St. Jude To Acquire Heart Failure Startup CardioMEMS before Mid 2014

St. Jude Medical executives told analysts and investors Wednesday that the Minnesota device maker will complete the acquisition of CardioMEMS before mid 2014, but didn't talk about when its device would be approved by the FDA.

CardioMEMS is a closely-watched startup given that many believe the Atlanta company is developing what could be a game-changing technology to manage congestive heart failure patients who rack up huge bills for repeated hospitalizations. In 2010, St. Jude Medical made a $60 million investment in CardioMEMS that included an option to buy the company for another $375 million if certain commercialization goals were met.

Atlanta-based CardioMEMS has developed an implantable sensor that is able to monitor intracardiac pressure and alert physicians of any change, who can respond approproately, thereby preventing hospitalization of congestive heart failure patients. The promising solution is based on a wireless sensing and communication technology for the human body. After initially rejecting the device’s premarket approval application, analysts believe that FDA will now approve it.

In a fourth quarter earnings conference call Wednesday, it appeared that was also the assumption of St. Jude Medical executives.

St. Jude Medical’s vice president of Finance and CFO Donald Zurbay told investors and analysts that the company would complete the acquisition of CardioMEMS “before mid year.” He added that revenue of $15 million to $20 million from the sales of the Champion device has been added to the revenue guidance for St. Jude Medical’s cardiovascular business in 2014.

That declaration led Deutsche Bank analyst Kristen Stewart to request for more detail and clarification from St. Jude Medical CEO Daniel Starks. She wanted to know when St. Jude expects to launch the Champion device given that the revenue expectation naturally would naturally assume an FDA approval. She also wanted to know what the impact on earnings would be as a result of acquiring CardioMEMS.

But Starks said he was going “disappoint” Stewart as he proceeded to decline to answer her questions.

-- By Arundhati Parmar, Senior Editor, MD+DI

“Given that we do not own CardioMEMS, we have a discipline of leaving communications about the timing and opportunity for FDA approval to CardioMEMS. We think that the technology deserves to come to market. We think that the clinical benefits and the cost effectiveness benefit of the technology is extremely strong, but we won’t offer any additional comments about the FDA process and the timing, and instead will leave that communication to CardioMEMS.”

Starks also declined to comment on the launch of cardioMEMS.

It is somewhat curious that a company would go so far as to include revenue assumptions of a product that has not yet been approved into its revenue guidance for the year. While analysts seem to expect a FDA approval, there is some doubt among the FDA panel who reviewed the device late last year.

Meanwhile, St. Jude Medical reported that it garnered sales of $1.42 billion in the fourth quarter, a 4% increase from sales of $1.37 billion in the same quarter a year ago. Profits however increased to $123 million, or 42 cents per share, up from $120 million, or 39 cents per share.

The strong performance which beat analyst estimates handily was a result of sales growth across all of its businesses.

-- By Arundhati Parmar, Senior Editor, MD+DI
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