08.24.09
$8 Billion
KEY EXECUTIVES:
KEY EXECUTIVES:
Pete M. Nicholas, Director, Chairman, Founder
Ray Elliott, President and CEO
Kenneth J. Pucel, Exec. VP, Operations
Sam R. Leno, CFO and Exec. VP for Finance and Information Systems
Fredericus A. Colen, Exec. VP and Group President, CRM
William H. Kucheman, Sr. VP and Group President, Cardiovascular
Stephen Moreci, Sr. VP and Group President, Endosurgery
Michael Onuscheck, Sr. VP and President, Neuromodulation
NO. OF EMPLOYEES: 24,800
GLOBAL HEADQUARTERS: Natick, Mass.
Boston Scientific Corp. executives made substantial strides in 2008 toward making the company stronger, leaner and more diversified. But that progress did not happen overnight.
The seeds for that progress were planted several years ago, when decision-makers identified five key areas that needed an overhaul, and they mapped a strategy for driving that change and positioning the company for future growth.
“2008 was the year our efforts came together and created a renewed foundation for sustainable, profitable growth,” Pete Nicholas, Boston Scientific chairman, and Jim Tobin, former president and CEO, said at the start of the 2008 annual report. “We have now transformed quality, revitalized our pipeline, streamlined the organization, strengthened our financial fundamentals and diversified our product portfolio.”
Tobin did his part to transform the company by announcing his retirement several months after writing the 2008 annual report with Nicholas. Tobin was replaced by Ray Elliott, who assumed the post on July 13. (Editor’s note: For more details about Tobin’s retirement and the background of his replacement, see People News on page 122).
The U.S. Food and Drug Administration (FDA) helped Boston Scientific reach its quality objective by lifting several restrictions it imposed on the firm in 2006. A corporate warning letter sent to the company by the FDA that year cited insufficient quality management practices and serious regulatory problems at numerous facilities. Since the issuance of that warning letter, however, the company has worked to “shift from correcting problems to preventing them, and from remediation back to innovation,” Nicholas and Tobin said. As a result, the FDA in October lifted several restrictions related to Class III product approvals and certificates to foreign governments. While the warning letter remains in place pending the final resolution of some medical device report filing issues, the FDA’s decision virtually removed the moratorium on new product approvals, enabling the company to release a bevy of new products to the market.
Most of the new devices were launched within the Cardiac Rhythm Management (CRM), Cardiovascular, and Endosurgery sectors. Within CRM, the company released the Cognis cardiac resynchronization therapy defibrillator and Teligen implantable cardioverter defibrillator (the smallest, thinnest high-energy devices currently on the market, according to Nicholas and Tobin). Other CRM products included the Confient implantable defibrillator, which helps protect patients at risk of sudden cardiac death; the Livian CRT-D, which delivers individualized cardiac resynchronization and defibrillation therapies in one device; the upgraded Latitude Patient Management System with enhanced remote monitoring capabilities; the Altrua family of pacemakers; and the Acuity Spiral left ventricular lead.
Boston Scientific’s Cardiovascular sector unleashed a steady flow of stents to the market throughout 2008. The most significant release occurred in April, when Canadian health officials approved the company’s second-generation Taxus Liberté paclitaxel-eluting coronary stent system. The FDA gave the company its blessing in October after a two-year delay, and the Japanese Ministry of Health, Labor and Welfare signed off on the Taxus system in January.
The FDA also approved Boston Scientific’s Taxus Express Atom paclitaxel-eluting coronary stent system, a device designed specifically to treat small vessels.
The Taxus approvals, however, did not come without controversy. At the time of their release, Boston Scientific claimed both Taxus stent systems had been evaluated through an extensive randomized, controlled clinical trial program, with follow-up to five years in certain cases. Trial results, the company contended, were supported by data on more than 35,000 patients enrolled in post-approval registries.
But The Wall Street Journal reported that a study used by Boston Scientific used a flawed equation favoring the Taxus stent. Had the company used one of several other calculation methods, the Liberté clinical trial would have failed, the Journal article stated.
While the cornucopia of new products is expected to help Boston Scientific garner more revenue (about 38 percent of total revenue is expected to be generated by new products this year), the company took several other steps in 2008 to boost its bottom line. It streamlined operations by selling five non-strategic operating businesses and sold its non-strategic public and private portfolio investments. The transactions created more than $1.6 billion in after-tax proceeds.
Boston Scientific also completed the integration of its CRM and Neuromodulation businesses in 2008, a move that helped diversify the company’s product portfolio into new markets. Such decisions over the last several years have enabled Boston Scientific to reduce its reliance on coronary stents for its main source of revenue. Since 2005, the company has halved the percentage of revenue generated by stents—from nearly 50 percent to 23 percent in 2008. Other revenue sources came from CRM products (28 percent) and devices representing Endoscopy, Interventional Cardiology, Neuromodulation, Neurovascular, Peripheral Interventions and Urology/Gynecology (49 percent).
