St. Jude Medical's financials disappoint; CEO warns about warning letter

For St. Jude Medical ($STJ), it is sobering enough to have to report fiscal 2012 third-quarter numbers that are less than stellar. Net sales declined 4%, for example, with a 7% drop in sales of implantable cardioverter-defibrillators (ICDs) and a 9% decline for pacemakers. No segments posted an increase, save for the company's atrial fibrillation products. 

But then there's this: CEO Dan Starks told investors during the company's earnings call that the company expects an FDA warning letter regarding its Sylmar, CA, manufacturing plant. As noted in MedCity News' coverage of the unusual call, the FDA inspection is ongoing at the facility, which makes high-voltage leads. 

This, as the article reminds us, is a touchy spot for St. Jude, which engineered a massive recall of its Riata ICD leads last year due to serious safety concerns. Starks is quoted as saying he wasn't sure how many cardiac rhythm management-related products are made at the plant. But according to the story, he tried to spin the unusually timed disclosure as "good for our markets if the public knows that the FDA is exercising its regulatory oversight of medical device companies in a very rigorous and robust way, and it is clear to us that FDA is doing that."

Investors weren't convinced. They drove St. Jude's stop down by more than 5.8% in late-morning trading, to $40.43.

St. Jude's net sales for the fiscal 2012 third quarter hit $1.326 billion, down 4% from $1.383 billion over the same period last year. After adjusting for foreign currency impact, revenue increased less than 1%. The company's ICD sales plunged 7%, to $412 million, and pacemaker sales dropped 9% compared to the fiscal 2011 third quarter, to $279 million. Both reflect ongoing industry-wide market struggles with cardiac rhythm management product space. Cardiovascular product sales dipped 4%, to $314 million, and neuromodulation sales declined 1%, hitting the $101 million mark.

Overall, St. Jude booked $176 million in net earnings for the quarter, or 56 cents per share, versus $227 million in net earnings, or 69 cents per share, during the fiscal 2011 third quarter. One bright spot: St. Jude said its atrial fibrillation product sales jumped 9% during the fiscal 2012 third quarter, hitting $220 million in product sales.

- read the earnings release
- check out the MedCity News story