1. The Coronary Stent Revolution A MT 5007 Project

2. SNAPS Group Members Chan Kah Inn, Darryl Choo Jun Quan, Stefan Bjorn Mattias Lindfors Phua Geok Bee (PanYumei) Tan Chye Huat Tang Shu Ling Soon Yew Boon

3. Presentation Outline Introduction to Coronary Artery Disease Evolution of Technologies for disease treatment PTCA as Disruptive Technology to CABG Coronary Stents: BMS, DES, Bioabsorbable stents Evolution of Stent Design Stent Industry Overview & Market Analysis Introduction to Abbott Vascular & SWOT analysis Challenges & Managing the Innovation

4. What is Coronary Artery Disease? A type of heart disease which occurs when the coronary arteries become narrow due to the build-up of fatty deposits called plaques Coronary arteries supply the heart with oxygen and nourishment

5. Disease Prevalence Grim Statistics Leading cause of death globally Estimated 17.3 million died in 2008 By 2030, almost 23.6 million will die yearly 80% of deaths occur in low and middle-income countries Source: WHO report Global Atlas on Cardiovascular Disease Prevention and Control, 2011

6. Distribution of Economic Wealth Blue Circled Areas on World Map Denote where current healthcare interventions are focused Strong Co-relation between Cardiovascular Diseases and Low per capita GDP

7. Drivers for Coronary Revascularization Technologies Evolution Demographics Ageing Population Increase of cardiovascular patients (Lifestyle changes) Demand for Technology Enhance Lifestyle Save life, Decrease pain, Improve health Lower morbidity and mortality rates

8. Evolution of Coronary Revascularization Technologies 1960s 1977s 1987 Today Coronary Artery Bypass Grafting (CABG) Invasive surgical procedure Arteries or veins from elsewhere in the patient's body are grafted to the coronary arteries Surgery is usually performed with the heart stopped, necessitating the usage of cardiopulmonary bypass

9. Evolution of Coronary Revascularization Technologies 1960s Percutaneous Transluminal Coronary Angioplasty (PTCA) 1977s 1987 Today Minimally Invasive procedure PTCA involves only a small incision through which a balloon-tipped catheter is threaded Upon reaching the point of blockage, the balloon is inflated to restore blood flow However, less effective compared to CABG Higher revascularization rate of 21% (CAGB 6%)

10. Performance - Lower restenosis rate Procedure rates /1,000 population, age 45+ S Curves for CABG and PTCA PTCA At the start, PTCA s efficacy is below that of CABG BUT CABG PTCA Market demand CABG Time PTCA has important key attractions Minimally invasive Fast recovery from procedure, short hospital stay Costs less PTCA was welcome by patients & adopted rapidly by cardiologists as gold standard for CAD treatment Incremental improvements eventually rendered PTCAs performance acceptable by main market

11. How does PTCA affect conventional medical practice? Disruptive in job scope of cardiologists Need to learn new skills and techniques Steep Learning Curve: Cardiologists specialized in coronary intervention Knowledge conversion Internalization: From Explicit to Tacit knowledge Learning & acquiring new tacit knowledge in practice

12. Evolution of Coronary Revascularization Technologies 1960s 1977s 1987 Coronary Stents Today Stents are tiny mesh tubes that are left in coronary arteries to keep blockages from recurring. Stents significantly reduced post-BA complications of restenosis

13. Evolution of Coronary Revascularization Technologies The success of Stents has subsequently bolstered it to become the dominant design in the coronary revascularization industry Battle for the stent market shares 1960s 1977s 1987 Stents WARS!! Today

14. Stent Design Race to develop the Ideal Stent: flexible trackable low unconstrained profile; radio-opaque; thromboresistant; biocompatible; reliably expandable; high radial strength; circumferential coverage; low surface area; hydrodynamic compatible.

15. Evolution of Stents Design Stent Prototype (1985) Establishment of Stents Radical Design (Early 1990s) Created from copper wire and solder by Dr Julio Palmaz [Innovator] J & J [First Mover] No Experience 1st COMMERCIALIZED Design Numerous Stent Designs Palmaz-Schatz Stents Construction Slotted Tube [Dominant Design] Wallstent Wiktor GR Flex-Stent Palmaz/Palmaz- Schatz elgiloy tantalum stainless steel stainless steel Form wire wire wire tube Fabrication braid bend bend EDM Geometry braid helical rings clamshell slotted tube Material

