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March 14th – March 20th on Twitter @THEHCC

In the general news, heavy storms in the Northeast brought strong winds and
record rain for 48 hours straight resulting in heavy flooding. Tiger Woods announced that
he will play in the Masters and soccer star Beckham’s career might be over with an
Achilles rupture. Lastly, the biggest national news of the week was again healthcare
reform, as a Sunday vote looms.
In business, BSX announced a complete recall of all ICD products raising in
question the company’s ability to stay solvent. The HCC first warned of this risk in
February. Roche hosted an analyst day while OSIP rejected Astella’s acquisition offer.
Fred Hassan, the ex-Schering-Plough and Pharmacia CEO, is now the Chairman of
Bausch and Lomb. LLY suffered a $75 M heist of drugs from a warehouse. MDCO
won in patent court. Teva plans to acquire Ratiopharm for $5 B, beating PFE in a bidding
war, while Pfizer’s CEO Kindler became the new Chairman of PhRMA.
On the data front, the ACC meeting highlighted the ACCORD study investigating
ABT’s Tricor. The drug was no better than placebo. Recall, ABT recently paid $6 B for
Solvay, the European partner. The good news for ABT came from a study on their
MitraClip device, and ABT’s ABSORB trial for its bioabsorbable stent showed good
safety at 30 days. Novartis’ NAVIGATOR study of nateglinide and valsartan to treat
diabetes showed that diet and exercise are better then the drug therapies. Another blow to
NVS was the failure of the ASPIRE trial to show benefit from Tekturna to lower CHF
rates. MDT’s A-Fib trial called STOP-AF met endpoints allowing this cryoablation
product to compete with JNJ’s Biosense Webster product. BTIM posted anti-aging data
and ABII posted good cancer drug data.
From the FDA, it will investigate the risk/benefit of ABT’s Tricor/Trilipix in the
wake of the bad ACCORD data. SOMX shares soared more than 130% on approval of
its sleep drug. BSX won an AdCom approval for the MADIT-CRT indication, with
restrictions, while MDT also garnered an approval vote for MRI-safe pacers. Atritech
was delayed in approval for its left atrium plug to
prevent stroke. CYTX shares were down on approval
delays of its fat harvesting system. MNKD tanked 25%
on more delays as well. Lastly, APPA’s antiemetic
drug was rejected.
Picture of the Week
Storm damage in New York from a massive two-day front

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Update: Would an ICD recall be sustainable to Boston Scientific?
March 15, 2010

The HCC has previously reported on the real risk of an ICD recall situation for BSX and
was the first to report about "header malfunctions" and the Dr. Maisel article. . The news
crossing the wire now indicates that BSX has suspended sales of all ICD products. Given
the large legal settlements with JNJ, BSX had no margin for error in operations. The risk
of BSX becoming insolvent and unable to pay the 2011 debt obligations is much more
significant now.

Would an ICD recall be sustainable to Boston Scientific?

February 9, 2010

The importance of the brewing Boston Scientific ICD “header” malfunction problem is
whether it would lead to a high-profile press-driven recall, ala 2005 under Guidant.
Several powerful organizations (i.e. competing device companies, EP doctors who work
for competitors, etc.) have vested interests in exposing every malfunctioning ICD made
by BSX that can possibly be found. Moreover, the way that BSX handled the “header”
loosening problem, by trying to claim it was only a problem seen in the rare subpectoral
position, will likely prove to be incorrect and anger EP doctors. Per our previous stories,
subcutaneous implants are also being found to have malfunctioned indicating a larger
scale problem, as 95% of implants are subcutaneous.

The HCC believes that BSX has requested permission from the FDA to make some
manufacturing changes to correct the problems. However, it is unclear to our sources
whether the new devices are truly fixed. If the MAUDE database reporting increases due
to the publicity of the issue, then the FDA will likely require at least the issuance of a
“Dear doctor” letter, and perhaps “voluntary recall”. BSX does not have a good backup
line of ICDs if this were to happen. Significant market share changes would ensue.

Given the recent exorbitant legal settlements forced upon BSX making refinancing of its
2011 debt obligations an almost certainty, there is little safety margin left for the
company as a going concern (see previous video with Rick Wise). A major hit to the
revenue line, such as an ICD recall, could push BSX into insolvency.

