Boston Scientific Should Be Thankful

Two years after the purchase, Boston Scientific's (NYSE: BSX  ) acquisition of Guidant really came through for the company in the third quarter. If management hadn't had the wherewithal to purchase Guidant back in 2006 this could have been a pretty ugly quarter.

Not only did Guidant contribute pacemakers and defibrillators, a segment that was up over 10% year over year for Boston Scientific, but the acquisition also allowed the company to sell the drug-eluting stent that went to Abbott Labs (NYSE: ABT  ) in the breakup of Guidant. Had it not had those products, I believe conditions at Boston Scientific would have been worse today, and revenue would probably have fallen more than the 3.4% it did. If you remember, at the time of the Guidant purchase, growth was slowing in its own stent business and it needed to expand.

In the U.S., while it didn't expand this last quarter, Boston Scientific was actually able to keep its share of the drug-eluting stent market. Now it's divided between its older Taxus stent and its new Promus, for which it has to ship a 40% royalty over to Abbott, but holding onto market share is quite impressive. Abbott sells the same stent under the brand name Xience V and Medtronic (NYSE: MDT  ) launched a new stent earlier this year. The big loser is Johnson & Johnson's (NYSE: JNJ  ) Cypher, which lost half its U.S. market share.

The good news for Boston Scientific is that demand for stents is increasing, although prices have been cut given the increased competition. Management thinks that its recently approved second-generation Taxus Liberte is going to arrest the slide of lost market share that the older Taxus is experiencing, but I'm not convinced. An updated stent just isn't going to be as exciting for cardiologists as the two new ones.

Guidant has kept Boston Scientific from falling into the abyss. Now it just needs to show that it can launch new products in order to be a viable comeback candidate.

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