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Updated from 3:24 p.m. EDT

Shares of

Boston Scientific

(BSX) - Get Boston Scientific Corporation Report

jumped 7.5% Monday after the company reported strong test results for a device that keeps arteries open after patients have undergone a procedure that unclogs arteries to reduce the risk of heart attacks.

The long-awaited announcement showed that patients had significantly lower rates of reclogged arteries -- 7.9% -- when they were treated with Boston Scientific's drug-coated Taxus stent. Stents are wire mesh tubes inserted into arteries after the artery-clearing process known as angioplasty. The stents are designed to reduce rates of restenosis -- or reclogging -- of the arteries.

The reclogging rate of the drug-coated stent was significantly better than the 26.6% rate for patients treated with Boston Scientific's traditional bare metal stents.

The announcement of the test results at a Washington, D.C., medical conference also laid the groundwork for Boston Scientific's efforts to challenge

Johnson & Johnson

(JNJ) - Get Johnson & Johnson Report

, which has the only drug-coated stent on the U.S. market. J&J's Cypher stent was approved by the Food and Drug Administration on April 24.

The key clinical trials for J&J's Cypher that led to FDA approval was a study of 1,058 U.S. patients that showed an 8.9% restenosis rate for patients receiving the drug-coated stent vs. a 36.3% rate for those receiving a bare metal stent.

It's important to note that the Boston Scientific study, called Taxus IV, and the J&J research, called Sirius, are not head-to-head tests.

The value of the different drug-coated stents were measured against different "control" groups -- the Boston Scientific drug-coated stent was tested against a Boston Scientific bare metal stent, and the J&J drug-coated stent was tested against a J&J bare metal stent.

Still, that's not going to make much difference to Wall Street analysts who had been speculating about the Taxus research for months, with many suggesting that even if Boston Scientific's Taxus restenosis came in slightly higher than Cypher's reclogging rate, the results would bode well for Boston Scientific's stock.

Boston Scientific said Tuesday that an FDA advisory panel will meet Nov. 20 to review the company's application to market the Taxus drug-coated stent. The company submitted its application in June.

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The Taxus results are "outstanding," said Bruce N. Jacobs, a medical devices analyst for Deutsche Bank Securities, in a research note to clients on Monday. "Perhaps most importantly, the data should result in an extremely competitive stent offering vs. J&J's Cypher, to say the least," said Jacobs, who maintained a buy rating on Boston Scientific. He doesn't own shares; his firm expects to receive or seek payment for investment banking services in the next three months from the company.

Going into Monday's trading session, 21 analysts rated Boston Scientific as a buy and six had hold ratings, according to Thomson First Call. Wells Fargo Securities raised its rating on the company to buy from hold on Monday afternoon.

Boston Scientific's stock, which was halted until the company released its Taxus test results, closed at $66.02, up 7.5%, or $4.62. The stock moved as high as $67.50.

The stock of the Canadian company

Angiotech Pharmaceuticals

(ANPI)

also was halted before formal trading began. Angiotech licenses its drug coating technology to Boston Scientific.

But once trading resumed, Angiotech was all over the place -- as low as $34.20 and as high as $51.65. It closed at $49.70, up 13.3%, or $5.85.

On the negative side, shares of J&J skidded to $50.84, down 1.5%, or 79 cents. The stock fell as low as $50.15. But a bigger hit was absorbed by

SurModics

(SRDX) - Get Surmodics Inc Report

. The Eden Prairie-based company provides the drug-coating technology for the Cypher stent. SurModics shares sank to $30.20, down 10.1% or $3.39, after falling as low as $29.70.

Prior to the publication of the Taxus test results, many analysts said physicians and hospitals would welcome the competition and the lower prices that would invariably accompany a new entrant.

J&J didn't wait. It began discounting its Cypher stents to some customers a few weeks ago. After Cypher was launched, J&J's manufacturing and distribution could not keep up with demand. Some analysts suggested this Cypher price cut, which they say is targeted primarily at high-volume customers, was designed to mollify customers as well as blunt the anticipated introduction of Boston Scientific's drug-coated stent. J&J's Cypher had a list price of $3,195. Analysts said the average selling price would be in the $2,600 to $2,800 range.

Analysts believe the Taxus stent could reach the U.S. market during the first quarter of 2004. Boston Scientific hasn't commented on the price. Both Taxus and Cypher are available in many international markets.

The results of Boston Scientific's tests were released in Washington, D.C., at the annual Transcatheter Cardiovascular Therapeutics symposium. "These are extraordinary results, and they offer convincing evidence that (the Taxus drug-coated stent) is a safe and effective treatment for coronary artery disease," said Jim Tobin, president and chief executive of Boston Scientific.

"The extremely low restenosis rates at nine months ? represent a new benchmark" for treating patients with clogged arteries, said Dr. Gregg W. Stone, the principal investigator of the study that covered 1,326 patients at 73 U.S. sites. Stone is vice chairman of the Cardiovascular Research Foundation at the Lenox Hill Heart and Vascular Institute in New York.

Boston Scientific also pointed out that patients receiving the drug-coated stent had a lower rate of repeat procedures -- 3% -- compared with patients receiving the bare metal stents -- 11.3%.

J&J's U.S. tests showed a retreatment rate of 4.2% in patients receiving Cypher vs. a 11.3% retreatment rate in patients receiving a J&J bare metal stent.

There also was plenty of activity before the main event. In the early morning, Boston Scientific said it expects sales and earnings to exceed previous third-quarter estimates due to strong sales of the Taxus drug-coated stent in Europe as well as sales of the traditional Express2 stent system in the U.S.

Boston Scientific now predicts third-quarter sales will be between $855 million and $865 million and that earnings per share will be 28 cents to 30 cents excluding special charges and credits. That compares with the company's July 3 guidance for sales of $810 million to $840 million and earnings per share of 24 cents to 28 cents excluding special charges.

Johnson & Johnson didn't wait quietly for Boston Scientific's results. Last week, J&J released an updated look at previous clinical trials involving Cypher that had been conducted in Europe and Canada. These results showed a combined restenosis rate of 5.1% for the patients tested in separate clinical trials, based on a nine-month follow-up of these patients. The restenosis rate was better than the 8.9% rate in the SIRIUS trials were crucial in securing approval by the FDA.

Late Monday morning, J&J said it was making a multimedia presentation offering praise for Cypher "from the world's leading heart doctors and their patients." Less than a hour later, J&J issued an announcement pointing out that the combined European and Canadian tests had demonstrated restenosis rates for difficult-to-treat patients that were better than for similar patients in the U.S. tests.

For diabetics, the rate was 10.8% vs. the U.S. patients' rate of 17.6%. For procedures involving small blood vessels, the European/Canadian test results produced a 7.7% restenosis rate vs. the U.S. patients' 18.4% rate.

Several analysts commented last week after J&J's first follow-up report on the Canadian/European follow-up study that the improvements seemed based in part on doctors' doing a better of job of managing the procedure.

And Boston Scientific's research on Monday showed that diabetics had a 6.4% restenosis rate. Diabetics accounted for about one-fourth of the TAXUS IV study, and Boston Scientific added that diabetics are "more likely" than the general population to experience reclogged arteries after undergoing angioplasty.