Stents

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Stents

• Marketing Considerations

Deborah Pan and Jeffrey Su
May 12, 2003
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Agenda

• Introduction to Cardiovascular Disease
• Overview of Costs and Profits
• Competitive Landscape
• Firm Comparisons
• Role of Patents
• Conclusions
• Questions

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No geographic, gender, or social boundaries
World Health Organization Report, 2003

• 16.6 MM deaths worldwide each year
• 1/3 of all global deaths
• Leading cause of death in most countries (excl.
  Africa)
• Projected estimates
• By 2010, leading cause of death in all developing
  nations
• By 2020, 25 MM deaths worldwide each year

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Balancing actassessing global needs and
marketability factors

• Assessing global need
• Population density
• Mortality stats ( of CVD deaths)
• Risk factors
• Industrialization
• Diet, physical activity, etc.

• Assessing marketability
• State of the economy
• Amount of devoted to healthcare
• Acceptance of technologically advanced procedures
  in recent past

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Mortality and percentage of CVD deaths (per
100,000)
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Agenda

• Introduction to Cardiovascular Disease
• Overview of Costs and Profits
• Competitive Landscape
• Firm Comparisons
• Role of Patents
• Conclusions
• Questions

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Brief comparison of total health
expenditures(per capita)
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Comparison of procedure costs

• Stentings direct and indirect costs comparable
  to those for angioplasty.
• May also be used to treat peripheral vascular
  diseasenew and emerging market!

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Financial effect of drug-eluting stents on
hospitals

• Hospitals will face losses
• Cost of the drug-eluting stent (DES)
• Medicare reimbursement Cost of angioplasty
  1800 for DES
• Approximately same cost to hospital for DES or
  bare-metal stent

Problem 1.7 stents/patientMedicare only covers
1 stent procedure. Marginal cost not covered!
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Lost revenue from less need for other procedures

• 10-20 drop in coronary artery bypass graft
  (CABG)
• 12 drop in redo angioplasties
• Overall loss for hospital in coming year
  between 3-6 million
• Effects depend on hospital type and response

Source Hospital Materials Management,
Avamed.org, HMM, Modern Healthcare,
KnightRidder/Tribune News Service, The Boston
Globe
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Potential profitability of drug-eluting stents

• Boston Scientifics Drug Partner
• produces Paclitaxel
• Cost Breakdown for Boston Scientific

2,000
1,000
Source Daniel Rosenberg
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Potential profitability of drug-eluting stents

• Boston Scientific
• Profit 1750/stent
• Profits soar as of DES sales increases

• Angiotech Pharmaceuticals
• Profit 250/stent
• Estimated revenue from DES in 2004 56 million

Source Angiotech 2002 Annual Report, Wyeth 2001
Annual Report, Barrons, Deutsche Bank
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Agenda

• Introduction to Cardiovascular Disease
• Overview of Costs and Profits
• Competitive Landscape
• Firm Comparisons
• Role of Patents
• Conclusions
• Questions

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Currently, Guidant and JJ dominate the market
2002 U.S. Market Share 44 2002 Global Market
Share 38
2002 U.S. Market Share 27 2002 Global Market
Share 28
2002 U.S. Market Share 14 2002 Global Market
Share 16
2002 U.S. Market Share 12 2002 Global Market
Share 13
Source Morgan Stanley
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Market positioning has changed dramatically
By 2005, there will be a complete flip in the
dominant players in this market
Source Deutsche Bank
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Out with the old market leaders
Fallen Leader
Falling Leader

• Founded in 1949
• Mid-size device company focused upon heart and
  neurological disease
• Already lost leadership position to Johnson
  Johnson in 2002
• Current major stent S7
  Zipper
• Future major drug-eluting stent S7 (ABT-578)
  to be released in
  2005

• Spun off of Eli Lilly Co. in 1994
• Relatively small firm focusing on cardiovascular
  products
• Set to lose sales when drug-eluting stents
  capture the market
• Current major stent product
  MULTI-LINK ZETA
• Future major drug-eluting stent MULTI-LINK
  VISION (everolimus) to be released in 2005

