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Who is
Working to Create the Market?
Drug-eluting stents, a product with
an imposing name, have the potential to eliminate many heart surgeries. These
small tubes hold coronary arteries open and slowly release (elite)
pharmaceuticals after they are placed. By addressing a frequent side effect of
heart surgery and today's non-eluting stents, interim study results suggest
that the drug eluting stents appear "to have brought the cardiology community
to a moment of awe. Struggling to keep hold of their native skepticism, experts
are entertaining the possibility that the quarter-century battle with
restenosis since the first angioplasty procedure in 1977 may be ending."
(Walter Alexander, Cardiology Today, Oct. 2001)
Many
companies are working hard to bring these stents to market. The major players
include the Cordis division of Johnson & Johnson (JNJ), Guidant (GDT), and
Boston Scientific (BSX). Some of these have had very impressive results in
trials, including the amazing result of zero restenosis in at least one trial.
What
Is the Market?
Each year up
to 7 million people get some form of open chest angioplasty. This invasive
surgery is both expensive and dangerous. With stents, both risk and cost drop
substantially. However, in around a quarter of all stent placements, the
patient's blood vessel forms the equivalent of a plaque build up (restenosis),
clogging the artery and requiring open chest surgery to correct. Eliminating
restenosis can improve the quality of patient care substantially and reduce
costs dramatically.
Each stent is
likely to cost approximately $2500 to $3,000, and if clinical trials continue
with the same results, the new stents may quickly become the standard for care.
The drug-eluting stent market, which does not exist today, could blossom to $3B
per year in the United States within 24 months. (This is exclusive of the costs
involved in inserting a stent.) That rate of sales would make the new stent one
of the most successful medical devices ever.
How are
These Companies Working to Create That Market?
The most
successful and repeatable path to creating a new market is to solve a specific
problem that your prospective customers strongly feel. Another path is to pick
a less critical problem and then reduce the customer's cost of solving that
problem to the noise level. This is less likely to succeed. Repeat coronary
stent procedures are a substantial, strongly felt problem. The quote above,
including the word "awe," reflects the most common reaction to the possibility
of eliminating restenosis in stent procedures.
Doctors are
reluctant to prescribe what they do not trust, so a major component of market
success for medical products is establishing credibility, and that will be key
to creating a new market for these stents. Each company is conducting trials in
Europe and the United States, with the intent of using the trials to get
government approval as well as to build the data for credibility. Credibility
will come from previous comfort with the supplier and from superior results
from the trials. Guidant has the strongest following among doctors for the bare
metal coronary stents in current use, but had one trial fail this spring.
Cordis (a division of J&J) has the best trial results as of February 2002.
It's hard to do better than zero occurrences of restenosis. The demand for
drug-eluting stents may be so intense that a substantial lead to market
acceptance will translate into market domination. If so, J&J/Cordis is
positioned to achieve that domination.
What Is
the Benefit?
Surgeons will
insert perhaps a million stents in the U.S. this year. Of those, possibly
250,000 patients will develop restenosis within a few months and require
corrective surgery. Additionally, perhaps 100,000 cardiac patients will get an
open chest operation instead of a stent because the doctor thinks that the 25%
chance of restenosis outweighs, in that patient, the risks associated with a
bypass. To eliminate a quarter million surgeries outright, and to turn perhaps
100,000 major surgeries into more minor procedures is a substantial advantage
to those patients.
Cost works to
the advantage of this market as well. The average surgical cost is around
$10,000 per stent and $50,000 per open chest surgery, equating to a potential
cost avoidance of over $6 Billion. That will be of interest to the
organizations that have to pay for the operations.
Will the
New Market Work?
A critical
factor for success in existing markets is the skill of the supplier to handle
basic operational requirements. If the product does not work, won't ship on
time, or if customer service is inadequate, the market can fail.
In this case,
the companies know the operational issues and they are assembling almost all
the products from existing technologies (known stents, known drugs to elute
from them.) The sales teams are experienced, the mechanism to deliver the new
stents to market is in place.
This is a
clear connection of a good solution to a strongly felt problem, with known
customers. Our view is that the market will exist, and that one vendor will
quickly grab a dominant position in what will probably become a highly
profitable $3B plus business. J&J is positioned to return to dominance
here.
For more
information, please contact Peter Meyer at 831/439-9607 or Peter@MeyerGrp.com.
Copr. 2002 by the Meyer Group, all rights reserved. Much of the process used to
evaluate new markets is contained in "Creating and Dominating New Markets"
published by AMACOM in March of 2002.
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