First off, I own neither J&J or BSX, but know the industry well.
A few comments:
For premium priced products Europe is NEVER an indicator of US success. BSX capture of a reported 50% EU market share is no doubt unit based and is a direct result of selling at a reduced price. Albeit DES penetration in EU has been extremely low. Token achievement, but a great strategy. Creates investor confidence that EU docs know something about how good the product is that will carry over to the US, however, BSX will not compete on price once they hit the US market. No reason to erode margins with only 2 competitors. Only way BSX will compete on price is IF Taxus IV data is outside of statistical equivalence with Cypher. Whole new game if that happens anyway.
Notice I said once they hit the US market. They will get approval, but not in �03. Dealing with a cytotoxic drug, the FDA will not approve their application sooner than J&J�s so late Q1 or early Q2 is realistic.
BSX will have problems ramping up to manufacturing this level of volume. Just because they have said they will have full capacity doesn't mean they will. Any delay in approval may actually help them with the extra time to hit the ground running will a full bag of products.
Tier 2 competition will be out in late �05. This means that BSX will have just under two years of high market share and will then lose a substantial amount of share along with J&J. Cardiology market has always had 3-4 major competitors. It will with DES also. They have been a close #3 in the stent market with 25-30% market share before DES. That is probably how it will shake up again. One important note: in the US, rapid exchange represents about 60% of the total interventional usage. This has created a monopoly for GDT, BSX, and recently J&J. But BEWARE: the Yock patents for RX expire in August of �05 (I think) which means that the field will have even more competition. Polymer release should not be an IP stumbling block. Total available market will contract by '06. Incidence rates will not keep up with pricing pressures. Conversion of CABG and PTCA is already factored into market projections.
BSX�s success will not come from DES cash flow but how it spends it. They have done well in the past with their M&A selections creating a very robust and diverse portfolio, but that is a risky strategy to rely on their future external spending to keep earnings up to justify the ultra high P/E. They do not have anything internal that will make up the loss in revenue that will come in early �06 as they lose DES market share. Cordis/J&J doesn�t either, but it impacts them less.
At this point, BSX�s ultimate success hinges on J&J�s ultimate failure (which they seem to be handling).
Disclosure: I do not THINK that Taxus IV data will be as good as Cypher�s. There is too much published about this compound for me to think otherwise. Should be fun watching though either way!
As for why BSX would invest so much and continue to do so if they know the data is not as good? The decision to add resources was made months ago. They are in this race for the long run. Same reason GDT just introduced the first cobalt chromium stent to the US knowing the market share will be low. They also are in it for the long haul!
Btw� WestCoastdocs post on Novoste is very relevant to this board as it is/was DES competition. Keep in mind that brachytherapy had extremely low restensosis rates at 6 months. Fell out after that. I do think brachytherapy will be able to carve out a niche as the primary treatment for in-stent restenosis. Any thoughts?
I agree that a coating leaching heparin would be less ideal than having it immobilized - although I would still consider it a local, rather than systemic, treatment in much the way that Cypher elutes sirolimus locally.
An interesting aside is that (according to Carmeda) not all covalent heparin coatings will have the same activity. Carmeda claims that attaching the heparin molecule via one end preserves its functionality better than being attached at a midpoint (which is where, I imagine, its competitors attach).
Since heparin as a coating is typically used for acute thrombosis, I am not sure why you would want to elute it as a more systemic treatment. I guess it would be possible to use as a topcoat to slow the elution of a drug beneath it.
I see Carmeda's or perhaps Surmodics being the supplier of choice for that since it is attached to the surface.
"I don't know any details about Surmodic's Heparin product (i.e. immobilized or eluted)."
SRDX uses their patented photolink covalent coupling process to attach heparin to the surface of devices. They also have synthetic non-heparin based coatings for enhancing blood compatibility that offer certain advantages to heparin.
They unblinded the Taxus IV results in early June before they announced their intention to file the PMA, which they filed late June. Management had previously said they would only file this if they felt the data was competitive with JNJ. They laid all this out in their conference calls, especially the 1Q call, and it was widely covered by analysts - that's why there were so many upgrades and the stock ran so much after they announced they were going to file the PMA.
They are keeping the results private until releasing them with 9-month follow-up data to the public at the TCT conference on Sep. 15th. I believe they are keeping it private because they need to see the final 9-month follow up data but from my understanding the risk of the 9-month data being different from what they saw in June is very small.
Curious, how do you know that the BSX results are already in? Why would they not release the results now if they were so great?
I know you are over on the BSX board - no problem. Curious as to your train of thought and logic here. What are your sources ass- u - mptions?
Well here we have a new oracle who has sprung from the woodwork knowlegable on his/her first posting. How do they do it?? Unless gentle reader, they have posted before under another name.... Biomed7772001 first post is this one I believe. Why would you post if you have no personal interest. That seems very odd to me. You must have a lot of time on your hands for such a big post.
I think that there is a lot more in the BSX pipeline than you Biomed seem to think. A lot of it is purchased no doubt. BSX seems to be doing better at M&A activities than in the past. Hopefully no more Medinols!
I don't see why there would be a market contraction for DES in 2006. There might be more players in the market but if anything the pie should be bigger not smaller.
Don't know how you could possibly say that approval will not come from FDA in 2003 unless you are in FDA and are reviewing the documents personally. I call BS on that.
A lot of what you say may be true, could possibly be true but some of it is clearly a wish for what might be.
I think brachytherapy is dead but not yet buried and NOVT a good candidate for a short if you are inclined to do that which I am not.
