Earlier this week
Boston Scientific Corporation
(
BSX
) reviewed future prospects of its endoscopy business. This
business wing contributed 16% to total revenues in the most recent
quarter.
This division develops and manufactures devices to treat diverse
digestive diseases, including those affecting the esophagus,
stomach, liver, pancreas, duodenum, and colon. With global sales
exceeding $1 billion, and equal contributions from domestic and
international markets, management seems optimistic about
endoscopy.
According to company estimates, the targeted market for its
endoscopy business is valued at approximately $2.7 billion, which
is set to grow at almost double digits over the next five years to
reach $4 billion. With core market recording 4% growth, Bronchial
Thermoplasty ("BT"), considered to be one of the key niches of this
segment, is growing at over 30%. Besides BT, the company discussed
other areas/technology as well, namely cholangioscopy, endoscopic
ultrasound, the WallFlex franchise of stents, among others.
Boston Scientific's Alair BT system provides long lasting and
improved asthma control for adult patients suffering from severe
asthma who have not benefited from currently approved inhaled
medications. Alair was inducted in the company's portfolio with its
acquisition of Asthmatx in October 2010. Asthma is one of the most
common ailments in the world requiring an expensive course of
treatment. The product has received approval in both US and
Europe.
The targeted market in US and Europe for BT technology is
estimated at $1 billion. In order to tap this potential, the
company has set a few objectives that include aiming higher
penetration in hospitals, a favorable reimbursement scenario and
creating awareness among patients and physicians. Revenues from
this technology in 2011 were albeit modest, but are touted to grow
in 2012 with a target to triple year on year in 2013 to a band of
$40−$50 million. If Boston Scientific is successful in converting
its goals into reality, it anticipates revenues from BT technology
in excess of $400 million in 2017.
We believe that Boston Scientific's focus on portfolio expansion
is imperative in the face of severe headwinds in its core segments
of stents and defibrillators. In this respect, the company has also
resorted to the acquisition route to revive growth. The company
recently completed the acquisition of Cameron Health, which has
brought in the S-ICD system, a subcutaneous implantable
cardioverter defibrillator. The market for the S-ICD system is
valued at approximately $750 million. Other players in the medical
devices space such as
Medtronic
(
MDT
) and
St Jude Medical
(
STJ
) are also exploring various alternatives to revive their flagging
top line.
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
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