On Dec 28, we issued an updated research report on St. Jude Medical Inc. STJ. We are optimistic about the recent additions to the company’s product portfolio which should bode well for its top line.
St. Jude recently announced the FDA approval as well as the European launch of its new upgradeable and recharge-free Spinal Cord Stimulation (SCS) System – Proclaim Elite. Additionally, the company announced the CE Mark approval for magnetic resonance imaging (MRI) compatibility on its Quadra Assura Cardiac Resynchronization Therapy Defibrillator (CRT-D).
Atrial Fibrillation (AF), Neuromodulation presents huge prospects for St. Jude. The CE Mark approval and the European launch of its Invisible Trial System – an app-based neuromodulation programming system which employs Apple’s and Bluetooth’s wireless technology is a key growth catalyst. The company is also expected to benefit largely from its presence in the Asian market, as China and India are expected to be the fastest growing pain management device markets in the long haul.
We also believe that the acquisitions of NeuroTherm and Spinal Modulation will reaccelerate growth. The takeover of Spinal Modulation – developer of the Axium Neurostimulator System – is an important one, given the system’s ability to treat specific areas such as foot, lower leg and groin.
We believe that this acquisition will significantly expand St. Jude’s chronic pain product portfolio, making it the first medical device manufacturer to offer radiofrequency ablation (RFA), spinal cord stimulation (SCS) and dorsal root ganglion (DRG) stimulation therapy solutions.
However, the implementation of the medical device excise tax of 2.3% on U.S. sales of medical products from Jan 2013 has increased St. Jude’s operating expenses and is in turn marring profits. Additionally, a sluggish CRM market continues to affect revenues.
Foreign exchange movements are also a drag on St. Jude’s results. The company derives more than half of its revenues from international operations, primarily in Europe and Japan. The strengthening of the U.S. dollar against Japanese yen and Euro is expected to impede sales in the near term.
Zacks Rank & Stocks to Consider
St. Jude currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the medical sector include Masimo MASI, Steris Plc STE and Abiomed ABMD. While Masimo and Steris sport a Zacks Rank #1 (Strong Buy), Abiomed has a Zacks Rank #2 (Buy).
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