I was very interested in your interpretation of the lubricity royalty rates for DES. SRDX has stated in prior conference calls that their lubricity royalty rate on other DES offerings is comparable to the current cypher (1%) royalty. Some a little more, some a little less. Your (1/10th of this) estimate is certainly not what they seemed to be implying in the CC. I'm not sure how to reconcile the discrepancy. [Are you suggesting, perhaps, the 1% figure SRDX talks about is only 1% of the value of the delivery system, rather than the delivery system and stent? - I'm not sure how or why they would break it down that way]
When Conor "talked of low single digits" could they have been talking about royalty rate, rather than $ per unit sold?
I might add that, while other endeavors such as coating prostatic stents, heart valves or coronary bipass grafts may have the glamour of being novel solutions...they are unproven. Lubricity isn't sexy, but it is virtually in the bag that Cypher Select will generate major revenue.
Changing the polymer would require extensive clinical trials. The Cypher line will probably continue to use the same drug eluting coating on multiple future stent iterations (with potentially other coatings on top of it, such as heparin or ECM proteins which could be said to deal with thrombosis but possibly also allow a more functional topcoat that gets around the BSX topcoat patent). JNJ will keep the line going until demand dies off - they have too much invested in the safety of the known commodity to do otherwise. Simultaneously they will probably launch into a separate line of DES (probably with a biodegradable polymer) to market in parallel with Cypher which we may or may not provide the drug eluting polymer for. If you look at what Barclay said, however, JNJ uses our lubricity coating on a large number of their delivery catheters. There is a good chance we would find ourself coating the catheter of JNJ's "other" stent line down the road whether or not we provide the drug elution.
Surmodics has said in the past that the lubricity royalty rate is not that far off of the current cypher royalty rate. That means we can probably look forward to at least 50% greater royalties from the Cypher line down the road. This announcement is a major positive and more than makes up for what will probably be a slow erosion of DES unit prices and slow reduction in number of units sold as a modest revisiting of bare metal stents occurs while we wait for the next big thing in DES to come along.
DES may be sexy...but lubricity has been, and continues to be SRDX bread and butter in many ways. This announcement heralds a huge boost to our future earnings.
Big grins from me today.
<"BTW, why would you want human antigens on a cell culture substrate (Donaldson Ultraweb)? Do you have any specific ideas in mind?">
I don't have a specific idea in mind - I'm only mentioning ECM proteins / Donaldson because it is the only major endeavor that isn't mentioned on the website. I agree it doesn't sound like it. But I want to be cautious with my optimism...if this doesn't represent something we already know about...the fact that they are creating another category for it on the SRDX website may well mean it is a substantial opportunity. i.e. some good news due soon.
I don't often browse the SRDX website, but they have a new major category for their technology which they have labelled "Recombinant Human Antigens". If you click on it it simply says "coming soon":
Any thoughts on what this is? (ECM modification ala Donaldson...or perhaps something new?)
I am not a chartist (or whatever name properly applies to making investment decisions by examining share price fluctuations graphically) but I have, from time to time, examined the graph of BSX and SRDX together. Ever since Taxus came to market, and became the lions share of BSX revenue, SRDX and BSX stock look like waveforms with slightly different carrier waves - but with the same modulation. By that I mean that there are underlying trends which can slowly move either stock up or down independently, but in the shorter term their sudden ups and downs track together more often than not. You can see the modulation on any BSX vs SRDX graph of one year duration or less (the modulation frequency gets averaged out when you move to the 2 year graph and can't be seen - although one year ago, if you looked at the one year comparative graph you would have seen a similar pattern to the one you see today) . For example:
I do not have the mindset to short or flip any of my positions so I would not act on it, but it is interesting to see that since the end of may the underlying "carriers" for BSX and SRDX have taken them in very different directions. All that I would take from this is that DES fortunes (and of course the more general market trends that effect the whole market)are not currently the largest factor in the respective share price fluctuations. At the end of May BSX finally closed the guidant deal,and SRDX announced the Corning collaberation. I personally think the Corning collaberation is huge, but I expect the main reason for this divergence is BSX closing the Guidant deal. I am certainly glad I am not holding BSX stock at the moment, and I marvel that anyone would continue holding it through all the very negative events of the last couple years.
It will be a long time before a SRDX coated prostatic stent could be available. It is also hardly a given that it would a)be efficacious and b)have a risk / benefit ratio that would be favorable over existing therapies.
