STERIS begins shipping replacement for flagship System 1

STERIS Corp. (NYSE: STE) has begun shipping the replacement to its System 1 sterilization system as the company looks to put one of its more difficult periods in its past.

The company said shipments of its new System 1E wouldn’t have a material effect on third-quarter financial results, but the shipments are an important step for STERIS, which has spent the last year trying to work its way back from a federal safety alert that said its System 1 device could harm patients.

System 1 is a liquid chemical sterilizing system used by hospitals, surgical centers and other healthcare facilities to sterilize medical instruments. The Food and Drug Administration said STERIS had changed the System 1 so much since its 1988 launch that the regulator no longer considered it a device approved for sale.

The biggest difference between the two sterilization systems is System 1E is restricted to use for sterilizing heat-sensitive devices — endoscopes made with materials or adhesives that degrade when heated — while System 1 can be used to sterilize both devices that are heat sensitive and those that aren’t. Practically, System 1E is able to process between 70 percent and 80 percent of the devices that System 1 can, STERIS executives have said.

While System 1E received regulatory clearance for sale in April, STERIS didn’t begin shipping the new device because it was waiting for FDA clearance of two accessory parts, even though the company wasn’t required by the regulator to wait.

The company has received clearance on just one of those two accessories — a chemical indicator — while it has not received clearance for the other — a biologic indicator — according to a filing with the Securities and Exchange Commission. The company is in discussions with the FDA about clearance of the biologic indicator.

Up against an August deadline from the FDA to have System 1E in its customers’ hands, STERIS decided to ship the product with just one of the accessory clearances in place. “We’ve heard from our customers that they want us to start shipping units as soon as possible,” said Steve Norton, a company spokesman.

During STERIS’ quarterly earnings conference call with investors in early November, the company said it had taken more than 1,000 orders for System 1E and provided an additional 7,000 quotes. STERIS had produced about 2,000 of the units at the time, and expected to manufacture between 4,000 and 6,000 by the end of the year.

Norton said the company would update those figures during its next quarterly earnings call in February.

Separately, STERIS said it had received FDA clearance on its modified Reliance EPS Endoscope Processing System. Like the System 1, the Reliance system had undergone modifications that the FDA felt were significant enough to warrant a new 510(k) application for regulatory clearance. That led to STERIS suspending sales of the product in August.