The new CEO, Ray Elliott, has arrived to turn around a distressed company. He is much
of the mindset as the Pfizer CEO was when taking over there and is willing to take drastic
measures, including dropping the Boston Scientific name. At the Piper Jaffray
conference, he described BSX as more of a “holding company”. Could BSX be broken up
and sold for a sum of the parts?

BSX reports earnings tomorrow, and those are the topics paramount to the Q&A. The
crucial questions that no one yet can accurately answer are how widespread are the ICD

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header problems and how will it develop over time? Recall from our previous story
(January 16, Investor Flash), the Medtronic Fidelis lead fracture problem is growing with
time. Over the coming months, if the ICD header problem turns out to be a false alarm,
then BSX would be back on track as a turnaround story.

Do “rule out appy” CT scans benefit patients or lawyers?

March 20, 2010

The HCC has reported in a series of stories about the hazards of radiation exposure from
medical imaging and cardiology tests. Recently, portable ultrasound technology was
featured on The HCC as a non-radiation alternative.

A February original paper in the journal “Radiology” looked retrospectively at the

preoperative use of abdominal CT scans to diagnose appendicitis, or to correctly diagnose
other pain-inducing ailments and prevent unnecessary appendectomies. Are pre-op CT
scans to “rule out appy” useless, harmful, and done for legal reasons, or do certain groups
benefit?

We interviewed the lead author, Courtney Coursey, now at Emory. The video may be
viewed by logging in.

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Can the Dems “deem”?
March 16, 2010

As you have probably heard, the Democrats are not finding enough votes to pass the
Senate bill in unchanged form and have resorted to a “Hail Mary” rare parliamentary
tactic called “Deeming”, whereby one bill is assumed to have been passed, without an
actual vote, while a vote on a second bill takes place. We believe that this will be
unsuccessful because a vote is still required, albeit not on the actual contentious Senate
bill but on a package of “fixes”. Nevertheless, the Democrats voting on the fixes will
receive the same negative attention as if they voted on the actual Senate bill.

Some Democrats this evening have already come out opposed to this “Deeming”
maneuver. It is unclear what The President’s position will be. This entire process has
damaged Obama’s approval rating. A new WSJ poll indicates that a strong majority of
Americans have an unfavorable opinion of him now due to healthcare.

The next major event in this process will be the announcement of the CBO scoring of the
proposed “final bill”. It is likely that this scoring will solidify the “No” votes once the
larger price tag is announced.

FDA to investigate Tricor

March 14, 2010

The FDA just announced at the ACC meeting that it will be convening a panel to review
the merits of keeping Abbott’s Tricor on the market. The ACCORD study was negative
for the drug showing no efficacy and also showing several safety signals (renal and
HTN). Recall, ABT recently acquired the European partner for Tricor and Trilipx,
Solvay, for $6.6 Billion USD.

Statement to Healthcare Professionals on the ACCORD Lipid Trial

from the FDA’s Center for Drug Evaluation and Research
The U.S. Food and Drug Administration (FDA) is informing healthcare professionals that
it will review the primary data from the Action to Control Cardiovascular Risk in
Diabetes (ACCORD) Lipid Trial, which evaluated the potential cardiovascular benefits in
patients with type 2 diabetes mellitus taking simvastatin plus fenofibrate.

Presented at the American College of Cardiology conference on March 14, 2010, the
ACCORD Lipid Trial, funded by the National Institutes of Health (NIH), evaluated the
occurrence of major cardiovascular events (nonfatal heart attack, nonfatal stroke,
cardiovascular death) in patients receiving simvastatin plus fenofibrate, compared to
simvastatin alone. All patients in the study had a history of type 2 diabetes mellitus, were
at high risk for cardiovascular disease, and were followed on average for 4.7 years. The

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trial found that there was no difference in cardiovascular outcomes between the two
groups (Hazard Ratio = 0.92; 95% Confidence Interval: 0.79 – 1.08; p = 0.32).

At this time, FDA has made no new conclusions or recommendations regarding the
combination use of simvastatin or other statin drugs and fenofibrate. The agency
will conduct a thorough review of the primary ACCORD data as soon as they become
available.

In 2008, FDA approved Trilipix (fenofibric acid):

"as an adjunct to diet in combination with a statin to reduce triglycerides (TG) and
increase HDL-C in patients with mixed dyslipidemia and CHD or a CHD risk
equivalent who are on optimal statin therapy to achieve their LDL-C goal."
The Trilipix labeling currently states that no incremental benefit of Trilipix on
cardiovascular morbidity and mortality over and above that demonstrated for statin use
alone had been established. Part of FDA's review of the ACCORD trial will be to
determine how the study's findings relate to the approved indication and labeling for
Trilipix.

