Jenks Healthcare Business Report October 2003

	Jenks Healthcare Business Report
October 2003 issue Getting Bent Over Stents: The Battle Goes On Drug-eluting stents work, are becoming very popular with cardiac patients, and are at the center of several lawsuits. So far, Johnson & Johnson remains at the top. See page 1 Public Equity Market Two IPOs get priced, but they are not going to get the market excited for the ones waiting to go. As a result of recent price surges, four secondary offerings are also priced. See page 2 Private Placement With the public markets still not ready for much business, 19 companies raised more than $213 million in the private placement market. See page 5 Feature Stories M&A Market: Third quarter volume rises, with 230 deals. See page 6 Venture Capital Market: A record level of deal volume. See page 10 Profile: Ambrx New company taps experience and gets its first venture capital round. See page 14 Charts Public Equity Market - 3 Private Placement Market - 4 M&A Announcements - 7 Stock Chart See page - 8-9 Venture Capital Market - 11-12 Sign up for a trial subscription and get the current issue! Read the past headlines.	Getting Bent Over Stents: The Battle Goes On While two companies already in the drug-eluting stent business are squaring off and two other companies are preparing to jump in, some studies are showing that the high degree of consumer demand for these products may not be warranted. Eight hundred thousand Americans have stents implanted during the course of balloon angioplasty each year. Before the invention of stents, about one out of every two patients who underwent such a procedure would experience restenosis—narrowing of the arteries again. Bare metal stents were introduced in 1987 and cut the occurrence of restenosis down to one in three patients—and in only one in six would it be severe enough to require a repeat procedure. This year, the first drug-eluting stents (drug-coated stents that release medication to prevent restenosis), introduced in April 2003, hit the U.S. market with all the force of a wonder drug. Johnson & Johnson’s (NYSE: JNJ) Cordis Corp.’s Cypher drug-eluting stent, the first to receive FDA approval, captured more than half of the U.S. stent market within its first four months of availability. Three other companies are poised to enter this lucrative market. But while the popularity of the drug-eluting stent concept has been very good for the bottom line of JNJ and has given a bump to its closest competitor, its impact on hospitals and insurers is considerably more negative: Each Cypher costs almost four times as much as a plain metal stent, and angioplasty patients generally receive two stents each—at a cost of over $6,000 per patient for Cyphers, opposed to $800 for plain stents. It’s a potential $4.8 billion annual blockbuster market that, in bare metal, was only a $640 million market. However, overall costs will be ameliorated if, as projected, lower rates of restenosis cut down on the need for bypass surgery. Boston Scientific Corp. (NYSE: BSX), which has a large stent business, suffered from Cypher’s competition, but its own Taxus drug-eluting stent has passed key trials, with the latest announcement of results triggering an almost 8% jump in BSX’s stock price. Strong sales of Taxus in Europe, where it is already approved, caused BSX to increase its guidance for third-quarter sales and earnings. Analysts expect Taxus to add $1 billion to BSX’s current $2.9 billion annual revenues. The final size of the market will depend on how many different circumstances the stents can be useful for. Currently the Cypher statistics are only available for patients who have short blockages that fill almost the entire artery and who have never had previous surgical intervention. In those cases, 27% fewer patients experienced restenosis with the Cypher. Studies do not yet exist for a wider range of usage—different amounts of blockage, different blood vessels, different surgical histories—that makes up the entire stent market. Cypher is coated with the antirejection drug Sirolimus (rapamycin). Its would-be competitors each use a different drug, and have minor differences of size and shape, but are similar enough that Cordis Corp. has filed patent infringement lawsuits against BSX, Medtronic (NYSE: MDT) and Guidant (NYSE: GDT). So far, in August a federal court ordered GDT to pay JNJ $425 million, and MDT is appealing a court award of $271 million in damages to JNJ. BSX, on the other hand, is countersuing Cordis. Treading more lightly, Edwards Lifesciences (NYSE: EW) is introducing new stents, but focusing on the less competitive noncoronary and peripheral stent markets. Medtronic’s drug-eluting stent, Endeavor, is moving along in its clinical trials, as is Guidant’s Champion stent, on target for a 2005 launch. Since only one in six candidates for a coronary stent will experience restenosis, cautious cardiac-catherization practitioners point out that it costs $48,000 to treat those six patients with Cyphers in order to prevent one case of restenosis. But patients don’t like those one-in-six odds, and cardiologists across the country report almost universal demand among their patients for drug-eluting stents. Preliminary projections are for drug-eluting stents to virtually control the stent—at least the coronary stent—market by the end of 2004. Medicare has already approved reimbursement for the new stents (the Medicare price is $2,400), and the elderly are lining up, not wanting to take any chances with having another procedure.
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