Johnson Johnson announced on Wednesday that it would stop manufacturing drug-coated heart stents by the end of the year, abandoning an intensely competitive $4 billion market after a series of setbacks for the company and rising concerns about the use of stents in some patients.
The company is expecting to take a $500 million to $600 million restructuring charge this quarter and to trim 900 to 1,000 jobs this year.
The announcement by the company and its subsidiary Cordis, long expected by some analysts because of a dwindling market share, opens up more sales possibilities for three competitors.
The use of heart stents is being challenged as unnecessary for some patients. Stents are tiny devices inserted through blood vessels to keep arteries open in the heart. But research in recent years has suggested that stents are overused by doctors and that drugs may be a cheaper, safer and more effective way for many patients to avoid heart attacks or strokes.
The emerging concerns, the recession and pricing pressures have caused a fall-off in stent sales. The worldwide market for coronary stents dropped to $4.2 billion last year, from $5.3 billion in 2006, according to the investment house Leerink Swann.
Cordis’s sales of drug-coated heart stents fell to $627 million globally last year, from $2.6 billion in 2006. By the end of the year, Cordis will stop manufacturing its Cypher stent — the first drug-coated stent to be approved by the Food and Drug Administration in 2003 — and stop researching a new one called the Nevo stent, the company said in a statement Wednesday.
Seth Fischer, worldwide chairman of Cordis, said the decision was prompted by “changing dynamics” and price pressures in an increasingly competitive market.
“There’s no question that our market share has declined in the last several years as competitors have joined the market,” he said in a telephone interview. “We felt that we could turn our attention toward other potential areas that would enhance cardiovascular health for patients.”
Mr. Fischer also said J. J.’s losses in patent cases, including an appellate court decision last week, had a significant effect. “Unlicensed competition” has eroded its pricing, sales and market share, he said.
Cordis will cut 900 to 1,000 positions by closing its Cypher stent manufacturing facility in San Germán, Puerto Rico, and its Nevo stent plant in Cashel, Ireland, and trimming research, sales and marketing, a company spokeswoman, Sandra Pound, said in a telephone interview.
Johnson Johnson, based in New Brunswick, N.J., has suffered a series of consumer product recalls largely because of manufacturing problems. The decision to get out of the stent market also appeared to hurt the company in the eyes of investors. The stock price dipped by 1.4 percent to $66.16 on Wednesday.
Its departure should help the market leaders, Boston Scientific and Medtronic, which are each introducing new drug-eluting stents in mid-2012, according to an investor note from Barclays Capital.
Boston Scientific stock rose 2.8 percent to $6.93, while Medtronic declined by nearly 1.25 percent, to $37.92. Abbott Laboratories, which also sells heart stents in the United States, held even in the stock market.
J. J. held about 15 percent of the worldwide market share in drug-eluting stents. Barclays said that share was expected to drop to 10 percent this year and 7 percent in 2012.
Leerink Swann, in an investor note, said the company’s withdrawal was long expected and would both help other stent-makers and help Johnson Johnson focus on more profitable areas.
Article source: http://feeds.nytimes.com/click.phdo?i=12433576c5f34ff0fcf0b2bf24a23ad9
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