Defibrillator Maker Props Up Stress Test Company

St. Jude Medical is stepping in to prop up a start-up company that it hopes can help revive the stagnating $6 billion market for implantable heart defibrillators.

The start-up, Cambridge Heart, based in Bedford, Mass., said yesterday that St. Jude Medical would take over efforts to sell its product: stress test equipment that doctors use to assess patients as candidates for defibrillators.

St. Jude will also pay Cambridge Heart $12.5 million in convertible stock, a financial infusion that eliminates the possibility that Cambridge Heart could run out of cash in the next year.

Heart defibrillators sold by St. Jude and others are implanted electronic devices that can restore normal cardiac rhythms if the heart starts beating erratically. The devices can cost up to $50,000 including implantation surgery, and insurers have begun balking at paying for them because three-quarters of patients end up never needing a defibrillator shock to save their lives.

Medicare has urged the use of Cambridge Heart’s test, which costs $300 to $400, as a way to screen patients to determine who is unlikely to need a defibrillator. Cambridge Heart’s system measures what are known as T-Wave alternans, which are tiny variations in a single electrical wave in the heart.

Normal T-wave signals are seen as a reliable predictor that a heart-failure patient is not at risk of having a heart attack in the next year. At the same time, abnormal or unclear T-wave results have been associated, although not quite as strongly, with heightened risks of having a heart attack.

Cambridge’s system is far less invasive than previous devices that measured T-waves.

But as St. Jude’s investment reflects, the test might also encourage more doctors to recommend the implants, which could revive sales.

Besides the questions raised by insurers, the defibrillator has been clouded in the past year by widespread publicity about failures of the implants involving a small number of patient deaths.

An advertising campaign by Medtronic, the market leader, has had little apparent effect in allaying the concerns. Medtronic invested $6.5 million in Cambridge Heart in 2003. Medtronic, St. Jude and the other maker of defibrillators, Boston Scientific, have paid for clinical trials of Cambridge Heart’s test equipment.

In announcing the deal yesterday, Cambridge Heart raised its projected revenues for this year by $2 million, increasing it to a range of $14 million to $16 million. But the company projected that losses would widen because of spending to support St. Jude’s sales force.

Cambridge’s shares fell 4 cents, to $2.71. The announcement was made after the market’s close.