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Investment Overview for Boston Scientific (NYSE:BSX)
Below are key drivers of Boston Scientific's value that present opportunities for upside or downside to the current Trefis price estimate for the company's stock:
- Boston Scientific's market share in Interventional Cardiology: This is the most important division and the biggest source of revenue for Boston Scientific. As the company continues to innovate its drug eluting stent technology (DES) and its Transcatheter Aortic Valve (TAVR) system, we expect the company to retain its market share over our forecast period.
The Promus PREMIER stent, which was launched in the U.S. and European region in 2013 and in Japan in 2014 is gaining widespread acceptance. Meanwhile, the SYNERGY stent continues to perform strongly by representing more than 25% of the company’s total European DES sales in Europe. Similarly, the product offerings of the company's structural heart business is expected to sustain its growing market share. The Lotus TAVR received the CE mark in 2013 and has since been reporting impressive growth in the international market. Another product that could bolster revenue for the IC division is the Watchman device that recently received FDA approval in 2015. As the segment is the largest revenue contributor and constitutes more than 25% of our price estimate, even a small out-performance with respect to our expectations will have a huge impact on the company's valuation.
Cardiac Rhythm Management
- Boston Scientific's market share in Cardiac Rhythm Management: This division is the second biggest revenue source for Boston Scientific. We forecast the company's market share to remain around our current level of 8% for the rest of our forecast period. During the second half of 2012, the company finished the acquisition of Cameron Health. Cameron Health builds next generation implantable cardioverter-defibrillators (ICDs) called Subcutaneous ICDs (S-ICDs) which has helped to improve the company's market share in the ICD market over time. These ICDs do not require a transvenous lead to connect the device to the heart. Further, the company recently received FDA approval for the Blazer™ Open-Irrigated Radiofrequency Ablation Catheter, designed for use in ablation
procedures to restore a normal heart rhythm for patients with Type I atrial flutter, marking the first time that the company will
offer an open-irrigated catheter to the U.S. market. Going ahead, if the company improves its market share by 5%, due to strong adoption of the recently launched devices in the U.S., we can see 20% upside to our price estimate. However, if Boston Scientific's market share declines by 3 percentage points due to heightened pricing pressure in the US, our price estimate can decline by more than 10%.
Founded in 1979, The Boston Scientific Corporation develops, manufactures and supplies medical devices across the world. These devices are primarily sold in the following areas of medicine - Interventional Cardiology, Cardiac Rhythm Management, Endoscopy, Peripheral Interventions, Urology/Women's Health, Neuromodulation and Electrophysiology. The company's largest sources of revenue are sales of Interventional Cardiology and Cardiac Rhythm Management devices
Boston Scientific supplies its devices in around 98 countries around the world, mainly the U.S., Europe, the Middle East, Japan, Canada, China, India and Brazil. The company historically has been very acquisitive in order to strategically expand its operations and sales.
Its main competitors are Johnson & Johnson, Medtronic and St. Jude Medical.
Interventional Cardiology, Endoscopy and Cardiac Rhythm Management are the major sources of revenue for the company. Here's why:
Continuous innovation and product improvement
Coronary stents are implantable tubes which help in opening blocked arteries and ensuring smooth blood flow. These are the largest revenue driver for Boston Scientific as it is the only company in the world to provide a two-drug platform. The company keeps launching improved versions of these stents to maintain its market leadership position. Following the same trend, the company launched Promus PREMIER Element, an improved version of its drug-eluting stent (DES) technology in 2013 along with the next generation line of defibrillators and pacemakers. Continuous innovation and product improvement should allow Boston Scientific to maintain a healthy market share and increase its revenue base from the division, in our view.
Acquisitions to capture more market share
Acquisitions have always been an integral part of Boston Scientific's growth strategy. In 2011, the company acquired Sadra Medical and Atritech in order to increase the market share of its respective structural heart therapy and atrial fibrillation businesses, which fall in the Interventional Cardiology division. It also acquired Cameron Health which will strengthen the sales of its Cardiac Rhythm Management business.
Launch of new devices
Boston Scientific spends a significant portion of its revenues on research and development. As a result it has been able to launch many self-manufactured products in the market. In the last few years, the company has launched a few new devices in its major segments. We expect that the company will remain committed to heavy R&D expenditures in order to fuel its long-term revenue growth.
Acquistions in all segments
Following its historical acquisition strategy, Boston Scientific has acquired several companies in the last few years in order to expand its product portfolio.
Boston Scientific is undertaking a restructuring program which aims to improve efficiency and innovation. This should help improve its market presence while also cutting costs, benefiting margins.
Healthcare reform could impact selling prices
Stringent healthcare regulations have implemented checks on the pricing structure of medical device companies, which could have a negative impact on global revenue growth.
How Does Trefis Modelling Work?
How do we get the historical numbers for this chart?
Trefis has a team of in-house Analysts who gather historical data from company filings and other verifiable sources. When historicals are available, we explain how we got them at the bottom of the Trefis analysis section below.
Who came up with the Trefis forecast for future years?
The Trefis team of in-house Analysts considers a variety of factors when projecting any forecast. The rationale for our projections is explained in the Trefis analysis section below.
How does my dragging the trendline on the chart impact the stock price?
- We use forecasts for business drivers to calculate forecasted Revenues and Profits for each division of the company.
- We then use forecasted Profits in a Discounted Cash Flow (DCF) model to obtain the Price Estimate for the company.
See more on: DCF Methodology
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