07.01.06
$6.3 Billion ($74B Total)
Key Executives:
Pete Nicholas, Chairman
Jim Tobin, President and CEO
Paul A. LaViolette, Chief Operating Officer
Mark Bartell, Co-leader of the Cardiac Rhythm Management Group
Lawrence C. Best, Exec. VP, Finance and Administration and CFO
Brian R. Burns, Sr. VP of Quality
Fredericus A. Colen, Exec. VP and Chief Technology Officer
No. of Employees: 28,000
World Headquarters: Natick, MA
Boston Scientific, the aggressor of the industry, doesn’t ever seem to pause for breath. The double-digit (12%) gains in sales for 2005 would have been newsworthy enough on their own—but then the news got even bigger.
With a growth rate (35% over 26 years) unlike many other companies in the top 10 of this report, Boston Scientific made sure its name was heard last year when it went down in history as the company that edged out Johnson & Johnson in its quest to purchase Guidant Corporation. This shakeup now makes Boston Scientific the top maker of cardiovascular devices (Medtronic was formerly the leader in this category).
The strategic move to purchase Guidant for $27 billion shocked many, but those who have followed the company’s aggressive acquisitions over the past few years may not be as surprised. This purchase was Boston Scientific’s move to expand its reach in the lucrative cardiac rhythm management (CRM) market, an area experiencing double-digit growth. Moving forward, the Guidant brand name will be phased out over the next year, partially in a move to help decrease the burden of all the bad press Guidant has received over safety-related product recalls.
Although it had a reputation as a top innovator in the cardiology device sector, Guidant (as detailed in its own profile on page 78) was faced with dwindling consumer confidence and sliding sales after news surfaced that the company withheld information about faulty defibrillators—since June 2005, more than 80,000 of them have had safety warnings or recalls attached to their brands, and warnings were issued about 200,000 pacemakers. As a result of all these issues, Boston Scientific now must deal with the flood of product liability lawsuits that are likely to be filed. Boston Scientific will also keep busy as it spends the next few years removing Guidant from product packaging and the actual medical devices being used. Furthermore, it will reduce Guidant’s Indianapolis, IN headquarters to a regional sales office.
The headaches haven’t quieted down with the inheritance of Guidant’s products, however. In May, Boston Scientific notified doctors that some of the acquired defibrillators, from the Vitality and Contak lines, may be at risk for early battery depletion; this move was followed up by a full-fledged recall in June.
“Clearly, Boston Scientific shareholders are going to be tested once again,” Tao Levy, an analyst at Deutsche Bank Securities Inc., told Reuters news service. “On the outset, this problem could be very significant given the scope of the potential devices affected and leaves us wondering what type of mess Boston Scientific is left to fix.”
While the news in the past year seemed to be all about the Guidant acquisition and resultant problems taken on, some other noteworthy activities were occurring. Boston Scientific inked a $6.4 billion deal with Abbott Laboratories to divest Guidant’s vascular intervention and endovascular businesses while agreeing to share rights to Guidant’s drug-eluting stent program.
In addition to all the acquisitions and sales news of the past year or so, Boston Scientific has been the subject of some other press regarding litigation. It was hit with some hard news in May when a federal judge upheld rulings that several of Boston Scientific’s products had infringed on patents for Palmaz and Gray coronary stents made by Johnson & Johnson’s Cordis unit. The ramifications could be a penalty of up to $1 billion—which certainly could affect the company’s future revenues. However, the same judge also upheld a ruling that Cordis infringed on Boston’s Jang patents (Cordis announced it would appeal the judgment). In addition, it’s unclear yet whether the judge will uphold a prior jury ruling that Cordis infringed on Boston’s Ding patent. Depending how all of these situations shake out, Boston Scientific may be able to fare a little better than first speculated.
In May, Boston Scientific filed a lawsuit in Ireland against Conor Medsystems alleging that its Conor CoStar Paclitaxel-Eluting Coronary Stent System infringes a balloon catheter patent owned by Boston Scientific.
Problems with the company’s quality systems have also plagued the manufacturer. In a warning letter from the FDA in January, three facilities were cited as having serious regulatory problems and the agency told the company in no uncertain terms that its corporate-wide corrective action plan stemming from earlier warning letters was inadequate. In the letter, officials expressed concern regarding six facilities, as well as recent product recalls.
The good news is that the FDA re-inspected the company’s Galway, Ireland facility and found no problems. Last year, there were several problems related to the quality of manufacturing systems for the TAXUS, Liberte and Carotid Wallstent systems.
Boston Scientific’s domination in the stent market has helped solidify its presence in the cardiovascular market. In 2005, first full-year US sales for the TAXUS Express drug-eluting stent largely contributed to the company’s overall 12% growth in sales. With several new product launches expected this year, as well as more than 267 patents on hand, the company plans to capitalize on its success to fuel future growth. The company is currently awaiting approval for products such as the Carotid Wallstent Monorail Endoprosthesis. In June, the company received FDA approval for the Sterling Monorail Catheter.
However, competitors loom in the distance, and they could eventually cut into Boston Scientific’s massive share of the cardiovascular and endovascular markets (among others for which the company makes products).
Cardiovascular sales accounted for nearly $5 billion of the company’s total in 2005, with $2.7 billion stemming from stents. Endosurgery also grew 13% to $1.2 billion. While most of the company’s total sales came from the United States, the company reported that international sales grew an impressive 15% last year.
In spite of all the changes occurring within the company, Boston Scientific is approaching its 2006 projections with optimism. Total revenue is expected to soar to $9 billion. First quarter sales were the best in the company’s history, reaching $1.6 billion.
