It's been a rough year so far for St. Jude Medical's cardiac rhythm management (CRM) business, which has dealt with the high-profile Riata lead recall fallout, quelled fears about the Durata lead, launched a 'scorched-earth' campaign against Medtronic, and battled a barrage of bad press all in just a six-month period. Yet despite drawing widespread criticism for its aggressive PR stance and having to repeatedly defend the Durata lead during these turbulent first two quarters of 2012, the company has managed to come out of the wreckage relatively unscathed where it counts—sales.
St. Jude's CRM unit has seemingly spent six solid months embroiled in one controversy after another, nabbing negative headlines at every turn. It began innocently enough as St. Jude unsurprisingly went into damage-control mode following the December Class I recall of Riata ICD leads. The recall served as a rallying point for advocates of improved postmarket surveillance and consumer groups, after all, and cardiologist Robert Hauser quickly emerged as St. Jude's most vocal critic.
The full-scale media blitz, however, didn't launch until the publication of a study conducted by Hauser and his colleagues in the journal Heart Rhythm at the end of March titled, "Deaths Caused by the Failure of Riata and Riata ST Implantable Cardioverter-Defibrillator Leads." In the piece, the authors analyzed deaths of Riata and Riata ST ICD patients and compared them with patient deaths associated with Medtronic's Quattro Secure leads. The study's conclusion was far from favorable to St. Jude.
Firing off a missive in response, St. Jude questioned the authors' methodologies and the accuracy of the results, ultimately demanding a retraction from the journal. It didn't happen. And that's when things got ugly.
MPMN chronicled the public spat that followed in a piece earlier this year titled, "St. Jude vs. Medtronic: Who's Winning the War Over Defibrillator Leads?" However, the long and short of it was that the two companies engaged in a very public dispute that escalated rapidly over the course of just a few weeks and was marked by rapid-fire press releases, rampant accusations, sniping in the media, and general mudslinging that didn't do either company any favors. In fact, in an MPMN poll at the time, 44% of respondents felt that the public image of everyone involved, including St. Jude, Medtronic, and even Dr. Hauser, was damaged by this series of eyebrow-raising events while 32% felt that St. Jude had primarily painted itself in a negative light.
Experiencing a backlash in the aftermath of the feud, St. Jude's CRM unit has kept a relatively low public profile until recently. But the company has been busy outside of the spotlight, educating clients and attempting to allay fears that the Durata lead could suffer the same fate as the Riata. This latter objective has become especially important in the wake of an adverse event report in FDA's MAUDE database related to an externalized conductor in the Durata lead. In response to the news of this report, the device maker's stock tumbled 6.2% in one day in June and illustrated the extent of the market's fears about the Durata lead.
St. Jude quickly reacted by launching an investigation and issuing a statement. "Our analysis indicates the damage to the Durata lead is consistent with external abrasion from contact with a calcified, or hardened, heart valve or possibly from lead-to-lead contact. External abrasion is a known cause of failure across all cardiac leads in the industry, which is different from the inside-out abrasion seen with externalized conductors observed in some Riata leads," the company said.
The medical device giant has its work cut out for it in terms of restoring faith in the Durata and its own public image. Yet despite these significant obstacles and against analysts' expectations, St. Jude's CRM division has managed to remain relatively resilient. During its Q2 2012 earnings Webcast on Wednesday, the company announced that total CRM sales dipped 6% compared with Q2 2011. ICD product sales decreased 4% compared with Q2 2011, but U.S. ICD sales, in particular, only saw a 2% drop. "Although we clearly lost some business during the quarter due to reduced use of our high-voltage leads in the U.S. ICD market, we gained more new business than that, so it all nets out to what we think is about a point to 1.5 points gain in U.S. ICD market share for the quarter," president and CEO Daniel Starks said during the call.
All things considered, the numbers don't seem that bad—an observation that was echoed several times by seemingly surprised investors during the Q&A session of the call. And it's hard not to be surprised given the extent of negative press and fallout that has stemmed from the ripple effect caused by the initial Riata recall. The key to restoring customer faith, according to St. Jude, has been the dissemination of data and an educational campaign. "As we talk to customers, get a chance to go through the design differences between Durata and Riata, and show people the actual performance data, including our strong registry performance...customers come away with more confidence in our Durata leads and we're seeing that," Eric Fain, president of the CRM division commented. "There was certainly a lot of conversation." --Shana Leonard
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