Boston Scientific stents lag, CFO resigns, shares fall

Reuters

By Ransdell Pierson

Oct 24 (Reuters) - Boston Scientific Corp, which isin the midst of an attempted turnaround, reported weak sales ofits heart stents and provided a disappointing fourth-quartercompany sales forecast, sending its shares almost 7 percentlower on Thursday.

The medical device maker also caused market jitters byannouncing that Jeffrey Capello, its chief financial officersince early 2010, would resign effective Dec. 31. He will bereplaced by Daniel Brennan, the company's corporate controller.

"It was a bit of a surprise, and the company only said hehas his sights set on bigger opportunities," Morningstar analystDebbie Wang said, referring to Capello's planned departure.

Wang speculated that Mike Mahoney, who became chiefexecutive officer of Boston Scientific last November, is simplyputting together his own team.

"But given how many skeletons have fallen out of thecompany's closet, any hint something might go wrong makeseveryone jittery," she said. She was referring to heavy debtfrom its $27 billion purchase in 2009 purchase of Guidant Corp,costly product recalls and declining sales of several of itsproducts in recent years.

Wang said Capello deserved credit for a number of smartacquisitions during his term, despite heavy debt inherited fromthe company's much-criticized purchase of Guidant.

The medical device maker, which a day earlier announced anew round of job cuts, reported a narrower third-quarter loss onflat sales of its array of medical devices.

Global sales of its interventional cardiology products,primarily heart stents, fell 4 percent to $472 million in thequarter.

Sales of its cardiac rhythm management products, includingpacemakers and implantable cardioverter defibrillators (ICDs)used to shock dangerously irregular heartbeats into a normalrhythm, rose 1 percent to $464 million.

Medical studies have suggested that stents and cardiacrhythm technologies, two of the company's biggest franchises,have been overused, thereby crimping demand for the products.

Mahoney said it was the first time in years that sales ofits heart rhythm products grew, and added that newer heartrhythm products will bolster the product line.

"We believe we can build momentum there," he said, citingespecially high hopes for a new type of ICD - called the S-ICDsystem - that was approved a year ago by U.S. regulators.

The device is implanted below the skin. But unlike otherICDs, its thin-insulated "lead" wires are not attached to theheart. Instead, they are threaded up the sternum, under skin andfat tissue.

"It would help patients with poor vascular systems thatcannot have leads in the heart," such as many diabetics, Mahoneysaid in an interview.

Boston Scientific forecast sales for the fourth quarter of$1.78 billion to $1.83 billion, with the top end of the forecastin line with Wall Street expectations.

"But fourth-quarter sales guidance...does imply that salesgrowth isn't expected to accelerate further next quarter and mayeven decelerate a bit," Leerink Swann analyst Danielle Antalffysaid in a research note.

The company said it lost $5 million, or nil per share, inthe third quarter. That compared with a net loss of $664million, or 48 cents per share, in the year-ago period, when thecompany took restructuring and litigation charges.

Excluding special items, including for new restructuringprograms and litigation, Boston Scientific earned 10 cents pershare, one cent above the average analyst forecast compiled byThomson Reuters I/B/E/S.

Global sales of $1.735 billion matched Wall Streetexpectations. Boston Scientific said sales would have risen 4percent, excluding divested businesses and the impact of thestronger dollar.

The company forecast full-year earnings, excluding specialitems, of 69 cents to 71 cents per share. It had previouslyforecast 67 to 71 cents per share.

Boston Scientific is attempting to rebound from years ofdeclining revenue, not only caused by product recalls, butbecause of lower spending during the global economic downturn.

It has initiated numerous cost-cutting efforts andleadership changes over the last several years, and on Wednesdaysaid it will cut up to 1,500 jobs in its latest restructuringplan.

Boston Scientific's shares have more than doubled this year,after been stuck in the single-digit range for four years. Butshares lost ground late on Thursday, falling 83 cents to $11.46.

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