Medical Device Link.

Originally Published MX March/April 2006

BUSINESS NEWS

While the bidding war raged over the acquisition of Guidant Corp. (Indianapolis), it was generally acknowledged by members of the investment community that whichever company emerged as the victor would have to spend a great deal of time and money addressing Guidant's widely reported product quality problems. Yet just hours after Boston Scientific Corp. (Natick, MA) bested rival suitor Johnson & Johnson Inc. (J&J; New Brunswick, NJ) and nailed down its $27.2 billion bid, the company learned that, in addition to cleaning up the problems at Guidant, it now has to get its own house in order.

In a strongly worded warning letter from FDA's Center for Devices and Radiological Health (CDRH; Rockville, MD), Boston Scientific was notified of "serious regulatory problems" with medical devices produced at its facilities in Natick, MA; Maple Grove, MN; and Spencer, IN. The letter also referred to three earlier warnings regarding the company's production plants in Watertown, MA; Glens Falls, NY; and Quincy, MA. According to FDA, Boston Scientific's inability to address these issues in a timely manner indicated a "systemic problem with the entire corporate quality management system."

Schultz

According to CDRH director Daniel Schultz, MD, the warning to Boston Scientific was only the third time in FDA's history that the agency had issued such a broad-based warning to a medtech manufacturer. Schultz called on Boston Scientific "to resolve these serious violations promptly, and to do it not as it relates to specific products, but rather on a corporatewide basis."

Boston Scientific president and CEO James Tobin described the warning letter as an "embarrassment" and said, "We will work closely with FDA to resolve these outstanding issues, and we believe we are on track to do so promptly." Less than two weeks after receiving the warning letter, the company met with FDA representatives in a session that Tobin described as "productive."

Of particular concern to Boston Scientific is the stipulation that FDA will not approve any new products until the company's quality system is in order—a goal that Tobin pledged to reach by the end of June. FDA's provision delays the release of two stents for carotid artery applications that were scheduled for release in the second quarter. However, the U.S. market rollout of Liberté, the company's next-generation drug-eluting coronary stent, is still expected by October of this year.

Although the timing of the warning letter raised concerns in the investment community, FDA said it had nothing to do with Boston Scientific's merger with Guidant, a transaction the company still hopes to close by the end of the current quarter. However, the deal has yet to gain antitrust clearance from either the Federal Trade Commission or European regulators, and still needs to be approved by the shareholders of both companies.

Boston Scientific's acquisition of Guidant will provide the company access to the $10 billion market for heart rhythm management devices.

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