Key Executives:
Pete Nicholas, Chairman
Jim Tobin, President and CEO
Paul A. LaViolette, Chief Operating Officer
Mark Bartell, Co-leader of the Cardiac Rhythm Management Group
Lawrence C. Best, Exec. VP, Finance and Administration and CFO
Brian R. Burns, Sr. VP of Quality
Fredericus A. Colen, Exec. VP and Chief Technology Officer
No. of Employees: 28,000
World Headquarters: Natick, MA
Boston Scientific, the aggressor of the industry, doesn’t ever seem to pause for breath. The double-digit (12%) gains in sales for 2005 would have been newsworthy enough on their own—but then the news got even bigger.
With a growth rate (35% over 26 years) unlike many other companies in the top 10 of this report, Boston Scientific made sure its name was heard last year when it went down in history as the company that edged out Johnson & Johnson in its quest to purchase Guidant Corporation. This shakeup now makes Boston Scientific the top maker of cardiovascular devices (Medtronic was formerly the leader in this category).
The strategic move to purchase Guidant for $27 billion shocked many, but those who have followed the company’s aggressive acquisitions over the past few years may not be as surprised. This purchase was Boston Scientific’s move to expand its reach in the lucrative cardiac rhythm management (CRM) market, an area experiencing double-digit growth. Moving forward, the Guidant brand name will be phased out over the next year, partially in a move to help decrease the burden of all the bad press Guidant has received over safety-related product recalls.
Although it had a reputation as a top innovator in the cardiology device sector, Guidant (as detailed in its own profile on page 78) was faced with dwindling consumer confidence and sliding sales after news surfaced that the company withheld information about faulty defibrillators—since June 2005, more than 80,000 of them have had safety warnings or recalls attached to their brands, and warnings were issued about 200,000 pacemakers. As a result of all these issues, Boston Scientific now must deal with the flood of product liability lawsuits that are likely to be filed. Boston Scientific will also keep busy as it spends the next few years removing Guidant from product packaging and the actual medical devices being used. Furthermore, it will reduce Guidant’s Indianapolis, IN headquarters to a regional sales office.
The headaches haven’t quieted down with the inheritance of Guidant’s products, however. In May, Boston Scientific notified doctors that some of the acquired defibrillators, from the Vitality and Contak lines, may be at risk for early battery depletion; this move was followed up by a full-fledged recall in June.
“Clearly, Boston Scientific shareholders are going to be tested once again,” Tao Levy, an analyst at Deutsche Bank Securities Inc., told Reuters news service. “On the outset, this problem could be very significant given the scope of the potential devices affected and leaves us wondering what type of mess Boston Scientific is left to fix.”
While the news in the past year seemed to be all about the Guidant acquisition and resultant problems taken on, some other noteworthy activities were occurring. Boston Scientific inked a $6.4 billion deal with Abbott Laboratories to divest Guidant’s vascular intervention and endovascular businesses while agreeing to share rights to Guidant’s drug-eluting stent program.
In addition to all the acquisitions and sales news of the past year or so, Boston Scientific has been the subject of some other press regarding litigation. It was hit with some hard news in May when a federal judge upheld rulings that several of Boston Scientific’s products had infringed on patents for Palmaz and Gray coronary stents made by Johnson & Johnson’s Cordis unit. The ramifications could be a penalty of up to $1 billion—which certainly could affect the company’s future revenues. However, the same judge also upheld a ruling that Cordis infringed on Boston’s Jang patents (Cordis announced it would appeal the judgment). In addition, it’s unclear yet whether the judge will uphold a prior jury ruling that Cordis infringed on Boston’s Ding patent. Depending how all of these situations shake out, Boston Scientific may be able to fare a little better than first speculated.
In May, Boston Scientific filed a lawsuit in Ireland against Conor Medsystems alleging that its Conor CoStar Paclitaxel-Eluting Coronary Stent System infringes a balloon catheter patent owned by Boston Scientific.
Problems with the company’s quality systems have also plagued the manufacturer. In a warning letter from the FDA in January, three facilities were cited as having serious regulatory problems and the agency told the company in no uncertain terms that its corporate-wide corrective action plan stemming from earlier warning letters was inadequate. In the letter, officials expressed concern regarding six facilities, as well as recent product recalls.
The good news is that the FDA re-inspected the company’s Galway, Ireland facility and found no problems. Last year, there were several problems related to the quality of manufacturing systems for the TAXUS, Liberte and Carotid Wallstent systems.
Boston Scientific’s domination in the stent market has helped solidify its presence in the cardiovascular market. In 2005, first full-year US sales for the TAXUS Express drug-eluting stent largely contributed to the company’s overall 12% growth in sales. With several new product launches expected this year, as well as more than 267 patents on hand, the company plans to capitalize on its success to fuel future growth. The company is currently awaiting approval for products such as the Carotid Wallstent Monorail Endoprosthesis. In June, the company received FDA approval for the Sterling Monorail Catheter.
However, competitors loom in the distance, and they could eventually cut into Boston Scientific’s massive share of the cardiovascular and endovascular markets (among others for which the company makes products).
Cardiovascular sales accounted for nearly $5 billion of the company’s total in 2005, with $2.7 billion stemming from stents. Endosurgery also grew 13% to $1.2 billion. While most of the company’s total sales came from the United States, the company reported that international sales grew an impressive 15% last year.
In spite of all the changes occurring within the company, Boston Scientific is approaching its 2006 projections with optimism. Total revenue is expected to soar to $9 billion. First quarter sales were the best in the company’s history, reaching $1.6 billion.