I would doubt it's chances in pelvic pain syndrome ("prostatitis"). And I would expect it's role in prostate cancer to be one of palliating malignant obstructions rather than any type of cure (though that would still be of use). As for BPH...the drug elution may well work to reduce prostate volume and alleviate obstruction, but will there be adverse effects inherent in leaving the hardware in this location? It might work out. I hope it does. But, like all new ground being broken in medicine, the chances of success are not as great as the accompanying enthusiasm / promotion might lead us to believe.
I'm happy for the news release, but I would downplay the importance of such an early stage, and unproven technology.
What we should be happiest about is that this is only one of 30 such collaberations likely to be announced over the next 18 months. Though I will likely have varying degrees of scepticism about many of them, the sheer numbers will mean many (some probably very) succesful endeavors are due over the next few years.
It wouldn't surprise me to hear Lucentis will appear on Ivation, or one of our biodegradable coatings will grace Biotroniks biodegradable magnesium stent - both of which would be very major announcements. But, like the Donaldson and InnoRx endeavors (both major opportunities) most announcements will come as a surprise. We should, really, expect the unexpected over the next couple years (and beyond)...and be thankful that wall street only models what they can see, and has difficulty getting past the prospect of diminishing Cypher revenues.
<"From this SRDX press is it possible that new generation stents will not even use a drug?">
ECM protein surface modifications are really geared towards endothelial healing - which could be a solution for late thrombosis. I don't believe it would adress restenosis - which is more the response of the vessel wall as a whole to the trauma induced by the balloon dilation.
Interesting that you ask if stents would go drugless however. All along, the study which was most useful to do was to compare Cypher or Taxus to the best thin bare stent (e.g. vision) rather than comparing Cypher to Velocity or Taxus to the Express II - since neither are the best wrt restenosis amongst bare metal.
As I have also said before, from a health consumers point of view they should head to head Cypher or Taxus against top of the line bare metal with an oral inhibitor of restenosis like prednisone or sirolimus added. This of course would destroy their market - so even though it is in the best interest of truth and patient care, it probably won't be done.
<"Are there any stats on the relative incidence of late clotting in the JNJ coated stent vs. the BSX coated stent?">
Yes...but I don't have them in my head. BSX trends worse but there are not enough events to suggest stat sig relative to each other. It is becoming viewed as a durable polymer issue (rightly or wrongly) and an impetus behind the push for biodegradable polymers.
<"I think todays market move might be a little on the reactionary side. I am sitting on the sidelines for the time being. Bridge, FP, are you selling into this news?">
If I had cash to spare I would be buying.
The only really surprising news of the day was that the Donaldson matrix is being used for artificial liver research - and that Corning is teaming up with a leader in stem cell research to develop culture media that almost certainly utilizes our technology.
Its no surprise to me that DES are used too frequently. This is typical of new technologies - irrational optimism initially, followed by pessimism once adverse effects are better appreciated, followed by the finding a niche of use where it belongs.
Will DES use drop off? Probably. Will it drop off quickly? Probably not. Are treatment decisions influenced much by newspaper articles? - seldom. Is it a big problem for SRDX? No - especially since the two DES that might (emphasis on MIGHT) prove to have less late thrombosis utilize SRDX lubricious coatings.
Considering that I try my hardest to ignore the share price and focus only on SRDX related news, today was really more positive than not.
Could someone with a WSJO subscription please post this:
A good prospect for an Ivation type delivery. Do you remember if the current Ivation polymer can handle small strands of RNA?
Thanks for the correction. Perhaps the breakthrough in differentiation will come from studying the extracellular environment in different organs.
It would be a crude approximation, lacking much of the structure, but one wonders if you could extract the extracellular matrix from a donor pancreas and coat a nanofibre plate with that. You wouldn't know what the essential elements were if it was working to produce greater differentiation, but you would get kind of a shotgun attempt at it.
<"I wonder if Novocell is using Nanofiber cell culture media? Wouldn't it be nice if that was the reason for the enthusiasm?">
An interesting thought. If cell differentiation is your game, I would bet the nanofible media would be a big step forward.
With Surmodics as a partner, they likely have the option of special ordering plates that elute whatever their growth factor cocktail of the month happens to be.
If Novocell was using nanofibre media, and described their technique publicly, that could jump start sales.