FDA Lifts a Boston Scientific Alert, Clears Way for New Product

The Food and Drug Administration has lifted a warning letter that had been hanging over the Guidant division of Boston Scientific Corp, the medical-device maker said yesterday, freeing the Natick company to introduce products that had been blocked by quality-control problems.

FDA inspectors slapped Guidant Corp. with the warning in December 2005 after they found numerous problems with quality control and other procedures at the St. Paul, Minn., factory where Guidant made implantable defibrillators. The warning came after a series of recalls of Guidant’s heart-rhythm devices, which had failed to deliver life-saving shocks to several patients.

Such warning letters can weigh heavily on medical-device companies. Until the underlying issues are resolved, the FDA will not approve key new products.

Boston Scientific acquired Guidant for $27 billion soon after the FDA issued its warning, and since then has sunk significant resources into fixing Guidant’s manufacturing and quality problems. Chief executive Jim Tobin has said he is spending as much time at Guidant’s Minnesota facility as he does at Boston Scientific’s headquarters.

“Since I run the company, I get to appoint who runs Guidant, so I appointed me,” he told the Globe in January.

In November and December, a year after issuing the Guidant warning, FDA officials re-inspected Guidant’s facility, assessed new quality-control systems put in place by Boston Scientific, and did not observe any problems, the company said yesterday.

“We are very pleased with the FDA’s conclusion,” Tobin said yesterday.

A spokeswoman for the FDA said the issues raised in the warning “appear to have been adequately addressed,” and the agency will continue to monitor Guidant’s products and recalls.

Still in force, however, is a companywide warning letter Boston Scientific received from the FDA in January 2006. That letter applies to its drug-coated stent business and the rest of the pre-Guidant areas of the company. Executives have said they do not expect the warning issue to be resolved until the second half of this year. Until then, the company will be prevented from receiving agency approval of any new models of drug-coated stents.

Boston Scientific’s chief competitor in the $5 billion drug-coated stent market, Johnson & Johnson, is also operating under a warning letter.

Investors appeared cheered by the Guidant news yesterday, with Boston Scientific stock gaining 99 cents to close at $16, a 6.6 percent increase.

Guidant’s manufacturing problems, and Boston Scientific’s confidence in its ability to fix them, played a key role in the acquisition of the troubled heart-device company. Guidant was set to be bought by Johnson & Johnson until malfunctions in its devices triggered a series of recalls, causing Johnson & Johnson to sharply drop the price it was willing to pay for the company. Boston Scientific then jumped in and outbid its rival.

Since then, however, Guidant has continued to have problems, including a recall of 50,000 pacemakers and other devices in June, and a recall of 79,000 devices last week because their batteries can potentially run down prematurely.

Boston Scientific, and many analysts, had predicted robust growth for implantable defibrillators, which can save the lives of patients at risk of sudden heart stoppage and cost more than $25,000. But the troubles with Guidant’s devices, as well as those made by competitors, have steered doctors away from the devices and depressed sales.

In a note to investors, Deutsche Bank analyst Tao Levy said the FDA’s move would help Boston Scientific rebuild its share of the heart-device market, and also offered “a psychological positive” for the company’s stock, which has recently been buffeted by a sales decline in drug-coated stents.

SOURCE: THE BOSTON GLOBE