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J&J, Guidant Team up in Drug-Eluting Stents: A Marriage Made in Heaven?

Executive Summary

The announcement this month that Cordis Corp. is teaming up with interventional cardiology arch rival Guidant Corp. to sell the former's blockbuster Cypher drug-eluting stent (DES) seems, at least on the surface, to validate Guidant's take on the drug-eluting stent wars: the primacy of the stent's deliverability over the clinical performance of its drug component in driving stent selection by interventionalists. J&J, for its part, was also responding to the threat-many think it will be formidable-of Boston Scientific Corp., who received the much-anticipated US approval for its Taxus stent just weeks after J&J and Guidant announced their deal.

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World Congress of Cardiology: DES Safety Dominates Discussions

While the greater efficacy of drug-eluting stents (DES) compared to bare-metal stents is widely accepted, over the past year, data has continued to build showing that first-generation DES also have a higher late-stage in-stent thrombosis risk, a complication that can cause death 30% of the time, according to some estimates. The findings of these studies had some physicians at this year's World Congress of Cardiology calling for "an immediate halt to DES overuse." However, most conceded that additional randomized trials will be needed to fully understand the potential risks associated with these devices.

The Buzz at JP Morgan--Devices: No Longer the Conference Stepchild

Over the past five years, big cap device companies have been some of the strongest performers among all life science stocks, and this year's conference represented something of a renaissance of device companies. However, most interesting wasn't so much the revival of interest in device stocks itself, but the message that device companies sent and that investors are embracing: "Forget about the hype; slow and steady wins the race."

Elephant Cha-Cha: The J&J/Guidant Deal

If you want some sense of the magnitude of Johnson & Johnson's recently announced acquisition of Guidant Corp., consider this: the $25.4 billion price tag was more than six times larger than any other deal done in the medical device space over the past six years; Still, if device industry executives were amazed by the deal, they weren't surprised. J&J's play for Guidant had been rumored for years-driven, it was argued, by a logical desire on the part of J&J to build on a valuable cardiovascular device business by accessing a major cardiac rhythm management (CRM) business. But it was the vascular business of both companies that seemed to propel the merger beyond the talking stages, beginning most notably, with the deal J&J and Guidant signed earlier this year to co-promote Cordis' Cypher drug-eluting stent. However, for all of the promise implicit in the merger of these two giants, there are enormous integration issues to be addressed, both before and after the deal closes. And for now, precisely how these challenges are resolved is likely to be fraught with uncertainty.

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