Another Heartache for St. Jude

The hits keep on coming for St. Jude Medical (NYSE: STJ  ) .

Fresh off earnings that showed the continued decline of its cardiac rhythm management, or CRM, sales, St. Jude took a fresh cardio kick this week after its January recall of a component used to insert its Amplatzer PFO Occluder into patients. Now the FDA's sounding warning sirens around the recall, and St. Jude investors are experiencing yet another round of disappointment. Let's check out how this latest recall will hurt the company.

Caution signs at St. Jude
The actual Amplatzer heart plug, used to treat a defect that can cause holes in the chambers of the heart, isn't at fault here. Instead, St. Jude recalled the wire used to place the device -- a recall that has caught regulator attention in an alarming fashion.

The FDA this week assigned a Class-1 recall classification to St. Jude's action, its most serious recall designation that indicates affected patients could be seriously harmed or even killed should the wire fracture. Fortunately for investors, physicians can still use an older version of the delivery device in order to continue Amplatzer implants in the future. Nonetheless, this is not the kind of recall St. Jude needed as the company struggles to turn around lagging sales.

While this likely won't hurt the company's revenue much as the actual heart plug itself hasn't been pulled, some of St. Jude's other PR messes of the recent past come back to bite it.

St. Jude already faced a tough recall with its Riata defibrillator wires back in 2011. The FDA already has stepped in once this year as well, sending a warning letter to St. Jude over concerns regarding a manufacturing plant that makes the company's Durata defibrillator leads. With the agency threatening to not approve certain CRM products until the company fixed the processes, St. Jude's facing high hurdles in an industry it can't afford to foul up.

The company's full-year CRM sales declined 3.5% on a constant currency in 2012, and the industry outlook isn't good. Competitors such as Boston Scientific (NYSE: BSX  ) have also experienced tough times in the CRM market, with St. Jude's rival seeing CRM sales decline 7% year-over-year. This isn't a forgiving industry with sales in retreat, and the Durata mess isn't making St. Jude's goal of turning around falling sales any easier.

A downbeat diagnosis
St. Jude's already in a bind with sales falling, and the company's just shooting itself in the foot with recalls and FDA warnings like this. The FDA's warning over the Durata manufacturing facility could weigh much more on St. Jude's future sales than the Amplatzer wire fracture mess, but this is one more bump in the road that the company can't afford.

St. Jude's not helping out investors any with its recalls and problems, and falling sales threaten the company's future. As an investor, you'll want to avoid heartache-inducing stocks and look for the best long-term picks to build your portfolio. In our free report "3 Stocks That Will Help You Retire Rich," we name stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2255755, ~/Articles/ArticleHandler.aspx, 10/23/2014 1:05:59 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement