Medtronic suspends sales of heart device wire

By Susan Kelly and Dane Hamilton

CHICAGO/NEW YORK (Reuters) - Medtronic Inc said on Monday it suspended sales of a component used with its implantable devices to treat abnormal heart rhythms, saying the equipment may have contributed to five patient deaths.

Medtronic stopped sales of the Sprint Fidelis line of "leads," the wires that link the heart to an implantable cardioverter defibrillator (ICD), a life-saving device that can shock a racing heartbeat back to normal rhythm.

The company's shares sank 12 percent as analysts predicted the action could hurt what had been a tentative recovery for the struggling ICD industry. Medtronic is the largest maker of the devices, with about 50 percent of the market.

Sales of such devices have declined since 2005 following a series of defibrillator recalls, mostly by Guidant Corp -- which was later acquired by Boston Scientific Corp -- that slowed demand from cardiologists and their patients.

"This weekend's recall is a hit to industry efforts to repair the U.S. ICD market," Morgan Stanley analyst Glenn Reicin said in a note to clients. Reicin said recalls of leads are particularly problematic because the wires, which are threaded through blood vessels, are difficult to remove.

Medtronic said the leads have a "small increased risk of fracture" and recommended that patients not have them removed due to the possibility of injury during any replacement -- advice endorsed by the U.S. Food and Drug Administration.

Instead, patients should see their doctors to have their ICDs reprogrammed to better monitor for the potential of a lead to fracture. About 268,000 of the leads have been implanted worldwide, Medtronic said.

The Sprint Fidelis leads were developed as a thinner, more flexible alternative to the company's older model Sprint Quattro leads.

"Medtronic has identified five patient deaths in which a Sprint Fidelis lead fracture may have been a possible or likely contributing factor," the company said.

Minneapolis-based Medtronic said halting sales of the product would hurt revenue by $150 million to $250 million in the second quarter. The company generated $726 million in defibrillator sales in the fiscal first quarter ended July 27 in a $6 billion market for such devices.

Jeff Jonas, a portfolio manager with Gamco Investors, which holds shares of Medtronic, said the U.S. ICD market could retreat from its current low single digit growth rate on the Medtronic news.

Medtronic could also sacrifice market share to competitor St. Jude Medical Inc in the time it takes to ramp up production of alternative leads that can be sold with its ICDs. "This is going to be a blow for them," Jonas said.

Medtronic is contacting some 13,000 physicians worldwide to advise patients on their options. It said lead fractures may cause "inappropriate shocks and/or loss of output."

About 60 percent of Medtronic's U.S. sales of its leads involve the Sprint Fidelis, while the rest involve the older Sprint Quattro, the company told investors on a conference call. The percentage skewed toward Fidelis is higher outside the United States.

Medtronic also said there would likely be significant repercussions in the Japanese market, where the company has no other lead approved.