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Medtronic Down on Stent Test Data

Analysts focus on disappointing results in one key area of the test results.

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slipped Tuesday, even though the company said that just-published test results for its drug-coated arterial stent reaffirm its belief that the product can be approved by European regulators in late 2004 and by U.S. regulators in late 2005.

In early afternoon trading, shares of the Minneapolis-based medical device company lost 94 cents, or 2%, to $46.41. The stock declined after the release in Paris of a 12-month follow-up test of Medtronic's Endeavor stent.

Although Medtronic said most results were favorable, some Wall Street analysts seized upon one indicator whose performance was worse than earlier results. This is called "late loss" -- the degree to which an artery, propped open by a stent, becomes narrower over time. The 12-month result showed a late loss of 0.58 millimeters compared with the 0.33-millimeter late loss during a four-month period. (The 12-month and four-month results cover the same group of patients.)

"We expect the stock to decrease, considering the late loss is surprisingly higher than the other trials," said Adam K. Galeon, of Credit Suisse First Boston, in a Tuesday report to clients. "Despite the overall positive results, the higher-than-expected late loss raises concerns over both the efficacy and competitiveness of the stent." (He doesn't own shares, but his firm says it expects to receive or seek investment-banking-related compensation in the next three months.)

Stents are wire-mesh tubes that are inserted into arteries following angioplasty, a procedure that disperses artery-clogging plaque. Stents keep the arteries from reclogging. Drug-coated stents, which periodically release medication, do a better job of preventing reclogging than do uncoated stents, also known as bare metal stents.

Medtronic is trying to become the third maker of drug-coated stents, following

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. Both have products in European and U.S. markets. J&J's Cypher has been in the U.S. market since April 2003. Boston Scientific's Taxus has been sold in the U.S. since early March.

There haven't been any comparative tests between drug-coated stents, but Medtronic is conducting one -- called Endeavor III -- against Cypher, with the key determining factor -- the endpoint -- being late loss after eight months.

"Cypher's late loss seems to be a dependable 0.17 millimeters to 0.18 millimeters, raising a question in our minds about whether Endeavor III is sufficiently powered to meet its endpoint," Galeon wrote. But he added that other Endeavor test results suggests Medtronic "may have a compelling case" that late loss doesn't correlate with a greater rate of reclogging.

Galeon, who has an overweight rating on the stock, added that "the jury will remain undecided" until another Endeavor test's results are publicized later this year.

Dr. Ian Meredith, the physician who presented the results of the Endeavor test, said Tuesday that the results demonstrate "the sustained long-term benefit of the Endeavor stent."

Citing low rates of other important indicators, such as a low rate of cardiac problems and low reclogging rates, Meredith said the "moderate" increase in late loss results "appeared to have no meaningful effect on clinical outcomes, which was positive." Meredith is a medical professor at the Monash Medical Centre in Melbourne, Australia.

"These strong clinical outcomes indicate that the late loss is within an acceptable range," said Dr. Richard Kuntz, chief of the division of biometrics at Brigham and Women's Hospital in Boston. He is the co-principal investigator on another Endeavor clinical trial.

Bill Hawkins, Medtronic's chief operating officer, reiterated that his company expects to seek get European regulatory approval in late 2004 and U.S. approval in late 2005.