New Products, Pricing Growth To Boost Boston Scientific’s Cardiovascular Segment
Boston Scientific’s (NYSE:BSX) Cardiovascular segment accounts for around 40% of the company’s value, according to our estimates. The segment includes interventional cardiology and peripheral inventions, and generates revenues primarily from intraluminal ultrasound imaging and structural heart therapy, coronary stent systems, and coronary revascularization. The segment has been performing well over the past few years, generating revenues of $3.3 billion in 2016. Looking at the segment performance so far in 2017, sales have grown around 5.5% year-on-year, which compares with 3% growth in the Rhythm Management segment and 12% growth in the MedSurg segment. The chart below shows the historical as well as estimated revenue trajectory for Boston Scientific’s cardiovascular segment.
We expect the segment’s sales to grow at an average annual rate of around 5% in the coming years. This growth should be driven by the company’s new product launches, pricing growth, and expansion in emerging markets. We also expect the overall market to continue to grow, driven by a growing population and other health and healthcare-related factors, especially in emerging markets. Additionally, increasing wealth and disposable income have allowed more consumers in these markets to afford healthcare. The global coronary stent market is expected to grow at a CAGR of 6% over the next 4 years, according to a report published by Technavio.
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Boston Scientific has been launching new products, which is aiding its sales. The company’s Synergy DES was approved by the FDA in the U.S. in 2015 and earlier this year, the FDA approved Resonate family of implantable cardioverter defibrillator (ICD) and cardiac resynchronization therapy defibrillator (CRT-D) systems. This is likely to help the company to gain market share in the cardiovascular market going forward. As the product is launched in other markets, it will help the company to improve its market share, particularly in emerging markets. Further product launches should also help in overall pricing growth for Boston Scientific, given the pricing advantages provided by patent protection.
Our forecast also takes into account the risks associated with the business. The stent market is highly competitive, with a number of companies – including Medtronic and Abbott Labs – vying for market share. In addition, Boston Scientific’s coronary stent sales, which are part of the Interventional Cardiology division, have suffered in recent years due to the performance of some of its drug-eluting stents – coronary stents used to prevent blockage in coronary arteries.
Our price estimate of $30 for Boston Scientific is slightly ahead of the current market price.
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