BOSTON SCIENTIFIC POSITIONS SELF TO GROW WITH ACQUISITIONS.

Byline: Glenn Rifkin The New York Times

Even in the midst of the mergers and acquisitions frenzy in corporate America, Boston Scientific Corp. has raised eyebrows with its voracious appetite in the past year and a half.

The medical device maker has swallowed five significant competitors since August 1994, in stock swaps totaling $2.08 billion.

The hypergrowth strategy has caused revenues to more than double, from $450 million in 1994 to more than $1 billion in 1995; meanwhile, the company's work force has leaped from 1,800 a year ago to more than 7,000 by the end of 1995.

But if Wall Street is worried that Boston Scientific has bitten off more than it can chew, it doesn't show it. Earnings per share have jumped from 81 cents in 1994 to $1.24 in 1995.

From its start in 1979, Boston Scientific has been a bet on medical care evolving toward the sort of cost consciousness that has fully taken hold only in the past few years.

Most analysts rate the stock a strong buy, saying that Boston Scientific is building a powerhouse in its markets for minimally invasive medical devices - catheters used for treatment of coronary, gastrointestinal and urological diseases.

The company's founders, Peter M. Nicholas and John Abele, figured that the high financial and physical cost of major surgery would lead the medical community to embrace tools for the least damaging and dangerous methods of diagnosis and care.

Viewing the human body as a series of "biologic cylinders" that could be explored, purged and otherwise repaired using catheter-based devices such as balloons poked through the skin, Boston Scientific developed products that quickly became standards among physicians.

The beauty of the products is, for example, in angioplasty, doctors insert a catheter with a balloon fitted to the end that is inflated and used to open clogged arteries. An alternative treatment might require something as drastic as open-heart surgery.

"Using these devices allowed a physician to perform intervention much earlier in the disease cycle, with lower cost and lower trauma," said Nicholas, the company's chairman, chief executive and president.

"The alternative, which was further down the disease cycle, was major surgery, which was often worse than the disease itself."

With the company's sudden growth over the past year, Nicholas said his biggest worry is losing the "richness and crispness" of Boston Scientific's culture, a culture characterized by risk-taking, highly devoted employees, many of whom hold large financial stakes in the company's future through generous stock options.

But Nicholas is hopeful that the integration of the new companies will be smooth. And analysts, though wary, say if any company can pull it off, Boston Scientific can.

"It's a pretty daunting task," said Thomas Gunderson, a medical technology analyst with Piper Jaffray in Minneapolis.

"Can they juggle five balls? Nobody has been able to do it yet. But they are one of the best managed companies I know of. They have a lot of capacity and are very attentive to details."

The kind of growth undertaken by Boston Scientific reflects what Nicholas believes will be required for a company to survive and thrive in health care.

With the accelerating consolidation of hospitals and other health care providers, purchasers of medical devices suddenly have tremendous economic clout, he said.

And where the decision-maker was once the physician, today's buyer tends to be a corporate finance officer or purchasing executive.

"For us to be effective, we need to have the broadest product line within each of our businesses," Nicholas said. "We also need a leading share of the market; we have to be the low-cost, high-quality producer, and we need access to and control of technology that will impact our business in the future."

In acquiring Scimed Life Systems Inc., Heart Technology, Cardiovascular Imaging Systems Inc., Meadox Medicals and EP Technologies, Boston Scientific calculated that it was, in effect, buying product lines rather than companies.

Scimed, for example, sells a broad line of angioplasty catheters. Heart Technologies makes a catheter with a football-shaped burr at the end that spins like a router device, at 190,000 rotations per minute, to clear out plaque from arteries.

As hospitals merge or are swallowed up by chains, the pressure has increased for device manufacturers to consolidate as well, making it tougher for small players to compete.

For example, Johnson & Johnson's initially hostile takeover of Cordis, another catheter maker, is likely to mean more aggressive pricing strategies in the industry.

Companies like Seattle-based Heart Technologies, Nicholas said, had a single, high-quality product line "which made them vulnerable. They couldn't survive alone, so now they become a product line in our company."

Attention to detail has characterized Boston Scientific's management. Frederick Wise, an analyst with Bear Stearns, lauded Nicholas and Abele for their ability to work together, Nicholas commanding the strategic business and marketing side and Abele tending to the technical needs of the health care market.

"They are a very rare demonstration of a co-chairmanship that has worked for 16 years," Wise said.

Now, the pair will be tested beyond anything they have yet experienced.

"They're a good company, but they are at a very critical stage, moving from a moderate-sized company to a big company," said Dr. Robert Gussin, corporate vice president of science and technology at rival Johnson & Johnson.

"To assimilate all those businesses and move as quickly as they have in the past will be difficult. The jury is still out."

Moreover, a changing regulatory and business environment threatens Boston Scientific's continued commitment to risk-taking and leading-edge research, according to Dr. Jeffrey Isner, chief of cardiovascular research at St. Elizabeth's Hospital in Boston and a longtime customer.

"They have a lot of factors in health care reimbursement working against them," Isner said.

He cites the company's willingness to build catheters for cardiovascular human gene therapy. "They are the only ones willing to do that, so the risk-taking instincts are still alive there," Isner said. "But will the market allow them to do that a year or two from now?"

In its formative years, Boston Scientific earned a reputation in the medical community for forging close ties to physicians.

Abele, whom many in the industry call a visionary, became a fixture at hospitals and medical gatherings, soaking up new ideas and seeking input from doctors.

"John is a great tinkerer, constantly talking to anybody who had an idea," Isner said.

Boston Scientific had quietly remained private and richly profitable until 1992, when it reluctantly went public to pay off a 10-year-old financial obligation to Abbott Labs, which had bought 20 percent of the company in 1982.

Now, Boston Scientific is squarely on Wall Street's radar screen.

"Over the next 10 years, you won't see any field of medicine grow as fast as minimally invasive procedures," said Dean Kamen, president of Deka, a Manchester, N.H., medical products research and engineering firm. "Boston Scientific is very well positioned in all those areas."

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Photo Boston Scientific Corp. founders Peter M. Nicholas, left, and John Abele see expansion as necessary in the health care market. The New York Times Chart Aggressive Moves Boston Scientific has acquired five competitors in the last 18 months. Below are the companies, the date announced and value. The New York Times