Medtronic shares fall 11% on heart defibrillator warning

Medtronic Inc. warned doctors Monday that the wires connecting a patient’s heart to the firm’s implantable defibrillators break too often.

The news knocked Medtronic shares down $6.33 or 11.2% to $50.

Medtronic told doctors to stop using the Sprint Fidelis wires after linking five deaths to breaks in them. The company said the Fidelis wires failed slightly more often than the thicker wires they were meant to replace. The problem does not affect Medtronic pacemakers.

The Fidelis wire, or lead, is used on about 60% of Medtronic defibrillator implants, RBC Capital Markets analyst Philip Nalbone said.

Defibrillators are “a critical product, and it’s their flagship lead,” Nalbone said.

It was a major setback for Minneapolis-based Medtronic and its efforts to improve growth for its implantable defibrillators and pacemakers. The Fidelis wires are the only ones approved for Medtronic defibrillators in Japan. Without them Medtronic is essentially knocked out of a market with $150 million to $200 million in annual defibrillator sales from all manufacturers. Chief Financial Officer Gary L. Ellis said the lead problem would cause a “significant impact in Japan.”

Medtronic said the lead problems would reduce second-quarter revenue by $150 million to $250 million. Much of that is because doctors are being told to return unused leads, which Medtronic won’t be able to replace until the third quarter. It also expects inventory write-offs of at least $15 million in the second quarter, and other related costs will be $10 million to $20 million.

A defibrillator monitors a patient’s heartbeat; if it senses an abnormal heart rhythm, it delivers an electronic shock to reset the heart to a normal beat. A defibrillation system consists of a device implanted near the shoulder with one or more leads connecting the device to the heart.

Implantable defibrillator sales were a source of fast growth for Medtronic and rivals Guidant and St. Jude Medical Inc.

But recalls beginning in 2005 stalled that growth. First Medtronic recalled some of its implantable defibrillators that year because their batteries were draining without warning. Then Guidant began the first of a series of major recalls.