St. Jude Reorganizes, Sheds 300 Jobs

St. Jude Medical will restructure its product divisions and executive leadership. The St. Paul, Minn.-based medical device giant’s product divisions will now be divided into two new operating units: The Implantable Electronic Systems Division (IESD) and the Cardiovascular and Ablation Technologies Division (CATD). The company also will centralize several support functions including information technology, human resources, legal, business development and many marketing functions. St. Jude’s U.S. and international divisions, which are focused on product commercialization, will continue serving customers based on existing call points and specialties, officials noted.

The IESD will be lead by Eric Fain, M.D., previously president of the Cardiac Rhythm Management Division (CRMD). The IESD will comprise of the former CRMD as well as the former Neuromodulation Division.

At the helm of the CATD will be Frank Callaghan, previously president of the Cardiovascular Division. The CATD will be made up of the former Cardiovascular Division and Atrial Fibrillation Division. Both Fain and Callaghan will report to the Group President Michael Rousseau, who has held this position since January 2008.

As part of the reorganization, three additional executive officers have been named: Donald Zurbay, Rachel Ellingson and Kathleen Chester. Donald Zurbay is now vice president of finance and chief financial officer, reporting to John Heinmiller (who is taking on an expanded role as executive vice president, overseeing the centralization of the information technology, human resources, as well as legal and business development functions). Rachel Ellingson has been named vice president of corporate relations, and Angela Craig assumes additional responsibilities as vice president of global human resources (her previous position was vice president of corporate relations and human resources). Kathleen Chester has been named to a newly created role of vice president of global regulatory.

“The reorganization we have announced today is part of a comprehensive plan to accelerate our growth,” said Daniel J. Starks, chairman, president and CEO of St. Jude Medical. “We are focused on reducing costs, leveraging economies of scale, maintaining the highest level of quality, and funding our entire portfolio of new growth drivers.”

And reducing costs it will, as the unification of business units means the loss of approximately 300 jobs.

“This is another piece of fallout that we can attribute at least in large part to the medical device tax,” Thomas Gunderson, senior analyst at Minneapolis, Minn.-based Piper Jaffray & Co., told Businessweek. “From a shareholder standpoint and Wall Street standpoint, it’s always good to cut expenses.”

Analysts at Leerink Swan agree, comparing St. Jude’s actions to the recent restructuring efforts of Stryker Corporation and Covidien plc. “We assume that [St. Jude] is taking preemptive action to help offset the medtech device tax . . . which we estimate at $63 million in 2013,” wrote Leerink Swan.

Fallout it well may be, and not just due to the medical device tax set to kick in in 2013. St. Jude has been struggling with its public image for several months, ever since Robert Hauser, M.D.’s study on the company’s Riata defibrillator leads was released. Riata lead failures were alleged to be behind approximately 20 deaths, and faith in St. Jude’s new Durata defibrillator lead wires, has been tenuous.

St. Jude’s stock valuation has fallen 17 percent in the past 12 months.