Guidant: The Gift That Keeps on Giving

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Boston Scientific (NYSE: BSX) hasn't had a fiscal year of positive GAAP earnings since it bought Guidant in April 2006. It looks like it'll finally have one this year, but owning Guidant will now cost the company nearly all of what has been earned so far this year -- nearly half of the full year's projected earnings.

Last year, Boston Scientific took a whopping $2.7 billion goodwill writedown because it had to downgrade the value of what it got in acquiring Guidant. Now it's taking a measly $296 million charge to settle a dispute with the Department of Justice for failing to include information about three of Guidant's heart devices in reports to the Food and Drug Administration. The company also pleaded guilty to two misdemeanors in connection with the case.

However, the reports to the FDA happened the year before Boston Scientific bought Guidant. And the company already paid $240 million to settle lawsuits filed by patients claiming that Guidant knew about defects in its defibrillators. Johnson & Johnson (NYSE: JNJ), which bowed out of a bidding war over Guidant, is looking pretty smart right now.

The nearly $300 million fine could have been worse, I guess. Pfizer (NYSE: PFE) and Eli Lilly (NYSE: LLY) each settled cases with the DOJ for at least $1.4 billion in the past year.

Even though the Guidant acquisition has been plagued by more than its share of heart-wrenching issues, investors may have more joy in their hearts than heartache in their future. The heart-rhythm devices acquired from Guidant should get a boost from a recent study, and its Promus drug-eluting stent is doing well. That stent is made by Abbott Labs (NYSE: ABT) as part of the deal that split Guidant between the two companies, and is identical -- except for the packaging -- to Abbott's Xience V. Boston Scientific doesn't take in as much profit from the stent as its wholly owned older stent, but at least its revenue is holding steady among increased competition.

With any luck, it's done sending that revenue out the one-time-charges door.