analyst said Friday that St. Jude Medical Inc. faces growing legal and regulatory risks from its recalled Riata heart wires, and said it is becoming more likely that the company will have to take its Durata wires off the market.
THE OPINION: Analyst Matthew Dodds said he believes study data on safety of the Riata and Riata ST wires is getting worse, which puts St. Jude at greater risk for successful lawsuits from consumers and sanctions from the Food and Drug Administration. He said the risk that its newer Durata wires will be taken off the market because of similar insulation problems.
"We believe the risk of Durata being removed from the market in the next 12 months is much higher than the Street believes," he wrote. Dodds maintained a "Sell" rating on St. Jude shares and lowered his price target to $32 per share from $39.
St. Jude said Friday that the clinical data continues to support the safety and reliability of the Durata wires.
THE BACKGROUND: The wires, or leads, are used to attach a defibrillator to a patient's heart. 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. St. Jude stopped selling Riata and Riata ST and later took the products off the market. If the insulation on the wire is eroded, there is a greater chance the device could malfunction and either deliver a shock when none is needed, or fail to shock the patient's heart when it is not beating properly. Around 79,000 Riata leads are implanted in U.S. patients. Early in 2012 St. Jude recalled two other wires.
Durata is a newer wire with a different type of insulation, and St. Jude Medical says the insulation on Durata wires is more resistant to abrasion. The FDA has ordered St. Jude to collect more data on Riata as well as Durata. October, St. Jude Medical said it may get a warning from the FDA about a manufacturing facility in California.
THE STOCK: Shares of St. Jude rose 28 cents to $37.15 in afternoon trading on Friday. The stock is down 14 percent since St. Jude reported its third-quarter results and disclosed the potential FDA warning on Oct. 17.