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January 2006 Archives:
Left to One's Own Devices:
Adverse Event Reporting Iowa -- the day after Thanksgiving 2005. Darrell has 3 Cypher stents implanted. Five weeks later he breaks out in an unbearable burning itchy rash. It doesn't go away. His doctors and cardiologist have no answer. His wife suggests that he go on the internet to search "stent allergies". He winds up on our Forum (the first hit) and realizes that he is not alone; many other patients have experienced similar symptoms. He writes: "I should listen to my wife more often." At Angioplasty.Org's Patient Forums, we've been getting increasing numbers of postings from patients who are having problems. Our top four "complaint" topics have almost 500 postings. Call us a mini-MAUDE database, if you will, but we're compiling a significant number of "adverse reports". And we have the feeling that many of these anecdotal incidents are not being reported to the FDA. The recent JACC study "Hypersensitivity Cases Associated With Drug-Eluting Coronary Stents" agrees that these reactions are under-reported by the device manufacturers, patients and physicians. We'd assume this applies across the board. The U.S. Food & Drug Administration also agrees. The FDA Center for Devices and Radiological Health (CDRH) recently announced a Postmarket Transformation Initiative to "transform and strengthen the way it currently monitors the safety of medical devices after they reach the market" -- more of a "real world" observation than what is seen in tightly-controlled clinical trials. We applaude this effort. But we would also like to see the device manufacturers be proactive and take the initiative to help the real end-users of their devices -- the patients. Terrie from Ohio's husband started exhibiting all the symptoms noted in the JACC article and, until she found our site and its link to the study, got no answers -- from her doctors or from Cordis (in fact Cordis spokesman, Chris Allman, disputed the conclusions of the JACC study to the Chicago Sun-Times, calling it "pretty speculative"). And I don't mean to single out Cordis; in the "stent allergy" Forum, we've gotten postings from Taxus recipients as well. In the good ol' days of angioplasty, Andreas Gruentzig & Co. compiled as much data as they could. They were not so concerned with the value per shareholder as they were "possessed with the adventure", as Richard Myler called it, of finding out how this procedure could help patients. Unfortunately, in today's environment, what should be important concerns about devices are getting drowned in what vascular surgeon Sir Peter R. F. Bell characterized to me as "a tidal wave of dollars". If but a miniscule percentage of the billions of device dollars that were flying through the columns of the Wall Street Journal last week could be spent on really understanding how these new and revolutionary treatments are affecting patients in the "real world", and in helping them understand complications, if there are any. Yet, these same device companies have reduced, not increased, their expenditures on that non-revenue-friendly activity of patient education. Which brings me to the intersection of agendas. As the sun was rising on January 25, Boston Scientific and Guidant penned their agreement, announcing it to an anxious financial world at 7:02am; ten hours later, the FDA faxed a warning letter to Boston Scientific -- a stern company-wide admonition that, among a number of other cautions, took them to task for late or non-reporting of 145 adverse incidents involving a range of devices. The FDA was upset because previous warnings had gone unresolved. And why are these reports about patient experience so important? As Daniel Schultz, director of the CDRH, told the Pioneer Press:
The letter stated that most future approvals would be on hold until the issues were dealt with. Boston's stock got hammered and went down almost 7% which, according to some analysts, might threaten to unravel the Guidant deal. So, alas! My entry about patient safety and adverse event reporting winds up discussing, yet again, its impact on the "big deal". But after all, that's what it's about: safety and money. « permalink » « send comment » « back to top »
