Boston Scientific Stays at Neutral - Analyst Blog


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We have reaffirmed our Neutral recommendation on Boston Scientific Corporation ( BSX ) following its first quarter fiscal 2012 results.

The challenges at Boston Scientific's core segments consisting of stents and defibrillators do not show any sign of near-term abatement although both revenue and EPS surpassed the corresponding Zacks Consensus Estimates during the reported quarter.

However, the company is working on portfolio expansion, with fresh products approved in the recent past and some in the pipeline. We believe the emphasis on newer technologies should boost the company's top line. The earlier-than-expected approval of Promus Element in the US (in November 2011) followed by its approval in Japan and Canada, both in March 2012, should boost drug eluting stent ("DES") sales. We are also encouraged by the launch of Ingenio and Advantio pacemakers and Invive cardiac resynchronization therapy pacemakers (CRT-P) in Europe in April 2012, followed by FDA approval in May 2012.

The company's recent acquisitions have brought in several products (though many are under development) with immense potential, which should help boost the top line in the long term. The proposed acquisition of Cameron Health is the latest in line. With this Boston Scientific will gain access to the S-ICD system, a subcutaneous implantable cardioverter defibrillator ("ICD"). The S-ICD system scores over traditional ICDs with respect to placement as the former can be placed beneath the skin and leaves the heart and blood vessels unscathed. The traditional ICDs, on the other hand, require thin, insulated wires (leads) to pass through the venous system and into the heart.  Management expects the S-ICD system to have a potential $1 billion market opportunity as it will meet unmet patient needs, especially for young patients, patients who have difficulty with their venous system or those prone to infection. In April 2012, the S-ICD System received favorable recommendation (7-1) from the FDA Advisory Panel for the treatment of sudden cardiac arrest.

In the backdrop of flattening sales growth in the developed markets of US and Europe, Boston Scientific is expanding its presence in the emerging markets and enforcing cost reduction initiatives. The company's focus on the emerging markets of Brazil, India and China resulted in double-digit growth during the latest quarter. These steps will continue to benefit the company over time.

The company however continues to experience pricing pressure in the US and Europe. Additional challenges are softness in procedural volume due to economic uncertainties and competitive product launches. These headwinds have adversely impacted Boston Scientific's peers, Medtronic ( MDT ) and St Jude Medical ( STJ ), among others.

Our recommendation is backed by a Zacks #3 Rank (Hold) in the short term.

BOSTON SCIENTIF (BSX): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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