Many of the biggest U.S. medical-device makers will be reporting earnings this week, and investors will finally get a chance to see if a surprise profit warning from
St. Jude Medical
earlier this month was a sign of broader industry difficulties or a company-specific outlier.
St. Jude shocked stockholders and sector watchers in the first week of April when it said first-quarter earnings and revenue would fall short of Wall Street's estimates because of lower-than-expected sales of its implanted cardiac defibrillators.
Meanwhile, industrywide sales of drug-coated stents, the wire-mesh tubes used to prop open arteries that have been cleared of blockages, also have fallen in recent months.
Rick Wise, a health care analyst at Bear Stearns, believes one of the premier companies in the sector,
, will have a profit of 42 cents a share, 4 cents below the Thomson First Call consensus estimate, when it announces its results Tuesday.
Wise is estimating Boston's revenue for its most recent quarter will be in line with the consensus forecast, with $574 million in Taxus stent sales worldwide, down 16% from last year. U.S. Taxus sales should be about $391 million, 21% below last year, he says.
Taxus sales made up 43% of the company's revenue last year, but the product is facing growing competition from
Johnson & Johnson's
Cypher stent. Plus, Boston's share of the stent market in Europe is expected to suffer now that
Endeavor is available.
By Wise's estimate, Boston's share of the drug-coated stent market in the first three months of the year probably will amount to 52%, compared with 54% in the previous quarter and 61% a year ago.
Whatever Boston reports, investors need to remember that the company is about to begin a major transformation, and that this quarterly report will probably be its last in its current form. The company is nearing completion of a $27 billion deal to buy
, and any update Boston provides on the merger will take center stage.
J&J, the health care giant that had pursued Guidant before withdrawing its offer in January, is a big player in the device field via its Cordis division, which makes the Cypher stent. J&J's device sales are creeping higher while pharmaceutical sales are edging lower as a percentage of the company's overall revenue.
Wise is calling for Cypher sales of $698 million in the quarter, up 13% from a year ago. He initially expected J&J to show that it had captured 48% of the stent market, but now he believes his estimate could prove too optimistic.
For the just-completed first quarter, J&J's medical devices segment should bring in $5.28 billion in revenue, while pharmaceuticals are expected to account for $5.85 billion. All told, 40% of J&J's quarterly sales should come from devices and 43.1% from drug revenue. In the same quarter a year ago, devices made up 37.4% of sales and drugs were 44.8% of the total.
Besides its quarterly earnings, analysts will be hoping J&J addresses questions about possible acquisitions and a number of its pipeline drugs. The company's results will be out Tuesday before the market opens.
Meanwhile, St. Jude has said it probably earned 35 cents to 36 cents a share in the first quarter of the year. When the company warned a couple of weeks ago, it lowered its quarterly revenue expectations to $784 million from between $799 million and $839 million, citing sluggish defibrillator sales. Sales in all other segments were on track, the company said.
St. Jude says it's conducting a detailed customer review to get a better idea of the reasons for the slowdown. Defibrillator revenue outside the U.S. continues to meet expectations, St. Jude said.
also are on the schedule to report this week.