St. Jude Medical’s Q2 Sales Slip 2 Percent

Daniel J. Starks is quite the savvy businessman.

Not only did he orchestrate a $3.4 billion deal to buy rival heart pump maker Thoratec Corp., Starks announced the purchase the day of St. Jude Medical Inc.’s second-quarter earnings conference call. Most likely a purely strategic move, considering his company’s mediocre financial performance in Q2; during the conference call, most questions pertained to the Thoratec merger rather than the 3 percent sales drop or 9 percent slide in cardiac rhythm management (CRM) revenue.

Starks, St. Jude’s chairman/president/CEO, managed to paint a rosy picture of the company’s second-quarter performance, saying the results reflect the continued success of his innovation-based growth strategy. “We remain confident in our key programs that accelerated sales growth in the first half of 2015 and are raising our sales guidance in order to demonstrate our strong outlook for the remainder of the year,” he told analysts on the call.

St. Jude’s net sales slipped $38 million to $1.41 billion in the three-month period ending July 4, compared to net sales of $1.448 billion in the second quarter of 2014. On a constant currency basis, net sales increased approximately 6 percent.  

Total CRM sales, which include implantable cardioverter defibrillator (ICD) and pacemaker products, fell 9 percent to $670 million. After adjusting for the impact of foreign currency, CRM sales decreased 1 percent compared to the prior year quarter. Of that total, ICD product sales were $421 million in the second quarter, a 9 percent decline on a reported basis and 2 percent slide on a constant currency basis. International ICD sales were $156 million, which included $30 million of unfavorable foreign currency translations.

Second quarter pacemaker revenue fell 8 percent to $249 million but climbed 1 percent on a constant currency basis. U.S. pacemaker sales were $105 million while international pacemaker proceeds totaled $144 million, which included $23 million of unfavorable foreign currency translations. St. Jude executives said they still expect full-year 2015 CRM constant currency sales growth to range between negative 2 percent to flat with last year.

Atrial fibrillation product sales jumped 9 percent to $279 million, though they swelled to 18 percent a constant currency basis, driven by global market share gains from strong demand for the company’s FlexAbility and TactiCath Quartz Contact Force ablation catheters.

Total cardiovascular sales, which primarily include structural heart and vascular products, dropped 2 percent to $343 million. But on a constant currency basis, cardiovascular sales increased 7 percent compared to the prior year quarter.

Structural heart revenue was up 2 percent to $159 million, and vascular product proceeds surged 12 percent to $184 million.

Neuromodulation sales were strong in Q2, rising 10 percent on a reported basis and 17 percent on a constant currency basis to $118 million. The gain marked the fourth consecutive quarter of sales growth on a year-over-year basis, executives said.

Second-quarter net after-tax benefits came to $20 million, or 7 cents per diluted share, primarily related to acquisition-related adjustments, discrete income tax benefits and ongoing restructuring activities. Reported net earnings increased 7.4 percent to $290 million, or $1.02 per share.

For the third quarter, St. Jude bigwigs expect revenue to grow between 5 percent to 7 percent on a constant currency basis with currency negatively impacting revenue by roughly $105 million to $115 million. For full-year 2015, executives now expect total revenue to grow between 4 percent to 6 percent on a constant currency basis with currency negatively impacting revenue by $385 million to $410 million.

The company expects its consolidated adjusted net earnings for Q3 to range between 96 cents to 98 cents per share and full-year 2015 consolidated adjusted net earnings to fall between $3.96 and $4.