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$13.49 0.02 (0.15%)
5/22/2008 3:46 PM

Boston Scientific Corp. (BSX)

CAPS Rating:
***

The Company develops, manufactures & markets medical devices that are used in interventional cardiology, peripheral interventions, vascular surgery, electrophysiology, neurovascular intervention, oncology, endoscopy, urology, gynecology & neuromodulation.

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Avatar NetscribeMedDevs (91.87) Submitted: 2/23/07 12:16 AM : Underperform Start Price: $17.15 BSX Score: 16.99

Beginning its life by acquiring equity interest in a research and development firm relating to surgical alternatives, the company started by John Abele and Pete Nicholas has come a long way with revenues growing to the tune of $6.3 billion during a short time span of forty odd years. The company, which was in its prime during 2004, came down recently because of increasing competitive pressure and recall related problems for some of its products.

The company operates in three operating segments in terms of its product portfolio, they being Cardiovascular, which contributed 79% of total revenue, Endosurgury that chipped in with 18% and Neuromodulation with rest 3% during the nine-month period ended September 2006. The company derives most of its business from the U.S. and Europe with 93% of revenue share, which might be a cause for concern as the market for the company’s products have already saturated in these markets. Going further these markets offer no growth scope.

The company recently acquired Guidant through which it plans to enter the $9 billion Implantable Cardioverter Defibrillator (ICD). This move did not click well as Guidant was going through a rough time and was not in a good position to take advantage of the ICD market. Further the price Boston Scientific paid was little bit more comparing Guidant’s valuation.

Traditionally, the Drug Eluting Stent product line used to be the major revenue driver for the company bringing in as much as 51% in 2005. This market is also saturated and is slated to decrease to 24% by 2010. Endorsing the given, the company seems to be not in a position to regain its lost vigor.

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Avatar NetscribeMedDevs (91.87) Submitted: 5/28/07 6:00 AM

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In January 2007, Boston Scientific acquired 100 percent of the fully diluted equity of EndoTex Interventional Systems, Inc., a developer of stents used in the treatment of stenotic lesions in the carotid arteries. The acquisition was intended to expand their carotid artery disease technology portfolio.

Boston scientific is showing signs of recovery in its defibrillator business. First-quarter sales of implantable defibrillators (ICDs) rose sequentially for the second consecutive quarter. In April, FDA lifted the warning letter covering BSX's manufacturing facilities for cardiac rhythm management (CRM) devices. However, coronary stent sales continued to slip and net profit also declined by 63.85%. The company offered relatively weak revenue guidance for the second quarter, and more stent competition is looming. In addition, with more than $7 billion of debt incurred in the acquisition of Guidant, BSX faces considerable operational and financial risk as it navigates challenging markets for cardiac rhythm and cardiology devices.

The company faces considerable market and regulatory risk. In January 2006, they received a corporate warning letter from the FDA citing serious problems with quality-control systems at its manufacturing facilities. The letter further stated that prior corrective actions relating to three earlier warning letters were inadequate. As a result, the FDA would not approve any new products for U.S. sale or export until those issues were resolved. While production of currently marketed products was not halted, FDA hold could delay the U.S. approval and launch of the Liberte stent as well as other products. While the company is making progress in resolving the issues underlying the warning letter, a final resolution still appears to be months away.

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