St. Jude Medical Warns Patients of Potential Lithium Battery Malfunction

Embattled St. Jude Medical (NYSE:STJ) now faces a new challenge: due to a battery malfunction, their heart defibrillators—implanted in some 400,000 patients—can abruptly stop working. The issue has already been linked to two patient fatalities and St. Jude Medical’s stock is taking a hit. How will this affect the company’s acquisition by Abbott Laboratories (NYSE:ABT)?
Announcing the news was none other than Muddy Waters Research, the same short-seller that accused St. Jude Medical of cybersecurity vulnerabilities in August 2016. Taking to Twitter on October 10, they prematurely shared a field advisory notice prepared by the other company.
While St. Jude Medical has refuted earlier cybersecurity allegations, they readily acknowledged this safety concern. In a press release dated October 11, the company warned that built up lithium deposits in the defibrillators’ batteries can cause them to short-circuit, quickly running the battery down. That depletion can happen in a single day or take several weeks.

These so-called “lithium clusters” are a documented phenomenon with this battery type. In fact, St. Jude Medical added insulation to all batteries manufactured after May 23, 2015 in order to prevent these shorts.
Nevertheless, St. Jude Medical insists the risk is minimal, occurring just 0.21 percent of the time. That’s because location matters: only when lithium clusters bridge the battery’s cathode and anode does shorting occur.
Considering these devices moderate cardiac rhythm, that shorting can be deadly.
St. Jude Medical is not recommending patients replace the defibrillator. Instead, they advised patients to watch for a vibratory alert, which warns when the battery is close to depletion. If patients cannot feel that alert, they’re advised to make use of a home monitoring unit that reads battery level and transmits the data to their physician.
Of course, that home monitoring unit may be vulnerable to hacking attacks—at least if Muddy Waters Research is to be believed. Still, the FDA recommends making use of it: “The benefits of continued patient monitoring and the life-saving therapy these devices provide greatly outweighs any potential cybersecurity vulnerabilities,” the agency said.
St. Jude Medical does not expect the news to majorly affect the company’s financials. Still, it’s more bad press at an even worse time: the medical device manufacturer is in the process of being acquired by Abbott.
That deal was originally valued at $25 billion. But with all this negative attention, investors have questions about whether those numbers will change. Between October 10 and 12, St. Jude Medical’s stock fell by close to three percent. Abbott saw a similar loss—4.54 percent.
Nevertheless, the acquisition seems to be going forward, with an Abbott representative saying they expect to close the deal by the end of 2016.
Will it still be worth $25 billion then?

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Securities Disclosure: I, Chelsea Pratt, hold no direct investment interest in any company mentioned in this article.