The drug-eluting stent market in the U.S. used to be really easy to figure out. Either Johnson & Johnson (NYSE: JNJ) was winning or Boston Scientific (NYSE: BSX) had the lead. Two players; super simple.
But then the next generation of stents hit the market. Medtronic's (NYSE: MDT) Endeavor was followed quickly by Abbott Labs' (NYSE: ABT) Xience V, which it acquired when Boston Scientific and Abbott split up Guidant. As part of the deal, Boston Scientific was allowed to market the Xience V under its own brand name, Promus.
Four players are harder to follow than two, and it doesn't help that Medtronic's fiscal year (and quarters) are offset from the rest of the group. Still, it's clear that Xience is winning in the U.S. and Johnson & Johnson is fading quickly.
But no technology stands still, and the third generation of stents has started to emerge. Boston Scientific went platinum with the Promus Element and more recently with the Taxus Element. Both "Element" versions use platinum chromium alloy for increased strength, but are coated with different drugs: Promus uses everolimus, the active ingredient in Novartis' (NYSE: NVS) Afinitor, and Taxus uses paclitaxel, the active ingredient in Bristol-Myers Squibb's (NYSE: BMY) Taxol.
Johnson & Johnson is trying to get back into the party through its next-generation stent, Nevo, while Medtronic stuck with copying its names from inspirational posters and followed up the Endeavor with the Resolute.
Things certainly got complicated really quickly.
If only butting heads could help figure this out
To determine the winner, pretty much every company is running head-to-head trials against competitors' previous-generation stents.
At the EuroPCR meeting this week, Abbott has claimed victory for its Xience over Boston Scientific's Taxus. Medtronic wasn't that bold and only tried to prove that it's new Resolute drug-eluting stent was similar to the Xience; "non-inferior" is the scientific term for "at least as good."
Johnson & Johnson's trial testing the Nevo stent against Boston Scientific's Taxus Liberte hasn't been going on long enough to show a clear effect, but Johnson & Johnson is happy with the way the data is trending in favor of the Nevo.
Boston Scientific just started a trial pitting Promus Element against Abbott's Xience Prime; results are slated to be out in 2012.
If you're thinking that it might be a good idea to set up a giant grid to figure out this epic transitive-property-of-inequality-puzzle, I wouldn't bother. If current history is any indication of how innovative the companies are, there's never going to be a winner because the next generation of stents will just come in and beat the current competition.
What's an investor to do?
Investors should keep an eye on the next-next-next-generation stents, of course.
The next major step toward innovation seems to be bioresorbable stents that break down after doing their job of propping open the blood vessel. Since they don't remain in place like metal stents, blood vessels treated with bioresorbable stents end up being more flexible, which may decrease the rate of renarrowing of the blood vessel at the site. Abbott's stent, which doesn't seem to have a name beyond bioresorbable vascular scaffold (BVS), looks good so far in early clinical trials.
The other major thing that stent makers can change is the drug that covers the stent to help control renarrowing. Privately held Elixir Medical, for instance, is developing a stent using novolimus and another using myolimus. Ariad Pharmaceuticals (Nasdaq: ARIA) has licensed its cancer drug ridaforolimus to two different stent makers.
Making money the hard way
Keeping ahead of the curve isn't always easy. Identifying the winners before they happen is difficult in any high-technology field. And that's certainly true for drug-eluting stents.
But if you pick the right companies, getting ahead of the curve can also be very profitable. Unfortunately, the major stent makers are also major players in other areas, so the benefit from stents will have to be averaged with other areas of their business.
Of the four, Abbott seems to have good growth prospects both for its stent business and in other areas like its anti-inflammatory, Humira. If you're looking for a little more diversity, you can't go wrong with Johnson & Johnson; at least not usually.
