Broadly speaking, first-quarter financial reports released this week, across a broad range of industries, gave U.S. investors little on which to hang an optimistic hat (the $1.1 billion loss reported by General Motors being just one very large example).
But offering bright exceptions to this short-term trend were many companies in the med-tech sector, especially two firms – Boston Scientific (Natick, Massachusetts) and the Cordis unit (Miami Lakes, Florida) of Johnson & Johnson (J&J; New Brunswick, New Jersey) – in the cardiovascular device arena.
Both reported recent good growth driven by sales of their coronary drug-eluting stent (DES) products.
Appearing to produce the lion’s share of increases in this competition was Boston Scientific, which reported a 219% growth in Taxus DES sales worldwide, to $686 million, over the year-earlier quarter, and initial sales approaching nearly $500 million for its newest-generation DES, the Taxus Express2.
But Boston Scientific’s overall piece of the DES pie actually dropped somewhat – a slim 1% – while still maintaining the clear majority share at about 61%, according to analysts.
Cordis, with its Cypher DES – the only other DES product currently approved in the U.S. – gained the additional 1%, posting sales of $317 million for the quarter, or about $10 million more than the previous quarter.
The rather small shift was an indicator of the heavyweight-style marketing competition between the two companies. Cordis/J&J’s marketing activities were supported by a variety of studies rolled out at the annual meeting of the American College of Cardiology (Bethesda, Maryland), studies generally supporting Cypher over Taxus (Medical Device Daily, March 8, 2005). But Boston Scientific was able to counter that data with its own marketing efforts.
That was the view of Joanne Wuensch, device analyst for Harris Nesbitt (New York), who yesterday issued a report saying that Boston Sci has done “an admirable job in defending the safety and efficacy of Taxus.”
Overall, Cordis reported first-quarter sales growth at 10%, driven by a 72% improvement in international sales.
This was good news for parent company J&J, although adding only a bit more to its wide-ranging healthcare offerings. J&J reported 1Q sales of $12.8 billion, an increase of 11% over the year-ago period.
William Weldon, CEO and chairman of J&J, pointed to “the strong performance of each of the franchises in our Medical Devices and Diagnostics segment” as helping to boost “the more modest increase” in its pharmaceutical sales.
For Boston Scientific, growth in its DES sales was the primary driver in the company’s overall sales increase of 49% – somewhat more than $1.61 billion, compared to $1.08 billion for the year-ago quarter. Worldwide first-quarter sales of coronary stents – both bare-metal and DES – was $721 million, compared to $284 million for the year-ago period.
Jim Tobin, president and CEO of Boston Scientific, pointed to the success of the Taxus Express2 DES for producing “in large part,” he said, the record quarter, though adding a clear qualification for investors looking to the future.
“In the coming quarters, we expect our recent dramatic growth to return to more moderate levels,” Tobin said, “following a full year of Taxus system sales in the U.S.” He added: “Maintaining this leadership [in the DES market] will continue to be our No. 1 priority.”
Wuensch backed that performance perspective, putting expectations for Boston Sci at a 59% DES share for 2005, 57% in 2006 and 48% in 2007, the large decline in ’07 the result of the market entry by two big competitors. Guidant (Indianapolis), which is in the process of being acquired by J&J, and Medtronic (Minneapolis) are expected to win approvals for their DES systems in 2007, both potentially capturing shares of single-digit percentages.
Wuensch also warned that Boston Scientific’s market strength is a bit shadowed by the results of litigation that go to trial this year.
In June, the company will defend its coating and stent design vs. J&J, and also defend itself against breach of contract charges by its former Israeli partner, Medinol (Tel Aviv); and in October, defend itself again against J&J concerning a rapamycin patent.
Wuensch noted the potential for these legal battles to extend over many months and years but that they do present “a risk to our market assumptions.”
Whatever the ultimate market shares for DES, even small ones will be significant, since this arena is expected to reach sales of $4 billion in the U.S. alone by 2007 and $6 billion to $7 billion worldwide.