After writing my opinion piece for Bold.Global two weeks ago, I have received many comments and I felt it necessary to produce a follow up article. Much of the buzz surrounding the advisory has had a lot to do with the timeline of events—what happened when and how the company responded to concerns over the current ICD battery issues. I obtained a copy of the SEC filing that is required during an acquisition such the Abbott Laboratories/SJM deal. I also reached out to the leadership at SJM. After speaking with St Jude Medial Chief Medical Officer Mark Carlson last week and reviewing the SEC filing, I wanted to provide a bit more information and share what I have learned. Dr Carlson agreed to allow me to quote him in the production of this piece.
The AdvisoryTimeline (as provided by Dr. Carlson from SJM):
–2010 SJM begins production of the FDA approved family of devices that are the subject of the current advisory
–Following an ongoing internal investigation of lithium deposits at SJM, by 2014, there were a small number of devices that were found to have a lithium deposit induced short associated with premature battery depletion
–The first report of a patient death associated with premature battery depletion was in June of 2014. According to Dr Carlson, returned product analysis found no evidence of lithium cluster induced shorting
–November 11, 2014 SJM convened their Medical Advisory Board to discuss the premature battery depletion cases. SJM reported that the rate of battery depletion due to shorts was 0.004% of worldwide sales. MAB recommended continued monitoring rather than market withdrawal
–May 2015 SJM worked with battery manufacturer to produce a “design enhancement” in order to avoid further lithium deposit related shorts.
–August 25, 2016 SJM MAB reconvened to discuss the battery issue. Based on the recommendations from the MAB, SJM began the process of communicating an advisory with the FDA
–The second report of a patient death associated with premature battery depletion on March of 2016. The product analysis found no evidence of lithium cluster induced shorting.
–October 11, 2016 SJM issues an advisory due to the premature failure of batteries related to lithium deposits. At the time of the advisory there were 2 reported deaths, 46 confirmed shorts and 795 unconfirmed shorts (.21% of total sales).
The Acquisition Timeline (taken from the SEC filing on public record)
–On December 15, 2015, members of the respective managements of Abbott and St. Jude Medical met and that meeting also served as an introductory meeting between Miles D. White, chief executive officer of Abbott, and Michael T. Rousseau, the incoming chief executive officer of St. Jude Medical. During the course of the meeting Mr. White indicated to Mr. Rousseau an interest in discussing a potential business combination between Abbott and St. Jude Medical.
–During the first week of January 2016, Mr. White contacted Daniel J. Starks, former chief executive officer and current executive chairman of St. Jude Medical, regarding a possible business combination between Abbott and St. Jude Medical.
They agreed to meet in person later in the month.
–On January 23, 2016, White and Starks met in person and at this meeting, Mr. White indicated that Abbott expected to present St. Jude Medical with a proposal to acquire St. Jude Medical.
–On February 23, 2016, Mr. White called Mr. Starks to communicate a preliminary indication of interest for Abbott to acquire St. Jude Medical at an indicative value of $83.00 per St. Jude Medical share, with consideration consisting of 60% in cash and 40% in Abbott shares, subject to due diligence. On that date, the closing price of St. Jude Medical shares was approximately $53.99 per share.
–On February 29, 2016, members of management of Abbott and St. Jude Medical met. St. Jude Medical management delivered a presentation on the company’s businesses, financial information and operations. Abbott began a due diligence review of SJM
–On March 13, 2016, Abbott communicated an updated proposal for the acquisition of St. Jude Medical at an indicative value of $84.00 per St. Jude Medical share, with consideration consisting of 60% in cash and 40% in Abbott shares.
–On March 15, 2016, the St. Jude made a counterproposal for Abbott to acquire St. Jude Medical at value of $85.00 per St. Jude Medical share, based on a mix of cash and stock consideration. On March 16, 2016, the closing price of St. Jude Medical shares was approximately $54.50 per share.
–After agreeing to terms as outlined above, Abbott and St. Jude Medical executed the merger agreement after the closing of trading on the NYSE on April 27, 2016. Abbott and St. Jude Medical announced the transaction with a joint press release prior to the opening of trading on the NYSE on April 28, 2016.
Putting all of this In Perspective: Where Does this Leave Us?
It is clear that the timelines (as reported by SJM) that led up to the issuance of the battery advisory did overlap with the acquisition talks with Abbott during late 2015 and all of 2016. However, based on SEC filings, it appears that the initial investigation of the battery issues preceded the discussions with Abbott by more than a year. During this time, the SJM stock price fluctuated by nearly 20 points according to SEC documents. So, exactly how much did the acquisition proceedings influence the timing of the advisory for the current battery issue? We may never truly know—it is my hope that those who lead in the medical device industry will consider the enormous impact that their decisions have on patients—Both GOOD and BAD. I sincerely hope that senior leadership recognizes that the choices they make every day affects real human beings. In the interest of full disclosure, I must admit that I know many of these individuals at SJM personally and call many of them friends– and I have always had great respect for each of them. However, I have had no direct knowledge or involvement in the business dealings of SJM. I also have had no knowledge of any battery issues with SJM devices until the day before the advisory was released to the press in early October 2016. During the timeline of SJM internal investigations of the battery issues, I and all other physicians continued to implant these devices without any knowledge that there was a possible concern—only SJM and their medical advisory board were aware.
Based on the information provided to me by Dr. Mark Carlson, it does appear that SJM did have discussions with the Key Opinion Leaders (KOLs) on their Medical Advisory Board early on in the process. It also appears that SJM did pursue due diligence in the analysis of the behavior of lithium deposits in medical devices. From my research into the lithium issue it does appear that others in the market—including Medtronic as well as Boston Scientific—have also noted issues with deposits that may affect battery life. These reports indicate that these occurrences are quite low. However, many patients depend on these devices to have a ZERO failure rate (and yes, I realize this is not possible). In addition, I have learned that the lithium deposits have been found to be “fluid”—they may appear and disappear over time. After reviewing the available information, it does appear that the St. Jude Medical team did work in a systematic way to determine the root cause of premature battery depletion with a goal of balancing patient safety with business success. It does appear that the company did continue to sell the devices in question after the battery manufacturing process was altered and according to Dr Carlson this was due to the fact that (after discussions with the medical advisory board) the failure rate was very low and did not meet criteria to take action either internally or with the FDA .
Ultimately, more needs to be done in the Medical device AND pharmaceutical industries in order to protect patients. While under a certainly a completely different set of circumstances, recent well-publicized pharma company actions (such as Mylan and Epi Pen rate hikes) have reflected poorly upon the entire medical device and drug industry. Unfortunately, these activities have served to increase suspicion concerning the motives of industry leaders. As healthcare consumers, we must work to hold all in the industry accountable—However, we must also approach each situation with an open mind and evaluate each case individually. Time will tell just how significant the current SJM advisory truly is and if other companies have similar issues. It is my hope that industry leaders will advocate not only for stockholders but for patients as well.