Healthcare professionals should consider the available clinical information on

simvastatin and fenofibrate when deciding what cholesterol-lowering medications to
prescribe.

BSX FDA panel briefing docs not favorable for ICD expansion
March 16

We will have more on this later, but on first glance, the FDA briefing documents ahead of
the advisory committee to approve a wider indication for CRT-D ICD do not look
favorable for approval.

Briefly, some of the concerns are that the trial was essentially rigged to win and enrolled
patient much sicker than typical Class 1 and II patients, making the efficacy greater for
the CRT-D device arm.

Here’s the link

http://www.fda.gov/downloads/AdvisoryCommittees/CommitteesMeetingMaterials/Medi
calDevices/MedicalDevicesAdvisoryCommittee/CirculatorySystemDevicesPanel/UCM2
04682.pdf

Also, the doctors and the FDA are human and will be biased by the recent BSX recall of
ICDs. It would be very surprising if this indication gets approved.

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Heads up: Senate to hold hearing today on drug price negotiations
March 17, 2010

The Senate will be convening an oversight hearing today to discuss the escalating prices
for prescription drugs in the U.S. and why drug price negotiating is not allowed by
Medicare. Several of The HCC stories on this matter could be used in some form by the
panel (search The HCC archives for “Actavis” and “Lucentis” and “Effient”), although it
appears there is an effort to not specifically single out egregious drugs by name.

Available now are the letters sent to the drug companies:

Letter to AstraZeneca: www.aging.senate.gov/letters/drugcostsaz.pdf

Letter to GlaxoSmithKline: www.aging.senate.gov/letters/drugcostsgsk.pdf
Letter to Lilly: www.aging.senate.gov/letters/drugcostslilly.pdf
Letter to Novartis: www.aging.senate.gov/letters/drugcostsnovartis.pdf
Letter to Pfizer: www.aging.senate.gov/letters/drugcostspfizer.pdf
Letter to Sanofi: www.aging.senate.gov/letters/drugcostssanofi.pdf

How long might the BSX ICD recall last?

March 15, 2010

The crucial question for analysts trying to gauge the financial impact of the Boston
Scientific ICD recall is how long will it take for the FDA to approve the manufacturing
changes. In order to answer that, one needs to know whether the manufacturing changes
in question were those made to address the header fracture problem first reported by The
HCC (February 9 Investor Flash). Based on our checks, not many people outside of BSX
know the answer to that at this time. Therefore, one can only perform a sensitivity
analysis based on assumptions.

We do know that the CEO of BSX discussed on the recent earnings call the
manufacturing changes made to address the header malfunctions. If those were the
changes that were not properly cleared with the FDA, since they involve safety issues, a
PMA supplement would be required, according to our FDA experts. PMA supplements
require certain amounts of bench and/or animal testing to assure that the changes were
effective. The PMA supplement process takes at least 180 days.

There is a faster “real time” method for having manufacturing changes approved by the
FDA. However, these require having all of the animal and bench data available for the
FDA. If those data are now available, then one would wonder why BSX cut corners in the
first place and got into this predicament.

Confounding the problem is the fact that the highest priority right now for the new FDA’s
Director of the medical device division (CDRH), Dr. Jeffrey Shuren, is the overhaul of

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the PMA process. The HCC has reported on this many times and has interviewed the
Deputy Commissioner of the FDA.

Based on all of the above, and the fact that BSX is still under a rare corporate-wide
warning letter, the prudent investor should assume that this total recall of ICD products
will not be resolved within a matter of weeks.

Update on BSX ICD recall

March 17, 2010

A street consensus seems to have been established that the BSX ICD manufacturing
changes were not made to any aspect of the ICDs that could lead to possible safety issues,
or were not made to correct malfunctions causing possible safety risks. The origin for this
belief is the one sentence in the BSX press release, “The Company has no indication
that the manufacturing process changes pose any risk to patient safety, and it is not
recommending explantation of the devices.”

That sentence was placed in the release purely for the purpose of alleviating doctor and
patient concern, in our opinion, and does not mean that the manufacturing changes were
not related the “header” malfunction problem. If the manufacturing changes were made
to correct the header problem, then the FDA inspectors will likely deem them to have
been related to safety, triggering at least a 180 day PMA supplement process. However,
to clarify, no one outside of BSX knows what the changes were, at this point.

