What’s Abbott Xience Stent Worth? Rise to $70 a Share

Abbott Laboratories may seize more than a third of the $4 billion market for heart stents when its Xience is approved. That’s enough to drive the shares to a 10- year high.

Sales of drug-covered stents used to prop open clogged arteries plunged 40 percent, and doctors turned to older, bare- metal versions, after studies in 2006 showed they can trigger clots and increase death rates. Research released in the last year found Xience is more effective, persuading doctors to resume use of the drug-coated products.

Abbott anticipates U.S. approval of Xience in mid-2008. The performance of the device in patient tests is likely to help it grab market share from Boston Scientific Corp., Johnson & Johnson, and Medtronic Inc. As a result, Abbott may surge 33 percent to $70 a share over the next year as doctors embrace Xience, said Jan David Wald, a Stanford Group analyst. Stephen O’Neil, with Hilliard Lyons in Louisville, Kentucky, says Abbott may reach $75 within two years because of the stent.

“With Xience, Abbott has gone from being a wannabe to one of the most important players,” said Wald, a Boston-based device analyst, in an interview. “Abbott is going to trade as a stent company and rise on the success of Xience.”

Xience will garner about 36 percent of the global drug- coated stent market by next year, said Larry Biegelsen, an analyst with Wachovia Capital Markets in New York, in a note to clients. Xience will add about $1.5 billion, or 46 cents a share, to Abbott’s earnings by 2012, he said. The market peaked near $5 billion in 2006.

Shares

Abbott, of Abbott Park, Illinois, rose 82 cents to $53.57 at 4 p.m. in New York Stock Exchange composite trading. The company dropped 6 percent in the last 12 months.

Technology advantages will make Xience the top seller, said Samin Sharma, director of interventional cardiology at Mount Sinai Medical Center in New York. Sharma, who implants about 5,000 stents a year, said 60 percent of his procedures will use Xience.

“Abbott is the clear winner,” Sharma said in an interview. “Xience is the closest to the ideal stent available for the next several years.”

Medtronic spokesman Joe McGrath declined to say how much market share Xience may command. “In order to gain any market share, it will have to come to market first,” McGrath said in an interview.

Sharing the Gain

Boston Scientific will share some of Abbott’s gain because the company will sell a version of Xience called Promus, said spokesman Paul Donovan.

J&J spokesman Chris Allman also wouldn’t comment on how much market share Xience would grab. J&J’s Cypher stent “has the largest clinical body of evidence of any drug-eluting stent,” he said in a statement.

Stents are tiny metal mesh tubes that keep arteries open after doctors clear clogged vessels in a procedure called a balloon angioplasty. The devices are coated with a chemical polymer and drugs to prevent the growth of tissue re-blocking the artery, the main complication of older bare-metal models.

The $3,000 drug-coated stents almost completely displaced bare-metal versions in the U.S. in 2005. Boston Scientific’s Taxus and J&J’s Cypher, both drug-coated products, were used in almost 9 out of every 10 U.S. procedures in the first quarter of 2006.

Doctor Attitudes

J&J and Boston Scientific have both said the proportion of stent surgeries done with drug-covered versions rose in the first quarter of 2008, the first hint new data is already changing doctor’s attitudes.

Each percent rise in the share of operations done with coated stents adds $30 million to the U.S. market, and every percentage gain in the number of total procedures adds another $15 million, according to Boston Scientific research.

“The market is turning around now that the data is almost overwhelmingly about the safety of drug-coated stents,” said Gregg Stone, head of cardiovascular research at Columbia University Medical Center in New York, in an interview. “By the end of the year we will easily see more than 70 percent of surgeries done with drug-coated stents.”

Drug covered stents won’t be used quite as much as they were before clot risks were revealed because some patients won’t be able to take anti-clotting drugs such as Bristol-Myers Squibb Co.’s Plavix, said A. Michael Lincoff, vice chair of the department of cardiovascular medicine at the Cleveland Clinic in Ohio, in an interview.

`Not a Good Candidate’

“There’s a real risk of clots when patients stop Plavix, and any patient likely to be noncompliant with that therapy isn’t a good candidate for a drug coated stent,” Lincoff said.

In 2009, U.S. stent sales will rise 5 percent to $1.7 billion, Biegelsen says. Xience, and a version of the same product marketed by Boston Scientific under the name Promus, will gain 40 percent of that revenue, he said. Medtronic’s drug- coated Endeavor stent will grab 20 percent, and Taxus will take 29 percent, leaving Cypher with 11 percent.

Bruce Nudell, an analyst with UBS Investment Research in New York, paints a slightly more optimistic picture of the longer term prospects for Cypher and Taxus, though he too sees the older devices losing share to new competitors.

Boston Scientific’s share of the U.S. market will drop to 32 percent by 2010, from 55 percent last year, Nudell said in a note to clients. By 2010, Abbott will capture 30 percent of the market, and Medtronic will gain 20 percent, leaving about 18 percent to Johnson & Johnson.

Boston Scientific and Johnson & Johnson say they have long- term data that will help them compete with Abbott and Medtronic. New studies show their stents are particularly effective for high-risk patients, such as those with diabetes.

SOURCE: Bloomberg