Boston Scientific swings to 2nd-quarter profit, but revenue falls

Medical device maker Boston Scientific Corp. said Friday it swung to a second-quarter profit as costs fell from the year-ago buyout of Guidant Corp.

The company earned $115 million, or 8 cents per share, in the three months ended June 30 compared with a loss of $4.26 billion, or $3.21 per share, during the same period a year prior.

Revenue fell to $2.07 billion from $2.11 billion a year ago.

Excluding special charges, such as the Guidant buyout and stock-based compensation, the company said it earned 18 cents per share during the quarter, compared with 31 cents per share a year prior. Analysts polled by Thomson Financial expected profit of 9 cents per share on revenue of $2.09 billion.

Its shares fell 38 cents, or 2.5 percent, to $14.79 Friday.

During the quarter, sales of drug-eluting stents fell to $437 million from $647 million, but the dropoff was less pronounced in overseas markets.

The company was boosted by the launch of its Taxus stent in Japan.

"The success of our Taxus Japan launch was a key factor in the strength of our international numbers," chief financial officer Sam Leno said in a conference call with analysts.

Drug-coated stent sales have suffered because of concerns that the small metal mesh devices inserted into clogged arteries to keep them open may put patients at slightly higher risk for blood clots than older bare-metal stents.

Another study questioned whether stents are more effective than less-costly drug therapy for treating patients who don't face an imminent heart attack risk.

"In drug-eluting stents, it seems that the market's beginning to stabilize, which is good news," Chief Executive Officer Jim Tobin said. "However, it seems to be stabilizing at lower numbers than we had hoped."

Daniel Owczarski, an analyst with Soleil-Belmont Harbor Research, said the company doesn't seem to have fully acknowledged their steep falloff in the stent market, or given clear direction about any infrastructure changes or cost-cutting moves to offset it.

"If their mindset is that there truly is going to be this bump up in (stent) procedures six months from now, it's kind of that same mentality of, 'Let's wait, let's wait, it's going to come back,'" he said. "That doesn't seem to be in synch with what the rest of the world is thinking."

The company also saw losses in another key area, implantable defibrillators, which regulate heart beats. Second-quarter sales fell to $377 million, down from $383 million from the year-ago quarter and $398 million from this year's first quarter.

The continued struggles with stent sales was offset by double-digit growth compared with the year-ago quarter in other business areas, including the company's three endosurgery businesses, and in urology-gynecology and neurovascular units.

The resolution in April of quality control problems cited by the Food and Drug Administration at a Minnesota plant that makes defibrillators and pacemakers also helped drive results.

"Overall, I'd describe out results for the quarter as mixed," Tobin said in the conference call. "We saw progress in a number of key areas, but not as much as we'd like in others. Most importantly we've made progress in quality throughout the organization.

The company expects profit between 3 cents and 8 cents per share during the third quarter on revenue between $2 billion and $2.1 billion. Excluding acquisition charges, it expects profit between 12 cents and 17 cents per share, while analysts expect profit of 11 cents per share.