St. Jude Medical Buys Leadless Pacemaker Technology

It has been a good week for cardiovascular device giant St. Jude Medical Inc. On Oct. 14, the company completed its acquisition of Nanostim Inc., a privately owned developer of miniaturized, leadless pacemakers. The acquisition adds the world’s first and only leadless pacemaker to the St. Jude Medical product portfolio and culminates a two-year partnership between the two companies during which St. Jude Medical invested in and collaborated with Nanostim throughout its product development and commercialization initiatives.

Cardiac pacemakers are used to treat bradycardia, which is a heart rate that is too slow. The devices monitor the heart and provide electrical stimulation when the heart beats too slowly for each patient’s specific physiological requirements. More than 4 million people worldwide have an implanted pacemaker or other cardiac rhythm management device, and an additional 700,000 patients receive the devices each year.

In May 2011, St. Jude Medical began to invest in and obtained an exclusive option to acquire Milpitas, Calif.-based Nanostim. St. Jude Medical paid $123.5 million, and the agreement also provides for additional cash payments of up to $65 million,  contingent upon certain revenue-based milestones.

Unlike conventional pacemakers that require a more invasive surgery, the Nanostim is implanted directly into the heart via a minimally invasive procedure using a steerable catheter through the femoral vein, eliminating the need to surgically create a pocket for the pacemaker and insulated wires (called leads) that historically have been recognized as the most vulnerable component of pacing systems.

In another bit of good news for St. Jude, Nanostim also recently received CE mark approval and will be available soon in select European markets, company officials reported. It also recently received U.S. Food and Drug Administration (FDA) conditional approval for its investigational device exemption application and pivotal clinical trial protocol to begin evaluating Nanostim leadless technology in the United States.

“The Nanostim leadless pacemaker represents one of the most important advances in the history of pacing technology, and builds on St. Jude Medical’s strong history of pacing innovation—beginning with the first implantable pacemaker in 1958 through the introduction of quadripolar cardiac resynchronization therapy pacing,” said Eric S. Fain , M.D., president of St. Jude Medical’s Implantable Electronic Systems Division. “We look forward to welcoming Nanostim employees to St. Jude Medical and to continuing our legacy of transforming the treatment of cardiac rhythm disorders with pioneering technology.”

Nanostim is less than 10 percent the size of a conventional pacemaker. The small size of the device and lack of a surgical pocket, in addition to the exclusion of a lead, improves patient comfort and can reduce complications, including device pocket-related infection and lead failure, company officials noted. The elimination of the visible lump and scar at a conventional pacemaker’s implant site, as well as the removal of patient activity restrictions that may prevent the dislodgement or damage to a conventional lead, potentially will improve the quality of life for patients with this technology by allowing most to continue living active, uninhibited lifestyles.

“For the past 40 years, the therapeutic promise of leadless pacing has been discussed, but until now, no one has been able to overcome the technical challenges,” said Johannes Sperzel, M.D., of the Kerckhoff Klinik in Bad Nauheim, Germany. “This revolutionary technology offers my patients a safe, minimally invasive option for pacemaker delivery that eliminates leads and surgical pockets. This is the future of cardiac pacing.”

The device was designed to be fully retrievable so that the device can be readily repositioned during the implant procedure and later retrieved if necessary, such as at the time of normal battery replacement. Initial results from a prospective, single-arm, multicenter study evaluating patients with the Nanostim leadless pacemaker, were presented earlier this year and demonstrated overall device performance comparable to conventional pacemakers. Total implant procedure times averaged 28 minutes. Even with miniaturization, the device battery is expected to have an average lifespan of more than nine years at 100 percent pacing, or more than 13 years at 50 percent pacing.

Third-Quarter Financial Results
Third-quarter (ended Sept. 30) financial results for St. Jude also was mostly good news.

Sales totaled $1.33 billion, up 1 percent from the year-earlier quarter and edging Wall Street’s consensus of $1.32 billion. Adjusted for foreign exchange rates, revenue rose 3 percent.

Reported net earnings for the third quarter of 2013 were $262 million or 90 cents per share compared to reported net earnings for the third quarter of 2012 of $176 million or 56 cents per share, a 61 percent increase in reported net earnings per share for the third quarter of 2013 compared to reported net earnings per share for the third quarter of 2012.

Analyst Danielle Antalffy of Leerink Swann wrote in an email to clients that St. Jude’s cardiac rhythm management devices drove the marginal gain, while its other businesses were in line with her expectations. She noted, however, that gross margins were down about 200 basis points from the year-ago quarter, and slightly below consensus.

Results by Product Type
Atrial fibrillation (AF) product sales for the third quarter totaled $235 million, a 7 percent increase over the third quarter of 2012. On a constant currency basis, AF product sales increased 10 percent in the third quarter of 2013.

Total cardiovascular sales, which primarily include vascular and structural heart products, were $317 million for the third quarter of 2013, a 1 percent increase compared to the third quarter of 2012. On a constant currency basis, cardiovascular sales increased 4 percent compared to the third quarter of 2012.

Total structural heart product sales for the third quarter of 2013 were $149 million, up approximately 3 percent compared with the third quarter of 2012. On a constant currency basis, structural heart sales increased approximately 5 percent.

Sales of vascular products in the third quarter of 2013 were $168 million, a 1 percent decrease compared to the third quarter of 2012. On a constant currency basis, vascular product sales were up approximately 4 percent.

St. Jude Medical sales of neuromodulation products were $104 million in the third quarter of 2013, up approximately 3 percent from the prior year on a reported and currency neutral basis.