Stent War Claims Casualties

Investors punish Guidant and Medtronic as they try to cash in on the hot new medical device.
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Updated from 4:39 p.m. EDT

Shares of two medical-device makers dropped Wednesday on news about experimental drug-coated heart stents, even though both issued test results that showed the products were safe and effective.

Hardest hit was

Guidant

(GDT)

, whose shares sank in the afternoon after the company said it has identified "issues" with its Champion stainless steel stent. The Indianapolis company said it would discuss its stent status with investors and analysts Thursday.

Guidant has said that it is "refining its manufacturing processes" and continues to investigate the unnamed issues regarding the manufacturing of the Champion stent.

If the problems require only a manufacturing process change, the company said it still could submit an application in June to European health regulators. But if the company must change the design of the stent, the filing could be delayed by up to six months, Guidant said.

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. Drug-coated stents are more successful than bare metal stents at reducing the rate of reclogging and have become a major growth opportunity for a handful of medical device makers who sell or hope to sell them.

The company's shares fell $6.78, or 11.2%, to $53.71.

The other device maker trying to develop a drug-coated stent is

Medtronic

(MDT) - Get Report

. Its stock skidded 72 cents, or 1.5%, to $46.40 as it apparently continues to have trouble persuading investors about the prospects of its experimental stent. Medtronic said Wednesday that early results of a study on its Endeavor drug-coated stent show the device is safe when compared with a traditional uncoated stent. But like the results of a different, but related, study released Tuesday, the data didn't impress investors.

Both firms are chasing two other companies in the rapidly growing market for drug-coated stents:

Johnson & Johnson

(JNJ) - Get Report

and

Boston Scientific

(BSX) - Get Report

.

J&J's drug-coated stent, Cypher, has been available in the U.S. for 15 months; Boston Scientific's Taxus has been on the U.S. market since early March. Both companies sell the drug-coated stents overseas.

Boston Scientific's stock gained $4.46, or 11%, to $44.82, apparently capitalizing on investors' unhappiness with Guidant and Medtronic. J&J's stock gained 12 cents, or 0.2%, to $55.48.

Medtronic announced the results at a medical conference in Paris, adding that the safety data from this test called Endeavor II will be used in its application to seek European regulators' approval for the device.

Medtronic expects to seek approval in Europe later this year and in the U.S. in late 2005 for the device, which is used to keep blood flowing through coronary arteries after the vessels have been cleared of fatty deposits. Drug-coated stents are more effective in preventing the reclogging of arteries than are the traditional uncoated, or bare metal, stents.

Medtronic's announcement Wednesday focused on comparing, among other things, an indicator of safety called major adverse cardiac event (MACE). That includes patients who had heart attacks, experienced the need for repeat procedures, and ones who died. The test matched patients receiving the drug-coated stent with those getting an uncoated Medtronic stent. The test is "blinded," so neither patients nor investigators know the identity of the stents given to patients.

But the results of both groups were favorable enough to convince Medtronic that its drug-coated stent is safe. Both groups' MACE rates "are fully in the expected levels for this type of study," said Dr. Richard Kuntz, co-principal investigator for the study. Kuntz is chief of the division of clinical biometrics at Brigham and Women's Hospital in Boston.

In one group, the MACE rate was 2.9% for 596 patients. In the other group, the MACE rate was 3.5% for 595 patients. Other safety indicators also showed almost identical low scores for the two groups. The patients were tested in more than 70 hospitals in Europe, the Middle East and Asia.

"As the pivotal trial in our Endeavor clinical program, we are pleased to see the early results have confirmed the safety of the device at the customary 30-day analysis point," said Scott Ward, president of Medtronic's vascular products division.

The Endeavor II results follow by one day the release of another study -- called Endeavor I -- at the Paris conference. Although Medtronic executives said they were pleased with the results, some Wall Street analysts worried about one indicator called "late loss," which measures the degree to which an artery, kept open by a stent, becomes narrower over time.

Tuesday's announcement showed that the late loss after 12 months was 0.58 millimeters compared to the 0.33-millimeter late loss during a four-month period. The 12-month and four-month results cover the same patients.

Medtronic spent much of Wednesday's conference with analysts defending the Endeavor I test and saying that the late-loss numbers shouldn't affect its application to regulators.

"There is no evidence to support that this late loss correlates to a higher failure rate," Ward said. "These are excellent clinical results. ... We are very pleased with the overall performance."

Kuntz noted that late-loss rates can be affected by the size of arteries treated, adding that larger vessels could have a greater late loss because they have experienced a greater gain when they have been cleared of plaque and when the stents have been inserted.

He warned analysts against comparing late-loss results between different clinical trials and between different sizes of treated arteries.

"I have no reason to spin this data," said Kuntz, noting that he had no financial incentive in the study's outcome. Kuntz added that he was "pretty positive in the

overall results of this study." He said the key factors in the Endeavor I trial were the absence of changes in safety indicators, such as MACE scores, between four months and 12 months.

Guidant on Wednesday released results of two tests that the company said supports its belief that its experimental drug-coated stents are safe and effective. "These results are encouraging and continue to reinforce our confidence" in drug-coated stents, said Dana G. Mead Jr., president of the company's vascular products division.

In one test, Guidant said the MACE scores of a drug-coated stent remained the same -- at 4.8% -- at six months and at 12 months. The test covered 21 patients. In another test, the company compared 30-day MACE results between a different drug-coated stent system and a Guidant bare-metal stent system. The test was blinded, disguising the identity of drug-coated vs. bare-metal stents.

One group had a zero MACE score among 32 patients; the other had a 7.1% MACE score among 28 patients. Both results, Mead said, "are consistent with" 30-day MACE scores in other tests of drug-coated stents.