This morning Medtronic, MDT announced that they were suspending the sales of their sprint defibrillator (ICD) leads. I am not an electrophysiologist (a cardiologist who implants these devices), but I talked with a very esteemed colleague of mine today. The lead fracture rate for this lead is about 3% in 30 months or 5% in 5 years. This is about 5-fold higher than the previous generation of leads - which was much thicker. The current recommendations are to not change out old leads unless there is a problem and to go back to using the older thicker leads for now. My colleague tells me that this older lead is an excellent one, although most people prefer to use a thinner lead as it somewhat easier to manipulate.
The most likely side effect of a lead fracture is an unnecessary shock-certainly this would be painful, but is not life threatening. Much less frequently such a lead malfunction can result in a failure of a device to deliver an appropriate shock- which wouldnât kill a patient, but could prevent the device from saving a life.
It seems to me, that any concern about litigation risk is very much overblown. This isnât Vioxx or GDT. The company in this case didnât hide known problems (like GDT) or try to spin data showing risk into data showing benefit for other drugs (the way Merck did with the VIGOR data). There won't be thousands of cases here. There will be a lot of patients who will need extra device check and some who will need lead replacements over time.
Certainly, this isnât great news for MDT. They are no longer the obvious safer choice in the ICD market. This is bad press for defibrillators in general and MDT in specific. Still they have had recalls in the past, and no how to handle them well. This kind of news is likely to hurt St. Jude and BSX nearly ad much as MDT. Over the long run, the market will recover, much as it has after the rash of Guidant recalls.
MDT has also had some good news of late. The FDA panel recommended approval of their Endeavor- drug coated- stent. This should lead to approval soon and an opportunity to start to compete in the stent market. Both BSX and JNJ have FDA warning letters which have prevented them from releasing new stent designs for the past few years. Over time, MDT could come to dominate this market. Their Endeavor stent soon quickly gain about 20% market share in the US- as it has done in Europe. It has mixed safety data, but the stent is very easy to deliver to blockages.
So I am a buyer of MDT here. I suspect that the $6 billion haircut was an over reaction. I suspect we will see this stock back at $55 by the end of the month.
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