Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (8) | Ignore Thread Prev | Next
Author: Youngandold One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 10280  
Subject: Re: Cypher to become a cipher Date: 6/15/2011 9:03 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 9
I don't think DES was overhyped or that this is function of being overmarketed. The question is how is it that JNJ, which is supposed to be one of the most well managed of companies, can not find a way to win.

JNJ was the first to market in bare metal stents, and then ended up losing to market to competitors. There customer behavior was considered arrogant. But maybe more importantly, they couldn't iterate their product line with a cadence of improvements and next generation features. It got stale and uncompetitive and they ended up at <15% share.

When they entered the Drug Eluting Stent market with their Cypher stent, the very first stent to introduce the DES category, they swore up and down that they would not let what happened in bare metal happen in DES. They showed a planned product roadmap with an emphasis on introducing improvements and variants at regular intervaals. They were never able to deliver. Something about their decision making or R&D organization failed to deliver -- they didn't have the willingness to do what it took internally.

When they couldn't deliver there, their business development function went outside and started to try to acquire a next gen product. They signed a deal with Constar to acquire the company and the DES they were working on. A stent concept that seemed a bit hokey and used a drug that Boston Scientific seemed to have the dominant license to use for this application. They closed the transaction for something like $1.3B in Nov or Dec. Around Feb of the following year, they announced that the results of the clinical trial that Constar was conducting did not merit continuing on with the program and shut down the DES effort.

What?! That's right, three months after they signed a check for $1.3B, they shut down the program that was the primary reason for acquiring the company. You only hope someone got fired for that because that was about as irresponsible a use of shareholder money as anything you can find.

So with their pipeline dry, competitors iterating on product generations, and pricing competition heated, they decide to exit a market in which they found they could not compete. A product they originally generated $2B in sales on after their first year of introduction. I never imagined them doing it and its probably the right decision. But its only the right decision because they did not have the internal wherewithal to maintain the fierce competitive spirit and do what is required to win.

If this is what has happened to the rest of JNJ, we should all get out of the stock now. And believe me I'm thinking about it.
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (8) | Ignore Thread Prev | Next

Announcements

Foolanthropy 2014!
By working with young, first-time moms, Nurse-Family Partnership is able to truly change lives – for generations to come.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Macro Economics

Looking at Currency Ratios
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement