St. Jude Medical Logs Double-Digit Sales Growth

Thursday, July 21, 2016

 St. Jude Medical Inc., in the midst of being acquired by Abbott Laboratories, said solid demand at home and overseas pushed revenue 11% higher in its latest quarter.

The St. Paul, Minn., medical device maker agreed to a $25 billion tie up with Illinois-based Abbott in April, one deal in a flurry of transactions as companies across the health-care space respond to cost pressures by beefing up to increase their negotiating leverage and gain pricing power. St. Jude has itself been working to tap new markets, buying heart-device maker Thoratec last summer for $3.4 billion. Fellow device company Zimmer Biomet Holdings Inc. last month struck a deal to buy LDR Holding Corp. for $1.07 billion.

St. Jude Chief Executive Michael Rousseau said on a call with analysts and investors Wednesday that the deal is on track to close by the end of the year. He said the companies have established an integration team, and he expressed optimism over the combined company’s potential.

The company has been struggling in an increasingly competitive market, where it and rivals Medtronic PLC and Boston Scientific Corp. are dealing with hospital customers that have grown in size and are pushing back on the prices they are willing to pay. Last year, St. Jude’s revenue declined 1.4% while earnings dropped 12%.

But in its latest quarter, the device maker logged 12% domestic sales growth and said sales across international markets climbed 10% as it launched new products. “Our results this quarter, particularly in our international business, continue to give us confidence that our strategy will bring us back to top-tier growth,” Mr. Rousseau said on the conference call.

The international sales gain came despite the continuing drag from a strong U.S. dollar. Like many other American companies that do significant business abroad—St. Jude generates about half of overall revenue outside of the U.S.—currency moves bit into sales and pushed down the company’s gross profit margin. That measure of profitability declined to 69.3% from 70.3% a year earlier, with the year-over benefit of the repeal of the medical device excise tax partially offsetting the currency impact and continued weakness in the company’s higher-margin cardiac rhythm management business, according to Chief Financial Officer Donald Zurbay.

Double-digit gains in revenue from atrial fibrillation, heart failure and neuromodulation devices offset an 8% decline in world-wide CRM sales. Mr. Rousseau called weakness in the segment transient, pointing to a safety gap that he said will be resolved once St. Jude wins U.S. regulatory approval for its MRI-safe pacemakers and implantable defibrillators. He expects Food & Drug Administration clearance in the second half of this year and the first half of next year, respectively.

Over all for the quarter, St. Jude reported a profit of $238 million, or 83 cents a share, down from year-earlier earnings of $290 million, or $1.02 a share. Excluding acquisition-related expenses and charges associated with the amortization of intangible assets, among other items, per-share profit rose to $1.06 a share from $1.03.

Revenue increased 11% to $1.56 billion. Analysts projected $1.06 in adjusted earnings per share on $1.55 billion in sales, according to Thomson Reuters.

Given the pending merger, St. Jude withdrew its outlook for the year.

Shares in the company rose 1.2% in morning trading, pushing the stock’s gain over the past 12 months to 5.9%.

 

Source : wsj.com