St. Jude Medical May Have a Blockbuster Device on its Hands; Firm Opens Training Facility in China
Apparently, if you believe what “the street” is saying, St. Jude Medical may have hit one out of the park with its latest product offering.
The device, called Unify Quadra, is intended for patients suffering from heart failure.
Approval by the U.S. Food and Drug Administration and a commercial launch are expected in mid-2011. An earlier version of the device already has been approved in Europe. The defibrillator market had been the “golden child” sector for companies such as St. Jude Medical, Medtronic Inc. and Boston Scientific Corp. The market, however, has flattened during the last few years, leaving companies searching for the next industry-changing, blockbuster technology.
Cardiac resynchronization therapy defibrillators (CRT-D) are implanted in the chest and usually connected to the heart with three wires, called leads. The device stimulates both of the heart’s lower chambers so they are “synchronized” and more efficiently pump blood to the body. The devices also are able to defibrillate the heart if a patient is at risk for a life-threatening rhythm.
St. Jude’s new device has four electrodes on the lead that is placed in the left ventricle, which the company says simplifies the implant procedure and minimizes post-surgery complications. Boston Scientific Corp. and Medtronic Inc. are developing similar technology but currently are months behind St. Jude with a market launch, analysts said.
JP Morgan analyst Michael Weinstein called Quadra “the most important new product” in implantable defibrillators in the last nine years.
“Within three years, they’re likely to become the standard of care, owing to the ability to improve both the safety and efficacy of [CRT-D] implantation,” Weinstein wrote in a note to investors, citing a survey conducted by the brokerage firm. According to the poll, 82 percent of electro-physiologists expect St. Jude to take market share from rivals Boston Scientific and Medtronic Inc. Weinstein also surveyed 50 cardiologists—92 percent of whom said they expect the type of lead system in the Quadra system to become the standard of care in cardiology.
New Asia Training Center
St. Jude Medical also has reaffirmed its long-term commitment to the Asian market this year with the recent debut of its newest physician training center in Beijing, China.
The St. Jude Medical Advanced Technology Center Asia Pacific officially opened on March 22 in a ceremony attended by Sang Yi, the company’s vice president of Asia Pacific, doctors from the Asia Pacific Heart Rhythm Society (APHRS), Ministry of Health officials, and regional cardiologists.
“I am pleased to celebrate the inauguration of our St. Jude Medical Advanced Technology Center Asia Pacific,” Yi said at the facility’s inauguration ceremony. “St. Jude Medical values our relationship and business with China, and believes that our Advanced Technology Center is an important part of a long and prosperous relationship working with physicians throughout China and the entire Asia Pacific region to improve the health, welfare, and quality of life of the people there.”
The training center in China is the latest in a series of such facilities that St. Jude is rolling out across the globe. The company opened its first center in Brussels, Belgium, in 2008, and broke ground on a manufacturing facility and training center in Malaysia in early March. St. Jude is planning to open other training centers in Costa Rica, Japan and the United States.
The Centers educate and train doctors on St. Jude’s cardiology, cardiac surgery and arrhythmia management equipment. The facilities also train physicians to use St. Jude products through lectures, peer-to-peer education and hands-on experience using virtual reality technology, according to the company. The Center’s virtual reality experience allows physicians to simulate different procedures and develop clinical skills in a controlled environment. In this environment, physicians can bring to life previous training, directly experience how they would manage complications during procedures, and learn new advanced cardiac care techniques.
Using St. Jude Medical exclusive virtual reality simulators, physicians practice several different procedures in a human-size simulation. The technology mirrors an operating room environment, allowing doctors to use and familiarize themselves with both the St. Jude Medical products and best practices aligned with different techniques.
“To help treat patients using the latest advances in technology, ongoing learning and training is required,” said Prof. Shu Zhang, director of the Cardiac Arrhythmia Center and Clinical Electrophysiology Laboratory in Beijing Fu Wai Hospital. “With interactive sessions, a virtual reality experience, and curricula developed by Asia’s scientists specializing in arrhythmia management, I believe the training will provide physicians with a unique, hands-on and enjoyable learning experience they can’t find anywhere else.”
St. Jude bigwigs expect more than 2,000 physicians to visit the Center in Beijing each year from throughout Asia; they predict most doctors will come from hospitals in China.
The grand opening of the training center occurred during an Educational Summit that partnered St. Jude Medical with APHRS and local cardiologists to establish an educational curriculum. The summit was co-chaired by Zhang and included APHRS members from throughout Asia Pacific. The group of leading physicians will help the Advanced Technology Center staff design courses that provide realistic experiences for physicians treating cardiac-related illness.
