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Flash Player 9 or higher is required to view the chart Click here to download Flash Player now See all Bulls Reasons Bulls: Reasons To Buy Poised to capture market share in lucrative LCD segment 100% agree Poised to capture market share in lucrative LCD segment With the recent recall from rival Medtronic, and the struggles Boston Scientific has and is encountering with its acquisition of Guidant, STJ is poised to continue to capture market share in the lucrative ICD market View or Edit Reason 1 votes 100% agree Add your own Bulls Reason Bears: Reasons To Sell Feeling Bearish? Be the first to explain why this would make a poor investment Send the authors a comment or suggestion 5816 [Dismiss] [Done] See All Suggestions

Top Contributors Krishna K Related Articles Medtronic (MDT) Abbott Laboratories (ABT) Boston Scientific (BSX) C.R. Bard (BCR) Cardiac Disease

St. Jude Medical (NYSE:STJ) makes devices for cardiovascular and neurological conditions, including mechanical heart valves, pacemakers, and catheters. The company generates the majority of its revenue from its Cardiac Rhythm Management(CRM) division, which makes implantable cardiac rhythm devices (ICDs) and pacemakers.

St. Jude is dependent on the market for implantable cardiac defibrillators; in 2006 34% of the company's revenue came from its ICD business. Sales of ICDs have have stagnated in recent years. Several studies conducted in 2007 suggest that a majority of patients eligible to receive ICDs don't actually receive referrals for the devices from their doctors, implying that the market for ICDs may be smaller than initially estimated by ICD manufacturers.

[edit] Business Overview

STJ has five main business segments: cardiac rhythm management(CRM), cardiac surgery, neuromodulation, cardiology, and atrial fibrillation.

• Cardiac Rhythm Management includes two main products -- Implantable Cardiac Rhythm Devices (ICDs) and pacemakers. ICDs treat patients with hearts that beat inappropriately fast and pacemakers treat patients with hearts that beat too slowly.^[1]

• Cardiac Surgery includes products such as heart valves and heart valve repair products, which are used during heart valve surgeries. STJ mechanical heart valves have been implanted in over 1.5 million patients worldwide.^[2]

• Neuromodulation is generally used to manage sharp, intense and constant pain from nerve damage or nervous system disorders. It basically applies pacemaker-like technology to treat diseases such as chronic pain, Parkinson's, and epilepsy. STJ entered the neuromodulation market through its acquisition of Advanced Neuromodulation Systems (ANS) in 2005. ^[3]

• Cardiology includes products such as catheters, vascular closure devices (used to close artery puncture sites following certain procedures), and other heart related products. ^[4]

• Atrial Fibrillation (AF) is a rapid and inconsistent heart rhythm that occurs in the heart. People suffering from AF may experience fatigue and shortness of breath, and AF has been shown to increase the risk of stroke. STJ has a line of AF products such as catheters and 3D hearth mapping system which help physicians diagnose and treat irregular heart rhythms. ^[5]

STJ 2006 Annual Report (*Neuromodulation was through the acquisition of ANS) ^[6]

In 2006, STJ had revenue of $3.3 billion, a 13% increase over 2005. The acquisition of ANS in November 2005 increased 2006 net sales by $154.4 million.

STJ 2006 Annual Report^[7]

US sales accounted for 58% of the company's revenue, with the remaining 42% of revenue coming from abroad.

STJ 2006 Annual Report^[8]

[edit] Key Trends and Forces

[edit] Medicare approval drives neuromodulation segment

Health coverage is an important determining factor when patients and doctors choose among various treatment options. Medicare coverage is particularly significant in that it directly affects over forty million Americans, how much patients have to pay for STJ's products, and how much STJ will receive in payments from Medicare. Currently, Medicare and other third party payors are emphasizing more cost-effective medical devices, by limiting the reimbursement they will cover. Furthermore, even if a new medical device is cleared by the FDA, STJ faces limited demand for the device until Medicare and other payors approve the device for reimbursement. For example, Medicare improved reimbursement for pain stimulation in 2006. This drove the company's recent growth in the Neuromodulation segment.

[edit] Saturation of Implantable Cardiac Rhythm Devices (ICD) Market

ICDs are stopwatch-sized devices that monitor the heart and deliver appropriate therapy when an abnormal heart rhythm is detected. STJ is the second largest producer of ICDs with 20% market share for ICDs and over $1B in ICD sales in 2006. ICDs usage has grown substantially over the years, due to trial results which showed ICDs reduced death by 23% in people with moderate heart failure compared to those who did not receive ICDs. ^[9] Analysts are concerned, however, that initial market estimates of market size may have been over stated. Growth has been well below industry projections in recent years, a study released in 2007 suggests that only one in four patients that are eligible for the device actually receive referrals from their primary care physicians ^[10]

[edit] Market Share

STJ is one of the 3 big players in the ICD market, and has 20% of the ICD market.

[edit] Competition

STJ faces tough competition from Boston Scientific (BSX) and Medtronic (MDT) in most of its business units. STJ also faces competition from Abbott Laboratories (ABT) and C.R. Bard (BCR) in some divisions.

[edit] References

1. ↑ STJ 2006 10k, Pg 1
2. ↑ STJ 2006 10k, Pg 3
3. ↑ STJ 2006 10k, Pg 4
4. ↑ STJ 2006 10k, Pg 5
5. ↑ STJ 2006 10k, Pg 6
6. ↑ STJ 2006 10k, Exhibit 13
7. ↑ STJ 2006 10k, Exhibit 13
8. ↑ STJ 2006 10k, Exhibit 13
9. ↑ MDT 2007 10k, Pg 4
10. ↑ http://www.healthfinder.gov/news/newsstory.asp?docID=605636 U.S. Department of Health and Human Services, Experts Debate Limits on Implanted Defibrillator Use
11. ↑ STJ 2006 10k, Exhibit 13
12. ↑ STJ 2006 10k, Exhibit 13
13. ↑ MDT 2007 10k, Exhibit 13
14. ↑ MDT 2007 10k, Exhibit 13
15. ↑ BSX 2006 10k
16. ↑ BSX 2006 10k