Guidant moves to bolster market confidence

13 November 2005

Reeling from the safety warnings and product recalls for almost 200,000 pacemakers and 88,000 heart defibrillators, and numerous lawsuits, Guidant announced the establishment of a Design for Reliability Team. The three team members recently served as system safety experts examining the NASA space shuttle program.

The Team will perform an "independent and thorough assessment of the new cardiac rhythm management product development process, with a focus on recommending further improvements in design for future product generations". The team will review the life cycle of product development, from initial concept planning to full production release in the manufacturing phase.

The association with the NASA investigation, however, was labelled as one of the five dumbest things on Wall Street last week by TheStreet.com.

Guidant last week also published an updated Cardiac Rythm Management Product Performance Report that provides confirmed failure details by product family. This includes descriptions of clinical manifestations and causes for patterns of failures. Additionally, device failures are further characterized to describe therapy availability. The Report can be found at www.Guidant.com/physician/ppr/

Meanwhile, opinion in the American press favours an out-of-court settlement for Guidant's lawsuit against Johnson & Johnson to force the takeover started last December. This is not least due to 83-year old federal judge Robert W Sweet's tendency to persuade parties to settle matters before going to court.

The Johnson & Johnson move to acquire a medical device manufacturing capability is also seen as the beginning of a trend for pharmaceutical companies to re-enter the medical device markets to bolster pharmaceutical sales and to take advantage of drug-delivery technology.

This also means that, should the merger not go ahead, Guidant is unlikely to have problems finding another buyer, though it is unlikely to be at last December's $76 per Guidant share. Guidant's stock reached a low of around $56 a week ago. But it was labelled a good buy by some analysts and subsequently rose to $58.71 at Friday's close.

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