St. Jude Medical Boosts 2015 Outlook As Q2 Results Top View; To Buy Thoratec

(RTTNews) - Cardiovascular medical devices maker St. Jude Medical, Inc. (STJ) reported Wednesday a profit for the second quarter that grew from last year, despite unfavorable currency impact, reflecting lower charges and expenses. Both adjusted earnings per share and quarterly net sales topped analysts' expectations.

The company also provided earnings and sales growth outlook for the third quarter and raised full-year 2015 outlook.

Separately, St. Jude Medical agreed to acquire smaller rival Thoratec Corp. (THOR) for $63.50 per share in an all-cash deal valued at about $3.4 billion, net of cash acquired. The deal, primarily subject to Thoratec shareholder approval and regulatory approvals, is expected to be completed in the fourth quarter of 2015.

Thoratec is the worldwide leader in mechanical circulatory support technology for the treatment of advanced heart failure. The deal will provide St. Jude Medical a most comprehensive portfolio of products for the management and treatment of heart failure. It also accelerates St. Jude Medical's growth strategy by adding Thoratec's complementary products and technologies.

The offer price represents a 35.4 percent premium over Thoratec's unaffected closing price of $46.89 on July 17. The transaction is expected to be completed in the fourth quarter of 2015.

St. Jude Medical intends to fund the deal through proceeds from additional bank term loan debt and senior unsecured notes. However, the deal is not conditioned on financing.

The merger agreement includes a "go-shop" period, during which Thoratec will actively solicit alternative proposals from third parties for the next 30 days continuing through August 20, 2015.

The St. Paul, Minnesota-based company reported net earnings of $290 million or $1.02 per share for the second quarter, higher than $270 million or $0.93 per share in the year-ago quarter.

Results for the latest quarter primarily include $0.08 per share of restructuring charges, and $0.10 per share of discrete income tax benefits, while the year-ago included $0.15 per share of restructuring charges, and $0.08 per share of discrete income tax benefits.

Excluding special items, adjusted net earnings for the quarter was $293 million or $1.03 per share, compared to $308 million or $1.07 per share in the year-ago quarter.

Adjusted earnings per share had an unfavorable foreign currency impact of $0.18 per share.

On average, 23 analysts polled by Thomson Reuters expected the company to report earnings of $1.00 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter declined 3 percent to $1.41 billion from $1.44 billion in the same quarter last year, but topped twenty-two Wall Street analysts' consensus estimate of $1.39 billion. However, net sales increased 6 percent after adjusting for the impact of foreign currency.

Total U.S. sales grew 7 percent to $713 million, while international sales totaled $697 million, down 10 percent or up 5 percent in constant currency from last year. Total cardiac rhythm management sales were $670 million, down 9 percent, with implantable cardioverter defibrillator sales slipping 9 percent and pacemaker sales declining 8 percent from last year.

Total cardiovascular sales decreased 2 percent to $343 million from last year, with structural heart product sales declining 7 percent, while vascular products sales grew 2 percent from last year.

Meanwhile, atrial fibrillation product sales grew 9 percent to $279 million, and neuromodulation product sales increased 10 percent to $118 million from a year ago.

The company said atrial fibrillation revenue increased 18 percent on a constant currency basis due to global market share gains driven by the St. Jude Medical FlexAbility and TactiCath Quartz Contact Force ablation catheters.

"We remain confident in our key programs that accelerated sales growth in the first half of 2015 and are raising our sales guidance in order to demonstrate our strong outlook for the remainder of the year," Chairman, President and CEO Daniel Starks said.

Looking ahead to the third quarter, the company expects adjusted net earnings in a range of $0.96 to $0.98 per share, on projected revenue growth in the range of 5 to 7 percent on a constant currency basis to between $1.440 billion and $1.470 billion. Analysts expect the company to report earnings of $0.96 per share and revenues of $1.34 billion for the quarter.

For fiscal 2015, the company now expects adjusted net earnings in a range of $3.96 to $4.00 per share, on projected revenue growth in the range of 4 to 6 percent on a constant currency basis to between $5.435 billion and $5.575 billion.

Street is currently looking for full-year 2015 earnings of $3.94 per share on annual revenues of $5.51 billion.

Previously, the company projected adjusted net earnings in the range of $3.95 to $4.00 per share, on revenues growth in the range of 4 to 5 percent on a constant currency basis.

STJ closed Tuesday's regular trading session at $76.71, down $0.12 on a volume of 3.83 million shares. In the past 52-week period, the stock has been trading in a range of $54.80 to $80.84.