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UPDATE 3-Boston Scientific stents lag, CFO resigns, shares fall

Ransdell Pierson
Thursday, 24 Oct 2013 | 12:24 PM ET

Oct 24 (Reuters) - Boston Scientific Corp, which is in the midst of an attempted turnaround, reported weak sales of its heart stents and provided a disappointing fourth-quarter company sales forecast, sending its shares almost 7 percent lower on Thursday.

The medical device maker also caused market jitters by announcing that Jeffrey Capello, its chief financial officer since early 2010, would resign effective Dec. 31. He will be replaced by Daniel Brennan, the company's corporate controller.

"It was a bit of a surprise, and the company only said he has his sights set on bigger opportunities," Morningstar analyst Debbie Wang said, referring to Capello's planned departure.

Wang speculated that Mike Mahoney, who became chief executive officer of Boston Scientific last November, is simply putting together his own team.

"But given how many skeletons have fallen out of the company's closet, any hint something might go wrong makes everyone jittery," she said. She was referring to heavy debt from its $27 billion purchase in 2009 purchase of Guidant Corp, costly product recalls and declining sales of several of its products in recent years.

Wang said Capello deserved credit for a number of smart acquisitions during his term, despite heavy debt inherited from the company's much-criticized purchase of Guidant.

The medical device maker, which a day earlier announced a new round of job cuts, reported a narrower third-quarter loss on flat sales of its array of medical devices.

Global sales of its interventional cardiology products, primarily heart stents, fell 4 percent to $472 million in the quarter.

Sales of its cardiac rhythm management products, including pacemakers and implantable cardioverter defibrillators used to shock dangerously irregular heartbeats into a normal rhythm, rose 1 percent to $464 million.

Medical studies have suggested that stents and cardiac rhythm technologies, two of the company's biggest franchises, have been overused thereby crimping demand for the products.

Boston Scientific forecast sales for the fourth quarter of $1.78 billion to $1.83 billion, with the top end of the forecast in line with Wall Street expectations.

"But fourth-quarter sales guidance...does imply that sales growth isn't expected to accelerate further next quarter and may even decelerate a bit," Leerink Swann analyst Danielle Antalffy said in a research note.

Even so, Antalffy said the company appears to be on the road to a turnaround by delivering its second consecutive quarter of organic sales growth for the first time since mid-2009.

The company said it lost $5 million, or nil per share, in the third quarter. That compared with a net loss of $664 million, or 48 cents per share, in the year-ago period, when the company took restructuring and litigation charges.

Excluding special items, including for new restructuring programs and litigation, Boston Scientific earned 10 cents per share. On that basis, analysts, on average, expected 9 cents per share, according to Thomson Reuters I/B/E/S.

Global company sales of $1.735 billion matched Wall Street expectations. Boston Scientific said sales would have risen 4 percent, excluding divested businesses and the impact of the stronger dollar, which lowers the value of sales in overseas markets.

The company forecast full-year earnings, excluding special items, of 69 cents to 71 cents per share. It had previously forecast 67 to 71 cents per share.

Boston Scientific is attempting to rebound from years of declining revenue, not only caused by product recalls, but because consumers and government payers have cut healthcare spending during the global economic downturn.

It has initiated numerous cost-cutting efforts and leadership changes over the last several years, and on Wednesday said it will cut up to 1,500 jobs in its latest restructuring plan.

The new effort aims to save $150 million to $200 million in operating expenses by the end of 2015, and would reduce its current 24,000-employee global workforce by 1,100 to 1,500 positions through attrition and targeted job cuts.

Boston Scientific's stock price has more than doubled this year, after about four years in which it had been stuck in the single-digit range.

But the shares lost ground at midday, falling 83 cents to $11.46 on the New York Stock Exchange

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