St. Jude’s Optim Coating Supplier Threatens To Terminate Contract

In short

The word “embattled” springs to mind as St.Jude Medical Inc. has been served notice of material breaches of its supply agreement with AorTech, pertaining to the supply of the material branded as Optim®, the very polymer which coats St.Judes’ Durata® ICD leads.

Background

The backstory, for the uninitiated, is lengthy, contentious and not pretty. In a nutshell, following well-publicised problems caused by so-called “externalisation” of its previous generation of ICD leads, St.Jude has been vigorously defending and promoting its newer Durata ICD lead.

The company seems to be making progress in convincing the world that its newer lead is robust and free from problems associated with its troubled forebears, Riata® and Riata ST. So the last thing it needs is for the supplier of the very component part which seems to have done the trick, to have taken to legal process over its supply agreement. You can almost hear the groans when they opened the envelope.

Scottish company AorTech has served something called a “Rectification Notice” on a division of St.Jude Medical inc., citing material breaches in an agreement for the licences and supply of polymeric materials to the company. Quite what the breaches are is not made clear, but they are obviously material enough to represent a significant development and as such demanding of a notification to the company’s listing market AIM.

One could imagine industry watchers speculating that the material breach may be related to deminimus quotas, St.Jude’s sales of ICDs having struggled in recent months as it endures the hangover from the Riata externalisation debacle, as we reported here. No doubt we’ll find out in due course as events unfold.

In the meantime, for its side, St.Jude has issued a robust defence via Massdevice, stating that the rectification notice is “based on inaccuracies and misrepresentations, and will be vigorously defended.”

Probably of more concern for St.Jude would be the perception that it may lose supply of a key component in a key product. To calm this fear, the company said to MassDevice, “St. Jude Medical has a sufficient supply of inventory from AorTech to continue manufacturing Optim-insulated leads and we have adopted other contingencies that will prevent any supply disruptions of Optim in the future. The manufacture and supply of our Optim-insulated leads will not be interrupted.”

Source: AorTech International PLC., MassDevice