Bloomberg News

Boston Scientific’s Kucheman Sees Sales Growth Back in 2013

July 26, 2012

Revenue for Boston Scientific Corp. (BSX:US), the second-biggest U.S. maker of heart devices, won’t resume growing until 2013 as the industry adjusts to lower demand for implanted stents and defibrillators and new products reach the market, said Chief Executive Officer Hank Kucheman.

Boston Scientific trimmed its 2012 profit and revenue forecasts today after sales of stents and defibrillators declined in the second quarter. The shares of Natick, Massachusetts-based Boston Scientific plunged (BSX:US) 6.8 percent to a 17-year low price of $4.97 at the close of New York trading. The shares have fallen 28 percent in the past 12 months.

The market for defibrillators and pacemakers shrunk in the second half of 2011, making the comparison easier for the remainder of this year, said Jeff Capello, Boston Scientific’s Chief Financial Officer. The introduction of new products next year and growth in emerging markets will help the company break even, he said in a telephone interview.

“Our challenge is to stabilize those businesses here in the second half of 2012,” Kucheman said in an interview. “As we move into 2013 and beyond, our strategic investments will hit the top line of our enterprise in a meaningful way.”

Lower-than-expected long-term growth and underperformance in Europe led the company to take a $3.4 billion charge during the quarter to reduce the amount of goodwill on its balance sheet stemming from a 2005 acquisition of Guidant Corp.

Boston Scientific reported a net loss (BSX:US) of $3.5 billion, or $2.39 a share, compared with a profit of $146 million, or 10 cents, a year earlier.

Pricing Pressure

“We think second quarter results point to continued end- market weakness driven by intensifying pricing pressure and sluggish demand,” said David Roman, an analyst at Goldman Sachs Group Inc. in New York, in a note to clients today. “Against this backdrop, we estimate Boston Scientific continues to lose share in its core business segments.”

The company cut its sales forecast for this year to $7.2 billion to $7.4 billion, from an outlook of $7.35 billion to $7.65 billion in April. The company generated $7.6 billion last year and has seen lower year-over-year sales for nine of the past 10 quarters.

Earnings excluding one-time items will be 62 to 68 cents a share for 2012, Boston Scientific said. The company in April forecast 60 to 70 cents.

Cost Cuts

Boston Scientific reduced costs and improved profit margins by moving manufacturing to Costa Rica and selling its own Promus Element stent, an updated version of the device originally licensed from Abbott Laboratories, said Derrick Sung, a Sanford C. Bernstein & Co. analyst in New York.

The margins were significantly higher and should be sustained, Sung wrote in a note to clients today.

Kucheman said growth drivers next year would include the Alair system for treating severe asthma, the Watchman device to reduce stroke risk in those with erratic heart rates and an implanted defibrillator that works without the thin wires known as leads. The defibrillator has a potential market of $750 million, and Boston Scientific is the only company with the device, said Michael Mahoney, the company’s president.

To contact the reporter on this story: Michelle Fay Cortez in Minneapolis at mcortez@bloomberg.net

To contact the editor responsible for this story: Reg Gale at Rgale5@bloomberg.net


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