Boston Scientific Needs to Win Doctors' Hearts

Deutsche Bank analyst Tao Levy said in a research note that he queried 17 cardiologists over the weekend, finding that use of Taxus would drop to 62% from its current 69% rate, at least for the next several quarters. Levy reduced his 2004 and 2005 earnings-per-share estimate by 10 cents and 7 cents to $1.68 and $2.38, respectively. He maintained his buy rating, and his firm has a banking relationship with Boston Scientific.

Boston Scientific's earnings are expected to soar 185% to $1.77 in 2004, mainly because of the new Taxus drug-coated stent, according to the consensus estimate compiled by Thomson First Call. Earnings are expected to reach $2.38 a share in 2005. These estimates, or at least earnings for 2004, will be reduced as a result of Friday's recall.

Boston Scientific said it was still tallying the financial impact of the recall, but on a preliminary basis, it expected a reversal of sales of about $45 million, pre-tax, and a write-down of inventory of about $50 million, also pre-tax.

On an earnings-per-share basis, the company estimated the hit to be 6 to 8 cents in the second quarter. The company's second-quarter earnings announcement, set for this morning, was postponed one week to July 26.

Quick Acceptance

Boston Scientific launched Taxus in March, and it quickly became the No. 1 choice of doctors, grabbing a 70% share of the market from Johnson & Johnson's Cypher, which was launched in April 2003. Boston Scientific has sold about 500,000 Taxus stents so far, with sales in 2004 estimated to exceed $1.5 billion in the U.S. alone.

Stents are tiny metal coils inserted into arteries to prop them open and keep blood flowing to the heart. The addition of a drug coating to stents revolutionized their use by helping to retard the buildup of scar tissue around the stent, which often forced patients to have their procedures redone.