“With all the new developments in the medical industry it is important that corporations such as St. Jude Medical partner with societies, institutions and physicians to help drive continuous learning. APHRS is pleased to partner with St. Jude Medical to help provide a training experience that will be beneficial to clinicians throughout Asia,” said Masayasu Hiraoka, presidentof APHRS.
St. Jude Medical first entered the Chinese market in 1996. Since then, the company’s Chinese operation has grown from fewer than 10 employees to more than 250. In addition to its new Advanced Technology Center, St. Jude has sales offices in Beijing, Guangzhou and both a sales office and distribution center in Shanghai.
Terumo Expands With Buyout; Cardio Unit Cited by FDA for GMP ViolationApparently, second-best is just not good enough for Terumo Corp.
In an attempt to become the global leader in blood transfusion equipment, Japan’s largest medical device manufacturer recently purchased Gambro AB’s CaridianBCT unit for $2.63 billion, including debt. The purchase price is about 15 times CaridianBCT’s 2010 earnings before interest, taxes, depreciation and amortization, the companies said in a March 7 statement to the Tokyo Stock Exchange. Terumo plans to fund the acquisition with cash and bank loans.
Terumo’s purchase of CaridianBCT from Gambro will catapult the company to the top of the global blood transfusion market (it was the fifth-largest player before the deal), analysts said. Gambro is jointly controlled by Swedish industrial holder Investor AB and private equity funds manager EQT IV.
“Terumo has been trying to boost its blood transfusion-related operations and the deal is expected to help it,” Satoru Takaoki, chief analyst at Tokyo securities firm SMBC Friend Research Center, told Reuters.
Though Terumo’s chief impetus behind the purchase was its desire to become the world’s largest manufacturer of blood transfusion equipment, analysts claim the deal also highlights an aggressive push by Japanese companies to capitalize on a strong yen and purchase overseas assets to expand outside their maturing home base. Up nearly 10 percent against the dollar in the last year, the strong yen is bolstering the purchasing power of Japanese companies searching for U.S. and European targets, according to Bloomberg News. It is not clear yet how the recent devastating earthquake and resulting tsunami will impact these business plans. (For more information on the impact of the disaster on medical device markets, turn to Financial News onpage 44.)
And Japanese companies clearly are taking advantage of the yen’s improved fortunes: Three companies (including Terumo) have acquired foreign firms since late February. Kyowa Hakko Kirin Co., a unit of Japanese beverage maker Kirin Holdings Co., inked a deal on Feb. 21 to purchase Scottish biotech firm ProStrakan Group Plc for 292 million pounds ($475 million).
ProStrakan Chairman Peter Allen said the sale was in the best interests of the company and its shareholders. “The fit between ProStrakan and KHK is unmistakable in terms of products, geography and infrastructure,”he noted.
One week later, on Feb. 28, drug maker Daiichi Sankyo Co. Limited purchased Berkeley, Calif.-based pharmaceutical firm Plexxikon Inc. for as much as $935 million. The deal, according to Daiichi executives, will “accelerate” the company’s entry into the oncology market.
Terumo executives claim the deal for CaridianBCT will help the company generate 70 billion yen ($850 million) in annual sales from its blood transfusion operations, though the company has its sights set on a much higher number: 1 trillion yen within 10 years. Terumo reported group revenue of 316 billion yen in the fiscal year ending March 2010. The firm reported 66.7 billion yen in cash and deposits as of Dec. 31.
Terumo’s transfusion division sells mostly low-tech products such as blood bags, blood filters and aphaeresis systems that are used to separate blood components. Lakewood, Colo.-based CaridianBCT manufactures machines that collect blood components and filter pathogens; these machines are used by both blood banks and hospitals.
CaridianBCT’s annual sales have expanded an average of 12 percent since 2000, reaching $524 million last year.
Terumo expects to complete the acquisition by early May.
FDA Citations Results in Significant Payout
The federal government and Terumo Cardiovascular Systems (CVS) have come to terms on a consent degree issued by the U.S. Food and Drug Administration (FDA). The move bars the company from selling medical devices used in heart surgery, following years of quality control problems at company facilities at its U.S. base in Ann Arbor, Michigan.
The agreement will be subject to the approval of the United States District Court for the Eastern District of Michigan.
Terumo will be prohibited from manufacturing and distributing two of its heart-lung bypass systems and other cardiovascular devices to new customers because the FDA found that the company did not take corrective and preventive action to fix problems cited in earlier inspections.
