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Biotech / Medical : Guidant (GDT)
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To: D.Austin who wrote (185)9/5/2001 10:19:03 AM
From: Lighthouse  Read Replies (1) of 235
 
JNJ's data bring up some thorny issues:

JNJ will rapidly take at least 80% market share if their drug coated stent results stay where they are. This is the best case for GDT. This is a 2003 event. So the models I build for GDT will have to come down in 2003.

Assuming that GDT can get one of their two drug coated stents to match JNJ's "Zero threshold" then they have to offer something else to pry market share from JNJ. If the Cook deal puts GDT 9 months behind JNJ then we are looking at a 2004 event. (The Cook deal also has slightly lower margins than a "normal" stent from GDT) At this point market share will be below 10% and GDT will have to fight to regain their footing. In the past I had used a 5% restenosis rate for JNJ's coated stents to try and forecast market share for GDT. Now I have to go back and remodel 2004 and dial back my revenue estimates for GDT. This is where the data yesterday really hurts. A 20% market share in 2004 for GDT in a market that doubles in value will leave GDT with equal or slightly lower revenue run rates than they have today. I am unsure about using the 20% rate in 2004 because 1) No published restenosis rate for Cook/GDT devices 2) Fighting an uphill battle with JNJ. A 5% restenosis rate would have left room for improvement and an easier product to sell against.

The other divisions of GDT appear to be doing fine (excluding Contak). However, the stent division has grown so rapidly it has become the tail that wags the dog.

A+ for GDT's management, I really admire them: I am just unsure how they navigate around this one.

Cheers,
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