In the deal, Guidant and Cordis also agree to drop patent challenges each filed against the other.
By Associated Press
Published February 25, 2004
INDIANAPOLIS - Two rivals in the potential $6-billion-a-year market for drug-coated heart stents will team up to challenge other developers of the devices used to prop open coronary arteries after surgery.
Guidant Corp. and Cordis Corp., a unit of Johnson & Johnson, said Tuesday their agreement also settles patent disputes that have become a hallmark of the race for leadership in developing stents - a competition that also includes Boston Scientific Corp. and Medtronic Inc.
Shares of Guidant, based in Indianapolis, rose $4.36, or 7.1 percent, to $67.81 on the New York Stock Exchange while Johnson & Johnson shares gained $1.05, or 2.1 percent, to $54.10.
Stents are tiny scaffoldlike metal mesh tubes inserted into the groin and implanted in coronary arteries to prevent new blockages. Next-generation models now reaching the market are coated with slow-release drugs to prevent scar tissue from forming.
Cordis, based in Miami Lakes, will gain Guidant's help in marketing and producing Cordis' Cypher stent, which last spring became the first drug-coated stent on the U.S. market. Guidant, which trails Cordis and Boston Scientific in developing a rival product, will grant Cordis rights to use Guidant technology for implanting stents.
The companies also agreed to drop patent challenges each filed against the other. Four days earlier, Guidant said it had resolved similar disputes with Boston Scientific of Natick, Mass.
"I think it's an overstatement to say litigation in the stent area is a thing of the past," said Dhulsini De Zoysa, an analyst with Fulcrum Global Partners. "But today's announcement is significant for Guidant in that it allows Guidant to maintain a very visible presence" in the drug-coated stent market.
The agreement allows J&J to tap into Guidant's marketing and technology to better promote and refine its Cypher stent. De Zoysa said that will put J&J in better position to compete with Boston Scientific, which is widely expected to capture J&J's market-leading position after it wins U.S. regulatory approval for its Taxus stent. Boston Scientific expects approval by the end of next month.
De Zoysa said analysts generally agree with Boston Scientific's contention that its stent is superior to J&J's product.
Boston Scientific does not expect the Guidant-Cordis deal to affect its expectations of winning 70 percent of the U.S. drug-coated stent market by year's end, spokesman Paul Donovan said.
In a Guidant conference call announcing the deal, Merrill Lynch analyst Dan Lemaitre said Boston Scientific's product already has gained a leading market share in Europe.
Medtronic of Minneapolis expects to introduce its drug-coated stent in the United States in late 2005.
Tuesday's agreement "will allow Guidant to be a competitive and immediate participant in an attractive market which we believe will generate $3-billion a year by year's end," Dana G. Mead, president of a Guidant stent development unit, told analysts.
The agreement will expire when Guidant reaches the U.S. market with its Champion stent, expected in the first quarter of 2006. If Guidant fails to reach the U.S. market with its product, the deal with Cordis expires at the end of 2011. Guidant has been a market leader in sales of bare-metal stents, now on the decline with the introduction of drug-coated stents.
Cordis' Cypher stent, using a drug that inhibits cell growth, has been used to treat more than 500,000 patients worldwide.
