The making of a blockbusterHow Boston Scientific gambled on its new Taxus stentNATICK -- A decade ago, Boston Scientific Corp. got first dibs on a revolutionary technology, the cardiac stent, that could prop open clogged arteries in millions of heart patients. The medical-device maker couldn't afford it at the time, but rival Johnson & Johnson could and turned stents into a multibillion-dollar business.
So when it came time for the next-generation stent, one coated with drugs, Boston Scientific chief executive James R. Tobin bet the company on it. To help pay for the development costs, he laid off nearly 2,000 employees one summer and shut down three plants. ''We were up against the best in this," Tobin explains. ''So I took some chances." His gamble paid off last month when the Food and Drug Administration approved the drug-coated stent that Boston Scientific calls Taxus. Though competitor Johnson & Johnson got its version on the market a year ago, Boston Scientific says it has already begun to outsell its rival. Johnson & Johnson thinks the two sides have split the market about 50-50, but even that's quite an accomplishment for the new stent. Taxus, a device that's no bigger than the spring of a ballpoint pen, could nearly double the Natick company's $3.5 billion annual revenue on its way to becoming one of the biggest blockbusters in medical-device history. Already it seems to be ahead of its goals: Boston Scientific earlier this month said it sold $98 million worth of Taxus domestically in March, ahead of its best-case forecast. The company says demand is strong partly because some doctors find Taxus easier to implant in patients. Some doctors back that up but add they also like buying competing stents to keep prices down. Either way, the drug-coated stent marks a critical chapter for a company that had its start as a sleepy device maker. Boston Scientific's stock price has risen over the past year on Taxus's potential, making it the largest life-sciences company in Massachusetts. Its market capitalization of $34.8 billion now makes it bigger than the region's marquee drug makers, Genzyme Corp. and Biogen Idec Inc., or even Waltham defense contractor Raytheon Co. Taxus also represents a turning point for the reputation of the region's medical device industry, which traditionally took a back seat to drug makers and biotechnology companies. ''We're not making swabs and tongue depressors anymore," said Thomas J. Sommer, president of the Massachusetts Medical Device Industry Council, a Boston trade group. Taxus did stumble last week on reports that balloons used by doctors to press the stent into place seemed to occasionally stick to the device or not deflate properly, creating a potential blockage. Boston Scientific said it had reported to the FDA about 27 such cases but said that's an insignificant number relative to the 84,000 stents that have been implanted in American patients so far. ''Our view is this product is performing very well," said spokesman Paul Donovan. In 1993, Julio Palmaz, a Texas radiologist who invented and patented the cardiac stent, asked if Boston Scientific chairman and cofounder Peter Nicholas wanted to license the design. The stent marked a breakthrough for cardiologists, who had long sought ways to treat narrowed coronary arteries that cause heart attacks without painful open-heart surgery. Stents are threaded into blood vessels with flexible plastic tubes known as catheters. Nicholas, chief executive at the time, decided he couldn't afford the roughly $40 million license fee -- a decision he still thinks was correct. But Johnson & Johnson, the New Jersey medical-supply giant, could, and did. Currently, more than 900,000 patients a year have cardiac stents implanted after a procedure known as angioplasty, in a worldwide market that grew to $3.29 billion last year, up from $1.3 billion in 1997, according to Boston Scientific estimates. That's a huge number by medical-devices standards. In comparison, about 250,000 patients receive pacemakers each year. Being first to market with the stent also gave Johnson & Johnson a leg up in the race for the next-generation stent. Around 30 percent of patients who receive stents develop a condition called restenosis, the buildup of scar tissue around the stent that recloses the artery and requires repeat angioplasty. After seeing its rival take the initial lead in the bare-metal stent market, the Natick company couldn't afford to dawdle on the next-generation stent. As early as 1997, Boston Scientific licensed a Bristol-Myers Squibb drug called paclitaxel made from the bark of the Pacific Yew tree. Paclitaxel is used as a cancer treatment because it immobilizes cells and stops the process of division. It also stops inflammation, and has proven useful at preventing scar tissue from building up. Boston