Early last week, St Jude halted sales of its QuickSite and QuickFlex leads, wires that carry electricity from defibrillators to the heart, due to concerns the insulation could wear away and expose the wires.

Then, in an action that has confounded doctors and analysts alike, St Jude last Friday issued a lengthy press release urging a prestigious medical journal to retract an article tying failures of an earlier-generation lead to patient deaths.

The editor in chief of the journal, HeartRhythm, said on Tuesday that the publication would not retract the peer-reviewed article, written by Dr. Robert Hauser of the Minneapolis Heart Institute Foundation. The article concluded that leads made by Medtronic Inc were tied to fewer deaths.

"People are wondering, is there more to this story? When you see such a vigorous defense, you wonder what's evoking this? Why are they fighting people who are raising questions? This could leave lasting reputational damage," said Dr. Harlan Krumholz, a cardiologist at the Yale School of Medicine.

The impact of the lead issues on sales is too soon to determine, but investors are betting they will take their toll. St Jude shares have fallen more than 9 percent since the start of last week, compared with a 2 percent decline in the S&P Health Care Equipment index.

St Jude said that in demanding a retraction, it was trying to correct what it considered to be faulty data, and to ensure patients and physicians have all the facts.

The company is one of three that make heart rhythm devices. In 2010, Medtronic commanded 46 percent of the global market for implantable heart defibrillators, including leads. St. Jude had a 29 percent share and Boston Scientific Corp had a 25 percent share.

St Jude does not specify sales of its leads, but sales of its defibrillator products amounted to about one-third of its $5.6 billion in revenue last year. The company is sure to face questions from analysts on the leads on Wednesday, April 18, after it reports first-quarter results.

PHYSICIANS REACT

Dr. Martin Burke, interim chief of cardiology and director of the heart rhythm center at the University of Chicago Medicine, said he expects his fellow electrophysiologists to limit their use of the St Jude leads because of concerns raised by the Hauser article. Electrophysiologists are specialists who diagnose heart irregularities and select a device to treat it.

Burke said he stopped using a newer St Jude lead, called Durata, long before the article because "the backbone" was the same design as the older Riata type, which was the subject of the Hauser article and is no longer marketed.

"I stopped using Durata months ago. I stopped using Riata years ago," Burke said.

Electrophysiologists often stay away from a manufacturer whose products have been the subject of controversy, said Dr. Arthur Moss, a cardiologist at the University of Rochester Medical Center.

"This happens. At least temporarily," Moss said.

Dr. Eric Prystowsky, director of Electrophysiology at St Vincent Hospital in Indianapolis, said he will not use St Jude leads anymore until he sees better safety data.

"I have a lot of (recalled Medtronic) Fidelis leads in my patients and I don't want to go through that again," said Prystowsky, who is a paid consultant for Medtronic, referring to Medtronic's 2007 recall.

Prystowsky also said he was disappointed in the way St. Jude has handled the situation. "They should have alerted us sooner and given us a better perspective about the gravity of the problem," he said.

In an emailed statement, St Jude said, "Patient safety and device quality have always been and continue to be our highest priorities. Our intention with all of our communications regarding the Riata leads has and continues to be to provide physicians with complete, accurate information so that they can make the best decisions for their patients."

NO INJURIES

St Jude said no injuries resulted from its QuickSite and QuickFlex leads. The leads were used in its cardiac resynchronization therapy (CRT) devices, which coordinate the action of the right and left ventricles in patients with congestive heart failure.

The older Riata and Riata ST leads from the medical journal controversy were used with the company's implantable cardioverter defibrillators (ICDs), which can deliver a life-saving shock to jolt a rapid heartbeat back to normal rhythm.

The U.S. Food and Drug Administration ultimately classified St Jude's Riata market withdrawal as a recall.

Hauser's analysis of reports in an FDA database linked Riata lead malfunctions to 20 patient deaths. Some 79,000 U.S. patients currently have Riata and Riata ST lead implants, St Jude said.

David Heupel, senior healthcare analyst at Thrivent Investment Management, said investors fear that physicians could grow more cautious in their use of newer St Jude leads, notably the Durata defibrillator brand, even though there have been no signs of problems with that line.

St Jude's lead woes come just as the market looks to have bottomed after several years of slow demand brought on by the weak economy. Analysts had been expecting St Jude to gain market share this year, spurred by sales of new products. Now, it may see slight market share erosion.

"Until I can get more confirmation that the Durata lead is OK, it will continue to be a concern," Heupel said.

Jefferies analyst Raj Denhoy questioned why St Jude chose to go public with claims that Hauser's research undercounted Medtronic's lead problems, rather than focus on defending the performance of its own products.

"Their posturing in this has the potential to really alienate their customers," Denhoy said. "This is an ominous development."

St Jude defended its decision to call for the retraction, saying it wanted to ensure physicians and patients "have all of the correct facts."

"Our intent in correcting the manuscript and in calling for a retraction is simply that our research indicates that the data in the published manuscript is in error," the company said in a statement to Reuters.

Morningstar analyst Debbie Wang said that while some doctors could curtail their use of St Jude's Durata leads as they wait for more data on the newer products, she does not expect a big hit to St Jude's revenue.

Medtronic was able to bounce back from the Fidelis recall, she noted, and St Jude should be able to do the same.

"Looking at the long list of product quality issues that have come up, it makes the doctors and hospitals never want to put all of their eggs in one basket," Wang said. "It ensures the market will always be an oligopoly."

St Jude shares up nearly 3 percent at $40.37 on Thursday, after hitting an 11-week low of $38.29 on Tuesday.

(Reporting By Susan Kelly and Debra Sherman; Editing by Steve Orlofsky)

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