The steps Boston Scientific took last year to become a leaner, stronger, more diversified medical device firm generated $8 billion in sales, a 4 percent decrease compared with the $8.35 billion the company posted in 2007. Fluctuations in exchange rates increased net sales by $213 million.
Gross profit fell 7.2 percent to $5.58 billion, and net loss more than quadrupled, going from $495 million in 2007 to $2.03 billion last year. The company prepaid $1.4 billion in debt in 2008 and reduced operating expenses by more than $500 million. It also maintained a $1 billion investment in research and development, a move executives said is necessary to foster new product development and innovation.
Despite its overall losses in net sales and profit, Boston Scientific reported some notable gains in several of its business units. CRM sales rose 7 percent to $2.43 billion, and Endosurgery Group product sales climbed 8 percent to $1.37 billion. Neuromodulation product sales jumped 20 percent, going from $204 million in 2007 to $245 million last year. Neurovascular sales increased 2 percent to $455 million.
For the second consecutive year, sales of Boston Scientific’s drug-eluting and bare metal stents declined. In fiscal 2008 (ended Dec. 31), drug-eluting stent sales totaled $1.63 billion, an 8.6 percent decrease compared with the $1.78 billion the company reported in 2007. Bare metal stents slipped 9 percent, going from $239 million in 2007 to $217 million last year. Executives attributed the losses to increased competition and said the company’s share of the U.S. drug-eluting stent market dropped to 46 percent last year from 55 percent in 2007.
Last year’s losses in stent sales were somewhat offset by gains in sales of implantable cardioverter defibrillators (ICD) and pacemaker systems. ICD sales rose 9 percent to $1.68 billion, while pacemaker revenue increased 3.9 percent to $605 million. Combined sales of ICDs and pacemakers climbed 7.6 percent last year to $2.2 billion.
Litigation-related expenses fell 8.5 percent to $334 million, though Boston Scientific still spent a considerable amount of time in court last year defending itself against patent infringement lawsuits filed by rivals Johnson & Johnson, based in New Brunswick, N.J.; Medtronic in Minneapolis, Minn.; and Tel Aviv, Israel-headquartered Medinol Ltd. A federal district court in Delaware determined that Boston Scientific’s NIR stent (which it no longer sells) infringed upon a J&J patent. The court awarded J&J $296 million in damages, but Boston Scientific is appealing the decision. A Canadian court dismissed J&J’s lawsuit.
In February, a federal jury in Texas decided the company’s Taxus Express and Taxus Liberté stents infringed upon a patent held by Dr. Bruce Saffran, a Princeton, N.J., radiologist. The jury awarded Saffran damages of $431 million, but Boston Scientific appealed that decision also.
Earlier this year, Boston Scientific settled two lawsuits with Medtronic and agreed to stand down in three others. The move stopped all current litigation between both companies in the fields of interventional cardiology and endovascular repair.
NO. OF EMPLOYEES: 24,800
GLOBAL HEADQUARTERS: Natick, Mass.
Boston Scientific Corp. executives made substantial strides in 2008 toward making the company stronger, leaner and more diversified. But that progress did not happen overnight.
The seeds for that progress were planted several years ago, when decision-makers identified five key areas that needed an overhaul, and they mapped a strategy for driving that change and positioning the company for future growth.
“2008 was the year our efforts came together and created a renewed foundation for sustainable, profitable growth,” Pete Nicholas, Boston Scientific chairman, and Jim Tobin, former president and CEO, said at the start of the 2008 annual report. “We have now transformed quality, revitalized our pipeline, streamlined the organization, strengthened our financial fundamentals and diversified our product portfolio.”
Tobin did his part to transform the company by announcing his retirement several months after writing the 2008 annual report with Nicholas. Tobin was replaced by Ray Elliott, who assumed the post on July 13. (Editor’s note: For more details about Tobin’s retirement and the background of his replacement, see People News on page 122).
The U.S. Food and Drug Administration (FDA) helped Boston Scientific reach its quality objective by lifting several restrictions it imposed on the firm in 2006. A corporate warning letter sent to the company by the FDA that year cited insufficient quality management practices and serious regulatory problems at numerous facilities. Since the issuance of that warning letter, however, the company has worked to “shift from correcting problems to preventing them, and from remediation back to innovation,” Nicholas and Tobin said. As a result, the FDA in October lifted several restrictions related to Class III product approvals and certificates to foreign governments. While the warning letter remains in place pending the final resolution of some medical device report filing issues, the FDA’s decision virtually removed the moratorium on new product approvals, enabling the company to release a bevy of new products to the market.
Most of the new devices were launched within the Cardiac Rhythm Management (CRM), Cardiovascular, and Endosurgery sectors. Within CRM, the company released the Cognis cardiac resynchronization therapy defibrillator and Teligen implantable cardioverter defibrillator (the smallest, thinnest high-energy devices currently on the market, according to Nicholas and Tobin). Other CRM products included the Confient implantable defibrillator, which helps protect patients at risk of sudden cardiac death; the Livian CRT-D, which delivers individualized cardiac resynchronization and defibrillation therapies in one device; the upgraded Latitude Patient Management System with enhanced remote monitoring capabilities; the Altrua family of pacemakers; and the Acuity Spiral left ventricular lead.
