Updated from 10:10 a.m. EDTReduced stent sales led Boston Scientific ( BSX) to report weaker third-quarter numbers than Wall Street expected, and the medical-devices maker cautioned that consensus estimates for the rest of the year also appear to be too high. Boston Scientific lost $269 million, or 33 cents a share, in the third quarter, including charges of $616 million. The bulk of the charges, $598 million, stemmed from a settlement with Israeli company Medinol, which had alleged that Boston's Express and Taxus Express stents infringed its patents. Overall the Natick, Mass., company had revenue of $1.51 billion, compared with $1.48 billion a year ago. "Obviously a flattish result for the quarter," said CFO Larry Best during the company's conference call Friday. "Not exactly what we expected." Excluding the charges, earnings totaled $347 million, or 42 cents a share, compared with $404 million, or 47 cents a share, last year. Analysts surveyed by Thomson First Call were expecting the company to earn 44 cents and report revenue of $1.56 billion. Worldwide coronary stent sales sank 7.7% to $633 million for the quarter. Taxus drug-eluting coronary stent systems brought in $601 million of the total. Stent sales were $686 million a year ago. "The size of the market was a bit under what we thought in the third quarter," Best said, adding that most likely Johnson & Johnson ( JNJ) took some of its market share. At least part of that can probably be explained by the results of a study conducted by J&J's Cordis unit, which compared the safety and effectiveness of its own Cypher stent with Boston Scientific's Taxus. "It is a factor that has weighed on us," said Paul LaViolette, Boston Scientific's chief operating officer. Cordis found that the stents were equally effective, but said the Cypher was safer. LaViolette said that led to an "erroneous safety campaign" based on an "isolated trial that has produced anomalous results."
For the third quarter, Boston Scientific's share of the drug-eluting stent market was 55%, below its previous goal of 60%. The company also offered fourth-quarter estimates that would miss analysts' targets, projecting that sales will be $1.55 billion to $1.59 billion, with earnings of 40 cents to 44 cents a share. Analysts, meanwhile, want a profit of 47 cents and a top line of $1.64 billion. Considering the third-quarter results and the fourth-quarter forecast, it doesn't come as a surprise that Boston Scientific's full-year outlook is also below expectations. For 2005, Boston Scientific expects sales ranging from $6.29 billion to $6.33 billion, and earnings, excluding charges, of between $1.81 and $1.85 a share. The consensus forecasts call for sales of $6.42 billion and earnings of $1.90. Shares of the company were lower by 33 cents, or 1.4%, to $23.97. "Overall, we were pleased with the solid growth in most of our businesses, with the exception of U.S. drug-eluting stent sales," Jim Tobin, president and CEO of Boston Scientific, said in a statement discussing the third quarter. The company's domestic businesses brought in $926 million, down 5% as U.S. Taxus sales fell to $403 million from $502 million a year ago. "If you take
drug-eluting stents out of the quarter, we grew roughly 10%, rounded up a tad, encompassing all the businesses we have," Best said. Excluding Taxus, he said the company would have seen double-digit growth overall, as well as in its cardiovascular, endosurgery and spinal cord stimulation businesses. From the second half of 2004 and going into this year, more patients were converting from bare-metal stents to drug-eluting stents, leading to high market penetration, but according to LaViolette, the adoption rates have stabilized since then.