Medical Device Daily Associate
St. Jude Medical (St. Paul, Minnesota) reported that it is combining its Cardiac Surgery and Cardiology divisions to create a new Cardiovascular division, effective Jan. 1, 2007.
The company said the new division will focus on developing and bringing to market medical device technology and services to help patients who suffer from vascular disease or structural heart defects. It will incorporate the activities currently managed by the Cardiac Surgery and Cardiology divisions, although the company will continue to have specialized cardiac surgery and cardiology sales forces.
Company spokesperson Angela Craig told Medical Device Daily that as a result of the consolidation, the company has determined that 30 employee positions represented redundancies between the two divisions and consequently, those positions would “regrettably” have to be eliminated, and some employees would be given added responsibilities. She noted that the affected jobs were “senior administrative positions.”
“This strategic reorganization is another example of St. Jude Medical's commitment to continuous improvement and to focusing on the needs of our customers,” said Daniel Starks, chairman, president and CEO, in a statement. “Our cardiology and cardiac surgery businesses will be stronger together than each business is separately. By streamlining our organization, we can boost operating efficiencies and ultimately use the associated savings to invest in research and development. This in turn is expected to strengthen our competitive position and improve St. Jude Medical's total growth profile both in cardiology and in cardiac surgery to benefit our customers, employees, and shareholders.”
Starks said that the creation of the new division, coupled with the expansion of the two units' respective sales forces and recent new product introductions, are part of a comprehensive program to position St. Jude Medical “to deliver a minimum 15% growth in 2007 and beyond.”
Craig noted that the two divisions have offices in the St. Paul area and that the company plans on retaining both of the offices, at least in the near term.
The Cardiovascular division will be led by George Fazio, who has served as president of the company's Cardiac Surgery division since 2004. Prior to his current role, Fazio was appointed president of St. Jude Medical Europe in 2001. His preceding roles included president, health care services, and general manager for the company's operations in Canada.
Paul Buckman, currently president of the Cardiology division, will become corporate vice president of business development. Since joining St. Jude Medical in 2004 in his current role, Buckman has overseen a significant expansion of the Cardiology Division's products and programs.
In addition, the company is initiating several changes to enhance the efficiency and effectiveness of its sales and customer service operations in certain international geographies.
As a result of these restructuring plans, the company said it expects to incur a pre-tax charge of $25 million to $35 million in 3Q06.
Prudential Equity Group (New York) senior med-tech analyst Larry Biegelsen wrote in a research note that the restructuring will reduce annual selling, general and administrative expenses by an estimated $6 million, or 1 cent per share.
While he views the restructuring as a positive development, Biegelsen said he believes “it supports our view that spending requirements to reaccelerate ICD [implantable cardioverter-defibrillator] sales growth will limit earnings growth.”