Bernard, You May Be On To Something! Have You Seen This?
Dow Jones Newswires -- June 20, 1997
U.S. Coronary-Stent Mkt On Verge Of Real Competition
By Louis Hau
NEW YORK (Dow Jones)--The U.S. coronary-stent market is finally
about to see some real competition.
World-wide sales of the tiny coil-like devices, which are deployed
after an angioplasty to prop open once-clogged blood vessels, zoomed
to $1.1 billion last year from $230 million in 1994, according to
Montgomery Securities Inc.
Johnson & Johnson (JNJ), maker of the pioneering Palmaz-Schatz
stent, continues to dominate U.S. stent sales, with more than 90% of
the market. Privately held Cook Group Inc. of Bloomington, Ind.,
accounts for the remainder.
But amid the rapid advances in interventional cardiology, the Palmaz
is already beginning to show its age and now other medical-device
companies are trolling for a piece of the action.
During the next 12 months, Guidant Corp. (GDT), Boston Scientific
Corp. (BSX) and Arterial Vascular Engineering Inc. (AVEI) are all
expected to get Food and Drug Administration approval of their own
stents.
Cardiologists eagerly await the new entrants, which will offer doctors more choices and likely force companies to cut prices, according to John Hirschfeld, director of the Cardiac Catheterization Laboratory at the University of Pennsylvania School of Medicine in Philadelphia.
''The minute they hit the market, it'll be open season (on the Palmaz),'' he said.
A balloon angioplasty clears a coronary blockage by pushing the
obstructing plaque against the blocked artery's walls. But the
procedure is fraught with problems related to the blood vessel's
reaction to the physical trauma the balloon's deployment causes.
The enormous commercial success of stents stems from their ability to reduce the incidence of these problems. They include elastic recoil, in which the blood vessel snaps back to its pre-angioplasty dimension; acute occlusion, which refers to the injury and subsequent collapse of the arterial wall; suboptimal angioplasty, when a procedure fails to restore satisfactory blood flow; and restenosis, or the gradual renarrowing of the vessel, through the formation of scar tissue or through the contraction, or ''remodeling,'' of the entire artery.
Stents decrease the incidence of recoil, acute occlusion, suboptimal
angioplasty and remodeling, but appear in some cases to contribute to the buildup of scar tissue, said Jeffrey Brinker, director of
interventional cardiology at Johns Hopkins Hospital in Baltimore.
Cardiologists quickly embraced stents as an effective, if imperfect,
remedy for these problems. Stents are now used in 50% to 60% of all
angioplasty procedures in the U.S., Brinker said.
This warm reception from the medical community has paid off
handsomely for Johnson & Johnson, which saw its world-wide stent
sales leap to $760 million in 1996 from $149 million in 1994, the year of the Palmaz's U.S. launch, according to Montgomery Securities.
New competitors are expected to take a big bite out of Johnson &
Johnson's U.S. market share. These next-generation devices -
including Guidant's ACS Multi-Link, Boston Scientific's Nir and
Arterial Vascular's Micro Stent II and GFX - are far more flexible
than the Palmaz, making them easier to maneuver through the hairpin
turns in the body's vasculature. At the same time, doctors say, they
maintain sufficient radial strength to keep a blood vessel open.
The FDA approval of Medtronic Inc.'s (MDT) Wiktor stent is
expected soon, but the Wiktor will be restricted initially to the
treatment of abrupt closures.
The Palmaz stent is an excellent performer ''if you can get it into
place,'' said Penn cardiologist Hirschfeld, who has participated in
clinical trials for the Johnson & Johnson device.
''There's no question that these incoming devices are superior (to the Palmaz) and once there's competition, prices will come down,'' he
said.
Spencer King, director of interventional cardiology at the Emory
University School of Medicine in Atlanta, agreed that increased
maneuverability will be a major selling point for the new-generation
stents.
''The jump between the J&J and new stents will be so dramatic that it will allow doctors to do an easier job,'' he said.
Johnson & Johnson has launched a more flexible stent of its own, the
Palmaz-Schatz Crown. But that device, which was rolled out internationally late last year, doesn't match the flexibility of its
competitors, King and Hirschfeld said.