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and in with the new
Future Leader
Current Leader

• Founded in 1979
• Small firm focusing on alternative products and
  therapies
• Aggressive growth strategy leading to future
  market dominance
• Current major stent product Express2
• Future major drug-eluting stent Express2
  (taxus/paclitaxel) to be released in
  2003

• Founded in 1886
• Broadly based manufacturer of healthcare products
  in 54 countries
• Continued market dominance based upon strong
  product pipeline
• Current major stent Bx
  VELOCITY
• Future major drug-eluting stent CYPHER
  (sirolimus/rapamune) to be released in 2003

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The market tracks technology, not companies

• Consumers in this market gravitate towards the
  newest and the bestBoston saw quarterly market
  share triple in 2002, due to the introduction of
  its new Express2 stent

The next big shift in consumer sentiment drug
eluting stents from Boston and JJ!
Source Deutsche Bank
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The market is already rewarding Boston
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Agenda

• Introduction to Cardiovascular Disease
• Overview of Costs and Profits
• Competitive Landscape
• Firm Comparisons
• Role of Patents
• Conclusions
• Questions

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There is more to the story than meets the eye
Boston is far more dependent on stent sales than
its peers
Source Deutsche Bank, Morgan Stanley,
www.sec.gov, Dow Jones News Service
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Problems may arise for smaller companies

• Clearly, these firms must have enough assets to
  cover their liabilities in the event of retarded
  stent market growth. Below are the
  asset-to-liability ratios for these firms

2.74
1.68
1.31
2.61
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Firm riskiness reflects relative firm size

• The market value of shares outstanding for these
  four firms is very telling of relative size issues

11.6 billion
163.3 billion
17.3 billion
57.4 billion
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Litigations may dictate outcome of stent race

• Case 1 vs.
• Licensing infringement
• ? Guidant/Cook agreement ruled unlawful
• ? Guidant delayed 1 year in stent race,
  estimated 1B in losses
• Case 2
  vs.
• Patent infringement
• ? 11/2000 NIR stent infringes six claims (five
  ruled invalid)
• ? 1/2003 Express2 stent infringes 1988 Cordis
  patent

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Agenda

• Introduction to Cardiovascular Disease
• Overview of Costs and Profits
• Competitive Landscape
• Firm Comparisons
• Role of Patents
• Conclusions
• Questions

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Overview of patents

• Three types of patents
• Composition, use, process
• Requirements to receive patent
• Useful, unobvious, novel
• Important considerations
• Lifetime 20 years
• Broad vs narrow claims

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Design and delivery patentability

• Delivery Balloons
• Material
• Folding
• Inflation
• Deflation

• Design
• Strut design, number
• Dimensions
• Material
• Expansion method

• Hard to determine who has a leading edge in
  patents
• Each company has numerous patents
• Claims are extremely important
• Continuation patents and cross-referencing

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Stent coating patents

• Smaller companies have patented coatings
• Licensing agreements with Big 4
• Coatings for each stent producer
• Boston Scientific Proprietary co-polymer
• Guidant Polymer-free technology
• Johnson Johnson Heparin
• Medtronic Phosphorycholine polymer

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Stent drug patents

• Licensing agreements with smaller companies
• Highly litigious between companies
• Drugs for each stent producer
• Boston Scientific Paclitaxel
• Guidant Everolimus
• Johnson Johnson Rapamycin
• Medtronic ABT-578

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Stent patent summary

• Highly patented, competitive area
• Relative importance of stent patents
• Drug
• Design
• Coating
• Delivery Devices
• Abundant lawsuits

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Agenda

• Introduction to Cardiovascular Disease
• Overview of Costs and Profits
• Competitive Landscape
• Firm Comparisons
• Role of Patents
• Conclusions
• Questions

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Conclusions
TBD
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Agenda

• Introduction to Cardiovascular Disease
• Overview of Costs and Profits
• Competitive Landscape
• Firm Comparisons
• Role of Patents
• Conclusions
• Questions

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Questions
?