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BusinessWeek: January 11, 1993 |
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WHEN THE HEART HAS A MIND OF ITS OWN Medtronic Inc. is expected to win government approval soon for one of the most eagerly anticipated medical devices in years: the PCD implantable defibrillator. About the size of a pack of playing cards, the $20,000 PCD can prevent cardiac arrest in people with abnormally fast heartbeats. It electronically senses whether to gently pace, moderately jolt, or rudely shock the heart back to normal rhythm. Says Medtronic CEO William W. George: "Simply stated, it's a computer in the heart." No easy trick, that. It took Medtronic two decades to get the device launched. In the early 1970s, the Minneapolis company decided against developing a basic defibrillator, thus effectively handing the market to Eli Lilly & Co. Since then, Medtronic has been trying to overcome that misstep. At stake: a worldwide defibrillator market expected to explode by 1996 to $1 billion a year--four times its size today. The current technology, which has limited programmability, delivers painful electrical shocks when the heart rate increases, regardless of how fast the heart is beating. The shocks are meant to slow the heart down. But the new devices, led by the PCD and Ventritex Inc.'s Cadence, send electrical pulses that vary according to the severity of the problem. They also keep records of recent heart disturbances, which can be sent by radio to a cardiologist's computer. Says Ira S. Loss, an analyst at County NatWest/Washington Analysis Co.: "It's the difference between the Wright brothers' airplane and a 747." WIRE SENSORS. The new devices not only are more sophisticated but also require far less traumatic surgery to install. The PCD's lead system avoids the need to open up a patient's chest. With the PCD, a surgeon snakes thin wires, which sense when the heartbeat is speeding up, through a vein and into the heart (diagram). A patch, which slows the heart by sending electrical pulses to the chest, is sewn under the skin above the heart. Already in use in Europe, where the device has grabbed 40% of the market in just two years, Medtronic's lead system could win U.S. approval in 1993. Such approval could help Medtronic wrest sales from Lilly and would boost its current 16% worldwide share of the market to 43% by 1994, estimates Hambrecht & Quist Inc.'s Kurt H. Kruger. Lilly will lose share to Medtronic and Ventritex until it gets U.S. approval for its new device, which will probably be a year after its rivals, concedes Ronald W. Dollens, president of Lilly's medical-device unit. Says Edward L. Mutsch, managing director of investment firm Piper Jaffray Inc.: "Medtronic could generate as much revenue seven years from now from its implantable defibrillator as its total revenues today." In fiscal 1992, ended Apr. 30, Medtronic posted sales of $1.2 billion. The tale of how Medtronic fumbled the defibrillator market begins in 1970. Company representatives met with two doctors from Baltimore's Sinai Hospital, who demonstrated an implantable device that could defibrillate a dog's heart. Impressed, Medtronic agreed to a joint research venture. But in 1972, it pulled the plug, after deciding that available circuitry was too primitive. Medtronic returned the patents to the doctors, who took them to Medrad Inc.'s Intec heart division. VERDICT APPEALED. Meanwhile, advances in miniaturization prompted Medtronic to begin testing its own device--attracting a patent-infringement suit from Intec. Litigation was halted briefly during the 1985 sale of Intec to Eli Lilly--a deal that Lilly's Dollens calls "one of the prouder moments of our organization." The fight was soon revived, however, after former Medtronic CEO Winston R. Wallin accelerated the company's PCD development. Lilly's contention was that Medtronic did not have the right to do clinical testing until Lilly's patents expired in 1990. In 1988, a Philadelphia jury returned a $26.5 million judgment against Medtronic, which blocked it from producing defibrillators in the U.S. but allowed clinical testing. Medtronic appealed, and in June, 1990, the Supreme Court decided in its favor. Three months later, the company applied to the Food & Drug Administration for marketing approval. By 1991, Medtronic was selling the PCD in Europe. Last February, it received a thumbs-up from an FDA advisory committee, followed in mid-September by an "approvable" letter--a sign that the agency is getting ready to give a final O.K. to the device. Investors are widely anticipating the approval, bidding Medtronic's stock up nearly 50% since April, to around 94 now. Approval may at last be nearly certain, but cardiologists in the U.S. remain unhappy about the delays caused by litigation and a regulatory process as slow as molasses. "It is enormously frustrating that Europeans are routinely using technology for patient care that we have to beg and scrape to use here," says Dr. Eric N. Prystowsky, chairman of the American Heart Assn.'s committee on cardiac electrophysiology. For those who need the device to live a normal life, 20 years must certainly seem too long to wait. | |
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