07.23.08
$8.4 Billion
Peter Nicholas, Co-founder and Chairman
Jim Tobin, Director, President and CEO
Fredericus Colen, President, CRM
Jospeh Fitzgerald, President, Electrophysiology
Michael Onuscheck, President, Neuromodulation
Mark Paul, President, Neurovascular
Stephen Moreci, Sr. VP and Group President, Endosurgery
Boston Scientific’s slogan is “Delivering What’s Next.” Many have been wondering exactly what is next for the Natick, MA-based cardiovascular company. Since its acquisition of Guidant two years ago, Boston Scientific has worked to restructure and divest divisions, generate cash, pay down debt, weather a slowdown in the stent and implantable cardioverter defibrillator (ICD) markets, and work its way through FDA warning letters. All that, along with regular research and development and manufacturing activities, makes for a pretty crowded plate.
Despite all the challenges, the company achieved record sales of $8.4 billion, an increase of $536 million, or 7%, compared with 2006. Worldwide sales of the company’s drug-eluting coronary stent systems posted a significant drop in sales—24%— to $1.788 billion, compared with $2.358 billion in 2006. Both US and international markets declined. Bare metal stent systems also slipped 19% from $2.506 billion in 2006 to $2.027 billion for fiscal 2007. US sales of the bare metal stents were down, while international sales rose slightly.
Worldwide sales for the company’s Cardiac Rhythm Management (CRM) business in 2007 were $2.124 billion (including $1.542 billion in ICD sales), compared with $1.371 billion in 2006 (which included $988 million in ICD sales). On a pro forma basis for 2006, although Boston Scientific had acquired Guidant on Jan. 1, 2006 (the actual deal was closed in April), CRM sales were $2.026 billion, which included $1.473 billion of ICD sales. Overall sales for the company’s cardiovascular products were $6.561 billion, up from $6.241 billion in 2006.
Endosurgery sales for 2007 were $1.479 billion, compared with $1.346 billion for the prior year. Neuromodulation sales grew to $317 million, up from $234 million in 2006.
Despite an overall rise in sales, the company once again reported a net loss. For 2007, Boston Scientific was $495 million in the red, though much improved compared with 2006. Reported results for 2007 included acquisition, divestiture, litigation and restructuring-related charges of $1.9 billion, or $1.10 per share. Adjusted net income for 2007, excluding these charges and amortization expense, was $1.2 billion. Reported net loss for 2006 was $3.6 billion, or $2.81 per share. The company said overall total debt was reduced by more than $700 million during the year.
As part of its plan to streamline operations while reducing expenses and personnel, the company divested business units it termed “non-strategic,” including Cardiac Surgery and Vascular Surgery ($750 million to Sweden-based Gettinge Group); Venous Access and Fluid Management ($425 million to private equity firm Avista Capital Partners); and Auditory. The company had explored selling a stake in its Endosurgery division but decided against the move.
For the Auditory business sale, Boston Scientific amended its merger agreement with Advanced Bionics, which it acquired in 2004. Under terms of the new deal, the company sold the Auditory business and drug pump program of Valencia, CA-based Advanced Bionics to principals of the firm for $150 million. Boston Scientific retained the pain-management business (part of its Neuromodulation group), whose shareholders will be paid out in installments—$650 million in January 2008 and $500 million scheduled for March 2009. The new arrangements will save Boston Scientific $500 million in payments that would have been due in 2008 and 2009, and a potential $2.1 billion that might have come due in future years, according to Paul Donovan, a spokesman for Boston Scientific.
The company also sold its 13.3% stake in Houston, TX-based device maker Cyberonics Inc. for $48.6 million.
For 2007, Boston Scientific wasn’t solely in sell mode. It purchased Remon Medical Technologies Inc., a privately held company based in Caesarea, Israel. Remon’s technology uses wireless communications to exchange energy and data with minute devices placed deep inside the body. The devices monitor a variety of physiological parameters, stimulate tissues and organs or activate other devices, creating therapeutic responses. Terms of the deal were not disclosed.
Of course, a leaner Boston Scientific means fewer employees. The company predicts 2,000 fewer workers as a result of its divestitures. Beginning in 2007, the company initiated plans to cut an additional 2,300 jobs, for a total of 4,300 jobs lost. Officials estimate between $475 million and $525 million in savings as a result, the majority of which will be realized in 2008.
In April, the FDA lifted a warning letter that Boston Scientific acquired along with Guidant, freeing the company to introduce products that had been blocked by quality-control problems. Still in force, however, is a company-wide warning letter Boston Scientific received from the FDA in January 2006 that applies to its drug-coated stent business and the rest of the pre-Guidant areas of the company. The resolution of this warning letter has gone on much longer than the company had predicted.
