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What’s Driving St. Jude Medical’s Atrial Fibrillation Segment?

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Apr. 20 2016, Updated 5:08 p.m. ET

Overview

St. Jude Medical’s (STJ) atrial fibrillation (or AF) therapy area offers products for the treatment of irregular heart rhythms. In 2015, the AF product segment generated sales of ~$1.1 billion. That was 19.8% of the company’s total revenues and YoY (year-over-year) sales growth of ~5%.

Medtronic (MDT) leads the market for defibrillators, followed by St. Jude. Johnson & Johnson (JNJ) and Boston Scientific (BSX) are some of the other major players that offer products in atrial fibrillation therapy.

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According to St. Jude’s estimates and as you can see in the above diagram, atrial fibrillation market opportunity worldwide is expected to be more than $4 billion in 2016. The above diagram shows the AF segment-wise market potential for 2016.

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Product pipeline

St. Jude Medical’s AF therapy area is comprised of a comprehensive electrophysiology product portfolio that enables physicians to provide tailored therapy to patients. MRI- (magnetic resonance imaging) safe defibrillators are expected to be launched later in 2016, which should help improve sales going forward. In 2015, the segment’s sales were driven by increased sales of the TactiCath Quartz ablation catheter and the FlexAbiity ablation catheter. These received FDA (U.S. Food and Drug Administration) approval in October 2014 and January 2015, respectively.

The Agilis NxT steerable introducer and cardiac mapping systems also contributed to growth of the atrial fibrillation therapy segment. In 2016, St. Jude expects to launch the EnSite PrecisionTM Cardiac Mapping System with advanced user interface and sensor-based catheters. The product is expected to generate significant sales.

Recent performance

In 4Q15, St. Jude reported approximately $276 million of AF product sales. It represents a currency adjusted YoY growth rate of ~4%. Ablation catheter sales have been the biggest catalyst of strong segment revenues, driven by the successful adoption of the TactiCath and FlexAbility ablation catheter.

Investors interested in gaining exposure to St. Jude Medical can consider investing in the iShares Core S&P 500 ETF (IVV). It holds ~0.09% of its holdings in STJ.

In the next part, we’ll see how St. Jude Medical could revive declining CRM (cardiac rhythm management) sales.

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