Stent Race Tightens Up
A day's worth of coronary stent presentations Sunday at a major cardiology has produced mixed news for shareholders of
Boston Scientific
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and
Johnson & Johnson
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, the two players in the growing drug-coated stent market.
But the best news may have been delivered for
Medtronic
(MDT) - Get Report
shareholders, as company-sponsored research got a favorable early nod from analysts, who say Medtronic's chances of being the third entrant into the market have been enhanced.
"A mixed picture emerged from 'Super Stent Sunday,'" said Rick Wise, a medical devices analyst for Bear Stearns in a Monday morning quarterback report to clients that also mixed metaphors. "I don't think any company hit a home run."
United by the drug-coated stents, each company has a different plot line.
For J&J, it is trying to regain market share for its Cypher stent, which reached the U.S. market in April 2003, but has since been overcome by Taxus from Boston Scientific. Taxus entered the U.S. in March 2004 and now has about two-thirds of the U.S. drug-coated stent market.
For Boston Scientific, any news comparing Cypher vs. Taxus is magnified by the fact that coronary stents -- mostly the Taxus device -- accounted for 42% of Boston Scientific's total revenue last year, whereas Cypher accounted for less than 5% of J&J's corporate sales, according to Bear Stearns.
As for Medtronic, which has a diverse portfolio of medical devices, its Endeavor stent represents a way to expand that diversity as the company tries to get to the market before several other competitors.
In the Taxus vs. Cypher struggle, "we don't expect these data to radically shift ... market shares, at least in the near term," said Wise, who has outperform ratings on Boston Scientific and Medtronic and a peer perform rating on J&J. (He doesn't own shares in any of the companies; his firm has had a non-investment banking relationship with Medtronic and J&J in the last 12 months).
"The playing field undoubtedly got leveled somewhat mostly in favor of Cypher," he added, even though a big J&J-sponsored comparison test of Cypher vs. Taxus showed no clinical superiority for either stent.
In early trading Monday, Boston Scientific's stock was up 40 cents, or 1.3%, $31.79 after having been down in premarket trading. J&J's shares were up 58 cents, or 0.9%, to $68.32. Medtronic's stock gained $1.74, or 3.3%, to $55.21.
Cypher Vs. Taxus
The much ballyhooed test released Sunday at the American College of Cardiology conference in Orlando, Fla., essentially yielded a draw as it compared Cypher vs. Taxus among 1,386 patients. The test, whose acronym is Reality, was sponsored by J&J.
Although the test didn't meet J&J's goal of trying to show Cypher's clinical superiority to Taxus, J&J could take away some positive news.
Wise said the test showed "no difference" between the two stents in deliverability. Questions about the ease of inserting the stents have dogged J&J almost from the day Cypher reached the market, and deliverability "has historically been one of the key market-share drivers," Wise said.
"Until last weekend, Taxus had the lead on this aspect -- at least perceptually," he said. "Our sense is that deliverability will play a secondary role in swaying market share."
Another finding in the Reality test, which J&J emphasized in its press release, was that there was a higher rate of stent-linked blood clots in Taxus (1.8%) vs. Cypher (0.4%). This problem is rare, and Wise noted that "consensus seems to be that the clinical benefits" of the drug-coated stents outweigh the concerns about blood clots. He added that the death rate among drug-coated stent patients "in general remains below that of bare metal stents."
Drug-coated stents are meshlike metal tubes inserted into arteries after vessel-clogging plaque has been removed. The stents improve blood flow and reduce the risk of heart attack. Drug-coated stents, also known as drug-eluting stents, release chemicals into the arteries periodically to reduce the risk of arteries reclogging. Uncoated stents reduce the reclogging risk too, but the drug-coated devices are more effective.
The mixed results from the Reality test is "hardly an affirmation of Taxus supremacy," said Juan V. Noble, of Oppenheimer, in a Monday research report. "Some of the study's conclusions, if widely accepted, could weaken support for Taxus market leadership." He has a neutral rating on Boston Scientific and no rating on J&J.
"Reality conceded nothing on Cypher's deliverability, suggesting that Taxus and Cypher were ... equally deliverable," he said. The difference in blood-clot rates could raise questions about the differing drugs that the companies use in their coated stents. (He doesn't own shares of the companies; his firm doesn't have an investment banking relationship.)
J&J received some favorable news from a Swiss study nicknamed Sirtax, also announced at the cardiology conference. It indicated Cypher performed better than Taxus in several clinical measurements. The study looked at just over 1,000 patients.
"The results of Sirtax may have raised more questions than it gave definitive answers," said Wise, of Bear Stearns.
"Sirtax builds a case for Cypher, but study limitations undermine trial conclusions," said the headline of a report by Lawrence Keusch of Goldman Sachs. He said the study's design and the fact that it was conducted in only two medical centers in Switzerland reduce the impact of Sirtax's findings.
Keusch doubted this study would affect physicians' choices. "We do not put much stock in the Sirtax results," said Keusch. He predicts Taxus' market share will erode slowly over the next few quarters, adding that Taxus will still hold 60% of the U.S. market by year-end.
Good News for Medtronic
Keusch was more emphatic about Medtronic and the results of its Endeavor stent trial, which he called "exciting." The company-sponsored comparison between its drug-coated stent and its bare metal stent indicated that Medtronic "is well on its way for full commercial development." The test tracked nearly 1,200 patients.
There are two more Endeavor tests to complete before Medtronic will seek approval from the Food and Drug Administration, Keusch said. A best-case scenario would be entrance into the U.S. market in early 2007.
Keusch has outperform ratings on Medtronic and Boston Scientific but no rating on J&J. (He doesn't own shares in any of the companies; Goldman Sachs has investment banking relationships with each company and the firm is aiding J&J in its acquisition of
Guidant.
(GDT)
)
The latest research makes Medtronic "a viable potential competitor," in the drug-coated stent market, added Juan Noble, of Oppenheimer. Noble, who has a buy rating, said he believes Medtronic could secure FDA approval in mid-2006. The latest results put Medtronic "on much more solid footing," he said. (He doesn't own shares; his firm doesn't have an investment banking relationship.)
A top Medtronic executive on Sunday said the company plans to seek approval for Endeavor in some foreign markets this spring. Results for the next Endeavor test will be presented in October; Medtronic will commence its fourth Endeavor trial in the next few weeks.