While the warning letter has made it more difficult for the company to move products through the FDA approval process, there was some regulatory success to report in 2007. The FDA gave its nod to
Boston Scientific’s Acuity Steerable left-ventricular lead for use with cardiac resynchronization therapy defibrillators and cardiac resynchronization therapy pacemakers, both of which treat heart failure. The company also launched its Precision Plus Spinal Cord Stimulation System, a small rechargeable neuromodulation device for the treatment of chronic pain of the trunk, back and limbs.
Boston Scientific also racked up European CE Mark approvals for a number of products, including the Livian cardiac resynchronization therapy defibrillator (CRT-D) and its Taxus Liberte paclitaxel-eluting coronary stent system for use in patients with diabetes.
In addition, though an indirect victory for Boston Scientific, the FDA approved Abbott’s Xience V drug-eluting stent in early July, making the company the fourth player in the US drug-coated stent market along with Johnson & Johnson, Boston Scientific and Medtronic. With the Xience approval, an identical stent, named Promus, made by Abbott but distributed on a private-label basis by Boston Scientific, also will be marketable in the United States. The unique arrangement stems from Boston Scientific’s acquisition of Guidant, the original developer of the Xience V device. As part of the deal, Abbott purchased Guidant’s stent business to assuage antitrust concerns, but Boston Scientific negotiated the right to sell its own version of the stent—although the company will, for the time being, pay a royalty of 40% to Abbott for every Promus stent it sells.
Moving into 2008, Boston Scientific remains in a restructuring mode. In June, the company signed an agreement to sell its investments in a portfolio of companies to Saints Capital, a secondary direct-investment firm. The transaction will raise pre-tax proceeds in excess of $100 million, the majority of which will be in cash, with a portion in a note payable over several years. Separately, the company announced that it has signed a definitive agreement to sell its investments in a portfolio of venture funds and companies, subject to certain closing and other conditions, to Paul Capital Partners, a private equity secondary market, for pre-tax proceeds in excess of $40 million.
Sam Leno, chief financial officer said: “The sale of these investments, which represent the vast majority of our private investment portfolio, is part of our previously announced plans to divest non-strategic assets, while focusing on our core businesses and increasing shareholder value.”
Going forward, the company expects strong growth in the implantable cardiac device market, which together with stents accounts for about half of its total sales. Boston Scientific executives also predict a slow recovery in the stent market, thanks in large part to recent studies that have shown the tiny mesh devices are safe and effective, contrary to earlier conflicting studies that have cast a long and very expensive shadow over the market.
The company’s first-quarter 2008 results showed drug-coated stent sales remain depressed, falling 9% to $428 million. Boston Scientific fared better with implanted defibrillator sales, which rose 3% to $411 million.
“The [drug-coated stent] market hasn’t gone away,” said CEO Jim Tobin at Goldman Sachs’ recent annual healthcare conference. “This is a market that is going to be robust in terms of patient flow for a long time.”
Tobin did note, however, that the market is not what it used to be and may never rise to its $6 billion pre-safety issue levels. But while market penetration may never regain its 88% level, it’s not going to stay at 60%, he said.
Tobin also recently announced that he will remain president and CEO for the foreseeable future and will shift his focus back to day-to-day operations. Tobin, who has held the top spot at Boston Scientific since 1999, also will take over for Chief Operating Officer Paul LaViolette, combining roles while acquiring more direct access to managers who run Boston Scientific’s businesses. As a result, LaViolette is retiring from the company after nearly 15 years of service—three years in his current job. LaViolette will serve as a senior adviser through Dec. 31 and will receive separation payments of $5.44 million next year and $1.81 million in 2010, provided he has complied with all requirements in the separation agreement.
“The time is now right for Jim to turn his full attention and energies back to the core challenges facing the company as a whole, especially those relating to strategy, the development of our human capital, organizational efficiency and effectiveness, and simplifying and streamlining operations,” said Peter M. Nicholas, Boston Scientific chairman and co-founder, in a release.
Fred Colen, who has been executive vice president, operations and technology for the CRM group, will become president of that business. Off to a good start so far this year, the CRM group received a number of FDA approvals during the first half of 2008, including the Altrura family of pacemakers, Acuity Spiral left-ventricular lead for use with cardiac resynchronization therapy, the Cognis cardiac resynchronization therapy defibrillator, the Confient ICD and Livian CRT-D.
