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A big test for Boston Scientific

Company to release study today on its Taxus stent

Boston Scientific Corp. hopes its new drug-coated stent will help unclog arteries in cardiovascular patients. But first the company needs to unclog its regulatory path, and its efforts face a critical test today in Washington.

This afternoon the Natick medical-devices company is scheduled to release data showing the effectiveness and safety of its Taxus stent in a study of its use in 1,326 patients. If it is positive, the data will also accelerate Boston Scientific's application to gain FDA approval for the device.

The stakes couldn't be higher for Boston Scientific, which aims to put Taxus on the US market to compete with a similar product that Johnson & Johnson gained approval to sell in April. Johnson & Johnson's stent, Cypher, carries a list price of $3,195. Boston Scientific hasn't announced pricing for its product, but analysts estimate that the total market could reach $7 billion in several years.

Even capturing a fraction of that will remake Boston Scientific, which had sales of $2.9 billion last year and had already announced plans to add 1,200 jobs, mainly at manufacturing plants in Ireland and Minnesota. The company has said that total employment worldwide will be 15,000 by year's end. Boston Scientific's shares have doubled in the past year and closed at $61.40 on Friday.

Despite the huge potential market for drug-coated stents, other competitors are much further away from submitting their own devices for approval, said James Tobin, Boston Scientific chief executive. He counts seven other companies trying to develop similar stents but terms most of those programs "restarts" of earlier efforts that failed.

"If it were easy, a lot more people would have succeeded," he said. Tobin said it could take five years or more before the market for drug-coated stents reaches $7 billion, but added that "assuming we get approval, we'll share an enormous market" with Johnson & Johnson.

In the best case, the FDA could approve Taxus by the end of this year. But the company faces problems if it doesn't gain approvals soon. In July Tobin disclosed that sales of some older stent models were falling short of expectations as doctors switched to Johnson & Johnson's Cypher stent.

With the stakes so high, Tobin said he has deliberately insulated himself from learning the results of the study until today so he won't accidentally convey hints to investors. Outside the company, Leerink Swann & Co. analyst Mark Landy said most investors mainly hope to avoid surprises. He noted that Boston Scientific already has approvals to sell its stent in Europe and that in real-life experience, doctors report that the smaller Taxus is somewhat easier to implant in patients. "They don't have to beat J&J, they just have to have a result that's fairly comparative," Landy said.

The Taxus and Cypher devices are both meant to make medical angioplasty more effective. In the procedure, surgeons use catheters to open blocked coronary arteries. But blockages often return. Device makers responded with tiny metal structures, stents, that prop open the arteries and reduce the failure rate to around 20 percent.

Doctors hope the new drug-coated stents will reduce the rate to single digits with their "drug-eluting" technology to deliver medicines such as sirolimus and paclitaxel to keep arteries open.

One piece of good news for Boston Scientific came Thursday when its stent was approved by Canadian regulators, driving shares up $2. But some evidence for pessimism also emerged last week, when the FDA said the company failed to follow study plans in testing of a different stent product in Europe, and failed to report the death of a patient who received it.

Some analysts dismissed the warning.

"Come Monday, it will be all right," wrote Merrill, Lynch analyst Daniel T. Lemaitre in a research note last week. He also said it is unlikely that Johnson & Johnson will be able to obtain a preliminary injunction to block the introduction of Taxus based on a patent-violation claim still pending in US District Court in Delaware.

Pricing issues might be more important to Boston Scientific's short-term sales success, as Johnson & Johnson has already begun discounting up to several hundred dollars per stent. In his own research note, JP Morgan analyst Michael Weinstein estimated that Boston Scientific's 2004 revenues might come in $50 million short of expectations because of the pricing war.

"Yes, J&J is getting more aggressive and this isn't good for the overall market, but far more important to BSX is Taxus . . . and what share the company captures in 2004," he wrote.

Ross Kerber can be reached at kerber@globe.com.

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