* Says models are no longer sold or available for implant
* No injury or death reported due to ICD issues
* Says possibility of patient harm is 1 in one million
* Shares up 2 pct tracking broad market rally
(Adds physician comment, updates stock prices)
By Debra Sherman
CHICAGO, July 22 Boston Scientific Corp (BSX.N)
said on Thursday it found problems with three older models of
its implantable heart defibrillators that can prevent the
devices from performing life-saving functions.
The world's second largest maker of heart devices, which
has been struggling with regulatory and product issues for the
last several years, confirmed a Reuters report on Wednesday
that the company would issue an advisory to doctors on three
models of its implantable heart defibrillators, known as ICDs.
In a telephone interview, Boston Scientific Chief Executive
Ray Elliott said this action is likely the end of the problems
associated with the Contak Renewal 3 & 4 and Vitality HE ICDs
manufactured between January 2006 and November 2007.
They are not sold anymore and are not in hospital
He did not expect the advisory, as such notices to doctors
are called, would have a material financial impact on the
There are 38,000 of the devices implanted worldwide, but
the company did not recommend physicians replace them, saying
they should continue routine follow up.
The company found that a magnetic switch on the ICD --
which monitors and corrects dangerously rapid heart beats --
can get stuck, preventing it from delivering potentially
NO TICKING TIME BOMB
Dr. Laurence Epstein, chief of the Cardiac Arrhythmia
Service at Brigham and Women's Hospital in Boston, said the
risk of having a problem related to this issue is smaller than
the risk of doing surgery to replace the device.
"This is one of those cases where (the company is)
reporting it because of the need to be transparent, but the
chances of anything happening is so small that as a physician,
I'm not going to do anything about it," he said. "I don't want
people to panic. There's no ticking time bomb."
Goldman Sachs analyst David Roman estimated that 15 percent
to 20 percent of the devices would end up being removed at a
cost to Boston Scientific.
"This would clip expected replacement revenue in 2011-2013,
which we estimate would reduce projected revenue in each of
these years by $40 million to $50 million, or 1 to 2 cents (per
share) annually," he wrote in a research note.
The advisory is unlikely to have a direct impact on future
sales of initial ICD implants given the continued conversion to
newer models, he said.
"The bigger issue, in our view, will be to what extent this
recall has a negative reputational impact on Boston Scientific
and slows the company's efforts to recoup market share," Roman
said in the note. "Both St. Jude Medical STJ.N and Medtronic
(MDT.N) would be beneficiaries of any incremental share loss."
Boston Scientific shares rose 1.8 percent in early
afternoon trade, amid a broad rally for stocks. Medtronic
gained 2.5 percent and St. Jude, whose sales got a boost during
a Boston Scientific suspension of ICD sales in March, gained
3.1 percent. [ID:nN21169950]
NO INJURIES OR DEATHS TIED TO ADVISORY
The defibrillators covered by the Boston Scientific
advisory contain a switch designed to respond to a magnet.
In emergency situations or during a medical procedure,
physicians may apply a magnet to the skin surface just above
the implanted device, which will temporarily prevent delivery
of undesired defibrillator therapy. When the magnet is removed,
defibrillator therapy will once again be available if needed,
the company said in a statement.
In rare instances, application of a magnet may cause this
switch to become stuck in a closed position and prevent
delivery of programmed defibrillator therapy.
The company noted the possibility of patient harm is less
than one in 1 million devices and that no deaths or injuries
have been reported due to the issues.
It said the device will emit an audible beeping tone if a
problem occurs and in that case, the patient should go to a
hospital emergency room.
The advisory comes just two days after the company posted
better-than-expected second-quarter results that reflected a
rebound in its ICD market share after a one-month halt on
shipments of the devices. [ID:nN19119376]
(Reporting by Debra Sherman; Editing by Michele Gershberg,
Derek Caney and Tim Dobbyn)