Originally Published MX May/June 2006

COVER STORY

It's a rare medical device company that can report an 18% increase in quarterly sales--and be disappointed in its results. But such was the case of St. Jude Medical (St. Paul, MN) when it reported preliminary first quarter 2006 sales of approximately $784 million, compared with sales of $664 million in the year-ago period.

The company, which originally forecast quarterly net sales of between $799 million and $839 million, attributed the lower-than-expected revenues to a slowdown in sales of implantable cardioverter-defibrillators (ICDs), which posted a 27% sales increase over the prior-year period but were still below the company's guidance.

Otherwise, first-quarter revenues for all other St. Jude Medical product categories were expected to meet or exceed the company's forecasts, a trend that falls more closely in line with the company's overall financial performance over the past few years.

In 2005, St. Jude Medical reported net sales of $2.9 billion, a 27% increase over 2004 sales of $2.3 billion. This performance put the company at the top of the list of public medical device companies in terms of greatest year-over-year improvement.

As revenues have continued to grow, St. Jude Medical has been reinvesting in its future. In 2005, its research and development (R&D) expenses totaled $369.2 million, or 12.7% of net sales. This percentage has remained relatively consistent in past years, with St. Jude Medical R&D spending of $281.9 million (12.3%) in 2004 and $241.1 million (12.5%) in 2003.

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