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August 08, 2020  
MEDTECH NEWS: Technology & Innovation

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  • Stents Key to Corporate Merger

    Stents Key to Corporate Merger

    January 28, 2005

    By: Hannah Clark for Medtech1

    If a merger could be made into a reality show, Johnson and Johnson’s acquisition of Guidant might be “The Dating Game.” When Johnson and Johnson announced in December that it would buy Guidant, a leading maker of medical technology, it was the latest stage of a courtship that revolved around stents, the tiny metal tubes that prop open blocked arteries.

    The flirting began last spring, when Guidant’s sales staff began marketing Johnson and Johnson’s drug-coated stent, the Cypher. Physicians like Cypher’s drug, but they prefer Guidant’s delivery system – the catheter that guides the stent to the artery, and the ballon used to expand the tube once it’s in place. By selling the products together, the two companies figured they could improve the sales of both.

    They announced the stent partnership in February, and the acquisition in December. Stents are not the only, or even the main factor in the deal; Johnson and Johnson also covets Guidant’s pacemakers and implanted defibrillators. But stents are one area where the two companies – and, ultimately, patients – could benefit from a partnership. Over the next few years, assuming regulators don’t balk, the arrangement could result in the best drug-coated stent on the market.

    “It’s almost like dating when you try out something like that and you seem to have a pretty good relationship,” said Greg Aurand, a medical technology analyst with Zack’s Investment Research. “I think it was more of a dating dance and ultimately they decided maybe this would be in their best interests.”

    The partnership was born out of troubles each company has had with its own stent technology. Stents were developed to cut down on restenosis, the re-clogging of arteries after heart surgery. The original “bare metal” stents dramatically reduced restenosis rates.

    Guidant’s bare metal stent, Vision, was the market leader. But in 2003, Johnson and Johnson’s Cypher, the first drug-coated stent, was approved by the Food and Drug Administration. Drug-coated (or “drug-eluting”) stents lower restenosis rates even further, into the single digits. Since then, sales of Vision have lagged, and Guidant has had trouble developing a drug-coated stent of its own.

    While physicians like Cypher’s drug, they still prefer Guidant’s stent and delivery system. Guidant’s catheters are considered to be more flexible, and the edges of its stent cause less damage to the artery.

    “Johnson and Johnson has a great drug, but it’s an OK stent,” Aurand said. “Guidant has a great stent, but has had problems developing its drug.”

    Meanwhile, a second drug-eluting stent was approved last spring, Boston Scientific’s Taxus. Taxus quickly ate into Cypher’s market share, partly because of Cypher’s inferior delivery system. Now, about 65 percent of the drug-eluting stents sold worldwide are produced by Boston Scientific.

    The acquisition deal will give the two companies greater access to each other’s technologies and help them compete with Boston Scientific – and, eventually, Medtronic, which will probably come out with a drug-eluting stent of its own.

    “The holy grail of drug-eluting stents would be Guidant’s Vision stent, with its excellent delivery capabilities, matched up with Johnson and Johnson’s drug,” said Mimi Pham, an analyst with American Technology Research.

    The combined company will develop “more advanced, higher quality systems than either company could deliver on its own,” said Jeffrey Leebaw, a Johnson and Johnson spokesman.

    But John Putnam, a medical technology analyst and senior vice president at Stanford Financial Group, is skeptical. “Johnson and Johnson has never been good at following through with second and third generation products,” Putnam said.

    And then there are those pesky parents. Some analysts have expressed concern that combining two stent producers will raise anti-trust concerns. Regulators at the Federal Trade Commission (FTC) might fear the acquisition will decrease competition in the stent market. If the two companies are no longer competing to develop better products, the ultimate result could be fewer products available to choose from.

    Aurand said some research projects will be dropped as the two companies try to achieve merger “synergies.” But he does not think regulators will be concerned. Guidant isn’t even in the market for drug eluting stents, so it’s hard to argue that competition would be diminished, he said.

    “There was no guarantee Guidant would be in the market anyway. There will still be two market players,” Aurand said, referring to Johnson and Johnson and Boston Scientific. “There’s two now and there will be two.”

    Last updated: 28-Jan-05


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