On Friday, March 8th St. Jude Medical (STJ) announced that "the first patient implant in a new trial evaluating the company's Aplatzer Cardiac Plug, a device for the prevention of stroke, took place. The trial is designed to determine if the device is safe and effective in preventing thrombus from migrating out of the left atrial appendage in patients with non-valvular atrial fibrillation who have a high risk for stroke." According to the American Heart Association's website, an estimated 2.7 million Americans have atrial fibrillation and the likelihood of developing it increases as patients reach 65, 75 and 85. Defined as a quivering or irregular heartbeat (arrhythmia), atrial fibrillation can lead to such things as blood clots, stroke, heart failure and various other cardiac-related complications.
In 2001, GJ Hankey noted that, "Non-valvular atrial fibrillation, better known as NVAF, is a common heart arrhythmia, affecting one in 20 people over the age of 65 and one in ten over the age of 75. NVAF is a significant risk factor for fatal and disabling ischaemic stroke and is implicated in about 15% of all ischaemic strokes and as many as 30% of strokes occurring in people in their 80's". If the device can prove to be safe and effective in patients diagnosed with non-valvular atrial fibrillation, this could end up being a very significant break-though and as a result, such a procedure could help improve the company's bottom line over the next few years.
According to the company's press release, "Patients with untreated atrial fibrillation are four to five times more likely to have a stroke, which greatly increases their risk of disability or death. Dr. Forbes and I consider the ACP Trial an important study as we look for ways to reduce this risk," said Dr. Christian Machado, director of electrophysiology at the Providence Hospital Heart Institute, Southfield, Michigan.
Company Overview: Based in Saint Paul, Minnesota, St. Jude Medical develops medical technology that focuses on placing more control into the hands of those who treat cardiac, neurological and chronic pain patients worldwide. The company is dedicated to advancing the practice of medicine by reducing risk wherever possible and contributing to successful outcomes for every patient. Shares of St. Jude Medical which closed Friday at $42.25/share trade an average 3.481 million shares per day and have risen 15.41% higher since January 1st of this year.
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Uptrend Status: Based on Friday's closing price, shares of STJ are trading 1.40% above its 20-day simple moving average, 5.84% above its 50-day simple moving average, and 10.09% above its 200-day simple moving average. These percentages indicate a short-term, mid-term and long-term uptrend for the stock which generally translates into a buying mode for traders.
Peer-Based Comparative Analysis: When it comes to stock screens it's always good to see how the stock you're intending to purchase stacks up against some of its peers. In this analysis I plan on comparing St. Jude Medical to both Boston Scientific (BSX) and Medtronic, Inc. (MDT) since both companies develop products that are focused on the cardiac and vascular segments of the healthcare industry. In this portion of the article I've compared St. Jude Medical's Quick Ratio, Forward P/E, and Recent EPS Performance to that of both Boston Scientific and Medtronic.
Quick Ratio Comparisons: As an indicator of a company's short-term liquidity, a company's quick ratio measures its ability to meet its short-term obligations with its most liquid assets. Sometimes called an Acid-Test, the quick ratio is calculated by subtracting a company's inventories from its current assets and then dividing by its current liabilities. Of the three companies compared, St. Jude Medical's quick ratio of 1.66 clearly trumps the quick ratios of Boston Scientific (1.21) and Medtronic (1.04) by a pretty wide margin.
Forward P/E Comparisons: The estimated forward P/E of a company is often used to compare current earnings to estimated future earnings. For such a ratio to be considered positive it must be lower than the company's current P/E ratio. In the case of St. Jude Medical and its two peers, STJ with a forward P/E of 10.67 clearly demonstrates stronger potential than both Medtronic (11.81) and Boston Scientific (15.60).
Recent EPS Comparisons: Over the course of the last year, St. Jude Medical has managed to put together a very steady streak of surpassing the street's EPS estimates by an average of 2.35% in each of the previous four quarters, whereas the results for both Boston Scientific and Medtronic have been choppy at best.
The comparative quarterly EPS breakdown is as follows:
- Q1 2012: Boston Scientific ($0.09 vs. $0.08, 12.50% surprise), performed better than both St. Jude Medical ($0.86 vs. $0.83, 3.60% surprise) and Medtronic ($0.99 vs. $0.98, 1.00% surprise)
- Q2 2012: Boston Scientific ($0.11 vs. $0.10, 10.00% surprise), performed better than both St. Jude Medical ($0.88 vs. $0.87, 1.10% surprise) and Medtronic ($0.85 vs. $0.85, in-line with estimates)
- Q3 2012: St. Jude Medical ($0.83 vs. $0.81, 2.50% surprise), performed better than both Medtronic ($0.88 vs. $0.88, in-line with estimates) and Boston Scientific ($0.10 vs. $0.11, 9.10% miss)
- Q4 2012: St. Jude Medical ($0.92 vs. $0.90, 2.20% surprise) and Medtronic ($0.93 vs. $0.91, 2.20% surprise) both performed better than Boston Scientific ($0.11 vs. $0.11, in-line with estimates)
Conclusion: If St. Jude Medical can significantly lower the stroke rate in patients diagnosed with non-valvular atrial fibrillation through a series of successful clinical trials this breakthrough has the potential to be a valuable catalyst for years to come. Not only do I believe the company is well-positioned in terms of its Aplatzer Cardiac Plug, but I think the company's fundamentals also strengthen its case as an industry leader, especially when compared to its peers within the cardiac devices sector.
Disclosure: I am long STJ.