Boston Scientific Corporation versus Guidant Corporation

There has been a major overhaul recently in the stents market, largely because of the development of drug-coated stents. These devices have proved to be effective in minimizing restenosis, or the reclogging of arteries, which otherwise occurs in a majority of cases.

In early March 2002, Guidant, one of the leading manufacturers of coated stents, announced the suspension of clinical trials of its stents, as the drug, actinomycin-D, was not capable of preventing restenosis. This setback does not mean much to Guidant as it had partnered with Indiana-based Cook Inc., to market stents coated with a drug called paclitaxel, which has proved to be effective in preventing restenosis, and is commercially available. However, there seems to be an element of doubt about this deal, as Boston Scientific, a rival manufacturer of coated stents, has opposed the validity of the agreement.

Genesis of the Problem

The trouble started when Boston Scientific disputed the agreement signed by Cook and Guidant. This is because the right to use paclitaxel on stents was restricted to Boston Scientific and Cook based on an agreement they had signed in 1997 with Angiotech Pharmaceuticals, the developers of paclitaxel.

Boston Scientific contends that the Guidant-Cook deal is an violation of the agreement it had signed and hence, Guidant must refrain from marketing paclitaxel-coated stents. As the case is still sub judice, one cannot predict the outcome. The final ruling is expected in June 2002. As news of this legal battle, coupled with the announcement of its inability to market stents coated with actinomycin-D spread, the stocks of Guidant took a downturn. This does not auger well for the company, as there is enough indication that the verdict may be in favor of Boston Scientific. This means it may take a while for Guidant to get back into the coated stents market.

So Who Is Gaining?

The drug-coated stents market is estimated to generate revenues of $2.3 billion annually and there are sufficient indications that with the advancements in technology, this may increase further. The largest player and pioneer in the drug-coated stent market, Johnson and Johnson (J&J), is focused on product development. While the two combatants have been fighting for marketing rights, J&J has further strengthened its market share by continuing to show good results in the coated stents it manufactures. It is learnt that J&J is expected to introduce its Sirolimus-coated stent within the next two months of the current year in Europe, and is expected to launch the same in the United States by 2003.

Elsewhere, the U.K.-based Biocompatibles International Plc recently announced the selling of its stent unit to Abbott Laboratories for $235 million. Biocompatibles has entered into an agreement with Abbott to share royalties from future sales. It is inferred that they are likely to come out with new drug-coated stents and increase their market share in this emerging market. The agreement strengthens Abbott's position in stents technology and is likely to increase its market share in the near future. Abbott's web site, quotes Christopher B. Begley, its Senior Vice-President, Hospital Products, as saying: "This strategic acquisition strengthens Abbott's platform in the vascular business by enhancing our worldwide presence and augmenting our existing work to develop and commercialize innovative new products."

Outlook

Whatever be the outcome of the judgment, the coated-stents market is becoming more competitive. The best remedy for Guidant is to steer clear off litigation and try to reach an agreement with Boston Scientific. As Boston Scientific is already in a position of strength, it should not be a surprise if it pitches for a huge out-of-court settlement. All market players are large international corporations with significant investment sources. As competitors challenge the market with innovative products and new technologies, companies that focus on developing new products and positioning them will see increased revenues. Litigation should not clog the stent market and reduce its promotion.

For further information please contact:
busham Wagle
Public Relations
Bwagle@frost.com

www.medicaldevices.frost.com

( Source: S. Anand, Frost & Sullivan )

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