Guidant heart pacemakers at risk of failure

By Debra Sherman

CHICAGO (Reuters) – Cardiovascular device maker Guidant
Corp. said on Thursday it has identified two separate problems
with two models of its implantable pacemakers that could lead
to device failure.

Guidant, which agreed to be acquired by Johnson & Johnson
for $25.4 billion last year, said failure could result in
sudden, intermittent or permanent loss of pacing, causing
serious health complications. No deaths have been reported as a
result of the device failures.

The problems involve Guidant’s Insignia and Nexus
pacemakers and come just months after a spate of failures and
recalls of some of Guidant’s most lucrative heart devices,
implantable cardioverter defibrillators or ICDs.

Guidant has been in the spotlight in recent months
following revelations that it knew about a potential problem
with its ICDs, but did not tell doctors or patients for three
years. The problem was uncovered last Spring when a 21-year-old
college student died of cardiac arrest after his ICD
short-circuited.

The Heart Rhythm Society, a group of cardiologists
specializing in heart rhythms, last week met with device
manufacturers, regulators and heart patients in Washington D.C.
to discuss how recalls should be handled. The group hopes to
eventually establish guidelines and policies.

Guidant’s shares initially fell to a two-month low after
the latest recall was announced, but quickly regained some
ground and were down 25 cents to $69.25 around midday on the
New York Stock Exchange.

FAILURE RATES LOW

Indianapolis-based Guidant said it confirmed one type of
failure in 36 out of 49,500 pacemakers, which treat slow heart
beats. It estimates the potential future failure rate of
between 0.017 percent and 0.037 percent for the 41,000 patients
who still have the device.

U.S. Food and Drug Administration has classified the first
problem as a recall, the company said.

Guidant said a second type of problem resulted in 16 device
failures out of 341,000 Insignia and Nexus devices distributed
worldwide. Guidant said one patient, who was dependent on the
pacemaker, experienced fainting and was resuscitated for
cardiac arrest after the device failed.

Glenn Reicin, an analyst with Morgan Stanley, called the
FDA action “puzzling,” noting that failure rates are in line
with other devices on the market.

“At first blush, it does not look to be a material
communication,” he wrote in a research note to clients. “We
hope that this is an indication that we are nearing the tail
end of the FDA investigations into Guidant.”

Guidant, the No. 2 maker of implantable heart devices after
Medtronic Inc., said an estimated 145,000 devices are active in
the United States. It said the FDA may classify the second
problem as a recall. Guidant recommends doctors verify
pacemaker operation in the packaging before implanting the
device.

The FDA inspected Guidant’s heart device plant in St. Paul,
Minnesota, and provided it with a list of problems, including
observations about the two pacemaker brands noted in the
physician advisory, the company said.

“Pacemakers are a small part of the story from a revenue
perspective and it’s a shrinking market, so there probably
won’t be much financial impact,” Susquehanna Financial Group
analyst Mark Landy said. “And people don’t die from bradycardia
(slow heart rhythms), they just feel terrible.”

John Farrall, an analyst with National City Private Client
Group, said he does not believe Guidant’s most recent device
problems will affect its deal with J&J.

“I’m not in that camp. At worst, it may delay the deal, but
it won’t change the terms,” Farrall said. “But there are a lot
of people out there who do believe the price will be cut.