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Boston Scientific And The "Struggling" Stents

CNBC.com

Sales of drug-coated stents, Boston Scientific's most profitable products, came in at the low end of the company's guidance in the fourth quarter. Stents are the fragile little wire mesh cylinders that act like scaffolding to prop open clogged arteries.

And on the medical device maker's conference call this morning, BSX said that first quarter drug-coated stent sales will be sequentially--from the fourth quarter to the first quarter--up as much as $20 million to down as much as $40 million. That's likely due to the fresh competition it'll be facing from Medtronic's newly-approved drug-coated stent.

And don't forget that Abbott is waiting for Food and Drug Administration approval of its drug-coated stent, which under the strange terms of the Guidant deal Boston Scientific will get to sell under a different brand name.

BSX CEO Jim Tobin says his sales force is ready for battle. He told analysts and investors on the call that MDT's stent called "Endeavor" has "weaker efficacy and an absence of any safety advantage." During the q. and a. period on the call, another exec said a little cockily, "We have more drug-eluting stent data than any other company on earth."

Check out the video, and what Medtronic CEO Bill Hawkins has to say about that in this "First on CNBC" interview on "Squawk Box" Monday morning.

Separately, BSX issued 2008 revenue guidance of $8 billion to $8.2 billion. The consensus is $8.2 billion. And its full year earnings per share forecast is 5-6 cents below the Street. In a down market, BSX was giving back some of yesterday's nearly four percent gain in early trading today.

In a research note to clients this morning. Citi medical device analyst Matthew Dodds, who has a Sell rating on BSX, writes: "BSX's Q4 results show aggressive cost cuts/divestitures are offsetting GM (gross margin) declines, but muted sales growth and high debt suggest a turnaround is not around the corner." Citi has banked BSX.

In addition to cost cuts, Boston Scientific also says it's benefitting from the weak dollar.

The FDA is expected to approve the new ABT/BSX drug-coated stent in the first half of this year. Analysts say the devices are selling for around $2,000 apiece. But look for that number to fall as the third and fourth competitors come to the American market.

On the conference call a BSX official said prices fell by about four percent in 2007 and that he expects the pricing decline "to increase a little bit with more competition. But we don't expect any dramatic shift in pricing." He argued that all of the new competitors have spent a lot of money developing the products and have a vested interest in recouping their investment.

Questions? Comments? Pharma@cnbc.com

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