Recently, St. Jude Medical (STJ) entered into an agreement with the US Department of Justice (DOJ) to pay $3.7 million for the settlement of a fraud case related to illegal payments made to hospitals for securing heart device business. The settlement followed an action filed under the False Claims Act by a whistleblower.
The allegations made by the Department of Justice included payments made to hospitals as well as small and isolated product rebates over the last five years. St. Jude Medical generally provided rebates on heart device equipment to encourage buyers to purchase the equipments from them rather than from competitors. These payments led to false claims being submitted to federal health care programs and thus violated the False Claims Act.
The company asserts that this settlement will have no material impact on its financial position or operations. St. Jude Medical posted strong financial results for the first quarter of fiscal 2010. For the first quarter, earnings per share came in at 75 cents, beating the Zacks Consensus Estimate of 68 cents and the year-ago earnings of 58 cents.
The company expects earnings per share to be in the range of $2.80 to $2.85 for fiscal 2010, compared with the previous guidance range of $2.71 to $2.76. For the second quarter, earnings per share are expected between 73 cents and 75 cents. The Zacks estimates of 74 cents for the second quarter and $2.84 for fiscal 2010 lie midway in the company’s guidance range.
St. Jude Medical is a leading worldwide manufacturer, and distributor of innovative medical devices. The company offers high-quality products to physicians in cardiac rhythm management (CRM), heart valves, electrophysiology and specialty catheters/introducers. The company is a leader in the mechanical heart valve market.
St. Jude’s closest competitors are Medtronic Inc. (MDT) and Boston Scientific Corporation (BSX).
We currently have a Neutral rating on St. Jude Medical.
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