A Quick Snapshot of Boston Scientific’s MedSurg Segment

We estimate that the MedSurg segment constitutes over 30% of Boston Scientific‘s (NYSE:BSX) value. This division includes medical devices designed and manufactured for Endoscopy, and Urology & Women’s Health. Neuromodulation was also part of this segment until recently, but the company has now included this in its Rhythm Management segment. The MedSurg segment has been doing well in the recent past, primarily led by its Urology, and Women’s Health. Looking at the Endoscopy, the company has made a number of acquisitions to strengthen its product portfolio in recent years. We have created an interactive dashboard highlighting the company’s MedSurg segment. You can adjust revenue drivers and margins for 2018 and 2019 to see how it impacts the company’s overall revenues, earnings, and price estimate. Below we discuss our expectations and forecasts for the segment.

Expect MedSurg Segment To Grow In High Single Digits In The Near Term

We believe that the segment’s sales will grow at an average annual rate of 9% in the near term. This growth should be driven by both Urology & Women’s Health, and Endoscopy. The company’s next-generation endometrial ablation system has been successful in bringing in new business and should continue to do so in the near-term. Also, the company’s acquisition of American Medical Systems’ Urology portfolio in 2015 has expanded the segment’s sales significantly since then. In fact, Urology & Women’s Health revenues surged 45% in 2016, and grew in double digits in 2017. We expect it to continue to grow in low double digits in the near term. In the longer run though, an aging population in Europe and the U.S. will likely bode well for sales of urological devices. For a variety of reasons patients generally prefer minimally invasive medical procedures. As newer, minimally-invasive products are introduced, it should drive global sales. It should also be noted that the global urology devices market is expected to grow at a CAGR of a little over 5% during 2018-2022, according to a research report.

Looking at Endoscopy, the company is benefiting from its Spyglass, a visualization system to treat Pancreatico-biliary diseases. The company also expects to launch several other products over the next few years, which should help in increasing its market share. The worldwide endoscopy devices market is expected to grow at over 6% annually, and exceed $35 billion by 2022, according to a research report. There has been a consistent increase in the incidence of cancer, gastrointestinal diseases, and other chronic diseases, which can be attributed to the aging population, growing incidence of obesity, and lifestyle related factors. Additionally, the improvement in visualization and diagnosis technology, accompanied by higher awareness of advantages among medical professionals, is driving the demand. The market is dominated by flexible endoscopes, and this is likely to continue because of the variety of conditions these endoscopes are used for. Boston Scientific has several products in this category, and we believe this will likely drive Endoscopy revenue growth in the coming years.

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