St. Jude Medical Inc. (STJ:US)’s Durata, a wire used to connect life-saving defibrillators to the heart, was linked to a rare and dangerous fraying defect in one patient in a report to U.S. regulators.
A doctor voluntarily reported the case of a so-called externalized wire from April 17 to the Food and Drug Administration, according to a posting on the agency’s Maude safety database. The unidentified doctor didn’t tell St. Paul, Minnesota-based St. Jude, according to the FDA’s posting.
An anonymous report with such specific details is rare and raises questions about the credibility of the information, David Roman, an analyst at Goldman Sachs in New York, wrote yesterday in a note to investors. The agency reviews the information it receives and forwards the details to manufacturers, said Erica Jefferson, an FDA spokeswoman.
“There are a number of reasons for the agency to review all reports that come in, including the potential for fraud or the need for additional follow up,” Jefferson said in an e- mail. “We strip all privacy information out of the reports prior to posting them on the public database.”
The person reporting the incident, including a doctor, patient or someone else, can check a box indicating they want to maintain their privacy, Jefferson said, without commenting specifically on the Durata device.
St. Jude stopped selling an older version of the device known as Riata in December 2010 and recalled it a year later amid reports the wires known as leads could break through the insulation coating and fail to work properly. Durata replaced Riata, and the new product’s insulation coating, called Optim, was designed to prevent the rare defect. No cases of externalized Durata wires have been reported before now.
“All leads are prone to some level of failure and one lead failure does not implicate the entire family of Durata leads,” wrote Raj Denhoy, a Jefferies & Co. analyst in New York, in a note yesterday to investors. “This new report raises questions on whether Durata is truly immune to the same failures that plague Riata and at the very least, will keep up the discussion on whether St. Jude’s smaller diameter leads should be used when other more reliable leads are available.”
St. Jude fell (STJ:US) 6 percent to $36.24 at the close yesterday New York, the biggest single-day drop since December. The shares have dropped 26 percent in the past 12 months through yesterday.
“The report indicates that it was filed by a physician, but does not provide the device serial number, the name of the physician or the institution, which would enable us to learn more about the circumstances,” Amy Jo Meyer, a spokeswoman for St. Jude, said in an e-mail. “We will make every effort to learn more about this report as quickly as possible.”
There haven’t been any cases of externalized wires on a Durata lead reported to the company, Meyer said.
St. Jude’s declining stock price is an overreaction, Roman wrote. Durata’s performance seems to be similar to competitors and its future performance may show a reduction in lead failures, he said.
“The sharp negative reaction in the stock reflects the fear factor of a product recall that we ultimately do not think will materialize,” Roman said. “We see this as an especially compelling opportunity” to buy, he said.
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