The other rumor circulating is that the changes were simply “sterilization” changes. That
originated from something The HCC used as a hypothetical scenario to explain how BSX
might be able to get back to the market rapidly.

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What the new CDRH Director is doing
March 19, 2010

This is indicative of the priorities for the new CDRH Director, below. They are reversing,
perhaps, a previous scandalous ruling that abused the 510K process. Search The HCC
archives for more information on this or email us.

MARCH 19, 2010, 1:05 P.M. ET

Not Enough Data to Show Knee Device Is Safe, FDA Says

By JARED A. FAVOLE And ALICIA MUNDY

WASHINGTON—The Food and Drug Administration said ReGen Biologics Inc. hasn't
provided adequate data to show that its knee device is safe, and the company didn't
follow appropriate study guidelines.
The FDA also has ongoing concerns about whether it was appropriate for New Jersey-
based ReGen to compare its device to products that are used to repair the shoulder, a
hernia, or the bladder. Companies often compare their devices to older products to
support getting clearance to sell them.

The FDA is re-reviewing ReGen's Menaflex knee device, which was cleared to go on the
market in December 2008 over the objections of a half-dozen agency scientists and
managers. The FDA has acknowledged in an unusual report it released last autumn that
extreme pressure from Democrats on Capitol Hill and lobbying by the company
influenced the decision-making process at the agency.

An FDA-sponsored panel of medical experts will discuss the safety of the device at a
meeting next week. Documents posted to the FDA's Web site Friday show agency
scientists have lingering concerns about data ReGen submitted to support getting the
device approved.

"Overall, the FDA believes that [ReGen] did not provide adequate pre-clinical
mechanical testing data to clearly demonstrate safety against mechanical failure," the
agency said.
ReGen describes that Menaflex acts as a scaffold to repair and reinforce soft-tissue
injuries to the knee. In preclinical testing, or testing done in labs or animals but not
humans, ReGen compared its device to surgical meshes used to reinforce injuries to other
parts of the body. The FDA is concerned about such comparisons because, for example,
the weight stress on the shoulder is less than that on a person's knee.
ReGen said in documents posted ahead of next week's meeting that its device is safe and
effective compared to other products already on the market. The company also said that
the FDA's earlier report, which raised questions about the influence of politics on the
FDA's device-approval process, didn't raise safety questions about the device.

8
The FDA also raised multiple questions about clinical data ReGen submitted. The agency
said it's hard to analyze some of the data because the company didn't present it according
to recognized guidelines and didn't follow certain study protocols.

ReGen executives didn't immediately respond to requests for comment.

BSX ICD recall update

March 18, 2010

A sell side analyst is quoting BSX sales reps in a note today indicating that the
manufacturing changes BSX made and did not receive proper FDA approve for were
minor and could be resolved rapidly. These comments are obviously coming from highly
biased unreliable sources. Moreover, if a company had the required bench testing and
animal data required by the FDA to validate the changes, then they likely would not have
failed to submit a proper package.

We spoke with an FDA expert who was an actual field rep conducting plant inspections.
They wrote today:

“It is hard to tell what is going to happen. Clearly they want these handled as a real time
PMA supplement, and the reps are just saying these are paperwork issues for FDA
because the changes have been validated. The bottom line is “does FDA agree?”. I think
the science is going to rule here regardless. And, I’ve rarely seen a company do all the
work for a submission and then not submit. Usually, if the decision is made not to
submit, the validation work is incomplete.

I don’t think they really have a case for saying that removal of their devices adversely
affects patients (because there won’t be devices to serve them) because they notified
MDT and STJ to fill in the gap while BSX deals with these manufacturing issues. As
such, I am not sure about the “magnitude of the disruption” that would influence FDA to
review the file and reach a decision faster. It may only be a disruption to BSX bottom
line, but not to patients.”

The one optimistic sign from today comes from analyst Bruce Nudell who said that BSX
told him emphatically that the changes were not related to the “Header” problems. We
still believe that it is unlikely that BSX will be allowed back on the market within 30
days given these details, above, and the bigger picture of the corporate warning letter and
the new CDRH director placing an emphasis on PMA changes (see previous stories).

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About The Healthcare Channel

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Our viewers already have news services such as Bloomberg and Reuters, so we focus on
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