This board is for disagreement/discussion!
1. BSX acquired the right to the Bonzel patents from Schneider. Bonzel claimed the RX invention a year before Dr. Yock. After much legal debate and around $22 million, Schneider licensed the Bonzel patents to ACS (later acquired by GDT). After the settlement, Bonzel later added many of the claims that were filed in the Yock patents.
Either case, I think the RX market is wide open in the US in Aug '05. Someone please correct me if I have the timing off.
2. I don't think the supply issue with Cypher will have ANY bearing on the FDA's approval of Taxus. It didn't with Cypher and there was no alternative on the market and many cath labs had a back load of patients holding out for DES. Both J&J and BSX had fast track status.
3. I do agree that BSX and J&J will x-license IP after all the legal dust settles. IMO embargo is not likely. Typical path is judge ruling and then appeal and then both companies agreeing to binding arbitration for a settlement amount and x-licensing IP. Recent example with J&J is the deal with GDT for an RX platform.
4. Market contraction in �06 is primarily due to strong decrease in ASP. Most of the HUGE market for DES comes from the HUGE ASP (+$3000 compared to +$1100) for SDS. These prices will fall in �06 bring the total US market down with it. More competitors equals smaller slices of a smaller pie.
As for my recent posting on this board. I have followed this board for a long time. I read it to get info, not read people bashing other people. I posted to spark a little dialogue. No equity interest, but I DEFINITELY have a vested interest in the medical device market!
Sorry for the disagreement(s).
1) The Rx Patents are not Yock but are from Schneider days (monorail)...the name escapes me but BSX owns it.
2) The FDA WILL approve BSX early as patient/Dr demands for an alternative to the poor JNJ launch has created a vacuum for competitors (BSX).
3) There will be NO price pressure for some time (agreed)
4) JNJ and BSX will x-license their respective patent portfolios...doom for MDT in this business.
The Rx Patents are not Yock but are from Schneider days (monorail)...the name escapes me but BSX owns it.
Yock (together with Fitzgerald) is IVUS, although he may have other patents as well. I believe that IVUS is (was?) co-licensed with Agilent (who were trying to sell their rights, last I heard).
RX is the Bonzell patent. But even though BSX bought Schneider to get it, that didn't prevent them from getting sued over it later on.
(someday I'll learn to put all relavant info together into one post...)
The FDA WILL approve BSX early as patient/Dr demands for an alternative to the poor JNJ launch has created a vacuum for competitors (BSX).
Really? Please list a precedent for me where a cyto-toxic drug was approved "early" because of a market "vacuum".
I don't see the FDA granting early approval in this case because not only is there already an approved device on the market, there are already bare metal stents available in all sizes that serve adequately in "life threatening" cases.
Additionally, all indications are that trial data shows that AT BEST, Taxus is similar to Cypher - NOT SIGNIFICANTLY BETTER. If any Taxus data was significantly better - perhaps an early approval would occur. However, I have heard of no such data existing.
My belief is that the FDA views DES as an evolutionary step, not one worthy of an early approval, no matter how loudly the submitting company's marketing campaign crows about the market needing an alternative.
Biomed: your posts are thoughtful and well-timed. This board needs to return to topical discussions, rather than the recent litany of posts screaming "Shorty!".
Here's another, something most have missed.
Did you notice HOW FAR OFF THE SPLIT DATE IS? OCTOBER 15? ANNOUNCED WHEN BSX HAD DROPPED DOWN TO 56?
Combine that with the fact that BSX missed earnings and you have an interesting scenario. In my opinion this means BSX is going to MISS AGAIN, and to hold off investors from selling their shares, they announced a stock split.
The DES won't be here by October.
The split was set over 2 1/2 months AFTER it was announced because earnings won't be met.
As BSX procrastinates through a very clever and emotional communication-on-shares strategy, the lawyers for other firms are busy getting ready for the patent infringement.
One question, you say they are buying EU market share and that its a "Token achievement, but a great strategy. Creates investor confidence that EU docs know something about how good the product is that will carry over to the US"
What possible benefit to BSX is there to "create investor confidence" now when everybody knows that if data is not close to JNJ the stock will get crushed? Overpromising and underdelivering on this product would be a HUGE blow to credibility that would haunt the stock for years, so why would they sacrifice their reputation (and tons of shareholder lawsuits) for a few months of good stock performance? Please explain why this would make any sense.
Good question. But in light of the stock split, the current valuation, and agency issues, i can see why they would do that - or at least why they would be under a lot of pressure to. It wouldn't be the first time short term stock performance influenced the decisions of a company.
Good question, but again, the decision to compete in EU based on price was a strategy devised months ago. If Taxus IV data is not statistically equivalent (meaning a LITTLE better or worse really doesn't matter), this discussion board doesn't have much to talk about. The EU strategy is a tactic that will benefit them if the data is EQUIVALENT. They needed to operate under that assumption. If you knew months ago that you were 6-8 months behind J&J and did not know the supply constraints they (J&J)were going to have, you would need something to jump start your US market introduction. History tells us that J&J is reluctant to compete on price (aka Palmaz Schatz), it's an easy decision. Compete on price in the #2 region in the world that is historically sensitive to pricing issues against a company that is history reluctant to lower their prices.
Think about it. When BSX says that they have achieved a 50% market share in EU despite being months behind J&J, doesn't that make you a little more confident about their product? Yet, realistically it has nothing to do with their product being any better (or worse) than J&J.
I say it's a good strategy because it doesn't add much to their bottom line, but it gives them lots of good press leading up to the big US market intro.