Good News at Boston Scientific: What's Next

Three recent developments help Boston Scientific, but don't fundamentally alter the thesis

May 22, 2014 at 9:30AM

Flashy moves aren't always the best moves in med-tech. Medtronic (NYSE:MDT) shelled out big bucks for Aterial Vascular Engineering, CoreValve, and Ardian, and the first two led to significant patent infringement issues and the third may never lead to a marketable product (renal denervation). I don't want to pick on Medtronic alone, as Hologic, Johnson & Johnson, and Boston Scientific (NYSE:BSX) have all made some big deals that went south and squandered shareholder capital.

With that in mind, I like the recent updates from Boston Scientific. Between two clinical trial updates and a small acquisition, Boston Scientific is laying the groundwork for what should be some good incremental revenue and profit growth in the coming years. I don't believe these items are enough to vault the company's stock to the level of great buy, but they are positive developments nevertheless.

Buying peripheral assets from Bayer
Bayer AG (NASDAQOTH:BAYRY) has been one of the last major drug companies to completely move away from the drug-device combo business model, and the company announced on May 15 that it was selling its Interventional Business to Boston Scientific for $415 million. Bayer AG assembled these assets at a total cost of $485 million in 2008 and 2011, but has likely taken them as far as they can.

Boston Scientific is paying about 3.5x sales for assets that should be highly complementary to its existing peripheral intervention business. As the two businesses are both located in the Minneapolis area, operational synergies should be significant and easy to obtain.

Bayer's AngioJet Thrombectomy system (and Fetch aspiration catheter) holds about 40% share of the $200 million peripheral thrombectomy market, a segment growing at a mid-single digit rate. The JetStream Arthrectomy system is the #4 player in the peripheral arthrectomy market, a $350 million market growing at a mid-double digit rate.

At $20 million to $30 million in sales, the JetStream is well behind the market presence of Covidien's ev3/Foxhollow businesses, Cardiovascular Systems, and Spectranetics. The JetStream device has shown good clinical efficacy and the ability to work on soft thrombus and harder calcified lesions, but it has a capital equipment component (an aspiration system) that makes the system a little less appealing.

Covidien had already been losing share in arthrectomy and now Boston Scientific looms larger as a diversified solutions provider with stents, catheters, balloons, and mechanical arthrectomy for the peripheral vasculature. So too for Cardiovascular Systems, where the possibility of the company being bought by a peripheral intervention player lacking mechanical arthrectomy (like Bard or Boston Scientific) had been part of the bull thesis.

Synergy looking solid
As part of the ongoing EuroPCR meeting, Boston Scientific saw additional data presented on its new Synergy bioabsorable stent. In the EVOLVE study the Synergy has continued to demonstrate a very low target lesion revascularization rate of 1.1% (meaning that the area of blockage that needed to be treated stays clear in almost 99% of patients). There have also been no incidents of stent thrombosis at three years (a meaningful risk factor, where the stent becomes clogged).

The EVOLVE study is not the critical study for Boston Scientific right now – that would be the EVOLVE II pivotal U.S. study. It's also worth noting that TLR and stent thrombosis may not be the metrics that move the market. Stents are often used nowadays to relieve pain (there has never been all that much mortality benefit), and a study of Abbott's Absorb stent showed a significant reduction in angina at one-year follow-up versus the Xience stent (16% versus 28%). Getting Synergy on the market in the U.S. (likely a 2015/2016 event) is key for Boston Scientific, as the company plays leapfrog with Abbott and Medtronic in the stent market.

Lotus looks good
Boston Scientific also had an update from the ex-US REPRISE II study of its Lotus transcatheter heart valve. This was a six-month follow-up and patients getting the Lotus showed low leakage rates of 1.1%, with no severe cases. By comparison, Medtronic and Edwards Lifesciences have seen much higher leakage rates (4% at one year for Medtronic, and 17% for Edwards). All-cause mortality was around 8% and the disabling stroke rate was 3.4%-between the rates seen in the Medtronic valve at one-month and one-year follow-up (2.4% and 4.1%) and in the Edwards valve (5% and 10.6%).

These results do support the general idea that the ability to reposition and retrieve the Lotus valve is a meaningful advantage and that the valve design leads to lower leakage rates. That does argue that Lotus can be a competitive product despite a multiyear lead for Edwards and Medtronic, but it is worth remembering that the Lotus will actually be competing against newer, better valves from these companies and there may yet be patent issues that could trip up Boston Scientific.

The bottom line
As said above, these news items don't fundamentally change the Boston Scientific story. If you liked the stock before, these just reaffirm that bullish thesis and if you didn't like the stock they're not enough to shift expected revenue, profits, or cash flow enough to lead to a significantly higher valuation. They're all positive developments for the company, though, and Boston Scientific can certainly use all the positive news it can get.

Warren Buffett just bought nearly 9 million shares of this company
Imagine a company that rents a very specific and valuable piece of machinery for $41,000... per hour (that's almost as much as the average American makes in a year!). And Warren Buffett is so confident in this company's can't-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report details this company that already has over 50% market share. Just click HERE to discover more about this industry-leading stock... and join Buffett in his quest for a veritable landslide of profits!

Stephen D. Simpson, CFA has no position in any stocks mentioned. The Motley Fool recommends Covidien. The Motley Fool owns shares of Medtronic. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers