St. Jude Medical (NYSE:STJ), which reported better-than-expected results for the first quarter, is expecting an improvement in its U.S. implanted cardioverter defibrillator business.
“On the cardiac rhythm business, we have a lot of good, positive early indicators,” said CEO Daniel Starks, in a conference call on Wednesday. “We measure the total number of active accounts — we actually had a few more active U.S. ICD accounts in the first quarter of 2012 than we did in the first quarter of 2011, so that’s one very positive metric.”
He added that U.S. ICD revenue of $450 million increased 12 percent in the first quarter of 2012 compared to the last quarter of 2011.
However, earnings guidance that the company provided regarding its cardiac rhythm business in 2012, led one analyst to question whether St. Jude was being too aggressive. (ICDs and pacemakers make up St. Jude’s CRM business.)
Morgan Stanley analyst David Lewis couldn’t quite understand how St. Jude Medical was forecasting that full-year CRM revenue would be $3 billion to $3.8 billion when it was expecting only $725 million to $765 million in the second quarter — which he described as a “weak second-quarter 2012 guidance.” In the first quarter, it garnered $735 million in the CRM business.
“At the midpoint of [second-quarter 2012] guidance, CRM will decline about 2.5 percent [on a constant currency basis] in the first half of 2012,” he wrote. “To reach the midpoint of full-year guidance of [around] 2-4 percent [constant currency] growth, CRM growth would need to accelerate to 8-9 percent in [second half of 2012].”
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
He added that the level of acceleration on both overall second-half revenue and CRM revenue “seems aggressive.”
Lewis also questioned whether St. Jude Medical was providing a weak second-quarter guidance to its CRM business because it was expecting a lower demand for its Durata ICD leads. Ever since St. Jude was slapped with a Class I recall of the defective Riata and Riata ST leads, attention has fallen on Durata, which is similar in design to the recalled leads.
St. Jude Medical has repeatedly said that the Durata has a special, proprietary insulation that protects it from lead abrasion — something that plagued Riata and other older generation of leads.
[Photo Credit: Sura Nualpradid]
