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Drug-Eluting Stents, A New Market Success?

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Who is Working to Create the Market?

Drug-eluting stents, a product with an imposing name, have the potential to eliminate many heart surgeries. These small tubes hold coronary arteries open and slowly release (elite) pharmaceuticals after they are placed. By addressing a frequent side effect of heart surgery and today's non-eluting stents, interim study results suggest that the drug eluting stents appear "to have brought the cardiology community to a moment of awe. Struggling to keep hold of their native skepticism, experts are entertaining the possibility that the quarter-century battle with restenosis since the first angioplasty procedure in 1977 may be ending." (Walter Alexander, Cardiology Today, Oct. 2001)

Many companies are working hard to bring these stents to market. The major players include the Cordis division of Johnson & Johnson (JNJ), Guidant (GDT), and Boston Scientific (BSX). Some of these have had very impressive results in trials, including the amazing result of zero restenosis in at least one trial.

What Is the Market?

Each year up to 7 million people get some form of open chest angioplasty. This invasive surgery is both expensive and dangerous. With stents, both risk and cost drop substantially. However, in around a quarter of all stent placements, the patient's blood vessel forms the equivalent of a plaque build up (restenosis), clogging the artery and requiring open chest surgery to correct. Eliminating restenosis can improve the quality of patient care substantially and reduce costs dramatically.

Each stent is likely to cost approximately $2500 to $3,000, and if clinical trials continue with the same results, the new stents may quickly become the standard for care. The drug-eluting stent market, which does not exist today, could blossom to $3B per year in the United States within 24 months. (This is exclusive of the costs involved in inserting a stent.) That rate of sales would make the new stent one of the most successful medical devices ever.

How are These Companies Working to Create That Market?

The most successful and repeatable path to creating a new market is to solve a specific problem that your prospective customers strongly feel. Another path is to pick a less critical problem and then reduce the customer's cost of solving that problem to the noise level. This is less likely to succeed. Repeat coronary stent procedures are a substantial, strongly felt problem. The quote above, including the word "awe," reflects the most common reaction to the possibility of eliminating restenosis in stent procedures.

Doctors are reluctant to prescribe what they do not trust, so a major component of market success for medical products is establishing credibility, and that will be key to creating a new market for these stents. Each company is conducting trials in Europe and the United States, with the intent of using the trials to get government approval as well as to build the data for credibility. Credibility will come from previous comfort with the supplier and from superior results from the trials. Guidant has the strongest following among doctors for the bare metal coronary stents in current use, but had one trial fail this spring. Cordis (a division of J&J) has the best trial results as of February 2002. It's hard to do better than zero occurrences of restenosis. The demand for drug-eluting stents may be so intense that a substantial lead to market acceptance will translate into market domination. If so, J&J/Cordis is positioned to achieve that domination.

What Is the Benefit?

Surgeons will insert perhaps a million stents in the U.S. this year. Of those, possibly 250,000 patients will develop restenosis within a few months and require corrective surgery. Additionally, perhaps 100,000 cardiac patients will get an open chest operation instead of a stent because the doctor thinks that the 25% chance of restenosis outweighs, in that patient, the risks associated with a bypass. To eliminate a quarter million surgeries outright, and to turn perhaps 100,000 major surgeries into more minor procedures is a substantial advantage to those patients.

Cost works to the advantage of this market as well. The average surgical cost is around $10,000 per stent and $50,000 per open chest surgery, equating to a potential cost avoidance of over $6 Billion. That will be of interest to the organizations that have to pay for the operations.

Will the New Market Work?

A critical factor for success in existing markets is the skill of the supplier to handle basic operational requirements. If the product does not work, won't ship on time, or if customer service is inadequate, the market can fail.

In this case, the companies know the operational issues and they are assembling almost all the products from existing technologies (known stents, known drugs to elute from them.) The sales teams are experienced, the mechanism to deliver the new stents to market is in place.

This is a clear connection of a good solution to a strongly felt problem, with known customers. Our view is that the market will exist, and that one vendor will quickly grab a dominant position in what will probably become a highly profitable $3B plus business. J&J is positioned to return to dominance here.

For more information, please contact Peter Meyer at 831/439-9607 or Peter@MeyerGrp.com. Copr. 2002 by the Meyer Group, all rights reserved. Much of the process used to evaluate new markets is contained in "Creating and Dominating New Markets" published by AMACOM in March of 2002.

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email: Peter@MeyerGrp.com
phone: (831) 439-9607

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