Technology

Johnson & Johnson Fires Back


Johnson & Johnson has been put on the defensive after the release of research that called into question the safety of a medical device pioneered by J&J. On Sept. 3, a group of scientists at the World Congress of Cardiology in Barcelona presented research showing that stents—the diminutive wire tubes used to prop open clogged arteries—may pose more dangers to patients when they're covered with drugs, rather than made of bare metal. The researchers said drug-coated stents raise the risk of fatal blood clots and that the danger is greatest with J&J's product, Cypher. Patients implanted with the J&J device face a 38% higher risk of adverse events, the researchers said.

Three days later, J&J (JNJ) has fought back. The company's stent unit, Cordis, released results from a four-year trial showing that the clot risk was not significantly higher with drug-coated stents than with bare-metal stents. It didn't stop there. J&J also released two years of data showing that patients who receive the Cypher stent are less prone to heart attacks than those who receive the competing Taxus stent, made by rival Boston Scientific (BSX).

Simultaneously, Cypher was approved in Europe to treat a severe form of artery disease in the leg. The company trumpeted the news not only in Barcelona, but also at a meeting for Wall Street analysts held in Jersey City, N.J., on Sept. 6.

DOCTORS SHYING AWAY? The rapid-fire response underscores the importance of Cypher to a company that's better known for baby powder than cutting-edge technology. J&J has embarked on a multifaceted effort to improve its growth prospects—and profitability—in medical devices, which account for $19 billion of J&J's $50 billion in annual sales. Of the company's seven device units, Cordis is by far the hottest. Its sales grew 24% in 2005, to $4 billion. The other top-performing device businesses, diabetes-device maker LifeScan and orthopedic unit DePuy, each grew just 12% by contrast.

But Cypher's growth has slowed in the first half of the year, J&J execs concede. Drug-coated stents were once heralded as a breakthrough because the medicines that they release help prevent scarring that can cause newly opened arteries to close. Some analysts are worried that safety concerns could be causing physicians to shy away from the technology.

Rick Anderson, group chairman at J&J's Cordis unit, told analysts at the New Jersey gathering that the early success of the product—not the clot risk—is responsible for the recent drop in demand. Because the drug coating prevents dangerous scarring, "fewer patients are coming in for a redo," Anderson said. He said the company has not observed a trend by physicians to revert to bare-metal stents.

"NEXT RESEARCH FRONTIER." Still, Nicholas J. Valeriani, J&J's worldwide chairman for cardiovascular devices and diagnostics, admits that the company will need to study the clot question carefully. The condition, known as "late stent thrombosis," is rare, he told reporters at the meeting. But he added, "It's the next research frontier for us to address. One late stent thrombosis is one too many."

The Cypher safety questions pose yet another hassle for a J&J unit that has had its share of problems. Cordis has spent the last two years addressing a warning letter from the Food & Drug Administration regarding manufacturing practices in plants that make Cypher and related devices. On Sept. 6, Anderson said the company has completed six successful plant inspections with the FDA, and that he expects the matter to be resolved by the end of the year.

Success in medical devices could provide a much-needed jump start for the health-care giant. Analysts estimate that J&J's sales will grow just 6% this year, to $53 billion, and profits will rise a paltry 9%, to $11 billion. At the New Jersey event, J&J showed off a range of futuristic devices, from artificial knees that improve patients' mobility, to surgical devices that may make cutting into patients unnecessary for some common procedures.

But in the end, it was Cypher that stole the show, as analysts fired tough questions at executives about how much sales of the drug-coated stent could continue to grow in light of the recent challenges. The company declined to make long-term estimates. Concedes Valeriani, "there's noise in the marketplace."


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