Daniel Starks, Chief Executive Officer of Little Canada-based St. Jude Medical Inc. (STJ), a maker of cardiac heart rhythm devices, warns that the company may receive a regulatory warning letter involving a manufacturing facility in California. This was announced during the Company’s third-quarter earnings call on Wednesday.
The medical device’s manufacturing plant in Smylar, California is currently being inspected by the U.S. Food and Drug Administration (FDA), and will probably result in a negative report, possibly a warning letter, Starks said on a conference call today.
Starks did not comment on exactly why the company believes that a warning letter is coming, but said he is not aware of any specific problems at the plant.
“We would not be surprised if these observations are ultimately followed by the issuance of a warning letter,” Starks said on the phone call. If that happens, we will respond in a way that demonstrates our top priority is patient safety and quality assurance,” he said.
“The right process here is to have the FDA finish its inspection and…go from there,” Starks said, adding that the company wanted to communicate the possibility of receiving a warning letter in order to avoid surprising investors. In addition, a warning letter from the FDA could actually prevent St. Jude from obtaining future approval from regulators for new products until all issues in the letter are resolved, according to the FDA website.
St. Jude makes several products for the management of cardiac rhythm, including pacemakers, defibrillators, and leads (wires that connect defibrillators to the heart).
In 2010, St. Jude stopped selling its Riata wires, which were used to connect defibrillators to the heart, eventually recalling them one year later due to the possibility of the cables breaking through their insulation. Since then, St. Jude has been under the watchful eye of the FDA. The issue with the externalized cables sparked attention from physicians, patients and regulators, increasing the odds that the manufacturing plant could be cited, Starks said.
The company then launched a new line, Durata, with claims that the new leads would prevent the problems they experienced with the Riata wires.
However, in May, a doctor reported to the FDA that one of the Durata leads had also failed, after it was implanted in a patient. Specifically, the report said that the lead had cables, which were protruding through the insulation lining, which was the same problem they had with the earlier Riata wires. St. Jude said they analyzed the Durata lead that “failed” and found that it was damaged due to scraping against another object within the patient’s body, not in fact, due to a defect in the lead.
As predicted by CEO Daniel Starks, the FDA did send an “observation” letter to St. Jude Medical about a series of procedural violations found at a California plant that makes cardiac medical devices. The medical device company said the FDA’s action should not impede the manufacturing of cardiac rhythm management products at the plant.
Inspections between September 25 and October 17 revealed 11 “observations” of problems from an FDA investigator, according to the heavily redacted Form 483 St. Jude posted in a regulatory filing. This form, containing the “observations” and concerns by the FDA, may or may not lead to an official warning.
St. Jude said that it plans to respond to the FDA by November 7th “detailing proposed corrective actions, and has initiated efforts and redirected resources to address the FDA’s observations,” according to the filing.
“It is important to note that none of the observations identified a specific issue regarding the clinical or field performance of any particular device. The Smylar, California facility will continue to manufacture cardiac rhythm management devices while the company works with the FDA to address these observations,” STJ said. “The company takes quality and product safety very seriously and is committed to fully resolving the quality system observations identified during this most recent FDA inspection.”
STJ stated that the cost of fixing any problems is not expected to materially impact St. Jude financially.
After the announcement, shares of the company’s stock went down, closing at $40.85 on Wednesday, down 4.87 percent. St. Jude’s third quarter earnings were down 22.5 percent, compared to its earnings during the same time last year. Sales from the company’s cardiac rhythm management products totaled $691 million, down 8 percent from a year earlier.
In August, St. Jude announced plans to cut 300 jobs, including 80 in Minnesota, as part of a realignment of its business units, hoping to save about $50 million annually. This plan for job cuts was made prior to receiving the “observation” letter.
St. Jude is among Minnesota’s 15-largest public companies, based on revenue, which totaled $5.6 billion in 2011.
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