Abbott's CEO publicly reiterates that the acquisition of St. Jude Medical is moving forward as planned, despite recent headlines on cybersecurity and battery depletion worries.
Bumps in the road have not changed the final destination.
That seems to be the message Miles White, chairman and CEO of Abbott, has for investors, analysts, and industry about the company's planned acquisition of St. Jude Medical.
St. Jude Medical has experienced some setbacks in recent weeks, including raised concerns about cybersecurity vulnerabilities and an issue with premature battery deplection in some high-voltage cardiac devices, but those negative headlines are not impacting the transaction.
Speaking during Abbott's third quarter earnings call on October 19, White explained, "I think that [St. Jude] ha[s] done all the right things. They have been in great communication with use. Based on everything that we know, I don't see this impacting the close of the deal or the business long term," according to a Seeking Alpha transcript of the earnings call.
|Learn about "The Backdoor: Legacy Device Vulnerabilities and Risk" at BIOMEDevice San Jose, December 7-8.|
In late August, research company Muddy Waters—who teamed cybersecurity company MedSec—published research notes claiming the company's cardiac devices are more vulnerable to cybersecurity attacks and should be recalled. St. Jude was not made aware of the research findings before publication. Muddy Waters shorted St. Jude stock and MedSec was reportedly expected to also receive financial compensation from the profits. The cardiac company filed a lawsuit against Muddy Waters and MedSec alleging false statements, false advertising, conspiracy, and the related manipulation of the public markets. St. Jude Medical included third-party examination of the report by experts from the University of Michigan who "found that 'the evidence does not support their [Muddy Waters/MedSec] conclusions," according to a company press release.
On October 17, St. Jude announced the formation of a Cyber Security Medical Advisory Board (CSMAB) to provide guidance on medical device cybersecurity standards, according to a press release.
Just two days later, on the same day as earnings reports from Abbott and St. Jude Medical, a media representative for Muddy Waters Capital sent MD+DI an email announcing the launch of a new website, "Profits Over Patients," that he explained shows "several videos that demonstrate and prove the significant cybersecurity vulnerabilities with St. Jude Medical's implantable cardiac devices." The spokesperson added, "Muddy Waters has heard from several whistleblowers and cardiologists who believe St. Jude has a history of ignoring problems that could have a significant impact on patients' health," and noted that Muddy Waters is still short St. Jude Medical stock.
In response, the cardiac company released a public statement that read, in part:
Muddy Waters and MedSec have once again made public unverified videos that purport to raise safety issues about the cybersecurity of St. Jude Medical devices. This behavior continues to circumvent all forms of responsible disclosure related to cybersecurity and patient safety and continues to demonstrate total disregard for patients, physicians, and the regulatory agencies who govern this industry. We take this matter very seriously and will once again work to quickly evaluate this new information. St. Jude Medical stands behind the security and safety of our devices."
Earlier this month, St. Jude Medical sent a letter to physicians notifying them of a relatively rare issue with premature battery depletion with some of the company's ICDs and CRT-Ds. While the issue, which involved lithium material within the device batteries forming clusters that can short circuit the battery, was observed in just 0.21% of the sold devices, the absence of defibrillation therapy was associated with two patient deaths.
White told analysts on the October 19 call, "Well, what I would tell you so far is I think St. Jude has handled all this pretty well, pretty thoroughly . . . they are taking it seriously [with] their own investigations, the third-party consultants, and investigators that they have worked with and employed. I have to say, they definitely put patient safety . . . and physician credibility and the product performance and so forth first and that's right."
Michael Rousseau, St. Jude Medical president and CEO, echoed White's remarks during St. Jude's earnings call, also held October 19. According to a Seeking Alpha transcript of the call, he said, "I'd like to note that we continue to move forward as planned with the Abbott transaction and remain on track to close by the end of the year." He pointed out that in keeping with the acquisition, St. Jude and Abbott recently announced the divestiture of certain parts of its vascular closure and electrophysiology product portfolios to Terumo.
As for Alere, the other major acquisition on Abbott's plate, White noted on the earnings call that his remarks would be "very limited," but added, "Is the strategic fit there? Yes, it is. We like the products. We like the businesses. We have said that and I continue to say that."
Marie Thibault is the managing editor at MD+DI. Reach her at firstname.lastname@example.org and on Twitter @MedTechMarie.
[Image courtesy of CHANPIPAT/FREEDIGITALPHOTOS.NET]