St. Jude Expects Warning Letter From FDA

In a conference call on Oct. 17, St. Jude Medical’s CEO Dan Starks told shareholders that the company anticipates a regulatory warning letter from the U.S. Food and Drug Administration (FDA). The announcement caused the company’s shares to drop in value by 6 percent.

The agency is inspecting St. Jude’s Sylmar, Calif. plant (near Los Angeles) that manufactures defibrillators. Starks said that he expects the inspection to result in a negative report possibly resulting in a warning letter, though he declined to say what exactly he believes the FDA may find at the facility.

“We would not be surprised if these observations are ultimately followed by the issuance of a warning letter,” Starks said on the call. “[If a warning letter is issued], we will respond in a way that demonstrates our top priority is patient safety and quality assurance.”

St. Jude has been struggling with public and industry opinion of its defibrillators. Its Riata defibrillator lead wires were said to be the cause of several deaths, and most recently, the safety of its Durata and Optim lead wire insulation has come under question. The Scottish supplier that provides the polymer for St. Jude’s Optim product, AorTech International plc, recently threatened to terminate its partnership with the company for unspecified breaches in contract.

“When you ask what is ‘wrong’ in Sylmar, there is nothing,” Starks said. “Everyone should be realistic about what the likely outcomes are. There isn’t more to it than that. In the long run, we think it’s good for our markets that the public knows the FDA is exercising its role in a very vigorous and robust way.”

Cardiac rhythm management products including defibrillators and pacemakers generated $691 million in third-quarter sales, a drop of 8 percent from a year earlier, St. Jude said in a statement. The device maker lowered its forecast for 2012 sales of defibrillators to $2.83 billion to $2.86 billion, from $2.86 billion to $2.9 billion.

St. Jude’s Executive Vice President John Heinmiller told Bloomberg that the company disclosed the possibility of a warning letter in order to be as transparent as possible. Once the FDA notes several observations during a plant audit, the agency may be concerned there are “systemic or pervasive” flaws in the company’s quality systems, he said.

“We have enough insight into the status of the audit that we thought our comments—that we wouldn’t be surprised if we receive a warning letter—would be appropriate,” Heinmiller said.

St. Jude is a major supplier of medical devices across a range of applications, and is based in St. Paul, Minn.