St. Jude Medical (NYSE:STJ) reported strong earnings and buyers responded, pushing the company’s stock price up 4.3 percent to $38.95. While profits were up notably, the focus is on St. Jude’s robust — albeit delayed — pipeline of products.
Primarily, analysts and shareholders are eager for the delivery of Quadra, a slightly delayed cardiac therapy device that is expected to be a major win for the company while cutting into the market share of the Boston Scientific. Quadra’s four leads and new wires are able to connect to the heart and make it easier for physicians to avoid side effects from devices that had only two leads.
Analysts can’t wait for its arrival.
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St. Jude’s forecast brackets the analyst consensus of $3.27 a share and suggests 8 percent to 9 percent annual growth, said Michael Weinstein, an analyst at JPMorgan Chase & Co., in a note to clients today. The company is still waiting for U.S. regulatory approval of its quadripolar cardiac-resynchronization therapy lead, known as Quadra, which management has said it expected early in the fourth quarter.
While the forecast “implies a lower fourth-quarter earnings per share number than the Street had previously been modeling, $0.83 to $0.85 versus $0.86, we expect this to be seen as acceptable to investors in light of what’s played out in the ICD market in 2011 and the ongoing delay to Quadra,” Weinstein wrote. The market for implantable cardioverter defibrillators, or ICDs, plunged in the past year amid a U.S. Justice Department investigation and questions of overuse.
But it’s not only Quadra. St. Jude’s success will be tied to its ability to deliver a series of new products or apply new uses to older products, such as a neurostimulator to treat migraine headaches.
“St Jude’s challenge has always been to take the focus off the big business and refocus it on the smaller parts of the business,” Reuters quoted Nuveen Asset Management analyst Tim Nelson as saying.
All this pipeline innovation is driven by the fact that the heart-rhythm sector continues to be sluggish. St. Jude Medical gets half its revenue from heart rhythm devices. But on Wednesday’s conference call CEO Dan Starks described it as a “tough market” with “a number of distressed conditions,” but also added “it seems to be reasonably steady state.”