Two Weddings and a Funeral The funeral is, of course, the Johnson & Johnson deal to acquire Guidant. Hold the tears, however. While J&J's quarterly report yesterday showed a slowdown in sales, their profits soared and their Cordis Cypher drug-eluting stent overtook Boston Scientific's in the worldwide market. They now claim 51% of the total drug-eluting stent market, although their U.S. share has remained at 46%. And many J&J stockholders seem to be relieved that their company didn't overspend by trying to outbid Boston Scientific. With $50 billion in revenue for the year (that's eight Boston Scientifics) don't cry for me, New Jersey. And now the double nuptials:. Wedding number one -- the bride Guidant's maiden name is Lilly -- in 1995 several of Eli Lilly's device subsidiaries, cardiac rhythm management among them, were spun off to form part of a new device company, called Guidant. The groom, Boston Scientific's Founder Chairman Pete Nicholas, worked at Eli Lilly from 1967-78 (alongside Guidant Chairman James Cornelius). And Nicholas really is the groom because he is married to Eli's great-great-granddaughter. Now Pete's company will be buying this former Lilly division. Congratulations are in order. As for wedding number two -- a long time ago in a galaxy far, far away, when interventional cardiology was just beginning, a cardiology fellow named John Simpson was working with angioplasty pioneer Dr. Richard Myler in San Francisco. Dr. Simpson saw this burgeoning new field of medical devices and became an avid inventor/entrepeneur. His innovative balloon catheter and steerable wire system turned into a company named Advanced Cardiovascular Systems (ACS). In 1984 Simpson sold ACS to Eli Lilly (small world) and a decade later, it became -- you guessed it -- Guidant. Another of Simpson's inventions was a vascular closure device, used to seal the femoral artery after an angiogram or angioplasty without the time-consuming process of manual compression. It was called Perclose. This device turned into a company, also called Perclose, and in 1999 it was bought by Abbott. Now Guidant's vascular division, formerly Simpson's ACS, is betrothed to Abbott, formerly Simpson's Perclose. Congratulations are in order. So the happy couples are now making plans to set up house and figuring out how to merge their record collections, and what to do with their duplicate copies of Hotel California. Meanwhile, deep-pocketed Johnson & Johnson, having been rebuffed, is reportedly on the prowl for another eligible device partner. So, to console the lonely Johnson & Johnson, we send out this request tune, "Hey, [St.] Jude":
'Nuff said. « permalink » « send comment » « back to top »
Abbott's Partner -- It Ain't Costello So one has to wonder if history will repeat itself, and if the 2006 Boston Scientific Annual Report will contain a passage similar to this one from 14 years ago in 1992:
It is reported that BSC co-founders Pete Nicholas and John Abele alone currently hold 30% of the company's stock. A few days ago, a reporter asked me if I thought there were still a lot of "personal bonds" between Abbott and Boston Scientific. I'm not sure if corporate entities are wired to experience personal bonds, but as any fan of Battlestar Galactica can tell you, even robots can fall in love. * * * * A brief note: in my January 10th entry, I referred to the 1983 investment from Abbott as $100 million. My source was an interview with Pete Nicholas published in last month's Directors Monthly. My research has since shown that it was a more modest $21 million, made over four years. « permalink » « send comment » « back to top »
Breaking News: Boston Scientific bids
$80 per share Well, defensive turned seriously aggressive this morning with Boston Scientific offering a stunning $80 per share for Guidant with a "sell by 5:00pm" date stamped on the package. The deal includes a greater financial involvement from Abbott, higher price for the vascular business divisions, greater loan, and, new to this iteration, Abbott will now own 4% of the new combined company. Last week I noted that Abbott used to own 20% of Boston Scientific. What goes around, etc. etc. Update: Guidant's Board has deemed the Boston offer "superior", so they now have five days to decide whether to formally accept it. That means five days for Johnson & Johnson to up its offer, or give up the year-long acquisition process. Stay tuned! « permalink » « send comment » « back to top »
"You've got to know when to hold
'em, know when to fold 'em" The most recent bid was announced Friday evening. Johnson & Johnson upped their bet and Guidant accepted it, rejecting Boston Scientific's $2 a share higher offer. One reason proffered by some Wall Street analysts was the potential of antitrust problems that the Guidant-Boston Scientific deal might face during an FTC review. (I wrote about this last Monday.) The announcement capped a week of frantic bidding and counter-bidding and a day of bizarre events with one press release issued to kill a previous press release -- and on Friday the 13th to boot. You can access the blow-by-blow in the Timeline I have constructed. Johnson & Johnson and Boston Scientific have been arch-rivals since the mid-90s, when Johnson & Johnson successfully obtained FDA approval for a new coronary device called "the stent", which Drs. Palmaz and Schatz had licensed to them. According to a 2004 Fortune Magazine article, titled "Blood Feud", Palmaz and Schatz first brought their stent to Boston Scientific, but the company didn't offer enough for it. J&J did. Then J&J, wanting to get into the cardiology device business in a bigger way, tried to buy Boston Scientific and was rebuffed, and so bought Cordis instead. For the past two years the competition has taken the form of the "Stent Wars". J&J had the first drug-eluting stent (the Cypher, approved in March 2003) and a year later, Boston's Taxus was approved and rapidly took two-thirds of the market away. Ding! Round Two. Three months later, Boston Scientific recalled its Taxus stents to fix a non-stent-related problem in the catheter shaft. The recall was done voluntarily and smoothly and the new product was back on shelves instantly with Boston retaining its lead, although a bit lower. Then, at the 2005 ACC, J&J successfully spun a safety issue from the REALITY trial. Although the issue (as I reported) was not really supported by the data, Taxus' market share dropped to around 55%. For the past couple months, the competition has taken the form of the "Guidant Wars". As with the Cypher stent, J&J had a whole year to itself, having announced the Guidant acquisition agreement in December 2004. Then Boston Scientific swooped in on the action with a surprise move last month. But Boston Scientific's bid, and its side-deal with Abbott regarding Guidant's endovascular businesses, is not just about "getting Guidant". It's also a shared Boston-Abbott defensive move to prevent the giant Johnson & Johnson from getting it and totally dominating the field (if you've played RISK, you've probably done something like this). The main sticking points seem to be (1) Guidant and Johnson & Johnson have been working on this acquisition for over a year and seem comfortable with each other; and, (2) there are some unresolved antitrust issues that seem to cause concern. Boston Scientific's COO Paul LaViolette stated in a webcast last Monday that the company had already talked to the FTC at high levels and is assured that the way is clear for a quick completion. Compare that to Friday's Reuters interview with the FTC's person in charge of medical device mergers, Michael Moiseyev, who agreed that the Boston-Guidant review could be quick (he means two-to-three-month-quick) because the FTC recently did the J&J-Guidant review so it'll be working in familiar territory. But he also stated that there was no guarantee about the outcome of such an investigation and that he has not reached any conclusions about whether Boston Scientific's proposed deal raises antitrust problems, or what kind of divestitures could be required. Boston Scientific may well raise their bid a few dollars more. Or maybe they'll stay content with the knowledge that they cost Johnson & Johnson almost $3 billion. Or maybe the folks at Boston Scientific will pick up the phone and call Paul Buckman, ex-President of their SciMed Division, who currently serves as Divisional President at St. Jude Medical, a company which has slightly under a quarter of the heart rhythm market, and which has continued to pick up share since Guidant's defibrillator troubles last summer. The only major product overlap between St. Jude and Boston Scientific is in the neuromodulation market (each company has acquired a capability in the past year) thus few antitrust worries (divest one of the neuromodulation companies to...say...Abbott). Such an acquisition would give Boston Scientific not only the heart rhythm business, but heart valves (St. Jude's are reportedly the quietest) as well as the top-selling vascular closure device, Angio-Seal. (Boston Scientific's foray into this area, an ultrasound sealing device from their partner Therus, has had difficulties and is being reworked for another round of clinical trials.) St. Jude is just down the road from the Taxus plant in Minnesota. Maybe they can do lunch? « permalink » « send comment » « back to top »
GAT: Guidant Acquisition TimeLine So, to put this in order and in perspective, I have constructed a timeline of events, starting with Johnson & Johnson's announcement that they were going to acquire Guidant in December 2004, and ending with the last news from Friday 13th, that Guidant was accepting J&J's bid of $71 per share. I have also placed a graphic depicting the price being offered per Guidant share throughout the story. I invite all readers to add pertinent events that I am sure I've left out, and we'll keep this online. « permalink » « send comment » « back to top »
Would you be mine? Could you be mine?
