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J&J To Stop Making Stents, Cut Jobs, Take $500M Charge

Wed, 06/15/2011 - 9:02am
Linda A. Johnson, AP Business Writer

TRENTON, N.J. (AP) — Johnson & Johnson said Wednesday it will stop making and developing heart stents to focus on other stent types, a case of the pioneer in effect ceding that territory of the stent market to later entrants amid increasingly fierce competition and flat sales.

In a surprise move, the company that produced the first drug-coated heart stent, Cypher, now will abandon it, with sales barely a quarter of their peak five years ago. At the same time, J&J will cut hundreds of jobs, shutter two factories and take a charge of $500 million to $600 million in the current quarter as it restructures its Cordis heart device business.

"We watched the (drug-coated stent) market continue to evolve over the last several years," with rising competition forcing down prices, Seth Fischer, worldwide group chairman of Cordis Corp., told The Associated Press.

"In 2012, we expect to see new (drug-coated stents) come to the market," from two and possibly all three of its main competitors, Fischer said in explaining J&J's decision.

Stents, mesh-wire tubes used to hold arteries open after they are surgically cleared of fatty plaque, were the hot option for patients with clogged arteries in the 1990s and the first half of the last decade. Cypher and other newer-generation stents, coated with drugs to prevent scar tissue from forming over the tube and re-narrowing the artery months after the procedure, supplanted the original bare-metal ones and sales jumped.

But the medical consensus has changed as studies indicated many patients would do just as well by taking medicines to prevent heart attack or stroke and skipping the expensive, although minimally invasive, procedure to insert a stent. That's cut into sales, along with a recession and slow recovery that's left many unemployed, uninsured patients unable to afford a stent procedure.

So J&J, based in New Brunswick, N.J., said Cordis will stop making Cypher and Cypher Select drug-coated stents by year-end, and it will also stop development of a new drug-coated stent called Nevo. Cordis will focus on other areas of the heart device market where there is greater demand.

That includes various diagnostic and other heart treatment products, plus stents for blood vessels outside the heart, particularly in the legs and feet. J&J also is developing a new stent to treat life-threatening aneurysms in the abdominal aorta, a major vessel that distributes blood to arteries below the waist. That product, called Incraft, is in human testing in Europe.

Cypher once was the market leader and is still J&J's top-selling stent, but its market share has fallen steadily over the last several years as rivals Abbott Laboratories, Boston Scientific Corp. and Medtronic Inc. have introduced new stents and grabbed customers.

Cypher sales fell from a peak of about $2.6 billion in 2006 to $1.35 billion in 2008 and just $627 million last year.

The field is so competitive that the companies have repeatedly sued each other over alleged patent infringements. Just last Tuesday, a federal appeals court affirmed a decision voiding four J&J stent patents in a lawsuit brought by Boston Scientific.

Fischer said in an interview that its rivals have been competing directly with Cypher with products that infringe on J&J's patents, which the company continues to defend.

"There's a belief in the marketplace that these (rivals' stents) are very good products and support the physician needs and the patient needs, more importantly," Fischer said.

He said J&J believes the newer heart stents expected from rivals next year will not "offer any better safety or efficacy than Cypher," but will be easier for doctors to insert.

Typically, stents are put on the tip of a catheter, inserted through a small incision in the groin or arm and then threaded up through blood vessels to the heart, where they are pushed into place and inflated to widen the narrow opening.

J&J will eliminate up to 1,000 jobs as it consolidates a research and development team and shuts two manufacturing plants, the San German, Puerto Rico plant where Cypher is made and one in Cashel, Ireland, where Nevo was to be manufactured.

In late-morning trading, J&J shares fell 46 cents to $66.64.

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