The chief executive at Abbott Laboratories said Wednesday he’s not ready to predict if recent action by federal regulators at the company’s St. Jude Medical business in Little Canada will slow approval for a key product.
St. Jude Medical has been losing share in the market for implantable cardiac defibrillators (ICD) because its heart devices have lacked technology to make them compatible with MRI scans.
A warning letter this month from the U.S. Food and Drug Administration (FDA) called for changes at St. Jude’s manufacturing facility for defibrillators, and analysts have speculated the action could delay approval for St. Jude’s “MRI-safe” ICD. Company officials have projected the clearance will come during the second half of 2017.
The MRI feature has boosted sales for rivals Medtronic and Boston Scientific, which have large operations in the Twin Cities.
“At this point, I’m not going to change our launch dates or our assumptions on approval dates and so forth, because I don’t see a reason to do that, yet, or a direction to do it in,” Chief Executive Miles White said during a conference call Wednesday with investors.
“We’ve had a pretty good head start here on the issues,” White said. “We’ve been aware of the circumstances here for some time.”
Wednesday marked the first release of quarterly results for Abbott since it closed in January on a $25 billion acquisition of St. Jude Medical.
“The integration of St. Jude is going well and recently launched products are contributing to double-digit sales growth across several areas of our medical devices business,” White said in a statement.
Abbott reported first-quarter revenue of $6.3 billion, up 3.2 percent from the year-ago quarter after adjusting for currency fluctuations and incorporating prior-year results from St. Jude.
On this “comparable operations” basis, Abbott said net earnings came in at $843 million for the quarter after excluding for one-time charges. On a per-share basis, adjusted earnings of 48 cents were ahead of analyst estimates, the company said.
Analysts surveyed by Thomson Reuters were expecting earnings per share of 43 cents on $6.15 billion in revenue.
Despite beating analyst expectations for earnings during the quarter, Abbott officials said the company wasn’t yet increasing its earnings guidance for the year until more financial results are in hand.
St. Jude Medical is one of the nation’s big three manufacturers in the market for pacemakers and ICDs.
Last week, the FDA slapped St. Jude with a warning letter saying the company failed to properly investigate problems with certain batteries in its ICDs as well as the cybersecurity of its at-home monitoring equipment.
Michael Weinstein, an analyst with J.P. Morgan, said via e-mail Wednesday that the issues outlined in the warning letter are “pretty extensive.” As such, Wall Street will “assume that FDA holds up any PMA approvals” until the problems are resolved, Weinstein wrote, using the abbreviation for “premarket approvals” required of complex devices like ICDs.
When Weinstein asked White about the issue during the Wednesday call, the Abbott chief executive said: “The impact will depend a lot on our response — how thorough and how effective that response is. ... Right now we’re focused on what needs to be done in terms of corrective actions and improvements.”
St. Jude Medical has been losing share in the ICD and pacemaker markets because its products have been slow to incorporate technology that allows patients to safely undergo MRI scans.
During the first quarter, Abbott announced FDA approval for an MRI-safe pacemaker, and is projecting sales improvement throughout the year, as a result. Pacemakers and ICDs collectively are referred to as heart rhythm management devices.
“As expected, rhythm management sales in the U.S. were impacted by continued competitive dynamics in the MRI-conditional category of products,” Abbott said in an earnings release Wednesday morning.
When the acquisition closed in January, St. Jude Medical employed about 4,000 people in Minnesota. Abbott has not said exactly what will happen to the local workforce in the wake of the deal, but has described likely “synergies” — a term routinely used to describe cost cuts that can include job eliminations.
During the call with investors, Chief Financial Officer Brian Yoor said: “It takes time to ramp the synergies. As we move into [the second quarter], you’re going to start to see those synergies ramp in St. Jude as we move through the year.”
Asked to elaborate, Abbott issued a statement saying: “We have been working to bring together our large, global businesses, leveraging the capabilities and strengths of both organizations to create a premier medical device leader.”
Shares of Abbott Laboratories closed up slightly in trading Wednesday at $43.59.