Guidant Acquires Cook
Guidant (NYSE: GDT) announced an agreement to acquire privately held device manufacturer Cook in a deal valued at $3 billion in stock. Guidant is most interested in acquiring Cook's drug-eluting coronary artery stent system, which the two companies are already jointly developing.

Blood flow blockages in coronary arteries often lead to myocardial infarction (heart attack), unstable angina (pre-heart attack), and sudden cardiac death. Coronary artery stents are medical devices that prop open arteries in patients with such limits to coronary blood flow.

Stents deployed to relieve blood flow limitations are sometimes blocked by cells and tissue that creep into them, a process called in-stent restenosis. Several companies are developing stents that are coated with drugs that both prevent and treat initial coronary occlusion and prevent and treat restenosis.

The leading drug-coated stent is Johnson & Johnson's (NYSE: JNJ) Cypher Sirolimus-eluting stent. At the American College of Cardiology meeting in March 2002, JNJ presented data that showed that this drug-coated stent prevented virtually all in-stent restenosis in a 24-month trial. This translated into real clinical value - the recipients of the drug-coated stent had an event-free survival rate of 94% versus a 71% event-free survival rate for recipients of the normal, uncoated stents. The data were so powerful that it is conceivable that nearly all of the $2 billion stent market will eventually shift to drug-coated stents. Given their marked benefit, drug-coated stents are likely to gain rapid reimbursement approval at a higher price, and should boost the stent market to close to $4 billion in a few years.

In 2001, Guidant generated $819 million in sales (30% of total sales) from stents. To expand this market, Guidant chose to jointly develop, with Cook, a stent coated with a chemotherapeutic that prevents cells from growing into the stent. The drug, paclitaxel, has achieved considerable success most notably in ovarian cancer as Taxol (sold by Bristol-Myers Squibb [NYSE: BMY] and Mylan [NYSE: MYL]).

Cook had obtained paclitaxel-coating patent rights from Angiotech (NASDAQ: ANPI). The jointly developed stent has performed well in clinical trials. However, Boston Scientific, which also licensed paclitaxel-coating patent rights from Angiotech, argued that Guidant had infringed on the co-exclusive licensing agreement that Boston Scientific and Cook have with Angiotech. The initial court ruling was in Boston Scientific's favor, putting the long-term future of Guidant's stent business in doubt. By acquiring Cook, Guidant will likely circumvent this legal problem and gain the unfettered right to develop and market a paclitaxel-coated stent.

While Johnson & Johnson is still in the lead, it is likely that Guidant and Cook's paclitaxel-eluting stents and Boston Scientific's paclitaxel-eluting stents will be comparable in terms of specific, if not overall, treatment benefits and magnitudes of treatment benefit. Guidant has been very successful at competing with Johnson & Johnson and Boston Scientific in a variety of markets. Therefore, assuming this acquisition is consummated (the acquisition is contingent on several legal and clinical aspect of the jointly develop drug-coated stent), Guidant should be able to be a strong competitor in this expanding market. 

BTECH NEWS
by Leon Henderson, M.D.
Bennett Weintraub, Ph.D.
Christopher Martin
www.btechnews.com
July 31, 2002

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BTECH NEWS, published by Btech Investor, Inc., highlights selected events in the life sciences sector that the Btech Investor team believes are particularly relevant to biotechnology investors. The Btech Investor team combines scientific, clinical, and business experience to perform comprehensive analysis of the biotechnology industry and to identify future industry leaders.

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