BSX Launches BackStop Gel - Analyst Blog


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Boston Scientific ( BSX ) recently launched BackStop Gel to prevent migration of stones during surgical procedures. The company is marketing the product, a water-soluble polymer, in domestic and some specific international markets.

The launch of BackStop Gel can be of immense benefit to the physicians as stone migration is a common challenge during stone extraction. This can often lead to increased procedure time, lower stone-free rates and increased need for secondary procedures. The product is so designed that it will not experience any damage from devices used to fragment the stone and will dissolve on completion of the procedure.

Given the various headwinds currently at play for Boston Scientific, product launches made in the recent past should provide some cushion to its top line. We are encouraged by the recent launches of Promus Element in the US (November 2011) and Japan (March 2012). This represents $200 million in additional annualized gross margin contribution at the end of 2012. The recent launch of BackStop Gel should also contribute to the top line gradually.

Yet, the challenges at Boston Scientific's core segments consisting of stents and defibrillators do not show any sign of near-term abatement. The company 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. This has affected other players in the MedTech sector as well, such as Medtronic ( MDT ) and St Jude Medical ( STJ ).

To better tackle the current uncertainties, Boston Scientific has resorted to the restructuring route to strengthen its operational effectiveness and efficiency. This program is expected to reduce annual pre-tax operating expenses by $225-$275 million exiting 2013 and a part of this saving will be invested in the business to drive growth going ahead. Although benefits from these programs will not be accrued in the short term, these steps should strengthen the company in the long term.

We are also impressed with the company's focus on the emerging markets of Brazil, India and China that recorded double-digit growth during the latest quarter. The various strategies implemented by the company should help reap the immense potential embedded in the emerging markets.

We have a Neutral recommendation on Boston Scientific. The stock retains a Zacks #3 Rank ('Hold') in the short term.

BOSTON SCIENTIF ( BSX ): Free Stock Analysis Report
MEDTRONIC ( MDT ): Free Stock Analysis Report
ST JUDE MEDICAL ( STJ ): 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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