16. Evolution of Stents Design Flexibility = Deliverability or Contourability New Fabricating Technologies Photochemical (PC) etching --Addition of flexible connector [Incremental Innovation] Improvement Flexibility (1995) Laser micromachining Now preferred fabricating technique Improvement Geometry (1997) Open Cell / Closed Cell Stent Design Palmaz-Schatz stent and its successor, the Crown by J & J (A) Closed Cell = Inflexible = Not Good MultiLink stent by Guidant (E) Open Cell, Flexible = Good , Leading the Market for 5 years

17. Breakthrough appearance of stents eluting antiproliferative drugs Overall reduction in restenosis rate of between 70% to 85% Addition Drug Eluting Coating Modular Innovation

18. Image obtained via World Wide Web at http://www.art-stent.com/Images/Img-003-Big.jpg on 20 Oct 2011 Bioasorbable stent Stent support vessel with minimum local tissue aggravation Stent serves as scaffold construct that facilitates dynamic reconstruction of vessel tissue lining- Laws of Tissue Engineering (SH Teoh) Stent dissolves when tissue healing is almost complete Architectural Innovation

19. S-Curves - Stents Performance 2006: reported that DES pose an increased risk of late stent thrombosis Bioabsorbable Stent 2009: Abbott 2nd phase clinical trial Drug-Eluting Stent (DES) 2006: 1st phase clinical trial Bare Metal Stent (BMS) 2002: reduction of revascularisation, benefit of DES over BMS Effort / Time 1986 1994 2006

20. Stent Industry Overview

21. Quick Industry Facts The stent industry is highly competitive, due to historical average 85% gross margins (2005) Competition between firms mainly on basis of customer relationships and product quality High barrier to entry, requirements: Manufacturing capability, Relationships with physicians and FDA, large sales force and brand

22. Quick Industry Facts (cont.) High learning curves: FDA-approved manufacturing process hard to surmount No Network Externalities: Only externality being brand reputation Commoditization, mature market: DES stent price drop from 2003 price of $3000 to 2011 price of $1400

23. Acquisitions show that The stent market is maturing The decline in the number of operating companies and the price drops indicates a transition into a process innovation phase Merger and Acquisition is the only viable option for most small start-ups

24. Acquisitions 1995 Meadox Medicals SciMed Life Sys. Heart Technology Boston Scientific

25. Acquisitions 1996 MediSense Cordis Abbott J&J

26. Acquisitions 1997 Target Therapuetics Boston Scientific [3]

27. Acquisitions 1998 Schneider World. Boston Scientific [4] Depuy J&J [1]

28. Acquisitions 1999 Xomed Surgical Prod. Sofamor Danek Grp Medtronic Arterial Vascular Eng. Sulzer MedElectro Guidant

29. Acquisitions 2000 Knoll AG Abbott [1]

30. Acquisitions 2001 MiniMed Inverness Med Diab. Medtronic [3] J&J [2]

31. J&J[3] Acquisitions 2002 TibtecVirco Hokuriku Seiyaku VidaMed Abbott [2] Spinal Dynamics Medtronic [4]

32. Acquisitions 2006 Guidant The 2nd worst deal in US history according to Fortune Magazine, claiming that Boston Scientific paid too much for Guidant Boston Scientific [5]

33. Stent Industry Overview Drivers and Industry Learning

34. Technology and Industry Drivers Newer Drug Delivery Mechanisms Newer imaging Modalities for better Visualization Demographics Increased Efficiency and Efficacy Potential for Cheaper Stent Platforms? Introduction of New Drug Device Combinations

35. Technology: To contract or integrate? Dominant Design Paradigm: Paradigmatic Phase Stents are hollow, mesh-like, elongated structure, biocompatible, crimped on Strong Appropriability a stent delivery system Regimes of Appropriability Usually Strong Appropriability Efficacy of legal mechanisms of protection Complementary Assets: usually Specialized/Cospecialized assets Vertical (Dis)integration Channel Strategy Factors include time-to-market, price of stent (buy or make), controlling the quality of stent, incentives and options, etc. Complementary Assets Generic Specialized Innovator captures most of the value. Innovator & owners of specialized assets share value. Contract/ Outsource Integrate

36. Network of Learning & Innovation Locus of innovation of stents -- found in networks of learning Large-scale reliance on inter organizational collaborations Dedicated Invest / work closely with universities Keen eye on potential technology development Clinical Trials / Evaluation with research hospitals Purchase Rights to Universities ideas Research Institutes & Universities Exploration New radical developments Knowledge Innovation Vascular Firms Established Pharmaceutical Firms $$$ Regulatory Savvy Inadequate facilities for Basic R &D Manufacturing Marketing / Licensing Supply / Distribution Mergers & Acquisition Exploitation

