Devices & Diagnostics

St. Jude Medical likely to face tough questions about FDA warning letter on earnings call

The shoe finally dropped. The U.S. Food and Drug Administration sent a warning letter to St. Jude Medical (NYSE:STJ) on Jan. 10 regarding its inadequate design validation process for the Durata ICD lead at the medical device firm’s Sylmar, California manufacturing plant. The warning letter was expected as the company’s CEO Dan Starks had already […]

The shoe finally dropped.

The U.S. Food and Drug Administration sent a warning letter to St. Jude Medical (NYSE:STJ) on Jan. 10 regarding its inadequate design validation process for the Durata ICD lead at the medical device firm’s Sylmar, California manufacturing plant. The warning letter was expected as the company’s CEO Dan Starks had already alerted analysts that FDA could take action. But  it also shows that the agency felt it had to send a warning letter because the company had not provided enough evidence that it had taken corrective action following the initial Form 483 — a less dire form of communication where the FDA tells companies that it is concerned about something following an inspection.

Next Wednesday, St. Jude Medical reports its fourth-quarter earnings. Analysts estimate that the Minnesota medical device company will report a 4.7 percent increase in earnings per share.

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But the bigger question is not what happened a quarter ago, but what happens now?

Some analysts are already expecting that the company will be forced to pull Durata off the market, whose history has been plagued with fears over its predecessor , the recalled Riata. Previously, Citi analyst Matthew Dodds has said that Wall Street has largely not paid attention to the dangers posed to St. Jude by a possibility of a Durata recall, which he believes could come by mid-2013.

Given the warning letter, more analysts are likely to question St. Jude executives over how they plan to weather the storm of a recall. Not to mention how it would affect its business and what contingency planning it has in place.