St. Jude Medical Parkinson's Device Gets Go-Ahead

St. Jude Medical (STJ) has received the Australian Therapeutics Goods Association approval of the Libra and LibraXP deep brain stimulation systems used for the treatment of Parkinson's disease. Libra and LibraXP deep brain stimulation systems are electrical devices implanted in the brain and target areas affected by Parkinson's disease by sending mild electrical pulses.

Parkinson’s disease is a progressive neurological disorder that affects a person's control over his or her movements and speech. According to the company, there are roughly 6.3 million people suffering from this disease worldwide.

The new approval will add to St. Jude Medical’s ever-increasing top-line and bolster its position in the neuromodulation segment. St. Jude Medical is a leading medical device manufacturer that designs, manufactures and distributes medical devices to treat cardiovascular and neurological conditions.

The company holds the #2 market position for ICDs and pacemakers behind Medtronic (MDT) but ahead of Boston Scientific (BSX). This segment is the company’s largest in terms of revenue. St. Jude holds the #2 market position behind Medtronic in neuromodulation.

St. Jude resorted to several fund raising activities in the past few months. In December 2008, the company borrowed $500 million under its existing $1 billion credit facility. Then, it entered into a three-year agreement for $360 million with a consortium of banks in Japan and later issued $88 million of three-year notes.

In January 2009, the company borrowed an additional $180 million under this agreement. The company used these amounts to fund acquisitions and repay $1.2 billion in convertible debentures. The borrowings will increase the credit risk of the company if these funds are not productively used.

St. Jude remains relatively insulated from the recent economic fallout as a result of its life-sustaining product portfolio. In our latest report, we have assumed that the stock should trade at a 25% premium to the comparables’ mean P/E/G multiple. Based on this, we have reiterated our ‘Buy’ rating for this stock. We think investors stand to benefit by adding this stock to their portfolio.