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Device Makers Recall and Retool
By Althea Chang
TheStreet.com Staff Reporter
6/21/2005 4:53 PM EDT
In the last two days, St. Jude Medical (STJ:NYSE - commentary - research) said it would need to fix a software defect in some of its defibrillators, and word came that Medtronic (MDT:NYSE - commentary - research) received a warning letter from the Food and Drug Administration for failing to correct a problem at a facility that makes its Lifepak 12 device.
On Friday, Guidant (GDT:NYSE - commentary - research) said 50,000 of its implantable cardiac defibrillators in service could be subject to defects that have led to 45 malfunctions. The company warned doctors about possible problems with some of the devices and said two patients with defibrillators covered by the notification have died.
If bad news does in fact come in threes, the medical-device makers should be in the clear for the foreseeable future.
As for Guidant, SG Cowen analyst David Clayton says he remains positive on the company. And whereas Alexander Arrow of Lazard Capital Markets estimates recalls could cost Guidant as much as $225 million, St. Jude says it doesn't expect its advisory of possible software issues to have any material financial effect.
Guidant shares traded down 88 cents to $69.42.
St. Jude, based in St. Paul, Minn., said Monday that 39,000 of its implantable cardiac defibrillators need a noninvasive software upgrade to correct two "anomalies" found during a routine product evaluation. After examining a single returned ICD, the company said the device may deliver fewer than the intended six shocks when a patient's heart begins to beat at a dangerous pace.
The company said there were no reported adverse events. St. Jude worked with the FDA and consulted a physician advisory panel, and the upgrade was approved by the government on June 17. Cowen's Clayton said the software defects are a noncore issue and the upgrade will be easily implemented.
Also, "electrical noise" in some devices may cause an increased pacing rate. The software upgrade notice applies to the Epic and Atlas defibrillators. St. Jude shares were off 31 cents to $40.66.
News of the issues affecting the companies closely follows a recent expansion of Medicare coverage of the implanted devices. The Centers for Medicare and Medicaid Services expects heart devices will be implanted in at least 25,000 additional patients in the first year of coverage, potentially saving up to 2,500 lives.
Coronary heart disease is the most common cause of death in the U.S., according to the Centers. Sudden death, frequently from heart arrhythmias, is believed to account for about 50% of all coronary heart disease deaths. An implanted ICD monitors the heart's rhythm and delivers an electrical shock when a life-threatening arrhythmia is detected.
Medicare's expanded coverage of the devices will increase the number of beneficiaries eligible for an ICD by one-third, to nearly 500,000.
Meanwhile, the FDA said Medtronic failed to properly correct problems with its Lifepak 12 automated external defibrillators' therapy cables. Earlier this month, the FDA told Medtronic that its Lifepak 12 manufacturing facility doesn't conform to good manufacturing practice requirements.
The agency also said that although defective cables in the devices were replaced and inspected, there have been continued complaints of broken pins in the therapy cables.
" [The company] should take prompt action to correct these deviations," the FDA said in its letter. "Failure to promptly correct these deviations may result in regulatory action being initiated by the FDA without further notice."
Medtronic shares were down 44 cents to $52.40.
By Althea Chang
TheStreet.com Staff Reporter
6/21/2005 4:53 PM EDT
In the last two days, St. Jude Medical (STJ:NYSE - commentary - research) said it would need to fix a software defect in some of its defibrillators, and word came that Medtronic (MDT:NYSE - commentary - research) received a warning letter from the Food and Drug Administration for failing to correct a problem at a facility that makes its Lifepak 12 device.
On Friday, Guidant (GDT:NYSE - commentary - research) said 50,000 of its implantable cardiac defibrillators in service could be subject to defects that have led to 45 malfunctions. The company warned doctors about possible problems with some of the devices and said two patients with defibrillators covered by the notification have died.
If bad news does in fact come in threes, the medical-device makers should be in the clear for the foreseeable future.
As for Guidant, SG Cowen analyst David Clayton says he remains positive on the company. And whereas Alexander Arrow of Lazard Capital Markets estimates recalls could cost Guidant as much as $225 million, St. Jude says it doesn't expect its advisory of possible software issues to have any material financial effect.
Guidant shares traded down 88 cents to $69.42.
St. Jude, based in St. Paul, Minn., said Monday that 39,000 of its implantable cardiac defibrillators need a noninvasive software upgrade to correct two "anomalies" found during a routine product evaluation. After examining a single returned ICD, the company said the device may deliver fewer than the intended six shocks when a patient's heart begins to beat at a dangerous pace.
The company said there were no reported adverse events. St. Jude worked with the FDA and consulted a physician advisory panel, and the upgrade was approved by the government on June 17. Cowen's Clayton said the software defects are a noncore issue and the upgrade will be easily implemented.
Also, "electrical noise" in some devices may cause an increased pacing rate. The software upgrade notice applies to the Epic and Atlas defibrillators. St. Jude shares were off 31 cents to $40.66.
News of the issues affecting the companies closely follows a recent expansion of Medicare coverage of the implanted devices. The Centers for Medicare and Medicaid Services expects heart devices will be implanted in at least 25,000 additional patients in the first year of coverage, potentially saving up to 2,500 lives.
Coronary heart disease is the most common cause of death in the U.S., according to the Centers. Sudden death, frequently from heart arrhythmias, is believed to account for about 50% of all coronary heart disease deaths. An implanted ICD monitors the heart's rhythm and delivers an electrical shock when a life-threatening arrhythmia is detected.
Medicare's expanded coverage of the devices will increase the number of beneficiaries eligible for an ICD by one-third, to nearly 500,000.
Meanwhile, the FDA said Medtronic failed to properly correct problems with its Lifepak 12 automated external defibrillators' therapy cables. Earlier this month, the FDA told Medtronic that its Lifepak 12 manufacturing facility doesn't conform to good manufacturing practice requirements.
The agency also said that although defective cables in the devices were replaced and inspected, there have been continued complaints of broken pins in the therapy cables.
" [The company] should take prompt action to correct these deviations," the FDA said in its letter. "Failure to promptly correct these deviations may result in regulatory action being initiated by the FDA without further notice."
Medtronic shares were down 44 cents to $52.40.
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