St. Jude Medical Seals CardioMEMS Acquisition - Analyst Blog

Global medical device company, St. Jude Medical Inc. STJ completed its acquisition of privately-held CardioMEMS, Inc. – the developer of the CardioMEMS Heart Failure HF System. The buyout followed the recent U.S. Food and Drug Administration (FDA) approval of the device.

In Sep 2010, STJ had acquired a 19% stake in CardioMEMS for $60 million, with an exclusive option to buy the remaining 81% of the company for $375 million. Following the FDA clearance of the CardioMEMS HF System, STJ immediately exercised its option to acquire the Atlanta-based company.

The CardioMEMS HF System

The CardioMEMS HF System is a first-of-its-kind FDA-approved heart failure monitoring device that has been proven to significantly reduce heart failure-related hospitalizations.

A miniature wireless sensor that is threaded into the pulmonary artery is used to track the level of pressure borne by heart-failure patients. The implantable device is designed to detect early signals of rising pressure and worsening heart failure. Patients can wirelessly transmit the readings to their doctor who can proactively manage medications and other treatment options to avoid a crisis that could result in hospitalization.

FDA Approval

The FDA approved CardioMEMS' HF System based on a study of patients with Class III heart failure who had been hospitalized in the previous 12 months.
 
The study found that monitoring the amount of pressure in the pulmonary artery via the implanted device lowered hospitalization rates for heart failure by 28% at six months and 37% after an average of 15 months.

The FDA held that there is reasonable assurance that the device is safe and effective for heart failure management. Nevertheless, the agency requires the company to conduct a thorough post-approval study to ensure no unexpected risks or performance problems emerge when the device is used outside a clinical trial.

Going Forward

The CardioMEMS HF System already enjoys CE Mark approval in the EU. STJ now plans to initiate the system's strategic launch in the U.S.

STJ continues to provide innovative medical device solutions that ease the complexities of diseases like heart failure, both for patients and health care systems. The CardioMEMS HF System has set a new treatment paradigm for heart failure that reduces the need for hospitalizations and improves the quality of life for patients.

With the closure of the CardioMEMS acquisition, STJ expects accelerated growth in its cardiovascular segment. In its recent first-quarter earnings release, STJ stated that it expects the monitoring system to generate $15–$20 million in sales in 2014.

Zacks Rank

Currently, STJ retains a Zacks Rank #3 (Hold). Some better-ranked medical product stocks worth considering are Cardica Inc. CRDC, Eagle Pharmaceuticals Inc. EGRX and NeuroMetrix Inc. NURO. All these stocks carry a Zacks Rank #2 (Buy).