(FORTUNE Magazine) – It was enough to give James Tobin palpitations. On July 16, just two weeks after Boston Scientific (BSX, $34) announced a recall of some 200 of its lucrative Taxus drug-coated heart stents, the company's CEO was forced into an embarrassing expansion of the initial callback. This time Tobin told doctors and clinicians that some 85,000 Taxus stents sitting in hospital supply closets would need to be returned to the company.

The recall is just the latest chapter in the long-running stent wars (see "Blood Feud" on fortune.com). And it will be costly for Boston Scientific, which gets roughly 40% of its revenues from stents. Smith Barney Citigroup estimates that the recall will reduce the medical device maker's 2004 sales from $5.6 billion to $5.37 billion. But Boston Scientific's misfortune could actually be a bigger problem for its rivals than it is for Tobin and his team. And for investors who can stomach some risk, the 17% tumble Boston Scientific shares took in the week after the wider recall was announced may have created a buying opportunity.

Stents--tiny wire cylinders placed in clogged arteries to hold them open--are one of the most lucrative sectors of the health-care business; sales should hit $5 billion in 2004. And Taxus had all the makings of a blockbuster when Boston Scientific launched it in March. Drug-coated stents are quickly replacing conventional devices because they prevent the formation of scar tissue. Plus heart surgeons prefer Boston Scientific's Taxus over Johnson & Johnson's competing Cypher--the only other medicated stent currently on the market--in part because they believe the Taxus is easier to install. Within 70 days of its introduction, Taxus had grabbed 70% of the drug-coated stent market.

But starting in June, Boston began receiving complaints about the delivery systems doctors use to place the devices into blood vessels. The problem, according to the company, is that in some cases the balloon used to expand the stent has failed to deflate properly. In addition to the Taxus stents, Boston recalled another 11,000 Express2 nonmedicated, bare-metal stents. Together, the Taxus and Express2 stents are linked to three deaths and more than 40 serious injuries. In all, the callback covered about half of the Boston Scientific stents held by customers. (Since the problems occur only during insertion, stents that have been successfully implanted are not part of the recall.)

Most Wall Street analysts view the stock's recent nosedive as investor overreaction. They say that as long as Boston Scientific can fix the stent delivery problems quickly, it should maintain its lead over Johnson & Johnson. Morgan Stanley analyst Glenn Reicin believes Boston will lose "5% or less" of its 70% market share. In terms of earnings, that's a decline of about 10 cents a share this year. One reason J&J won't be grabbing more sales: The company is having trouble with supply. "They can't get enough out there right now," says Matthew Dodds, an analyst with Smith Barney Citigroup.

Meanwhile, tighter government scrutiny could actually benefit Boston Scientific down the road. Bare-metal-stent makers Medtronic and Guidant each have drug-coated stents in clinical trials; both are on schedule to release their new products by sometime in 2006. But if the FDA becomes more vigilant about the stent approval process, they could experience delays. That would help Boston Scientific retain its healthy lead over the field.

Trading at 22 times 2004 estimated earnings, Boston's shares are some 20% cheaper than those of its medical technology peers. We expect the stock to make a full recovery.