FDA Approves BSX Promus Element - Analyst Blog


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In a major breakthrough, Boston Scientific ( BSX ) received approval from the US Food and Drug Administration (FDA) for Promus Element stent, the company's next generation drug-eluting stent ( DES ) technology. The company plans to launch the product in the US shortly. This approval comes well ahead of the company's original expectation of a US launch in mid-2012.

The approval grants Boston Scientific the green signal to switch to the high margin, internally manufactured Promus Element stent from Promus in the US. The company expects to receive regulatory approval of the Promus Element stent and launch the product by mid-2012 in Japan. 

Under the current agreement, Boston Scientific will market Abbott Laboratories '  ( ABT ) everolimus eluting stent, Xience, under the brand name Promus in the US and Japan till the second quarter of 2012. Boston Scientific had earlier launched the internally developed Promus Element stent system in the Europe/Middle East/Africa (EMEA) region and certain Inter-Continental countries in the fourth quarter of 2009. In September 2010, the company received CE Mark approval for expanded use of the Promus Element stent system in diabetic and heart attack patients.

According to Hank Kucheman, the CEO of Boston Scientific, the approval of Promus Element represents $200 million in additional annualized gross margin contribution from the US and Japan at the end of 2012. This is a part of the targeted $650-$750 million opportunity for improvement in operating profit over the next few years.

Boston Scientific expects to record a pre-tax charge (related to inventory reserves which will impact gross margins) of approximately $40 million ($35 million after-tax) during the fourth quarter of 2011 owing to the early approval and launch of Promus Element in the US.  This charge was not taken into account in the previously issued guidance for the fourth quarter.

Our Take

The approval of Promus Element comes at a time when the core segments of Boston Scientific, consisting of stents and defibrillators, are struggling for growth. The company derives the majority of revenues from Cardiovascular, which comprises Interventional Cardiology and Peripheral Interventions. Sales at these sub-segments during the most recent quarter were a respective $613 million (flat year over year) and $182 million (up 9%).

Global sales of coronary stent system (within Interventional Cardiology) at $402 million increased 1.5% driven by higher sales of DES (up 2.7% to $375 million), partially offset by a 13% decline in sales of bare-metal stents to $27 million. Boston Scientific's share in the global DES market remained static at 36% (on a sequential basis) while dropping a percentage point in the US to 49% (46% at first quarter end). We expect market share in the US to improve following the successful launch of Promus Element. Moreover, the situation is likely to be congenial following Johnson & Johnson 's ( JNJ ) announced exit from the DES business.

We are currently Neutral on Boston Scientific, which also corresponds to a Zacks #3 Rank (Hold) in the short term, in line with both Johnson & Johnson and Abbott Laboratories. 

ABBOTT LABS ( ABT ): Free Stock Analysis Report
BOSTON SCIENTIF ( BSX ): Free Stock Analysis Report
JOHNSON & JOHNS ( JNJ ): 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.

This article appears in: Investing , Business , Stocks
Referenced Stocks: ABT , BSX , DES , JNJ

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