Johnson & Johnson is cutting nearly 5,000 jobs due in part to a stent decline after studies questioned the devices' safety and effectiveness in preventing heart attacks and bypass surgery. Boston Scientific is preparing its own cuts after its stock hit a five-year low and its credit rating sank below junk-bond status.
The industry hopes to resurrect the market by rolling out next-generation versions of stents, metal-mesh tubes about the size of an ink pen spring that unfold inside coronary arteries like a scaffold. Although the new stents are designed to be safer and more effective, industry analysts don't expect a quick turnaround.
"I'm not going to be so bold as to call this the bottom in the market yet, but we're close, in this country," said Thom Gunderson, a Piper Jaffray analyst. "I think in three or four quarters going forward, you'll see a rebound."
Fellow Piper Jaffray analyst Timothy Nelson and Millennium Research Group stent analyst Bina Mistry both said in interviews that they project the U.S. drug-coated stent market to shrink from about $2.9 billion last year to roughly $2 billion this year. They haven't done projections on the global decline.
It's been a quick turnaround for a market that emerged after J&J introduced the first U.S. drug-coated stent in 2003, and Boston Scientific followed with its own the next year.
Drug-coated stents are minute coils implanted in the artery and they gradually release a medicine to ensure the artery does not clog again after angioplasty. The devices quickly surpassed sales of older and less expensive bare-metal versions. The older stents left many angioplasty patients needing repeat procedures to reopen vessels clogged by scar tissue from the first surgery. Newer models' drug coating is designed to prevent such blockages.
The U.S. market peaked at $3.1 billion in 2005, when the global market hit $5.2 billion, according to Toronto-based Millennium, which surveys hospitals performing artery-opening surgery called angioplasty. In about four years, some six million people worldwide were implanted, a modern record for medical devices.
"This transition was incredibly rapid," said Dr. Bonnie Weiner, a cardiologist at St. Vincent's Hospital in Worcester and president of the Society for Cardiac Angiography and Interventions, the primary professional association for specialists in the field.
While stents helped fuel profits at highly diversified J&J, the impact was far bigger on Natick, Mass.-based Boston Scientific, a much smaller company. Its stock price more than tripled in less than two years. But the market reversed course in mid-2006, after research indicated drug-coated stents slightly raise the risk of life-threatening blood clots months or years after they're implanted, unless people stay on an anti-clotting drug.
Because of that risk, a Food and Drug Administration advisory panel in December warned against "off-label" uses — cases in which the devices are implanted in higher-risk patients whose heart conditions don't meet criteria the FDA set in approving the stents. Such uses, done at the discretion of individual physicians, had accounted for about 60 percent of drug-coated stent procedures.
In March, a study questioned whether stents are more effective than less-costly drug therapy for treating patients who don't face an imminent heart attack risk. Now, many doctors are opting against off-label use until more is known about the risks. Some are choosing bare-metal stents for certain patients, or relying on drugs alone or bypass surgery.
Use of drug-coated stents in all U.S. stent procedures reached as high as 89 percent early last year, but now is between 60 percent and 70 percent, according to Millennium data. "I do think that now physicians are being much more thoughtful and careful in who they refer" for stent procedures, said Dr. William Maisel, a cardiologist at Boston's Beth Israel Deaconess Medical Center who chaired the FDA advisory panel, said in a recent interview.
The changes have been painful for stent makers. Second-quarter U.S. sales of J&J's Cypher stent dropped by 41 percent. On July 31, the New Brunswick, N.J.-based company announced plans to cut its work force by up to 4 percent, or 4,820 jobs, because of the stent decline, as well as slumping sales of a key drug and looming patent expirations.
Sales of Boston Scientific's Taxus fell 32 percent last quarter. The company's stock, hurt by the stent downturn as well as debt from an acquisition, now trades at around $13 a share — down from nearly $44 at the stock's April 2004 peak.
Meanwhile, Boston Scientific's credit standing with ratings agencies this month fell into junk bond territory. And the 29,000-employee company is working on plans to be announced later this year to reduce expenses and raise cash, including job cuts and assets sales.
The shift away from drug-coated stents could also hit companies with next-generation drug-coated models that are just reaching European markets and are soon expected to arrive in the U.S. Such companies include North Chicago, Ill.-based Abbott Laboratories Inc., and Minnesota-based Medtronic Inc.
Weiner, the St. Vincent's cardiologist, expects those new models will eventually put drug-coated stents back in favor. "I think there are lots of new technologies out there that will move the field forward," she said. And industry analyst Gunderson believes many patients with stable heart conditions who now aren't being implanted with drug-coated stents will eventually need them — either because they'll find drug therapy alone won't ease their heart pains, or because patients receiving bare-metal stents will eventually develop new blockages from scar tissue.
"We might be in a zone now where we're building a backlog of patients who will eventually have to come back," he said.