Updated from 8:38 a.m. EDTBoston Scientific ( BSX) fell short of sales expectations and net income took a hit from charges in the second quarter, but operating earnings exceeded analysts' estimates. The company lost $4.26 billion, or $3.21 a share, in the quarter, including $3.42 a share in charges related to its acquisition of heart-device maker Guidant and its investment portfolio activity. Excluding those charges, as well as stock compensation expenses, the company earned $412 million, or 31 cents a share. Analysts were expecting Boston Scientific to report earnings of 17 cents a share. "The Guidant acquisition has transformed Boston Scientific into a leading cardiovascular company and has helped to diversify and enhance our growth opportunities," said Boston Scientific CEO Jim Tobin in a press release Thursday. "While today's results are highly impacted by one-time acquisition-related accounting adjustments, our business prospects are clearly promising." The Natick, Mass., company narrowly missed sales estimates of $2.15 billion from analysts surveyed by Thomson First Call. Net sales in the quarter were $2.11 billion, up from $1.62 billion a year ago, a 31% increase. Shares of Boston Scientific were up 2.8% to $17.54. Since the company closed the Guidant transaction April 21, its shares have fallen 22%. Worldwide sales of its Taxus stents, mesh tubes used to prop open arteries that have been cleared of blockages, were down year-over-year to $647 million from $663 million, with U.S. sales at $429 million compared with $467 million a year ago. Sequentially, worldwide Taxus sales were up from $633 million, and U.S. sales rose from $419 million in the first quarter, the company reported. Sales of devices within Guidant's cardiac rhythm management business, which was jolted by recalls last year and the market slowdown overall, were $529 million worldwide. The total included $383 million in sales of implantable cardioverter defibrillators, devices that shock twitching hearts back to normal rhythms, and $146 million in pacemaker sales. In the U.S., ICD sales were around $273 million, and pacemaker sales were $81 million.
Boston Scientific acquired Guidant for $80 a share after a battle with health care giant Johnson & Johnson ( JNJ) for the device maker. Some analysts believe the acquisition won't start adding to Boston Scientific's earnings until 2010 or beyond. Tobin, who is personally heading the cardiac rhythm management business, said any worries were misplaced. "I looked under the hood and kicked the tires," he said, adding that the problems in the Guidant business are manageable and that nothing suggests another product recall is imminent. However, Tobin didn't provide a timeline for Boston Scientific's expected return to double-digit growth besides predicting it would happen "sooner rather than later." Boston Scientific plans to hold its annual meeting with analysts on Nov. 7 when it will provide its outlook and goals for 2007.