Guidant’s Good News Month

After months when it seemed as though every announcement went from bad to worse, August turned out to be a good news month for executives at Guidant Corp. (Indianapolis).

The company’s difficulties began in late May, when it acknowledged that it had failed to properly inform physicians and patients about a potentially fatal flaw in one of its implantable cardiac defibrillator (ICD) models. Subsequent recalls of the company’s products affected thousands of its ICDs and pacemakers and received extensive media coverage. Industry analysts began to speculate about the potential long-term damage to the company’s high-profit cardiac rhythm management product line and to its pending $25.4 billion acquisition by Johnson & Johnson Inc. (J&J; New Brunswick, NJ).

But in August the company’s fortunes took a decided upturn.

Early in the month, FDA approved market reentry of the Contak Renewal 3, the company’s best-selling and most profitable ICD, with a price tag of around $30,000. The device was reapproved a week earlier by regulators in Europe, where it is sold as the Contak Renewal 4. Reapproval of the device followed Guidant’s decision to replace a faulty magnetic switch that could become stuck in the closed position, thereby preventing the delivery of the necessary electric impulse or shock in the event of cardiac arrest. The change was made in all existing inventory and will be implemented for all such devices manufactured in the future.

Guidant had previously notified physicians that recalled ICDs currently implanted could have the switch corrected via noninvasive software reprogramming of the device. The company also offered to replace any recalled ICD with a new model at no cost. According to reports, many cardiologists advised against such surgical removal, noting that the risk of postoperative infection was far greater than the risk of device malfunction. Out of the 46,000 Contak Renewal 3 and 4 units that had been manufactured at the time of the recall, only four devices were known to have malfunctioned.

U.S. and European regulators also approved market reentry of the following Guidant ICD models: Renewal 3, Renewal 4 AVT, and Renewal RF. Although Guidant recalled 11 ICD models on June 24, several of these are no longer manufactured.

Guidant’s McCoy: Upward momentum.

By all accounts, the market return of Guidant’s recalled ICDs came much sooner than expected. Such a quick turnaround is considered likely to minimize any loss of market share, particularly since the company claimed it would have inventory levels and prerecall implant rates fully restored by the end of August. “Our progress toward full inventory availability is ahead of schedule,” said Fred McCoy, president of Guidant’s cardiac rhythm management division. “Already we have achieved an inventory position to meet all current implant demand and to replenish customer inventory.”

ICDs represent a $4.7 billion market in the United States, where Guidant is the number two manufacturer, following Medtronic Inc. (Minneapolis). At the time of the recall, it was widely speculated that number three, St. Jude Medical Inc. (St. Paul, MN), would be a prime beneficiary of any fallout from Guidant’s ICD problems.

Continuing August’s good news, Guidant received FDA approval of the first device in what the company calls its ‘next generation’ of ICDs, the Contak Renewal RF and its Zoom Latitude wireless programming device. The wireless system is designed to save physicians and patients time during implant and at follow-up, with device interrogations that Guidant says can be three times faster than its previous programming wand. In addition, Guidant’s wireless communication technology removes the programming wand from the sterile implant field. The Contak Renewal RF and Zoom Latitude wireless programming devices are scheduled to be introduced to the U.S. market in the fourth quarter of this year.

Commenting on the product approvals, Guidant’s McCoy said, “The Contak Renewal 3 RF and Zoom Latitude programmer represent a new era in device management . . . and demonstrate Guidant’s ongoing commitment to provide innovative technologies designed to deliver physician convenience and patient benefit. These approvals are tangible evidence of Guidant’s efforts in working with FDA to bring new products to market in a timely fashion.”

Guidant’s recent good news was not limited to its cardiac rhythm management products. The company’s somewhat-flagging stent development program received a major boost from FDA when the regulatory agency approved the expansion of its Spirit III U.S. clinical trials for the Xience V drug-eluting coronary stent. Although Guidant’s cobalt chromium multilink Vision coronary stent platform has long been highly regarded by physicians and industry analysts, the company has experienced a number of setbacks in successfully combining the platform with drug-eluting technology. Spirit III trials will compare the safety and efficacy of Guidant’s everolimus-coated Xience V stent against the Taxus paclitaxel-coated stent from Boston Scientific Corp. (Natick, MA).

Guidant has not provided further information about its development plans for Xience V or any indication of when it expects to seek market approval for the device. At present, J&J’s Cypher and Boston Scientific’s Taxus are the only drug-eluting coronary stents approved for the U.S. market. In addition to Guidant, other U.S. device manufacturers with similar products in various stages of development include Medtronic, Abbott (Abbott Park, IL), and Conor Medsystems Inc. (Menlo Park, CA).

Guidant’s device recalls led many industry analysts to speculate about possible effects on the company’s pending acquisition by J&J. Many analysts thought that J&J would seek a renegotiated price, and a few even raised the possibility that the world’s largest medical device manufacturer would walk away from the deal, particularly if there were any additional damaging disclosures.

Yet Guidant’s timely and diligent response to the recalls and its ability to quickly gain ICD market reapproval from both European and U.S. regulators appears to have restored a great deal of the company’s regard among physicians, investors, and financial analysts alike. Now the pendulum of opinion seems to have swung in favor of the acquisition by J&J going through as originally structured last December, when it was first announced.

The proposed merger moved a step closer to reality following approval by European regulators, with the stipulation that the combined company sell off some business units to ensure fair competition. Specifically, the European Commission said the merged company must divest itself of either J&J’s or Guidant’s endoscopic vessel harvesting unit, Guidant’s endovascular business in Europe, and J&J’s European steerable guidewires unit. J&J has indicated its intent to comply with the divestiture request.

The only remaining barrier to completion of the acquisition is approval by the U.S. Federal Trade Commission, which is expected in October.

With its ICDs back on the market, expansion of its U.S. drug-eluting coronary stent trials, approval of a next-generation heart synchronization device with wireless programming, and European approval of its acquisition by J&J, Guidant and its stakeholders have to be pleased with developments during August. Now, on to September.

Canon Communications LLC

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