37. Abbott Vascular Division of Abbott (nutritional & pharmaceutical products) Global Leader: Cardiac & Vascular Care products HQ at Northern California Acquired Guidant vascular device division in 2006 Flagship product: XIENCE V (DES)

38. Abbott Vasculars Success Acquired Guidants vascular device division in 2006 with the Xience V DES technologies, patent assigned to Abbott Strategic move to gain entry into the coronary stent market Pursued R&D (clinical trials) on Xience V and Ziomaxx DES. Plans were to launch both stents & grab market share in the rapidly growing DES market In 2006, clinical trial showed Xience V as superior to Taxus DES by Boston Scientific Abbott withdrew Ziomaxx DES development program, focused efforts for immediate launch of Xience in European countries, followed by launch in the US. Time-to-market urgency crucial to stay ahead of competitors

39. SWOT Analysis Industry Leader Global Presence Heavy investment in R&D for product innovation Investment in Training & Education Leverage via relationship with Industry Professionals Excellent clinical trial results for Xience V (DES), shown to be superior to Taxus DES by Boston Scientific S W O T

40. SWOT Analysis Product Recalls: Powersail Recent negative limelight for incentivising a cardiologist, Dr Mark Midei to implant its stents S W O T

41. SWOT Analysis S W O T Emerging Economies Exit of J&J from stent market Bioabsorbable Stent Pipeline

42. SWOT Analysis W O Tight Regulatory Approvals S T Late stage Thrombosis and Major Adverse Cardiac Events (MACE) Mediated with Surgical Imaging Technologies such as Portable Ultrasound devices Image obtained from http://www.sciencephoto.com/image/2704 83/530wm/M3900535Angioplasty_techniques-SPL.jpg

43. How can Abbott capture a larger market ? Cost of Bare Metal Stent: ~$800 Cost of Xience V Drug Eluting Stent: ~$1500-$2000 Cost of Abbotts Bioabsorbable Stent: >> Xience V Image obtained from Controversies in Cardiovascular Medicine http://circ.ahajournals.org/content/114/16/1736.full http://online.wsj.com/article/SB10001424052748704471904576230671702390088.html

44. Shifting the Battlefield: From Upper Class to Middle Class Per Capital Income Population 296 million Disrupting the Top: 1 billion in headroom Measured Leap Downward- 2011: 2.4 billion in Headroom The Bulgeoning Middle Class $30,000 723 million $10,000 The bottom of the top 2,397 million $4,000 2,692 million : Middle Class experiences major burdens with CABG Procedures. In developing countries, surgeons may be ill-equipped to perform these procedures. : , ; Middle Class is expected to boom from 2 billion population to 5 billion in 2030. Tremendous upside potential once the firm finds a disruptive foothold at the bottom.

45. Disruptive Innovations as a Strategy- Abbott Performance Middle of Pyramid Bottom of Pyramid Top of Pyramid CABG Reduced surgical complexities Increased Cost Accessibility Angioplasty DES BMS Purples (XIECE V) and Orange (BVS) by solid arrows- currently adopted by Abbott Second growth wave: Reduction in Surgical Complexities Purples and Orange dotted arrowsstrategies that Abbott can adopt Effort- Time Third growth wave: Accessible Treatments to Emergent Economies

46. R&D, Networks and Alliances When Resources are Abundant Systemic Innovation R&D Joint- Collaboration with distribution companies to maximize market penetration (With Caution) Reduced time to market Reduced costs to market Interconnected framework for success Modular Innovation Drugs and Drug Release Technologies Research and Operations Base Leverage- Singapore a biotechnology and Trade Hub. Partnerships with Universities and RIs Make larger R&D of bioabsorbable stents scaled in dimensions for other biological applications Centralize Research Facilities in --- Drug & Device Coupling --- Device Compatibilities with Imaging Specialized Complement ary Assets Freedom to Operate & Protection IP Filing for new drug- device couplings Where to File? Systemic Innovation+ Control Is Important Acquire & Integrate complementary assets operations Integrate with Contract Manufacturing Organizations Alliances Get governments to endorse large scale clinical trials Overcoming Regulations Work with Group of Doctors in Hospitals--> Establish De- Facto

47. Integrating complementary assets of stents manufacturing, faster workaround of CE Mark and FDA approvals To remain as #1 leader in Cardiac Interventions. Target new, emerging geographical markets Reduce complexity of techniques and use of stents Catch disruptive waves for medical innovations in minimally invasive surgeries Establish de facto standards of new biodegradable stents. Conclusions There is at least 1 CAD is going to rise intervention afforded from 47 million DALYS by low- income to 82 million DALYS in countries. (WHO) 2020. Where should Abbott Aim? Will Abbotts stents be made available and affordable?