Growth Across Key Businesses Helps Boston Scientific Deliver Strong Earnings

Global medical device maker Boston Scientific (NYSE:BSX) delivered strong first quarter results with sales reaching $1.76 billion, a 6% year-over-year increase in operational revenue on a constant currency basis. However, when adjusted for foreign exchange, it reported flat revenue over the prior year quarter.

Interventional Cardiology (IC), the company’s largest division, grew 8% year over year on a constant currency basis in the last quarter. The Cardiac Rhythm Management (CRM) division, which contributes over 26% of the company’s top line, reported moderate growth of 4% year over year on a constant currency basis. Peripheral Interventions (PI) grew by 14% year over year in the last quarter. Other divisions, such as Endoscopy, Urology and Women’s Health and Neuromodulation, reported low to mid single-digit growth. ^[1]

The company incurred a net loss of $1 million this quarter due to higher litigation, acquisition and restructuring-related expenses and impairment charges. Excluding these one-time charges, net income increased by 6.7% to $286 million in Q1 2015. Adjusted gross margins expanded by 140 basis points y-o-y and reached 71.3%. ^[2]

However, the company lowered its full year sales guidance from $7.3-7.5 billion to $7.23-7.38 billion.

We have a price estimate of $14 for Boston Scientific, which is slightly below the current market price.

See our full analysis for Boston Scientific

Key Businesses Continue To Drive Growth

Interventional Cardiology (IC) and Cardiac Rhythm Management (CRM) are the two biggest divisions for Boston Scientific, comprising of over 50% of the company’s total sales. The IC division derives its revenues mainly from coronary stents and catheters, whereas CRM’s primary products are pacemakers and defibrillators. Sales for both these divisions exhibited growth in the last quarter.

Operational sales for the CRM division grew by 4% y-o-y to $456 million, driven by 6% growth in Europe. Defibrillator sales growth of 5% also drove the growth in the company’s CRM division. The company also continued to expand its footprint in the Implantable Cardiac Defibrillator (ICD) market.

The IC business grew 8% year-over-year on a constant currency basis to $541 million as the company held on to its leadership position in the drug-eluting stent (DES) market. Sales from DES products grew by 7% globally, backed by strong growth in Asia and Europe. Within Asia, the Promus Premier Stent increased its presence across China and the Promus Premier large vessel entered the Japanese market. Within Europe, the SYNERGY Stent represented more than 25% of the company’s total European DES sales. The Lotus percutaneous valve grew 31% over the prior quarter on a constant currency basis, while the Watchman device grew by more than 60% year over year after receiving FDA approval last quarter.

Other Divisions Maintain Growth

Boston Scientific’s other divisions also sustained their growth momentum in the first quarter. Endoscopy, which contributed about 18% of total sales, grew 4% year-over-year on a constant currency basis to $328 million, owing to strong performance in the Latin American and Asian region. In the last quarter, Boston Scientific made significant developments that will aid the growth of its Endoscopy division in the near future. It recently launched the SpyGlass, a visualization system to treat Pancreatico-biliary Diseases. Additionally, its announcement of a joint venture with Frankenman Medical, a Chinese medical device maker, is likely to capture a share of the endoscopy market in China.

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1. Boston Scientific’s (BSX) CEO Mike Mahoney on Q1 2015 Results – Earnings Call Transcript, Seeking Alpha [↩]
2. Boston Scientific Announces Results for First Quarter 2015, News Release [↩]