KEY EXECUTIVES:
Peter Nicholas, Co-founder and Chairman
Jim Tobin, Director, President and CEO
Fredericus Colen, President, CRM
Jospeh Fitzgerald, President, Electrophysiology
Michael Onuscheck, President, Neuromodulation
Mark Paul, President, Neurovascular
Stephen Moreci, Sr. VP and Group President, Endosurgery
NO. OF EMPLOYEES:
24,500 (as of Jan. 31, 2008)GLOBAL HEADQUARTERS:
Natick, MABoston Scientific’s slogan is “Delivering What’s Next.” Many have been wondering exactly what is next for the Natick, MA-based cardiovascular company. Since its acquisition of Guidant two years ago, Boston Scientific has worked to restructure and divest divisions, generate cash, pay down debt, weather a slowdown in the stent and implantable cardioverter defibrillator (ICD) markets, and work its way through FDA warning letters. All that, along with regular research and development and manufacturing activities, makes for a pretty crowded plate.
Despite all the challenges, the company achieved record sales of $8.4 billion, an increase of $536 million, or 7%, compared with 2006. Worldwide sales of the company’s drug-eluting coronary stent systems posted a significant drop in sales—24%— to $1.788 billion, compared with $2.358 billion in 2006. Both US and international markets declined. Bare metal stent systems also slipped 19% from $2.506 billion in 2006 to $2.027 billion for fiscal 2007. US sales of the bare metal stents were down, while international sales rose slightly.
Worldwide sales for the company’s Cardiac Rhythm Management (CRM) business in 2007 were $2.124 billion (including $1.542 billion in ICD sales), compared with $1.371 billion in 2006 (which included $988 million in ICD sales). On a pro forma basis for 2006, although Boston Scientific had acquired Guidant on Jan. 1, 2006 (the actual deal was closed in April), CRM sales were $2.026 billion, which included $1.473 billion of ICD sales. Overall sales for the company’s cardiovascular products were $6.561 billion, up from $6.241 billion in 2006.
Endosurgery sales for 2007 were $1.479 billion, compared with $1.346 billion for the prior year. Neuromodulation sales grew to $317 million, up from $234 million in 2006.
Despite an overall rise in sales, the company once again reported a net loss. For 2007, Boston Scientific was $495 million in the red, though much improved compared with 2006. Reported results for 2007 included acquisition, divestiture, litigation and restructuring-related charges of $1.9 billion, or $1.10 per share. Adjusted net income for 2007, excluding these charges and amortization expense, was $1.2 billion. Reported net loss for 2006 was $3.6 billion, or $2.81 per share. The company said overall total debt was reduced by more than $700 million during the year.
As part of its plan to streamline operations while reducing expenses and personnel, the company divested business units it termed “non-strategic,” including Cardiac Surgery and Vascular Surgery ($750 million to Sweden-based Gettinge Group); Venous Access and Fluid Management ($425 million to private equity firm Avista Capital Partners); and Auditory. The company had explored selling a stake in its Endosurgery division but decided against the move.
For the Auditory business sale, Boston Scientific amended its merger agreement with Advanced Bionics, which it acquired in 2004. Under terms of the new deal, the company sold the Auditory business and drug pump program of Valencia, CA-based Advanced Bionics to principals of the firm for $150 million. Boston Scientific retained the pain-management business (part of its Neuromodulation group), whose shareholders will be paid out in installments—$650 million in January 2008 and $500 million scheduled for March 2009. The new arrangements will save Boston Scientific $500 million in payments that would have been due in 2008 and 2009, and a potential $2.1 billion that might have come due in future years, according to Paul Donovan, a spokesman for Boston Scientific.
The company also sold its 13.3% stake in Houston, TX-based device maker Cyberonics Inc. for $48.6 million.
For 2007, Boston Scientific wasn’t solely in sell mode. It purchased Remon Medical Technologies Inc., a privately held company based in Caesarea, Israel. Remon’s technology uses wireless communications to exchange energy and data with minute devices placed deep inside the body. The devices monitor a variety of physiological parameters, stimulate tissues and organs or activate other devices, creating therapeutic responses. Terms of the deal were not disclosed.
Of course, a leaner Boston Scientific means fewer employees. The company predicts 2,000 fewer workers as a result of its divestitures. Beginning in 2007, the company initiated plans to cut an additional 2,300 jobs, for a total of 4,300 jobs lost. Officials estimate between $475 million and $525 million in savings as a result, the majority of which will be realized in 2008.