Scientific researchers still needed a way to coat paclitaxel onto the stents themselves. They tested a series of polymers to embed the drug, but all seemed to cause side effects that could damage tissue. By 1999, Jim Barry, Boston Scientific vice president for research, had grown so discouraged in the search for a polymer that he was willing to test a compound that another company had rejected. ''This was a do-or-die moment," Barry recalled. ''But we didn't really have another choice." To make sure the polymer -- known as ''translute" -- wouldn't break down and inflame tissue in the body, Barry's team shook the stents in a salt solution mixed to resemble human blood for about 400 million cycles, mimicking 10 years of heartbeats. They also needed to get the right dosage. Inserting the drug-coated stent in 350 pig arteries, they eventually arrived at the proper rate of release of paclitaxel. The company wouldn't specify the rate, except to compare the way the stent is designed to ''a two-layer M&M coating," said the company's medical director, Mary E. Russell. All of this was new territory for Nicholas. Until then nearly all of the company's products were regulated as medical devices, which need fewer approvals. He says he chose Tobin as CEO in 1999 largely for his experience in the pharmaceutical industry running Biogen, the Cambridge drug maker. Tobin didn't know much about the drug-coated stent when he took the helm, but he knew enough to pin the company's future on it. The company was about two years behind Johnson & Johnson, which began clinical trials for its drug-coated stent, Cypher, in 1999. The only way to catch up was to bet big on Taxus. That meant Tobin needed to build a reserve for its development. In the summer of 2000, he cut nearly 2,000 jobs and closed three plants, saving about $250 million a year. That also freed up money to spend on Taxus, which eventually cost the company $350 million, its biggest research project ever. In 2001, Tobin gave Russell the green light to launch an aggressive series of clinical trials in which larger studies were begun even before the results of previous trials were fully analyzed. A year later, based on the results seen in just over 100 patients, Tobin committed to spending $145 million preparing existing facilities in Minneapolis and Ireland to manufacture Taxus. Normally, companies in such a situation would wait to complete a much larger trial, of perhaps 500 patients, but Johnson & Johnson had just won European approval of its drug-coated stent. ''I realized that if we weren't bold in this we weren't going to get anywhere," Tobin said. Some wondered if Boston Scientific was betting too much on Taxus. At the company's annual meeting with investors at New York's Waldorf-Astoria Hotel in early 2003, analyst Robert Goldman of Buckingham Research questioned whether the company could really achieve an earnings projection and posed an implicit challenge about its aims at capturing a large market share. ''We don't see that too much in medical technology, that kind of a growth. I'm wondering, Jim, if you brought that projection up to the board, if the board has also endorsed that kind of a suggestion," Goldman asked, according to a transcript of the meeting. Stung, chief financial officer Larry Best jumped in to answer. ''It's a target, OK? There's nobody to approve this, nobody proposed it as a projection." Soon after, the FDA approved Johnson & Johnson's Cypher. In its first year, the New Jersey medical products firm sold 500,000 stents, generating $1.4 billion in sales. It may have looked like Boston Scientific had missed the boat, but unexpected production delays slowed down Cypher sales. Meanwhile, even though head-to-head studies have yet to be completed, some doctors who have used both stents started to tell others that Taxus is more flexible and thus easier to implant. When the FDA approved Taxus on March 4, Tobin sent out an internal e-mail with the news. Clapping and cheers erupted in cubicles and labs. By March 31, Boston Scientific reported it had sold $98 million worth of Taxus stents in 18 business days, far ahead of its goals. Total shipments, including stents not yet sold, hit 133,000 stents by March 31, the company said earlier this month. Boston Scientific could see its sales slow in 2006 from 2005 levels as more companies bring drug-coated stents to the market. About a half-dozen device makers are trying, including Guidant Corp. and Medtronic Inc. Still, Goldman, the analyst, said Boston Scientific deserves credit for getting an apparent blockbuster out the door. ''You have to make a lot of right decisions over many years to get to the point where BSX is," he said.
Ross Kerber can be reached at kerber@globe.com. © Copyright 2004 Globe Newspaper Company.
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