The U.S. Food and Drug Administration issued a warning letter to Abbott Laboratories, citing manufacturing flaws with a range of cardiovascular devices acquired with its purchase of St. Jude Medical in January for $25 billion.
The letter, dated April 12 and made public on Thursday, sent Abbott's shares down 2 percent to $42.61.
The FDA, which said the company failed to disclose at least one death associated with one of the devices, said an inspection of the company's facility in Sylmar, California, raised questions about the safety of several implantable defibrillators and its Merlin@home monitor, which allows doctors to care remotely for patients with cardiac devices.
The FDA investigation showed that lithium batteries in the devices were draining prematurely and that the company had "underestimated the occurrence of the hazardous situation."
Abbott said in a statement it has a "strong history and commitment to product safety and quality." It said the FDA's inspection took place in February and that Abbott responded on March 13 describing corrective actions it was taking.
"We take these matters seriously, continue to make progress on our corrective actions, will closely review FDA's warning letter, and are committed to fully addressing FDA's concerns," the company said.
The FDA said Abbott had provided implementation dates for several corrective actions but failed to provide evidence that the actions had actually been implemented.
Analysts said the FDA may now delay approval of new devices that can be used inside an MRI machine that the company had expected to see approved by the end of the year.
That could help rivals Medtronic Plc, which has such devices on the market and Boston Scientific Corp which expects to launch similar devices in the fourth quarter.
"These two companies stand to benefit in the event Abbott's approvals are delayed," Glenn Novarro, an analyst at RBC Capital Markets, said in a research note.
The affected devices, known as implantable cardioverter defibrillators (ICDs) and Cardiac Resynchronization Therapy Defibrillators (CRT-Ds) help pace slow heart rhythms and slow dangerously fast rhythms.
In October St. Jude said it would recall certain models due to reports of battery failure caused by deposits of lithium forming within the battery and causing a short circuit.
In its letter, the FDA said the company repeatedly concluded that the cause of premature depletion "could not be determined" even though the company's supplier had provided evidence that it was due to lithium deposits, known as lithium cluster bridging.
(Reporting by Toni Clarke in Washington; Editing by Bernard Orr and James Dalgleish)