St. Jude Medical ($STJ) is canning about 300 people worldwide in a move to save between $50 million and $60 million a year, the company said. The device giant is also consolidating its various divisions into two categories.
Under the new model, St. Jude's devices will be split into an implantable electronic systems group--including the former cardiac rhythm management and neuromodulation divisions--and a cardiovascular and ablation technologies unit, which will encompass the company's atrial fibrillation and cardiovascular products.
The action appears to be a preemptive move to offset the effect of the 2.3% medical device industry tax slated to begin on Jan. 1, Leerink Swann analyst Danielle Antalffy said in an Aug. 30 note. The tax will likely lead to a $63 million hit on the company in 2013, Antalffy wrote, noting that slashing jobs mitigates the issue.
St. Jude has been plagued by declining cardiac sales and the fallout from 2011's Riata recall, and the company in July reduced its annual earnings outlook in response to declining sales for implantable defibrillators and pacemakers.
"The reorganization we have announced today is part of a comprehensive plan to accelerate our growth," CEO Daniel Starks said in a statement. "We are focused on reducing costs, leveraging economies of scale, maintaining the highest level of quality, and funding our entire portfolio of new growth drivers."
The company is looking to put the costly Riata debacle in its rearview mirror and focus on new techs. However, a recent study suggests that Durata, the leads introduced to replace the recalled devices, might suffer some of the same flaws. In turn, the FDA has asked St. Jude to conduct three-year safety studies of its leads.
The St. Jude news comes a day after Boston Scientific ($BSX), also a victim of sluggish market conditions for implantable devices, revealed plans to trim its staff. Boston Sci didn't disclose how many positions it plans to cut, but the company is planning a reorganization of its own, splitting up the two main divisions of its cardiac device business.
St. Jude said it will "provide support" to the 300 employees getting the boot. To further cut costs, the company is centralizing many of its ancillary departments, including IT, HR, legal and business development.
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Editor's note: This story was updated to add a new third paragraph featuring analyst commentary.