Boston Scientific (BSX, Neutral) launches 25 mm Lotus Transcatheter Aortic Valve Implantation (TAVI) System and commences its commercial launch in Europe after getting CE Mark clearance. On top of it, company reported mixed second quarter results which were above consensus expectations. Revenue of $1.87 billion was nearly in-line with our estimates but recorded at least 4% growth year over year. The earnings of $0.21 were bit above consensus outlook.
The coronary stent and implantable cardioverter defibrillator sales encountered low demand was offset with choppy waters gains. Boston gained 4 percent ICD growth (best in last 12 quarters) due to new leadless S-ICD. Company still believes in leadless ICD market (due to monopoly position) while nearest competitors St. Jude Medical and Medtronic have introduced leadless pacemakers. This is likely to give tough competition to Boston in couple of years. Issue of overuse and over procedural volume under pressure; we still believe ICD sales to grow by 2.5% all the way to 2018.
Company’s med-surg division rendered 5 percent rise driven by urology and women’s health ($133 million, up 7.3%). The electrophysiology business ($56 million, up 55.6%) acquired from CR Bard boosted by spinning off company’s portfolio by paired products. Company produced gross margin of 70 percent in this quarter which was offset by operating expenses growth as a result of increasing SG&A Expenses ($743 million, up 13%) and legal reserves related to transvaginal mesh things. Company’s worldwide net sales were up 4% to $1873 million while Interventional Cardiology ($528 million), Peripheral Interventions ($211 million), Cardiac Rhythm Management ($497 million), Endoscopy ($333 million) and Neuromodulation ($114 million) reported average growth.
As per management’s raised guidance, revenue will range from $1.79 billion to $1. 84 billion in third quarter while $7.325 billion to $7.425 billion in 2014. Earnings per share will range from $0.08 to $0.10 in third quarter while $0.28 to $0.32 in 2014. While
Boston is leading peers in intellectual properties in the medical technology business and expected gain in rise in cardiac rhythm management and med-surg segment business with cut in royalty expenditure, we raise price target to $13.50 and see likely upside of 3% on current stock price and maintain ‘Neutral’ rating with no changes.