In April, the FDA lifted a warning letter that Boston Scientific acquired along with Guidant, freeing the company to introduce products that had been blocked by quality-control problems. Still in force, however, is a company-wide warning letter Boston Scientific received from the FDA in January 2006 that applies to its drug-coated stent business and the rest of the pre-Guidant areas of the company. The resolution of this warning letter has gone on much longer than the company had predicted.
While the warning letter has made it more difficult for the company to move products through the FDA approval process, there was some regulatory success to report in 2007. The FDA gave its nod to
Boston Scientific’s Acuity Steerable left-ventricular lead for use with cardiac resynchronization therapy defibrillators and cardiac resynchronization therapy pacemakers, both of which treat heart failure. The company also launched its Precision Plus Spinal Cord Stimulation System, a small rechargeable neuromodulation device for the treatment of chronic pain of the trunk, back and limbs.
Boston Scientific also racked up European CE Mark approvals for a number of products, including the Livian cardiac resynchronization therapy defibrillator (CRT-D) and its Taxus Liberte paclitaxel-eluting coronary stent system for use in patients with diabetes.
In addition, though an indirect victory for Boston Scientific, the FDA approved Abbott’s Xience V drug-eluting stent in early July, making the company the fourth player in the US drug-coated stent market along with Johnson & Johnson, Boston Scientific and Medtronic. With the Xience approval, an identical stent, named Promus, made by Abbott but distributed on a private-label basis by Boston Scientific, also will be marketable in the United States. The unique arrangement stems from Boston Scientific’s acquisition of Guidant, the original developer of the Xience V device. As part of the deal, Abbott purchased Guidant’s stent business to assuage antitrust concerns, but Boston Scientific negotiated the right to sell its own version of the stent—although the company will, for the time being, pay a royalty of 40% to Abbott for every Promus stent it sells.
Moving into 2008, Boston Scientific remains in a restructuring mode. In June, the company signed an agreement to sell its investments in a portfolio of companies to Saints Capital, a secondary direct-investment firm. The transaction will raise pre-tax proceeds in excess of $100 million, the majority of which will be in cash, with a portion in a note payable over several years. Separately, the company announced that it has signed a definitive agreement to sell its investments in a portfolio of venture funds and companies, subject to certain closing and other conditions, to Paul Capital Partners, a private equity secondary market, for pre-tax proceeds in excess of $40 million.
Sam Leno, chief financial officer said: “The sale of these investments, which represent the vast majority of our private investment portfolio, is part of our previously announced plans to divest non-strategic assets, while focusing on our core businesses and increasing shareholder value.”
Going forward, the company expects strong growth in the implantable cardiac device market, which together with stents accounts for about half of its total sales. Boston Scientific executives also predict a slow recovery in the stent market, thanks in large part to recent studies that have shown the tiny mesh devices are safe and effective, contrary to earlier conflicting studies that have cast a long and very expensive shadow over the market.
The company’s first-quarter 2008 results showed drug-coated stent sales remain depressed, falling 9% to $428 million. Boston Scientific fared better with implanted defibrillator sales, which rose 3% to $411 million.
“The [drug-coated stent] market hasn’t gone away,” said CEO Jim Tobin at Goldman Sachs’ recent annual healthcare conference. “This is a market that is going to be robust in terms of patient flow for a long time.”
Tobin did note, however, that the market is not what it used to be and may never rise to its $6 billion pre-safety issue levels. But while market penetration may never regain its 88% level, it’s not going to stay at 60%, he said.
Tobin also recently announced that he will remain president and CEO for the foreseeable future and will shift his focus back to day-to-day operations. Tobin, who has held the top spot at Boston Scientific since 1999, also will take over for Chief Operating Officer Paul LaViolette, combining roles while acquiring more direct access to managers who run Boston Scientific’s businesses. As a result, LaViolette is retiring from the company after nearly 15 years of service—three years in his current job. LaViolette will serve as a senior adviser through Dec. 31 and will receive separation payments of $5.44 million next year and $1.81 million in 2010, provided he has complied with all requirements in the separation agreement.
“The time is now right for Jim to turn his full attention and energies back to the core challenges facing the company as a whole, especially those relating to strategy, the development of our human capital, organizational efficiency and effectiveness, and simplifying and streamlining operations,” said Peter M. Nicholas, Boston Scientific chairman and co-founder, in a release.
Fred Colen, who has been executive vice president, operations and technology for the CRM group, will become president of that business. Off to a good start so far this year, the CRM group received a number of FDA approvals during the first half of 2008, including the Altrura family of pacemakers, Acuity Spiral left-ventricular lead for use with cardiac resynchronization therapy, the Cognis cardiac resynchronization therapy defibrillator, the Confient ICD and Livian CRT-D.