For yet another quarter, Boston Scientific (NYSE:BSX) has continued to be a stent story. While overall sales grew 9% (in terms of constant currency), stent sales made up about 44% of the total. Cardiology products in general were about three-quarters of the full amount.
Though sales of the Taxus drug-coated stent increased on a year-over-year basis, sales were sequentially lower on both a worldwide and a U.S. basis. That's not unusual, though, so investors shouldn't read too much into that performance. Importantly, Taxus' market share is staying more or less stable, with Boston Scientific controlling about 60% of the U.S. market for drug-coated stents and Johnson & Johnson's (NYSE:JNJ) Cypher stent taking the rest.
Now, a strong drug-coated stent franchise is all well and good, but I believe that Boston Scientific will need to start delivering some sort of second act. Boston Scientific has good R&D people and has spent a lot of money over the years buying small, development-stage med-tech companies. It's time for some of those efforts to emerge and carry their own weight.
There's nothing wrong with starting out as basically a one-product company, employing what I call the "Snow White and the Seven Dwarfs" model. Many companies, such as Medtronic (NYSE:MDT), started off as heavily reliant on one type of product before diversifying their growth. Sooner or later, though, other products need to step in and become real businesses in their own right.
In my view, that's the real kicker for Boston Scientific. If drug-coated stents have more or less caught up to the market, further growth will be a hard slog of market share gains and physician education.
Buying Boston Scientific shares today is, in my view, basically a bet that future R&D will pay off for the company. The company has a great drug-coated stent, and I'm sure that its Liberte stent will be a big success as well, assuming that litigation with Johnson & Johnson over the stent is settled. But I still believe that if Boston Scientific is to get the valuation of a stalwart grower and thus turn into a long-term winner, it needs to find another significant source of profits beyond just drug-coated stents.
For more takes on Boston Scientific and other stent makers:
- Stent Wars: Jury Strikes Back
- Stent Wars: Revenge of the Bypass
- Stent Wars 2: The Market Share Menace
- Stent Success Propels Boston Scientific
Fool contributor Stephen Simpson owns shares of Johnson & Johnson. The Motley Fool has a disclosure policy.
