Jefferies Cautions Investors: St. Jude Medical Device Issue Not Over Yet

Jefferies has warned that the storm hovering over St. Jude Medical, Inc. (NYSE: STJ) devices have not subsided yet, and in fact, there is likely more volatility to come.

The brokerage met Dr. Hemal Nayak, an electrophysiologist working as a medical advisor on the board of MedSec, which found alleged security vulnerabilities in St. Jude devices. Nayak sees medical data theft as a potential risk.

Jefferies said Nayak remains confident that St. Jude devices are "inherently less secure" than other companies' and they are vulnerable to cyberattacks. St. Jude has publicly and aggressively denied the allegation and sued Nayak and others at MedSec and Muddy Waters.

"His view was that when a device is put into Safe Mode it is an indication that something is wrong and MedSec showed it could remotely change the operating parameters of a device," analyst Raj Denhoy wrote in a note.

As of now, the alleged security holes have not affected physician behavior. But, the analyst cautioned that the issue could weigh on the shares.

"Dr. Nayak did note that more information would be coming, and should the claims prove to have any substance, even if the risk proves to be very, very low, it could compel some patients and physicians to use other companies' devices," Denhoy highlighted.

Denhoy reiterated his Hold rating and $60 price target.

At time of writing, shares of St. Jude had fallen 1.10 percent on the day to $78.48.

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