Won't you be my neighbor? Of course, there's still 20 shopping days till Chri...till the shareholder meeting at which the owners of Guidant stock will vote for their Board's recommendation or not. Elliott Associates LP, hedge fund owner of 3 million of those Guidant shares, had recommended the Boston deal and was none too pleased with the Board's decision to go with J&J. Nancy Havens whose fund owns 2 million Guidant shares told Reuters, "I can't believe that Guidant said yes to this deal. It seems outrageous to me." As for Boston Scientific, they came right back with an 8:00pm press release boldly proclaiming, "Our discussions with Guidant are ongoing. We intend to vigorously pursue this transaction to its completion." Given that 30% of Boston Scientific stock is owned by founders Pete Nicholas and John Abele, they could pretty quickly "up" their offer, or make some other changes more favorable to Guidant shareholders. So it's not over till at least somebody sings. An interesting observation was made to Reuters by Allen Michel, an M&A prof at BU School of Management, who thinks that the winner of the contest will be the loser. "Whenever you have multiple bidding ... the firm that wins usually ends up paying too much. It's a phenomenon that's known on Wall Street as the 'winner's curse.'" I too have a couple quick observations: (1) who would have thought that such a phenomenal billion-dollar-knock-down-drag-out bidding war would be going on over a company that only a month ago was generating headlines in the New York Times like, "More Deaths are Linked to Device"; and (2) what was it about the Boston Scientific deal that Guidant's Board didn't like? After all, Boston was offering $4 a share more than J&J, with a collar in case Boston's stock dropped below a certain level, and many assurances of financing, etc. The Wall Street Journal reported that Guidant's concerns "were said to deal with how Boston Scientific would divest itself of Guidant's stent and catheter businesses" to Abbott. There was no elaboration on this point and I can only wonder if what I discussed a couple of days ago might have been a factor, namely that since Guidant and Abbott have the only two FDA-approved carotid stents, wouldn't selling Guidant to Abbott cause some questions for the FTC regulatory review and possibly slow down the merger approval? In conclusion, I'd just like to say that, in case any shoppers out there feel left out, I have a web site I might be interested in selling: it's very popular, read by 60,000 visitors a month, top search engine placement, all that good stuff. In fact, I could even mess it up a little and throw in a few mistakes if that would make it more attractive. Talk to me. « permalink » « send comment » « back to top »
There's Some History There But when Boston Scientific founders Pete Nicholas and John Abele were struggling back in 1983 to make their company into a significant player in the medical device field, Abbott invested $100 million (that's million, not billion) with them -- in 1983 that constituted 20% ownership of Boston Scientific and the investment allowed Nicolas and Abele to grow their company until they took it public in 1992. At that time Abbott, unsure of the future of medical devices vis-a-vis the healthcare reforms being discussed in the Clinton years, decided to cash in its investment, then worth $340 million (not billion). Now, a decade-and-a-half later, Abbott will pay Boston $4.3 billion (that's billion, not million) for the Guidant division and a 50/50 partnership in the everolimus drug-eluting coronary stent. Abbott will also give Boston a $750 million loan. Why the loan? As Boston said in its conference call yesterday, "Why not?" I think it's just for old friendship's sake.... « permalink » « send comment » « back to top »
Quick Thoughts on Boston/Guidant Deal But here's something that I haven't heard discussed in any of the news articles or in the conference call this morning: carotid stents. There are only two currently approved in the United States. Guidant has one: the ACCULINK™ and RX ACCULINK™ Carotid Stent System was approved for use by the FDA back in August 2004. The ACCULINK Carotid Stent System, last I looked, was part of Guidant's endovascular division. And now, a year later, Abbott has the other carotid stent: its Xact® Carotid Stent and Emboshield® Embolic Protection System was approved for use by the FDA on September 15. If Abbott gets Guidant's endovascular products, doesn't that then give Abbott a monopoly on carotid stents? (Boston Scientific has a carotid stent product in the works; J&J has one that's "approvable", but has not gained FDA approval until it resolves some manufacturing concerns.) Okay, I'm sure wiser heads than mine have a simple answer to this; but I'm just curious as to why the words "carotid stent" haven't been discussed in all of the press flurry today. After all, as Abbott Vascular President Chip Hance said during a recent webcast, if the current CREST and ACT I clinical trials show results, carotid stenting could become a billion dollar a year business in a very short time. |