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Boston Scientific Busy with Stents

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BostonScientific (BSX) has expanded its drug eluting stent (“DES”) portfolio with approval from the US Food and Drug Administration (“FDA”) for longer lengths of Promus Element Plus stent. Subsequent to the approval, the stent (in both 32 mm and 38 mm) would be available in the US with immediate effect. The approval, which was expected in mid-2012, came on time and will help win market share.

DES sales have benefited from the earlier-than-expected approval of Promus Element plus in the US (in November 2011) along with launch of the product in Japan and Canada, both in March 2012. Within four weeks of launch, in Japan, the company successfully converted 75% of Promus volume to Promus Element. Market share thereby improved smartly from 32% to 42%.

The recent approval expanding the portfolio further should help in the penetration of the product. The approval of Promus Element in US and Japan represents $200 million in additional annualized gross margin contribution 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’s focus on portfolio expansion is inevitable in the face of severe headwinds in its core segments of stents and defibrillators. Other players in the medical devices space such as Medtronic (MDT) and St Jude Medical (STJ) are also resorting to various alternatives to revive their flagging top line.

The company’s focus on portfolio expansion is yielding results with several product approvals. Last month, the company received FDA approval for the Epic vascular stent, which is meant to open blocked arteries in patients with iliac artery stenosis. The FDA approval of the Epic vascular stent comes on the heels of CE Mark approval and subsequent launch of Innova self expanding bare metal stent. The Innova stent is designed to treat peripheral vascular lesions in arteries above the knee.

Some of the other significant products in the company’s pipeline include the fourth generation Synergy DES (CE Mark expected in late 2012 with full launch in 2013) and Vercise deep brain stimulation program for the treatment of Parkinson's disease. Both these technologies are expected to contribute to revenues from 2013 and incrementally in 2014.

We have a Neutral recommendation on Boston Scientific. The stock retains a Zacks #3 Rank (hold) in the short term.

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