July 1, 2005

Guidant recall classified as highest priority

By Debra Sherman

CHICAGO (Reuters) - Guidant Corp. on Friday said the U.S.Food and Drug Administration has given Class 1, orhighest-priority status, to its recently recalled implantableheart devices.

The products include Ventak Prizm 2 DR, manufactured on orbefore April 16, 2002, and Contak Renewal 1 and 2 devices,manufactured on or before August 26, 2004.

Physicians and patients were notified by mail on June 17,2005. The company advised doctors to stop using some of theimplantable cardioverter defibrillators, or ICDs, last monthafter issuing a recall for the devices, which monitor theheartbeat and deliver a life-saving shock when they detect anirregular rhythm.

The FDA assigns a recall Class I status when there is "areasonable probability that, if a particular device ismalfunctioning, the malfunctioning device will cause seriousadverse health consequences or death."

FDA has designated as Class II, the recalls of Ventak PrizmAVT, Vitality AVT, and Renewal AVT devices, Renewal 3 and 4,Renewal 3 and 4 AVT, and Renewal RF devices. The lowerclassification indicates that the product "may cause temporaryor medically reversible adverse health consequences, but thatthe probability of serious adverse health consequences isremote."

The FDA said the recall class designations do not affectthe company's recommendation to physicians that they continuenormal follow-up visits at three-month intervals.

Neither Guidant nor the FDA is making a recommendation asto whether individual patients should have their devicesremoved.

"These are very complex clinical decisions that need to bemade based on the device and the condition of the patient," Dr.Daniel Schultz, director of FDA Center for Devices andRadiological Health, told reporters on a conference call. "Webelieve it is vitally important for the specific decision ...to remain in the hands of the doctor and the patient."

The FDA continues to evaluate the circumstances of thetiming and notification of the recalled devices. It is likelythe investigation will conclude in a matter of weeks, theagency said.

Shares of Guidant, which agreed to be acquired by Johnson &Johnson for $25.4 billion, recouped earlier losses and inmidafternoon trading were down $1.32 at $65.98, off the day'slow of $64.20 on the New York Stock Exchange.

Tao Levy, an analyst with Deutsche Bank, said he does notbelieve the Class 1 designation will materially change thenumber of patients who opt to replace the device. He said hethinks it is reasonable to expect about 15 percent of thoserecalled devices to be replaced, which was similar to whatcompetitor Medtronic Inc. saw when it issued a recalled ofcertain implantable heart defibrillators earlier this yearbecause of a problem with the batteries.

"We continue to expect the acquisition by J&J to progressunder the terms announced, although we believe the ICD recallswill likely delay the deal's closing as Guidant works toresolve its product issues and J&J conducts its due diligencemore meticulously," he said in a research note.

Owning shares in St. Jude, the most levered to the ICDmarket, "acts as a prudent hedge against potential longer thanexpected product issues for Guidant," Levy added.