Boston Scientific Takes Conor to Court over DES

Boston Scientific has filed suite in the Netherlands to keep Conor Medsystems from selling its paclitaxel-coated stent in Europe. This is the latest effort by interventional cardiology companies to use litigation to protect market share.

All market share wars are, to one degree or another, fought on multiple fronts. While companies pursue aggressively a forward strike to convince customers to buy more products, they also, when appropriate, engage in a rear-guard action to keep other competitors from entering the market. Nowhere is this truer than in markets like interventional cardiology, where even small differences in design features can have a huge impact on product performance and thus are often crucial to customer adoption. The latest such rear-guard action: the lawsuit filed this past February in The Netherlands by Boston Scientific Corp. to keep Conor Medsystems Inc. from selling its paclitaxel-coated stent in Europe.

The suit itself was hardly a surprise. Boston Scientific officials had been saying publicly for several months that they felt that Conor's paclitaxel-coated stent was in violation of its IP and of rights for its paclitaxel coating it holds under a licensing agreement with Angiotech Pharmaceuticals Inc. [See Deal]. Conor officials, too, knew the litigation was coming: the company's prospectus for its IPO, which was filed in December, prominently noted litigation was not only possible, but likely.

What was surprising was that the suit was brought in Holland. Many industry executives expected Boston Scientific to file suit in Germany or Switzerland, where Conor's European partner, Biotronik GMBH & Co. , has its main headquarters and its IV business, respectively (See "Medical Device Start-Ups in Europe—The New Entrepreneurs," START-UP, June 1998 (Also see "Medical Device Start-ups in Europe--The New Entrepreneurs" - Medtech Insight, 1 Jun, 1998.).) Some speculated that the suit was filed in Holland because it is a more conducive market in which to get an injunction against Conor and Biotronik, which was Boston's primary goal.

Conor officials wouldn't comment on the suit or on their company's counter suit against Boston Scientific, filed in the UK, which seeks to revoke the Angiotech patent as it relates to paclitaxel-coated stents. And the extent to which the Boston litigation derails Conor, which has just begun to market its Costar stent in Europe in collaboration with Biotronik [See Deal], remains to be seen. Said one executive close to the company, "They're very confident that they can make their IP stand up in court."

As far as investors are concerned, the lawsuit seemed to have little impact: if anything, Conor's stock price actually rose slightly in the days after Boston's filing, to just over $17 a share, and has for the most part remained at that level.

Perhaps most importantly, Conor continues to push forward with data supporting the value of its innovative reservoir-based approach to drug elution. At the recent American College of Cardiology (ACC) meeting, Conor presented 12-month follow-up data on its PISCES trial, designed to assess the safety and efficacy of Conor's stainless steel drug-eluting stent. (Conor also reported shorter-term findings on its cobalt chromium drug-eluting stent.) A multi-center study involving 191 patients, PISCES examined the safety and efficacy of six different formulations of its bi-directional drug elution: fast, medium, and slow versions of drug released only to the arterial wall compared to drug released to both the arterial wall and the lumen. The 12-month data show that all 6 formulations are safe and effective, with no cases of delayed stent thrombosis and extremely low rates of in-stent binary restenosis and target lesion revascularization and major adverse events (MACE), according to company press releases.

For now, few industry executives or clinicians believe that the Boston litigation will materially dampen the prospects of Conor, or other small drug-eluting stent companies. Not only is patent litigation common in interventional cardiology, some insiders say, it rarely has had a limiting impact on the competition. "Name the last time that litigation sent a chill through the med/tech industry in the last 15 years or so," says Peter Fitzgerald, MD, of the Stanford University School of Medicine. "At the end of the day, I don't think that litigation ever prevails. It's not healthy for patients and it's not healthy for innovation. Litigation will foster posturing and competitive maneuvering, but it will never kill innovation." Gregg Stone, MD, of the Columbia University School of Medicine and the Cardiovascular Research Foundation, predicts that in five years, a half-dozen or so companies, not all of them big players, will be selling drug-eluting stents. "We've got a group of companies poised with good products to get into the space, and that's good, because that's going to really drive innovation for the next generation," he says. (See "View from the Cath Lab: Hot Global Issues in Cardiology" in this issue. (Also see "View From the Cath Lab: Hot Issues in Cardiology" - In Vivo, 1 Mar, 2005.))

Indeed, if anything, messy, seemingly unpleasant lawsuits often have ways of resolving themselves amicably. Some industry executives argue that Conor's best and most logical exit all along has been a sale to one of the large cardiovascular companies, and that the company's public offering was designed more to raise money to fight off litigation while it could establish its bona fides, than to establish itself as an independent company.

Interventional cardiology has, throughout its history, seen patent infringement lawsuits almost as a matter of course. And in many if not all cases, the disputants ultimately resolved their differences by making love not war. Perhaps the best example: Johnson & Johnson and Guidant Corp. , the ground for whose recent merger [See Deal], some have argued, was plowed years ago in patent litigation that ultimately was resolved in a cross-license arrangement between the two then-rivals.

No one's predicting that Boston's lawsuit and Conor's resistance will inevitably end in an acquisition of Conor by Boston Scientific. But such a turn of events wouldn't surprise anyone either: some industry executives argue that BSC will need a new stent platform soon and one that, like Conor's, doesn't entail the use of polymers. Meanwhile, for all the attention and praise Conor's innovative reservoir design has received, the war chest needed to build a commercial organization to compete in the DES wars may make acquisition by a large company inevitable, public company or not.