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St. Jude Buys Pacemaker Manufacturer

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St. Jude Medical Inc. (STJ) revealed that it has acquired the privately held world’s first and only leadless pacemaker manufacturer Nanostim, Inc. for $123.5 million, utilizing an exclusive option obtained on May 3, 2011 by entering a partnership agreement with the latter.

Sunnyvale, Calif.-based Nanostim produces pacemaker that can be inserted through the femoral vein using a steerable catheter through a minimally invasive surgery, thereby eliminating the need for creating a pocket surgically for the device and its insulated wires known as leads.

Due to its less than 10% size compared to a conventional pacemaker, non-requirement of a surgical pocket and exclusion of a lead, the pacemaker leads to better patient comfort and avoids vulnerabilities arising out of pocket-related infection and lead failure.

The device is also designed in a way so that it can be retrieved later in case of battery replacement and repositioned if necessary. Its battery is expected to have an average lifespan of more than 9 years with 100% pacing, or more than 13 years with 50% pacing.

The device is supported by the St. Jude Medical Merlin Programmer, which is also used to program STJ’s other pacemakers and implantable cardioverter defibrillators (ICDs). It has received CE Mark approval in Europe, where it will be sold in the near term.

The device has also received conditional approval from U.S. Food and Drug Administration (:FDA) for its Investigational Device Exemption (IDE) application in order to conduct clinical trials in the U.S.

As per the merger agreement, St. Jude Medical is subjected to additional cash payments of up to $65 million, based on the achievement and timing of certain revenue-based milestones.

Although the agreement will not impact STJ’s outlook for 2013 (except for acquisition-related expenses), the stock market reacted positively to the news. Shares of the company edged up 1.6% at the beginning of the week.

Shares of St. Jude Medical hit new 52-week high of $57.17 on Oct 4 and closed at $56.23 on the same date, which represented a solid one-year return of 32.5% and impressive year-to-date return of 56.1%. Currently, the stock retains a Zacks Rank #2 (Buy). The company is expected to report its third quarter results tomorrow.

Apart from STJ, stocks that are currently performing well in the medical products industry Bio-Rad Laboratories, Inc. (BIO), diaDexus, Inc. (DDXS) and INSYS Therapeutics, Inc. (INSY). All of them carry a Zacks Rank #1 (Strong Buy).

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