Boston Scientific’s Cardiovascular sector unleashed a steady flow of stents to the market throughout 2008. The most significant release occurred in April, when Canadian health officials approved the company’s second-generation Taxus Liberté paclitaxel-eluting coronary stent system. The FDA gave the company its blessing in October after a two-year delay, and the Japanese Ministry of Health, Labor and Welfare signed off on the Taxus system in January.
The FDA also approved Boston Scientific’s Taxus Express Atom paclitaxel-eluting coronary stent system, a device designed specifically to treat small vessels.
The Taxus approvals, however, did not come without controversy. At the time of their release, Boston Scientific claimed both Taxus stent systems had been evaluated through an extensive randomized, controlled clinical trial program, with follow-up to five years in certain cases. Trial results, the company contended, were supported by data on more than 35,000 patients enrolled in post-approval registries.
But The Wall Street Journal reported that a study used by Boston Scientific used a flawed equation favoring the Taxus stent. Had the company used one of several other calculation methods, the Liberté clinical trial would have failed, the Journal article stated.
While the cornucopia of new products is expected to help Boston Scientific garner more revenue (about 38 percent of total revenue is expected to be generated by new products this year), the company took several other steps in 2008 to boost its bottom line. It streamlined operations by selling five non-strategic operating businesses and sold its non-strategic public and private portfolio investments. The transactions created more than $1.6 billion in after-tax proceeds.
Boston Scientific also completed the integration of its CRM and Neuromodulation businesses in 2008, a move that helped diversify the company’s product portfolio into new markets. Such decisions over the last several years have enabled Boston Scientific to reduce its reliance on coronary stents for its main source of revenue. Since 2005, the company has halved the percentage of revenue generated by stents—from nearly 50 percent to 23 percent in 2008. Other revenue sources came from CRM products (28 percent) and devices representing Endoscopy, Interventional Cardiology, Neuromodulation, Neurovascular, Peripheral Interventions and Urology/Gynecology (49 percent).
The steps Boston Scientific took last year to become a leaner, stronger, more diversified medical device firm generated $8 billion in sales, a 4 percent decrease compared with the $8.35 billion the company posted in 2007. Fluctuations in exchange rates increased net sales by $213 million.
Gross profit fell 7.2 percent to $5.58 billion, and net loss more than quadrupled, going from $495 million in 2007 to $2.03 billion last year. The company prepaid $1.4 billion in debt in 2008 and reduced operating expenses by more than $500 million. It also maintained a $1 billion investment in research and development, a move executives said is necessary to foster new product development and innovation.
Despite its overall losses in net sales and profit, Boston Scientific reported some notable gains in several of its business units. CRM sales rose 7 percent to $2.43 billion, and Endosurgery Group product sales climbed 8 percent to $1.37 billion. Neuromodulation product sales jumped 20 percent, going from $204 million in 2007 to $245 million last year. Neurovascular sales increased 2 percent to $455 million.
For the second consecutive year, sales of Boston Scientific’s drug-eluting and bare metal stents declined. In fiscal 2008 (ended Dec. 31), drug-eluting stent sales totaled $1.63 billion, an 8.6 percent decrease compared with the $1.78 billion the company reported in 2007. Bare metal stents slipped 9 percent, going from $239 million in 2007 to $217 million last year. Executives attributed the losses to increased competition and said the company’s share of the U.S. drug-eluting stent market dropped to 46 percent last year from 55 percent in 2007.
Last year’s losses in stent sales were somewhat offset by gains in sales of implantable cardioverter defibrillators (ICD) and pacemaker systems. ICD sales rose 9 percent to $1.68 billion, while pacemaker revenue increased 3.9 percent to $605 million. Combined sales of ICDs and pacemakers climbed 7.6 percent last year to $2.2 billion.
Litigation-related expenses fell 8.5 percent to $334 million, though Boston Scientific still spent a considerable amount of time in court last year defending itself against patent infringement lawsuits filed by rivals Johnson & Johnson, based in New Brunswick, N.J.; Medtronic in Minneapolis, Minn.; and Tel Aviv, Israel-headquartered Medinol Ltd. A federal district court in Delaware determined that Boston Scientific’s NIR stent (which it no longer sells) infringed upon a J&J patent. The court awarded J&J $296 million in damages, but Boston Scientific is appealing the decision. A Canadian court dismissed J&J’s lawsuit.
In February, a federal jury in Texas decided the company’s Taxus Express and Taxus Liberté stents infringed upon a patent held by Dr. Bruce Saffran, a Princeton, N.J., radiologist. The jury awarded Saffran damages of $431 million, but Boston Scientific appealed that decision also.
Earlier this year, Boston Scientific settled two lawsuits with Medtronic and agreed to stand down in three others. The move stopped all current litigation between both companies in the fields of interventional cardiology and endovascular repair.