Stent Recall Stings

Shares of medical device maker Boston Scientific (NYSE:BSX) dropped 6.6% to $33.90 yesterday after the company expanded recalls of its blockbuster drug-eluting Taxus stent to include another 3,000 units. Those shares are down another 6% to $31.95 today.

Since the recalls began July 2, Boston Scientific has recalled about 96,000 stents, 11,000 of which are the company's Express2 bare metal stent and the rest of which are the drug-coated Taxus variety. As reported earlier, the problem is not the stent itself but the delivery system. Basically, there were "characteristics in the delivery catheters" that in some cases "had the potential to impede balloon deflation."

According to Boston Scientific, the balloon deflation problem for the Taxus system is known to have caused one death and 22 serious injuries. The company has stressed, however, that patients who already have the Taxus stent in place are not at risk and that the manufacturing problem has been corrected.

Since its last recall July 16, the company has shipped more than 100,000 new Taxus stents without problem.

Since its introduction on March 8, Taxus has dominated the drug-coated stent market, claiming 70% market share, leaving Johnson & Johnson's (NYSE:JNJ) Cypher drug-eluting stent with 30% of the market. Meanwhile, products from competitors Guidant (NYSE:GDT) and Medtronic (NYSE:MDT) are still some time away from Food and Drug Administration approval.

Boston Scientific's stock had been on an upward trajectory until the recalls began, reaching a high above $46 per share. But now, the fact that the safety of Boston Scientific's product been called into question (though not the actual stent itself) may at best cause it to lose short-term market share to J&J's Cypher stent -- but during a crucial window of time where Taxus and Cypher are the only competitors.

Fool contributor Jeff Hwang owns none of the companies mentioned above.