Biotech Values

[DewDiligence]

St Jude Beats the Street

[ICD sales are on the mend, evidently.]

http://www.reuters.com/article/topNews/idUKN1826886120070718?rpc=44

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Wed Jul 18, 2007 11:51AM EDT
By Debra Sherman

CHICAGO (Reuters) - St Jude Medical Inc. ( STJ ) on Wednesday reported higher quarterly earnings excluding a special charge, as sales of its key heart devices showed signs of recovery, sending its shares to a 16-month high. Excluding the charge related to a settlement of patent litigation, St. Jude beat Wall Street's estimates for the second quarter and raised its outlook for the second half of the year.

St. Jude Chief Financial Officer John Heinmiller said the market for implantable cardioverter defibrillators, or ICDs, which have been depressed for all manufacturers for more than a year now in the wake of product recalls, is rebounding. St. Jude reported an 18 percent increase in ICD sales from a year ago to $327 million.

"We think we probably took some (market) share in the quarter," Heinmiller said in a telephone interview, noting that U.S. ICD sales increased 10 percent at St. Jude. "We don't think (the U.S. ICD) market grew 10 percent."

St. Jude competes with Medtronic Inc. (MDT) and Boston Scientific (BSX) in the nearly $6 billion worldwide market for devices that manage errant heart rhythms. It was the first of the three to report quarterly results [MDT’s reporting quarter ends in July rather than June].

Over the next five years, Heinmiller said he expects St. Jude to capture one-third of that market.

NON-COMPETE CLAUSES TO EXPIRE

Sales momentum should accelerate in 2008 as non-compete clauses for many employees on the company's sales force expire in upcoming quarters. By 2008, those employees should make a greater contribution to sales, he said.

"That's what will help sustain the growth they've seen," said Jeff Jonas, a portfolio manager for Gambo Medical Opportunities Fund, which holds St. Jude shares.

Debbie Wang, an analyst at Morningstar, said she thinks St. Jude captured share from both of its competitors and may be the first to benefit from a recovery since prices of St. Jude's products tend to be lower since they have fewer features.

"These numbers suggest they've really gained share ... substantial share," Wang said.

Morgan Stanley analyst Glenn Reicin, who has an "overweight" rating on the stock, said in a research note that St. Jude "still represents the best vehicle to participate in a market recovery."

The St. Paul, Minnesota-based company posted a net profit of $135 million, or 39 cents per diluted share, compared with a profit of $141 million, or 38 cents, a year ago. Before the charge for the settlement, St. Jude earned 45 cents per share, which was 2 cents above the Reuters Estimate consensus.

Quarterly sales rose to $947 million from $833 million in the year-ago quarter, with foreign currency translations boosting sales by about $21 million in the latest quarter. Analysts had expected $909.8 million.

St. Jude, which raised its 2007 earnings forecast after a solid first quarter, said it now anticipates third-quarter earnings per diluted share of 44 to 45 cents and full-year earnings of $1.74 to $1.78, excluding the charge for the patent settlement.
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