Note to Boston Scientific
And what's up with making the announcement just as the stock market opens? You told your sales reps Sunday evening. You knew they'd tell doctors, who would tell analysts. How about making it a level playing field for the little guys without friends who happen to be cardiologists or analysts?
Maybe the delay was to come up with your euphemism for recall? "Ship hold and inventory retrieval" has a nice ring to it, but I wouldn't count on it helping to deaden the blow.
The only good news is that this is a paperwork issue and there isn't anything wrong with the quality of the devices -- or least any that we know of. Boston Scientific made changes to the way the products were manufactured, but the company never cleared the changes with the Food and Drug Administration. Oops. Not as bad as Sequenom
Putting sales on hold will hurt financially -- one analyst puts it at one penny in earnings per share for every two weeks or so -- but that should be a temporary situation. Either the FDA will eventually approve the changes or Boston Scientific will go back to manufacturing the products the old way. Either way, the company will eventually start selling the devices again.
The bigger issue is what the recall will do for Boston Scientific's reputation with doctors and the FDA. St. Jude Medical
Boston Scientific's rocky relationship with the FDA will be even more strained. In 2006, the company was cited by the FDA for having "ongoing systemic violations" of quality-control standards. Given the new oversight, it seems likely that the FDA will take a closer look at all its regulatory filings, which could delay the launch of new products.
Might Boston Scientific be a bad news buy? Maybe. As of this morning, there's been a small pop as investors realize they might have overreacted to the news. But why bother with doomed companies when there's so many well run companies like Johnson & Johnson
Johnson & Johnson and Procter & Gamble are Motley Fool Income Investor picks. Motley Fool Options has recommended buying calls on Johnson & Johnson stock. The Fool owns shares of Medtronic and Procter & Gamble and has written puts on Medtronic. Try any of our Foolish newsletters today, free for 30 days.