|In this undated product image provided by Boston Scientific, a "Cognis" heart defibrillator implant is shown. The medical device maker on Monday, March 15, 2010 said it is suspending sales of its heart-shocking defibrillator implants after uncovering a documentation error with the manufacture of the top-selling devices. (AP Photo/Boston Scientific)|
Boston Scientific suspends defibrillator sales
WASHINGTON—Medical device maker Boston Scientific said Monday it is suspending sales of its heart-shocking defibrillator implants after failing to alert regulators to changes in manufacturing of the best-selling devices.
The company said it uncovered two production changes that were not cleared with the Food and Drug Administration. Medical device makers are required to alert regulators to significant changes in life-sustaining devices like defibrillators, which help correct irregular heart beats.
The Natick, Mass.-based company said it will retrieve all the affected devices from suppliers and hospitals. It was unclear when the company would resume sales.
The company stressed there are no safety concerns with the devices and patients can continue using them as normal.
Monday's announcement was the latest in a string of problems for Boston Scientific's defibrillator business, which was acquired through the 2006 buyout of Guidant for a hefty $27 billion price tag.
That same year the company received a rare companywide warning letter from the FDA, which temporarily halted approval of all new products. Over the next two years the company issued multiple safety recalls on its devices.
Boston Scientific CEO Ray Elliott recently announced a major restructuring plan to trim operating costs.
But Morgan Stanley analyst David Lewis said Monday's announcement "will weaken quality perception of a company that was on the brink of recovery."
Shares of Boston Scientific plunged 98 cents, or 12.6 percent, to close at $6.80 Monday. Earlier shares traded at a 52-week low of $6.31.
Defibrillators are surgically implanted in the upper chest, where they monitor the heart for deadly irregular heartbeats and use electrical jolts to shock it back to a normal rhythm.
The devices make up 15 percent of total company revenue.
Boston Scientific accounts for about a quarter of the global defibrillator market, and analysts had expected the company to expand that share with the help of updated products.
However, Bernstein Research analyst Derrick Sung said in a research note that the sales suspension will likely deal a major blow to the company's brand.
"We believe this latest 'implantable cardiac defibrillator' action could have tremendous negative impact to Boston Scientific's business both from an acute and longer-term perspective, with St. Jude Medical and Medtronic both benefiting," wrote Sung.
Minneapolis-based Medtronic is the world's largest device maker and accounts for 45 percent of the defibrillator market, while St. Jude makes up 23 percent.
Sung estimated Boston Scientific will lose $5 million per day during the sales suspension.
The company said it is working with the FDA to resolve the situation as quickly as possible.
Company officials acknowledged that the suspension would likely affect its financial earnings guidance for the year. Last month Boston Scientific projected 2010 earnings between 62 and 72 cents per share.
Pacemakers and defibrillators, collectively termed "cardiac rhythm management" devices, are Boston Scientific's largest franchise. In the fourth quarter, the company reported $645 million in sales for the devices.
AP Business Writer Tom Murphy in Indianapolis contributed to this story.