Johnson & Johnson will cut back on manufacturing and development of heart stents, even halting sales of its best seller, as tougher competition and a flat market have sharply cut into sales.
J&J also will scrap jobs, shutter two factories and take a charge of $500 million to $600 million as it restructures its Cordis heart device business.
The New Brunswick, N.J., company said Wednesday that Cordis will stop making Cypher and Cypher Select drug-coated stents by year-end, and it will also stop development of a new drug-coated stent called Nevo. Cordis will focus on other areas of the heart device market where there is greater demand.
Stents are mesh-wire tubes used to hold arteries open after they are surgically cleared of fatty plaque. Newer generations of stents are coated with drugs to prevent scar tissue from forming over the tube and blocking the artery months after the procedure.
Cypher once was the market leader and is still J&J's top-selling stent, but its market share has fallen steadily over the last several years as rivals Abbott Laboratories, Boston Scientific Corp. and Medtronic Inc. have introduced new stents and grabbed customers.
The field is so competitive that the companies have repeatedly sued each other over alleged patent infringements. Just last Tuesday, a federal appeals court affirmed a decision voiding four J&J stent patents in a lawsuit brought by Boston Scientific.
Besides the increased competition, sales of all stents have been hurt by studies questioning whether patients getting stents inserted in heart arteries fare better than those who just take medicines to prevent heart attack or stroke. In addition, some patients who've lost health insurance due to the recession likely have put off the expensive surgery, opting for heart medication instead.
The company will eliminate up to 1,000 jobs as it consolidates a research and development team and shuts two manufacturing plants, the San German, Puerto Rico plant where Cypher is made and one in Cashel, Ireland, where Nevo was to be manufactured.
J&J will continue to make stents for blood vessels outside the heart, particularly in the legs and feet, and is developing one to treat life-threatening aneurysms in the abdominal aorta, a major vessel that distributes blood to arteries below the waist.
In early trading, J&J shares fell 14 cents to $66.97.
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