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Boston Scientific's Loss Widens on Product Holds

Tuesday, 27 Apr 2010 08:46 AM

Boston Scientific said Monday that write-downs and a hold on product shipments weighed on its first-quarter earnings, which missed analyst estimates.

The company will take a $1.8 billion write-down tied to a loss in value of its heart-pacing device business, which it acquired with the 2006 buyout of Guidant. The company, based in Natick, Mass., has struggled to balance its debt since making the $27 billion acquisition.

Performance was also hurt by a month-long shipment hold on the company's best-selling products, implantable heart defibrillators. The company temporarily halted sales of the devices in mid-March due to a regulatory oversight involving the manufacturing procedures.

U.S. sales of the devices during the period fell more than 20 percent from the prior-year to $246. The company also sells drug-coated stents, which are used to brace arteries that have been cleared of fatty plaque. Sales of those devices increased 17 percent to $246 for the period.

For the period ended March 31, the company posted a net loss of $1.6 billion, or $1.05, compared with a net loss of $13 million or one cent per share, for the prior-year period. Sales were $1.96 billion.

Excluding one-time charges the company would have earned $251 million, or 16 cents per share, in the same period last year.

Analysts surveyed by Thomson Reuters expected earnings per share of 8 cents on revenue of $2 billion.

Based on its first-quarter performance, Boston Scientific scaled back its full-year earnings estimate to between 50 and 60 cents per share, excluding one-time charges, from between 62 and 72 cents per share.

In the second-quarter the company expects to earn between 6 and 10 cents per share. Analysts are looking for 8 cents per share.

Boston Scientific has struggled in recent years to make up for slowing sales of its top-selling products, implantable defibrillators and stents, which have been hurt by safety concerns, increased competition and hospital belt-tightening.

Chief Executive Ray Elliot, who took the company reins last year, has tried to reposition Boston Scientific by reducing financial risk, cutting 10 percent of the work force and restructuring management.

That recovery plan hit an unexpected snag in March when the company pulled its two primary defibrillator lines off the market because company officials had failed to notify regulators of changes in the way it makes the devices. Device manufacturers are required to notify the federal government within 10 days of making any significant changes to life-sustaining implants like defibrillators.

Boston Scientific makes nearly 15 percent of its revenue from defibrillators, and analysts estimate the company lost 3 percent of its market share to competitors Medtronic and St. Jude Medical during the sales suspension.

Defibrillators are surgically implanted in the upper chest, where they monitor the heart for deadly irregular heartbeats and use electrical jolts to shock it back to a normal rhythm.

While the company has now returned to the market, analysts worry about permanent damage to its image.

"Although the resumption in 'defibrillator' sales is clearly a positive for Boston Scientific, in our view, the company will need to restore physicians' confidence in its products, which will take time," wrote Wells Fargo analyst Larry Biegelsen, in a recent investment note.

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Boston Scientific said Monday that write-downs and a hold on product shipments weighed on its first-quarter earnings, which missed analyst estimates.The company will take a $1.8 billion write-down tied to a loss in value of its heart-pacing device business, which it...
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2010-46-27
Tuesday, 27 Apr 2010 08:46 AM
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