Because of their technological advances, next-generation stents have
sold well in Europe, contributing to a sharp drop in Johnson &
Johnson's market share, to about 20% from about 50% in late 1995.
Some observers expect a similar decline in the U.S.
No way, counters Robert Croce, world-wide chairman of Johnson &
Johnson's interventional cardiology operations. He said that factors
which contributed to sliding sales in Europe don't exist in the U.S.
They included laxer regulation, which allowed numerous ''garage-type
places'' to make and sell stents on the cheap, and the deficit-cutting efforts of individual governments in preparation for European monetary union, which have taken a heavy toll on health-care
spending, leaving reimbursing authorities willing to pay only for
cheaper stents or none at all, he said.
Although analysts believe that Johnson & Johnson will inevitably
face dramatic share erosion in the U.S., they point out a few factors in the company's favor. First, the U.S. stent debuts of rival companies will be staggered over several months, sparing Johnson & Johnson the sudden deluge of competition that it faced in Europe.
More important, the company holds a broad patent on balloon-expandable stents. Most stents are wrapped around an
angioplasty balloon, which is then inflated to push the stent into
place.
Croce said that ''there's no use in having a patent if you're not going to defend it,'' but he added that the company may be willing to consider cross-licensing agreements.
''If it's to our advantage, we'll explore it,'' he said.
Johnson & Johnson reached a licensing pact in January with
stent-maker Cook Group in exchange for royalty payments.
Montgomery Securities analyst Kurt Kruger estimates that Cook is
paying a royalty rate of about 15% to 20%. Similar arrangements with
other competitors could help mitigate the loss of stent sales for
Johnson & Johnson, he said.
''J&J could lose share till the cows come home, but if they're making 20% in royalties'' it could soften the blow, he said.
Despite the rapidly expanding use of coronary stents during the last
three years, Kruger expects sales growth to cool sharply in the near
future. Although he projects world-wide revenue will increase by
more than 30% in 1997 to $1.5 billion, he expects sales to level off at $1.5 billion to $1.6 billion during the next few years.
Kruger attributes the coming slowdown to recent advances in
minimally invasive heart-bypass procedures and competitive pricing
pressure, which could eventually drop the price of a stent to around
$1,100. The Palmaz sells in the U.S. for about $1,500, a price that has remained virtually unchanged since its domestic launch in August
1994.
Boston Scientific Chief Financial Officer Larry Best disagreed.
Through a combination of aggressive marketing and expansion into
new emerging markets, such as Latin America and China, world-wide
coronary stent sales could hit $2 billion by 2000, he said.
''In the short term, stents are a phenomenal business to go with,'' he said.
Johnson & Johnson's Croce stressed that his company intends to
remain a strong contender in the stent market. The company is
developing new applications for stents involving radiation and
codeine that show early promise in combating restenosis, he said.
Johnson & Johnson has already rolled out a third stent in Europe
called the Cross-Flex, which Croce said is more flexible than the
Crown. In the coming months, the company will introduce a variety
of different lengths and sizes to its expanding stent family.
Croce conceded that ''there is no question we should have come out
with these versions earlier.'' But he bristled at the criticism of some industry observers who believe that Johnson & Johnson has
squandered its initial technological lead. Analysts said that this
comedown has been particularly disappointing in light of the
company's February 1996 acquisition of cardiovascular-device maker
Cordis Corp.
Croce defended his company's performance, contending that Johnson
& Johnson's share of the worldwide interventional cardiology market
- which includes angioplasty balloons and catheters as well as stents - grew in 1996 to 40% from 34% a year earlier.
''I'm having a hard time understanding why people think we're not
doing well,'' he said. ''Even with all the hits we took in Europe, we grew 6 percentage points.''
Beverly Huss, vice president of Guidant's vascular intervention
division, said she doesn't expect Johnson & Johnson to stand by and
watch its U.S. stent sales shrink as sharply as they did in Europe.
''I think J&J is going to come back with a vengeance,'' she said. ''I don't think they'll take it lightly this time.'' |
