Boston Scientific New Coverage: $6.80 Price Estimate

by Trefis Team
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Boston Scientific
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Trefis has launched coverage of Boston Scientific (NYSE:BSX), a global developer, manufacturer and supplier of medical devices. The company’s primary products include coronary stents and implantable cardioverter defibrillator (ICD) systems, used for the treatment of blocked arteries and abnormal heart conditions, respectively. Its main competitors are Johnson & Johnson (NYSE:JNJ), Abbott Laboratories (NYSE:ABT), Medtronic (NYSE:MDT) and St. Jude Medical (NYSE:STJ).

We recently launched coverage of Boston Scientific with a $6.80 price estimate for the company’s stock, which is about 20% ahead of the market price. 

See our complete analysis of Boston Scientific.

We have divided Boston Scientific into the following divisions which account for its value:

  • Interventional Cardiology – primarily produces stents and catheters used to remove clogging from arteries
  • Pacemakers and Defibrillators (Cardiac Rhythm Management) – primarily produces pacemakers and defibrillators for the treatment of heart conditions
  • Endoscopy – endoscopes used in the diagnosis and treatment of various diseases
  • Peripheral Interventions – products include stents, catheters, wires and other devices used to treat peripheral vascular diseases
  • Urology/Women’s Health – products used to treat patients with urological and gynecological disorders
  • Neuromodulation – precision spinal cord stimulation (SCS) systems and other products to treat problems like severe headaches and chronic back pain
  • Electrophysiology – radio frequency generators, catheters and other devices used to diagnose and treat disturbances in the flow of electricity among cells

The interventional cardiology, cardiac rhythm management and endoscopy divisions are the primary sources of value for Boston Scientific:

Interventional Cardiology

Interventional cardiology equipment helps remove artery blockage through the use of catheters to ensure smooth blood flow throughout the body. In 2011, this division accounted for approximately 33% of total sales and we estimate that it contributes about 30% of the company’s value. Boston Scientific enjoys a market leadership position primarily because of its self-manufactured coronary stent systems, which are small tubes used to treat coronary artery diseases.

While the launch of Promus Element, an improved version of the drug eluting stent (DES) technology, and the exit of Johnson & Johnson from the DES market should help Boston Scientific protect its market share, we forecast a declining trend mainly on account of an expected long-term increase in competition as well as some issues regarding the performance of drug eluting stents.

Cardiac Rhythm Management

Cardiac rhythm management equipment helps in the treatment of abnormal heart conditions by the use of pacemakers and implantable cardioverter defibrillators (ICDs).

In 2011, this division accounted for approximately 27% of total sales and Trefis estimates that the company derives more than 25% of its value from the business. Boston Scientific has received FDA approval for several new products which has enabled it to launch the next generation line of defibrillators in the U.S. market. The company also acquired Cameron Health, which builds next generation implantable cardioverter-defibrillators (ICDs) called subcutaneous ICDs.

Endoscopy

Endoscopy equipment is used to look inside of the body and helps in the diagnosis of various diseases like esophagitis, portal hypertension, peptic ulcers and pancreatic cancer.

In 2011, endoscopy equipment accounted for approximately 16% of Boston Scientific’s sales. We expect the company’s market share to increase on account of the launch of certain improved products in the market and the recent acquisition of Asthmatx, which has developed a minimally invasive catheter-based technology to treat asthma. Accordingly we estimate that the company derives nearly 18% of its value from this division.

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