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Muddy Waters' Carson Block says St. Jude Medical shares could fall to $55

Shares of St. Jude Medical could drop sharply if the takeover of the company by Abbott Laboratories falls apart, Carson Block of Muddy Waters Capital told CNBC on Friday.

St. Jude agreed in April to be purchased by Abbott Laboratories.

"If the deal were to break, I think that we could be $55 or lower," Block said in an interview with "Closing Bell."

Muddy Waters published a report announcing its short position in St. Jude on Thursday after receiving a report by cybersecurity firm MedSec that claimed St. Jude's cardiac devices are vulnerable to cyberattacks.

MedSec CEO Justine Bone told "Closing Bell" on Friday that she made the unconventional decision to go to Muddy Waters instead of St. Jude with the findings because St. Jude had a history of not responding to security concerns.

"We have not seen St. Jude raise the bar, unlike some of their competitors who have put some basic protections in place," she alleged.

Block also defended his decision to not approach St. Jude with the findings and instead potentially profit by shorting the stock.

"This isn't an oversight or small little hole that you have to look very hard to find. These are gaping holes," he said. "This is a company that will ultimately be held to be grossly negligent."

On Friday, St. Jude disputed the allegations made by Muddy Waters Capital and MedSec.

"We have examined the allegations made by Muddy Waters Capital and MedSec ... and we conclude that the report is false and misleading," it said in a detailed statement.

It called the test methodology used by MedSec "flawed" and said its software has been evaluated by several independent organizations.

"St. Jude Medical will remain ever vigilant and dedicated to patient safety," the statement said.

Shares of St. Jude were temporarily halted Friday afternoon before resuming trading and closing up 19 cents at $78.01.

— CNBC's Christine Wang contributed to this report.