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.

More Foolishness on turnaround possibilities:

If you're interested in picking through the wreckage for possible turnaround candidates, you should have the Inside Value team on your side. Check it out for free with a 30-day trial.

Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Johnson & Johnson is a Motley Fool Income Investor recommendation. The Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 761584, ~/Articles/ArticleHandler.aspx, 10/24/2014 11:43:41 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Apple's next smart device (warning, it may shock you

Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!


Advertisement