We have reaffirmed our Neutral recommendation on
Boston Scientific Corporation
) 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
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
St Jude Medical
), among others.
Our recommendation is backed by a Zacks #3 Rank (Hold) in the
BOSTON SCIENTIF (BSX): Free Stock Analysis
MEDTRONIC (MDT): Free Stock Analysis Report
ST JUDE MEDICAL (STJ): Free Stock Analysis
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