Terumo CVS, a division of Tokyo-based Terumo, Corp., agreed to pay $35 million in back profits from the sale of its devices.
Last March, FDA inspectors reported more than a dozen quality control violations at the company’s plant in Ann Arbor. The company was cited for similar problems and received warning letters in 2004 and 2006 about its potential violations to good manufacturing procedures. During the FDA inspection that took place between January and March 2010, the agency found violations including nonconforming products, complaints, purchasing, process validation, design controls and adverse event reporting.
Under the terms of the agreement, Terumo will create a work plan to resolve the observations. Until the work plan is complete, Terumo agreed to restrict the distribution of certain products manufactured at the plant to existing customers who deem the products medically necessary. Products manufactured at the plant include heart-lung machines and cannulae, as well as otherrelated products used in cardiac surgery.
Other Terumo products are not impacted by the decision, including: oxygenators, perfusion circuits that don’t contain cannulae, and all other products produced at the company’s other manufacturing facilities in Elkton, Md., and Ashland, Mass.; and products distributed by Terumo that are manufactured by other suppliers.
The consent decree does not involve any other Terumo division, company officials said.
“Terumo CVS is committed to fully addressing all of the FDA’s concerns. Over the past year, Terumo CVS had already begun implementing a significant quality system initiative that will create systemic, sustainable improvements in its quality systems,” said Mark Sutter, president and CEO of Terumo Cardiovascular Systems. “Terumo CVS has always been, and will remain, committed to those in the cardiac surgery community who use our products. Our ultimate goal during the consent decree is minimizing the inconvenience or disruption to
our customers.”
The FDA said the decree restricts Terumo from distributing and manufacturing the following products: Terumo Advanced Perfusion System 1; Sarns Modular Perfusion System 8000; Sarns Centrifugal System; HX2 Temperature Management System; Sarns TCMII Cooling and Heating System; CDI 500 Blood Parameter MonitoringSystem; Sarns Sternal Saw II System andReplacement Blades; T-Link Data Management Systems (Software Upgrades); cannulae for cardiopulmonary bypass; cannulae for cardioplegia delivery; and vents, suckers, dilators, connectors and reducers.
In addition, Terumo must cease the distribution of its CDI 101 Hematocrit/Oxygen Saturation Monitoring System, which has not yet been reviewed by the FDA.
Because no devices are under recall, the products will continue their places within the current market and Terumo will continue to provide service, replacement parts and loaner devices to its existing customers.
Medtronic Opens NewFacility in Singapore
Singapore may be a small city-state, but as a player in the medtech space, it’s attracting heavy hitters. Medtronic, Inc. officially opened the doors of its new manufacturing facility in Singapore on March 10.
The new site was built to respond to the future expected growth of cardiac devices in Asia, a company official said.
Chairman and CEO, Bill Hawkins, was joined by Executive Vice President and Group President of Medtronic International, Jean-Luc Butel, and Singapore’s Minister for Trade and Industry, Lim Hng Kiang, toinaugurate the plant.
“Cardiovascular disease is the world’s No. 1 cause of death. As a leader in the management of cardiovascular and other non-communicable diseases, we understand well the needs of patients and physicians and are leveraging all of our global capabilities to address this growing epidemic,” Hawkins said. “That is why our manufacturing investment in Singapore is so important. We now have greatly increased our ability to ensure Medtronic’s innovative medical technologies will help patients across emerging markets in Asia.”
The Cardiac Rhythm Disease Management business at Medtronic accounted for $5.2 billion of the company’s revenue in 2010. By the end of 2011, Medtronic will have invested more than $56 million in the development of its Singapore facility.
Beginning in November, Singapore also will serve as the distribution hub for the Asia-Pacific region. The new facility, which began operations in January, will enable Medtronic to respond more effectively and efficiently to the needs of customers and patients with cardiac rhythm disorders, improving standards of care in Asia.
Speaking at the opening ceremony,Minister Lim said, “The completion of Medtronic’s first pacemaker and leads manufacturing facility in Asia marksan important milestone in Medtronic’sever-growing presence in Singapore. Medtronic’s investment is a strong vote of confidence for our efforts in developing Singapore into a leading biomedical sciences hub.”
The company’s Singapore operations will have hired and trained more than 120 skilled staff by the end of the year as production increases. Worldwide, Minneapolis, Minn.-based Medtronic has more than 250 manufacturing centers, sales offices, research centers, and education and administration facilities.
