Normally, you wouldn’t expect the CEO of a major medical device company to employ the phrase “absolutely awesome” during a conference call with Wall Street analysts.
But then again, you really can’t blame St. Jude Medical Inc. (NYSE: STJ) CEO Dan Starks for showing a little enthusiasm. Starks was specifically referring to the initial sales of the company’s newest initial cardioverter defibrillators (ICDs) but he might as well have been describing STJ’s second-quarter performance.
In short, STJ kicked major butt, especially in its core ICDs and pacemaker business. The company said second-quarter profits soared nearly 16 percent to $254 million compared to $219.4 million during the same period a year ago. For the second-consecutive quarter, sales rose 11 percent, this time to $1.3 billion from $1.18 billion.
As a result, the company boosted its annual profit forecast of $2.78 to $2.83 a year from its earlier estimate of $2.73 to $2.78 a share.
As of noon EST, STJ shares rose 4 percent, or $1.31, to $35.93.
How good was STJ’s performance? Consider this: The company’s higher profit estimate includes negative currency impacts and dilution from its recent $90 million acquisition of LightLab Imaging Inc., two factors that shaved about 4 cents a share.
More impressively, STJ’s cardiac rhythm management (CRM), which includes pacemakers and ICDs, recorded impressive growth even without the $15 million in sales the company estimates it generated as a result of Boston Scientific Corp.’s (NYSE: BSX) temporary shutdown of ICDs shipments.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
Total CRM sales rose 12 percent to $788 million, far outpacing the global market growth rate of mid single digits. During the conference call, Starks was quick to note that STJ’s performance was not a market fluke, but rather the result of its growth strategies, including successful new products.
In particular, STJ’s Unify and Fortify ICDs, which received approval from the Food and Drug Administration in May, are off to a strong start.
Normally, the company does not offer sales information on individual products, but Starks said he would in this case: Unify and Fortify, equipped with a smaller circuit design and more advanced battery technology, made up more than 50 percent of total ICDs sales in the United States in June, an “unprecedented” feat and a good leading indicator for the remainder of the year, he said.
“I don’t think we have had such a rich technology era as we have now,” Starks said. “It’s about the value of our technology advantage. Anytime there is a crisis, there will be winners and losers. But we have done a good job in being proactive enough to position us to be a winner in this current economic environment. We’ve offered some good evidence St. Jude has been an absolute winner.”
