chief executive said Tuesday that his company will be a player in the drug-coated stent market and played down results of an early stage clinical test that gave some investors pause.
In an interview with
, CEO Art Collins said he wasn't fazed by
analysts' reactions to test data released Tuesday in Paris that left the shares down about half a percent on the day, despite the release of surprisingly strong earnings. The phase I trial found the devices to be safe and effective, the study's primary endpoint, but also showed some arteries treated had signs of narrowing.
One clinical investigator said the finding "appeared to have no meaningful effect on clinical outcomes," although several analysts put out cautionary notes Tuesday morning. For his part, Collins was sanguine.
"In our estimation, we feel very confident that the stent is very safe and efficacious," Collins said. He said the company's Endeavor strent "should be in good shape" when other test results are tabulated, including one test comparing Endeavor with Cypher, the drug-coated stent made by
Johnson & Johnson
. That would be the first head-to-head test of competing drug-coated stents.
Stents are wire-mesh tubes that are inserted into arteries to ease blood flow after the vessels have been unclogged via angioplasty, a procedure that disperses fatty deposits. The stents reduce the rate of reclogging in arteries; drug-coated stents are more successful than bare metal stents.
is the other drug-coated stent maker with its Taxus product.
also is working on a drug-coated stent.
Collins said there will be enough room in foreign and U.S. markets for all four products. "If you look at the history of the coronary stent market, you'll see there are fairly rapid changes in market share and position," he said.
Right now, Medtronic, which makes uncoated stents, also known as bare metal stents, has plenty of room to grow. Coronary stent sales accounted for only 1% of corporate revenue last year. The coronary stent market "is the most volatile within Medtronic," he said.
Each of the four stent companies has held commanding U.S. market positions at some time. For example, J&J had a virtual lock on the early stent market, including an 88% U.S. market share in 1996, according to research by Fulcrum Global Partners. Three years later, it had just 8%.
More recently, Guidant became the market leader with 45% in 2002. But that was before drug-coated stents were available. Cypher entered the U.S. market 15 months ago, and by the end of last year, J&J had 54% of the total market -- drug-coated plus bare metal stents. Taxus entered the U.S. market two months ago and has enjoyed strong sales.
Collins said he expects the U.S. drug-coated stent market to have a healthy expansion for a few more years, then level off to low-single-digit growth. "Most of the
product markets we participate in are underserved, but the angioplasty market and stent market are very penetrated," he said.
Even though drug-coated stents are rapidly pushing bare metal stents into niche-product status, "in a few years, growth in units will be offset by
cuts in price," Collins predicted. "We're very committed to the market." (Fulcrum Global Partners says total U.S. stent revenue last year was $2.1 billion, a 52% gain from 2002. This year, stent revenue could reach $3.3 billion.)
Collins said the build-up to -- and the publishing of -- the stent results has taken investors' attention away from the larger Medtronic package. "We feel we're strong at all positions except vascular," said Collins, emphasizing the strong fourth-quarter and full-year results, released Monday, that beat Wall Street estimates.
Despite the sales and earnings growth and despite huge number of buy recommendation on Wall Street, Medtronic's stock has been essentially flat over the last 12 months. "That will pass," said Collins, adding that investors have been preoccupied with the stent developments. "People will take a more balanced view of Medtronic, and the value will be realized."
And with $3.1 billion in cash and marketable securities, Collins said Medtronic is looking for additions to the company's product lines, emphasizing technological advances that could be used in more than one product and even more than one division. "We are not a conglomerate," he said. "When we try to move into new areas, we try where we can leverage our technology."