St. Jude Medical Inc. (STJ:US), a maker of heart rhythm devices, fell the most in five weeks after the company said its 2012 outlook is worsening as a product recall crimps sales and a stronger dollar erodes overseas profit.
St. Jude decreased (STJ:US) 3.8 percent to $37.75 at the close in New York, the biggest single-day drop since June 12. The company cut its forecast for full-year profit to $3.40 to $3.45 a share, St. Jude said today in a statement. The device maker in April estimated $3.44 to $3.49 a share.
Last year’s recall of Riata, a wire used to connect life- saving defibrillators to the heart, may have hurt sales of other products. The wires, or leads, had to be replaced after reports they could break through the insulation coating and fail. Sales of St. Jude devices that manage heart rhythms, including implantable cardioverter defibrillators and pacemakers, fell 6 percent in the second quarter from a year earlier.
“There was a risk that they were going to have to lower guidance because of the currency, the bigger concern is they sounded considerably negative about the cardiac rhythm management market,” Michael Matson, an analyst at Mizuho Securities USA Inc., said in a telephone interview. There is concern the recall is “starting to catch up with them,” he said.
St. Jude stopped selling Riata in December 2010 and recalled it a year later. Durata replaced Riata and was associated with one fraying incident in a report to U.S. regulators last month.
Sales of St. Jude’s implantable cardioverter defibrillators fell 4 percent in the second quarter to $459 million, according to the statement. Pacemaker sales decreased 9 percent to $287 million.
“Their sales aren’t falling off a cliff, but they’re clearly in the penalty box,” Joanne Wuensch, an analyst at BMO Capital Markets Corp. in New York, said in a phone interview.
For St. Jude, which gets about 52 percent of its revenue from outside the U.S. (STJ:US), the dollar’s strength against other currencies has also reduced the value of some sales. Second- quarter revenue fell 2 percent to $1.4 billion. Without the negative effect of currency translation, the company said sales would have risen 1 percent.
The U.S. dollar index, which reflects the value of the dollar against major world currencies, was on average 8.1 percent higher in the second quarter than a year earlier.
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