Boston Scientific Nixes Plan to Sell Endosurgery Group, But Will Cut Jobs, Sell Assets

Boston Scientific Corp. said Thursday it has decided against selling a minority stake in its endosurgery group, a move that the medical device maker had explored to raise as much as $1 billion in cash and help pay off debt from a $27 billion acquisition. However, Boston Scientific said it plans announcements in coming weeks and months to reduce costs, including job cuts as well as sales of assets and pieces of its investment portfolio. The moves come after the company’s stock has foundered following last year’s Guidant Corp. acquisition. The deal left Boston Scientific saddled with more than $7 billion in debt amid downturns in two of its key medical device markets — developments that led ratings agencies last month to downgrade the company’s credit ratings. The endosurgery unit has recently enjoyed strong growth, and is expected to generate $1.4 billion in revenue this year — nearly one-fifth of the revenue at a company best known for stents and defibrillators, heart devices that are suffering slow sales. Boston Scientific said in March it was exploring an initial public offering of a stake of as much as 25 percent of the endosurgery group, which develops devices to treat a variety of digestive, urological and gynecological disorders as well as certain cancers. But Chief Executive Jim Tobin said the company would benefit more from keeping the unit wholly owned than from selling a stake. “We have concluded that an IPO would have reduced — rather than enhanced — Boston Scientific’s shareholder value,” Tobin said in a news release. The Natick, Mass., company said it is developing a plan to reduce costs and make changes among its work force. Boston Scientific plans to release details of the plan next quarter. The company has repeatedly said in recent months it was planning cuts. On July 24, the company said it might sell off a unit that makes products to manage fluid and measure pressure during certain heart procedures. But Boston Scientific has yet to announce a broad cost-cutting plan, despite pressure from some Wall Street analysts to move quickly. After the company on July 20 announced a $115 million second-quarter profit and a 32 percent decline in sales of its Taxus drug-coated stent, Citigroup analyst Matthew Dodds wrote in a research note: “With operating profit declining further, Boston will have trouble paying down debt even as it scours additional ways to raise cash.” Ratings firm Moody’s Investors Service on July 24 cut Boston Scientific’s credit rating to below investment-grade status, marking the first such ratings downgrade for the company. Moody’s cited slumps in the stent and implantable defibrillator markets, and “the lack of definitive action related to material asset sales.” Moody’s move followed a downgrade to the lowest level of investment grade status on July 23 by Standard & Poor’s. Shares of Boston Scientific fell 12 cents to $13.31 in after-hours trading after rising 24 cents to $13.43 in the regular session. The stock is at its lowest level since mid-2002.