St. Jude Medical Logs Double-Digit Sales Growth -- Update
July 20 2016 - 10:10AM
Dow Jones News
By Lisa Beilfuss
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%.
Write to Lisa Beilfuss at lisa.beilfuss@wsj.com
(END) Dow Jones Newswires
July 20, 2016 10:55 ET (14:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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