Abbott Laboratories (NYSE: ABT - option chain) shares are higher today despite the surrounding market meltdown after a study released over the weekend showed the company's Xience stent showed significant safety advantages over competitor Boston Scientific's (NYSE: BSX) Taxus stent. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on ABT.

ABT opened this morning at $46.69. So far today the stock has hit a low of $46.65 and a high of $47.90. As of 11:35, ABT is trading at $47.73, up $1.13 (2.4%). The chart for ABT looks bullish and S&P gives ABT a positive 5 STARS (out of 5) strong buy ranking.

Abbott Laboratories (NYSE: ABT) got approval for its new drug-coated stent. The products are used to open clogged arteries, often in the place of by-pass surgery. The field has been dominated by deeply troubled medical device company Boston Scientific (NYSE: BSX). It looks that the weakened company is in for much more pain.

According to The Wall Street Journal, ABT "received regulatory approval for its Xience V drug-coated stent, which is expected to be the top seller in the roughly $2 billion U.S. market because it appears to be more effective than rival devices." Boston Scientific will sell the new Abbott product, but with 40% of the revenue going to its rival, it is hard to see how that is a good deal.

BSX has been beaten by competition at almost every turn. It took on tremendous debt when it bought medical device company Guidant. It faced trouble when some Guidant products hit quality control issues. Boston Scientific stents came under criticism a year ago, when medical research questioned how effective they were.

BSX traded at almost $45 in 2004. It is now at about $12. With new competition and a bad balance sheet, that is not likely to change much.

Douglas A. McIntyre is an editor at 247wallst.com.

Things seemed to be going so well for medical device maker Medtronic (NYSE: MDT). It recently got FDA approval for its drug coated stent, a product that holds clogged arteries open. At over $56, its stock had moved near a 52-week high.

The few days of celebration ended abruptly. The company warned that a wire in its newest defibrillator models has malfunctioned in hundreds of patients. It may have even caused several deaths. According to The New York Times, a defibrillator is a "device that shocks faltering hearts back into normal rhythm." The company is asking that 235,000 patients see their doctors to check for the defect. The Times also writes that replacing the wire on a heart device like a defibrillator is considered by experts to be far more dangerous than replacing the device itself.

The announcement points to one of the problems that big medical device companies face as their products become more complex. Boston Scientific (NYSE: BSX) has recently lost significant revenue as studies have shown that its drug coated stents may cause blood clots in the heart. That and other problems have taken the company's stock from over $27 less than two years ago to $15 in recent trading.

It is too early to say what may have caused the defect in the Medtronic device, but if there is a hint that the defect was discovered some time ago or that the product's flaw was due to faulty manufacturing, some smart attorney will be filing a class action suit before the year's end.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Recent bad news for heart patients is also bad news for Boston Scientific (NYSE:BSX), makers of a drug-coated stent that recent studies suggest may increase the possibility of blood clots. The effectiveness of stents over medications was also called into question in a March report.

The one-two punch to Boston Scientific's prize product caused sales for these stents to drop from $647 million last year, 2nd quarter to $437 million. Overall, net sales for the company were down slightly from 2006 year/year. However, this year's totals included revenue from Guidant, acquired in April of 2006, which should have pumped up the revenue.

Net income for the quarter was $0.08 EPS, shy of analyst expectations of $0.094. Backing out the costs of the Guidant purchase, which impacted both this quarter and 2006 2nd quarter, and the company realized only $.0.18 EPS compared to $0.31 in 2006.

The Wall Street Journal (subscription required) reported recently that Moody's is considering downgrading BSX's bonds to junk bond status, as the debt burden of the Guidant purchase looms more problematical with the shortfall in anticipated income. The company now expects income for the balance of 2007 to match 2nd quarter performance, far short of the $2.4 billion it projected when announcing the Guidant deal.

Until the company can show us new products that can replace the stent's profitability, or demonstrate sustainable belt-tightening to raise the bottom line, this is a stock I'd approach with trepidation.

MAJOR PAPERS:

• The 19.4B sale of Clear Channel Communications Inc (NYSE: CCU) to Bain Capital and Thomas H. Lee Partners is expected to proceed quickly as major shareholders Highfields Capital Management and Fidelity Investments are expected to agree to a new proposal raising the sale bid by 20 cents to $39.20 a share, reported the Wall Street Journal.
• Last month stent implants in the U.S. fell 15% to 71,200 from April 2006, signaling that they may no longer be a strong growth area for the medical industry, reported the Wall Street Journal.
• A new EU law that would slash the roaming charges for mobile phone calls by Europeans when they are traveling on the continent is expected to cut into the profits of companies including Vodafone Group (NYSE: VOD), France Telecom ADS (NYSE: FTE), and Telefonica SA ADS (NYSE: TEF) , reported the Financial Times.

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• EMI Group (OTC: EMIPY) has opened its books to rival Warner Music Group (WMG), setting up a four-way bidding war, reported The Business.
• New explorations by PetroChina Company Limited's (NYSE: PTR) parent company, China National Petroleum Corp, have found that the Jidong Nanpu Oilfield in Bohai Bay may have more reserves than previously estimated, reported China Daily.

Stents, the minute wire devices (I always envision the spring from a pen) placed in heart arteries through catheterization to open clogged arteries, have become an extremely popular and lucrative alternative to bypass surgery. Last year, nearly one million patients received the devices, bringing nearly $3 billion in revenue to producers such as Johnson & Johnson (NYSE:JNJ).

According to an article in The New York Times, further trials are revealing some disturbing information about stent usage. The most commonly used type of stent may slightly elevate the patient's risk for blood clots. This concern has some physicians and patients rethinking the decision to favor stents over bypass surgery.

Johnson & Johnson introduced the first bare-wire stent in 1996, which was very successful in opening up the affected arteries. However, some patients' systems reacted to the foreign substance as a wound and tried to heal over it, producing a blockage. The company began to market stents coated with a drug that would counteract the body's reaction. It is these stents that are suspected of causing what is called late-stent thrombosis.

Many physicians using the technology point to the low incidence of clotting, though -- only 3 patients in 1000.

Balanced against the invasiveness of bypass surgery, the decision is not an easy one. I'd guess, barring the loss of too many major lawsuits (and this topic is hot currently among litigation attorneys), Johnson & Johnson's stent business will remain strong as we of the boomer generation come face-to-face with the price of a lifetime of fast food and labor-saving devices.

Put back the crash carts. Boston Scientific (NYSE:BSX) is up and walking. A sharp, short-term decline in use of drug coated stents, brought on by studies that show they may cause heart problems, has not significantly hurts sales overall. The FDA, after a survey of its own, has not restricted use of the devices.

According to analysts at several Wall Street firms, drug coated stents will keep a 75% to 80% share of the market. At Boston Scientific, sales of the stents represent 25% of sales. If the market in the product stabilizes, it could be the event that helps repair the company's image which has been damaged by worries about stent sales and problems with products from its Guidant unit.

Boston Scientific's stock has been pounded like a red-headed mule as concerns about stents and problems with Guidant have mounted. The stock traded for $36 two years ago and now changes hands at a little over $16. While the S&P is up close to 20% over the 24 months, BSX stock is off by slightly over 50%.

With stents back in fashion, it is now or, perhaps, never for a BSX recovery.

Douglas A. McIntyre is a partner at 24/7 Wall St.