Cybersecurity KOL Refutes Claims Against St. Jude (STJ) - Piper Jaffray

September 8, 2016 7:58 AM EDT
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Piper Jaffray analyst Brooks West notes that during yesterday's KOL call, cybersecurity expert Mark Lanterman refuted security claims by MedSec and Muddy Waters against St. Jude Medical's (NYSE: STJ) pacemakers, defibrillators and Merlin monitoring system.

West noted that Lanterman began the discussion with the statement that the notion of hacking implantable medical devices was not new (referencing security around then Vice President Cheney’s pacemaker) and that through his work with several large device manufacturers he had firsthand experience with security protocols for these device.

He also said a 'crash attack' could not be replicated. " First, Lanterman refuted the notion that a hack could be carried out from 50 ft (or that a mass attack could be carried out with an enhanced antenna). Lanterman acquired a Merlin@home device and recreated the exact radiowave emitted by the STJ devices. Lanterman estimated a potential attacker would need to be within 5.5 ft of a patient (vs. MedSec’s claim of 50 ft.), and stated that if an attacker was that close to a patient other avenues of attack would be of more concern than interfering with a pacemaker. Lanterman stated that his test was more accurate than MedSec’s as he measured the exact radio frequency passing through a body where MedSec measured through the air.:

Lanterman said a 'battery drain attack' is also unlikely. Lanterman agreed with STJ’s assessment that a battery drain would take hundreds of hours of sustained pings – again within close proximity to the patient, the analyst noted. This type of “attack” would also most certainly be noticed by the patient.

The KOL also stated that if the problems suggested did exist, they could be easily corrected by a security patch and that this fix would not require the two years (and product recall) suggested by MedSec but rather could be downloaded in a similar manner to a software update to an iPhone,"

Overall, Lanterman stated that there is “not much meat on the bone” to the MedSec claims and the quality of the analysis. Paired with comments from Abbott at a competitor conference earlier in the day that the STJ acquisition was progressing toward a close before year-end, they see little reason to believe the transaction will not close in the planned timeframe.

The firm maintained a Neutral rating and $82 PT on St. Jude Medical.

For an analyst ratings summary and ratings history on St. Jude Medical click here. For more ratings news on St. Jude Medical click here.

Shares of St. Jude Medical closed at $79.18 yesterday.

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