The Stent Leaders Battling to Rule the Future

While medical device maker Boston Scientific (NYSE: BSX  ) may not dominate the industry like its bigger rivals, there's one market this company has dominated in recent years: coronary stents. But even this bastion of safety for the company has shown weakness lately -- both for Boston Scientific and as an overall market. The device maker's making moves to combat the stent market decline, but will it be enough to keep Boston Scientific at the top of this vital industry?

Taking a step forward
Boston Scientific has succeeded well with drug-eluting stents, or DES, in recent years. In the past quarter, the company's DES lines sold $283 million, or more than 16% of total revenues. Unfortunately, that number wasn't enough to continue growth; like the company's overall sales, DES revenue was down significantly from 2011's third quarter. DES sales that quarter came in a whopping 32.5% higher.

The device maker isn't just sitting on its hands while this happens, however. On Friday, Boston Scientific announced it had enrolled the first patient in its Evolve II clinical trial for its Synergy stent. The Synergy stent already received CE Mark approval in Europe, so this latest trail will push to support Food and Drug Administration and Japanese regulatory approval.

Why's this stent so important? It's part of the latest evolution of the market -- stents with bioabsorbable coatings that are absorbed into the body over time. The technology reduces complications, and while it's still very much in development, it's a huge step forward from traditional drug-eluting stents that could lead to late complications. This isn't the first test for Synergy, either: Boston Scientific ran the product through an earlier Evolve trial that showed outcomes similar to the company's Promus DES, which sold more than $650 million in 2011.

It's good progress for Boston Scientific -- but it's not the only competitor in this space.

The big kid on the block
Health care giant Abbott Labs (NYSE: ABT  ) also has a stake in the DES game, and this company has a lot of experience. Ever since Johnson & Johnson (NYSE: JNJ  ) left the market back in 2011, Abbott's been the largest player in the industry. Abbott's Xience stent has also been the top-selling product in the DES market for several years, with sales first eclipsing $1 billion since 2009 and rising ever since. Through the first nine months of 2012, Xience has recorded nearly $1.2 billion in revenues, posting 3% year-over-year growth.

Abbott also has a candidate in the next wave of stents. Its product, called Absorb, launched in Europe earlier this year and fully absorbs into the bloodstream. Abbott plans to submit the stent for regulatory approval in the U.S. by 2015, but its early launch in Europe hurts Boston Scientific's chances. The Synergy stent is expected to launch in only a limited release next year, with a full commercial release due by 2014. While Boston Scientific won't have too many competitors in the next wave of stents -- major stent rival Medtronic (NYSE: MDT  ) has yet to move into bioabsorbable stents -- Abbott's size and resources will give it an edge.

There's one more hurdle forming for Boston Scientific. Because Abbott's spinning off its pharmaceutical division into new company AbbVie, the health care giant will likely experience some turbulence as it adapts to focusing on medical devices, nutritional products, and generic drugs. However, the move will give Abbott the ability to focus in on medical devices such as stents as the company is less conglomerated -- a big worry for a smaller player like Boston Scientific, given Abbott's sheer size (even without its pharmaceutical branch).

Promising future, sluggish present
Unfortunately for both these companies, the current stent market is an uncooperative one. While Boston Scientific and Abbott do have the largest market shares of the global DES industry by far -- 33% and 31%, respectively, of the $4.6 billion market in 2010 -- market growth has slowed  as prices drop. It is expected that the market will pick back up in coming years and eclipse $6 billion by 2015, but there's further news that could complicate the matter.

A report came out earlier this year stating that doctors have been overusing drug-eluting stents in patients and could reduce costs by more than $200 million. While that may seem like an everyday issue in the health care field, with the fiscal cliff looming -- and with hospitals increasingly under tightening budgets and searching for ways to loosen financial assets -- some medical professionals could be tempted to use cheaper stents in cases with reduced risk.

Regardless, bioabsorbable stents like the Synergy and Absorb are the future of the coronary stent industry. If the industry does pick back up, expect Boston Scientific and Abbott to remain market leaders into the future. Like with its Xience stent, Abbott should take the lead with Absorb: Not only has the company beaten Boston Scientific to a European launch, but the Absorb stent is fully  bioabsorbable, unlike the Synergy's mere bioabsorbable coating. I'd expect the Synergy to do well, but Abbott's product has a technological advantage that leaves nothing behind in the body.

Given how well Abbott has done with Xience -- and the company's AbbVie spinoff that will let it focus more on medical devices -- it's foolish (with a small f) to bet against Abbott.

The right choice in stents
Boston Scientific and Abbott are leading the way for a new era of stents, but only Abbott has the right combination of company stability and technological progress to emerge on top. Both the Synergy and Absorb should do well in advancing the companies' products into the future, particularly if the stent market picks up and hospitals can cut costs without greatly impacting the industry. However, if you want one company to believe in for the future of stents, Abbott's the right pick for you.

Despite its rising fortunes in stents, however, Abbott's coming spinoff will leave the company without its massive blockbuster drug, Humira. It's a confusing event to understand, with many investors left wondering what to do with these two stocks once they're separated. To help investors better understand the upcoming event, the Fool has created a brand new premium report outlining both Abbott Labs and its spinoff, AbbVie. Inside, we outline all of the must-know opportunities and risks facing both companies, so make sure to claim this 2-for-1 report by clicking here now


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