|Stifel Nicolaus Cuts PT to $118 on Alexion; St. Jude Falls as Downgrade Raises Durata Concerns|
|By Staff and Wire Reports|
|Friday, 15 February 2013 21:48|
Stifel Nicolaus maintained Alexion Pharmaceuticals (NASDAQ: ALXN) with a Buy rating and lowered the price target from $125.00 to $118.00.
Stifel Nicolaus said, "Alexion posted FY12 top/bottom-line growth of >40% in the 5th consecutive year of Soliris commercialization – growth that appears readily achievable once again in FY13. While acknowledging the timing of European aHUS reimbursements and incremental data/news flow (mostly 2H13-weighted) is likely limiting the sense of urgency here, we remain hard-pressed to find a company with better fundamentals.
We're taking our previously Street-high FY13 and forward-year estimates down marginally, reducing our target price to $118 (previously $125), and remaining Buy-rated."
Alexion Pharmaceuticals closed at $87.63 on Thursday.
Shares of St. Jude Medical Inc. (NYSE:STJ) fell Friday after a Cowen & Co. analyst downgraded the medical device maker's stock, saying he believes the company's Durata heart wire is not very different from older wires that have been taken off the market.
THE SPARK: Analyst Josh Jennings reduced his rating to "Underperform" from "Neutral." In a note to clients, Jennings said he believes the Food and Drug Administration will conclude there is a significant risk of failure in Durata wires, and that over time, the failure rate for the Optim insulation on Durata wires will increase.
"The design differences between the Riata ST and the Durata are minor and do not reduce the risk of lead failure," Jennings wrote. "We do not expect the Durata to ultimately perform at a higher level than the Riata ST from a clinical and safety standpoint."
He said he expects St. Jude's market share in heart rhythm devices to fall in 2013 and in future years.
St. Jude Medical said there have been important advances in the design of heart device leads since Riata first went on the market, and Durata has a lower risk of abrasion and other problems.
"We believe that the Durata lead has undergone more scrutiny than any other lead on the market, and continues to demonstrate strong safety and reliability," spokeswoman Amy Jo Meyer said in an email.
THE BIG PICTURE: St. Jude Medical makes a variety of medical devices, including pacemakers and implantable defibrillators, which correct dangerous irregular heartbeats. The company has struggled in recent years to address quality issues with wires that are used to attach its defibrillators to the heart.
St. Jude stopped selling its Riata wires in late 2010 because of evidence the silicone coating of the wires could wear and break down over time, increasing the chance the defibrillator could malfunction and either deliver a shock when none is needed, or fail to shock the patient's heart when it is not beating properly. It recalled the wires in late 2011.
In some cases, pieces of conductors wear through the outer layer of insulation protecting them. The conductors have their own additional layer of insulation, but the wear and tear can make it more likely they will malfunction.
Last year the St. Paul, Minn., company recalled two other wires, QuickSite and QuickFlex, because of similar problems. Around 79,000 Riata leads are implanted in U.S. patients, and the FDA ordered St. Jude to conduct a three-year study to learn more about the risk of insulation failure.
In November the FDA released an inspection report on the facility where St. Jude manufactures the Durata wires. The inspectors noted a number of problems with the company's testing procedures, indicating staffers were not following their own quality control guidelines.
SHARE ACTION: Shares of St. Jude fell $1.81, or 4.2 percent, to $41.20 in afternoon trading. Shares fell 12 percent on Nov. 21 following the release of the FDA inspection report, but since then the shares have risen 37 percent to reach their highest prices in almost a year.
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