netrashetty
Netra Shetty
The Boston Scientific Corporation (NYSE: BSX) (abbreviated BSC), is a worldwide developer, manufacturer and marketer of medical devices whose products are used in a range of interventional medical specialties, including interventional cardiology, peripheral interventions, neuromodulation, neurovascular intervention, electrophysiology, cardiac surgery, vascular surgery, endoscopy, oncology, urology and gynecology.
Boston Scientific is well known for the development of the Taxus Stent, a drug-eluting stent which is used to open clogged arteries. This product was at the center of a claim of patent infringement on the part of Boston Scientific, which was found liable for $431 million in damages.[1]
Boston Scientific's main competitors are Johnson & Johnson, Medtronic, and St. Jude Medical. The company recently acquired longtime competitor Guidant for approximately $27 billion. The former Guidant was split between BSC and Abbott Laboratories. [2] [3]
Navilyst Medical was formed in February 2008 from Boston Scientific's Fluid Management and Vascular Access business units. [4]
Beginning in 2003, Johnson & Johnson and Boston Scientific have been involved in a series of litigation involving patents covering heart stent medical devices. Both parties claimed that the other had infringed upon their patents. The litigation was settled once Boston Scientific agreed to pay $716 million to J&J in September 2009 and an additional $1.73 billion in February 2010.[5]
Boston Scientific (NYSE: BSX) makes cardiology products such as drug-eluting stents and pacemakers, which each respectively accounting for 21% and 16% of total revenues. Drug-coated stents are used to prop up coronary arteries to help prevent heart attacks, but their effectiveness have been questioned after they were linked to a risk of blood clots, as well as competition from Abbott's stent Xience.[1]
Boston Scientific also makes Endosurgery and Neuromodulation products. The Endosurgery group includes esophageal, gastric, and duodenal intervention products; colorectal, pancreatico-biliary, and pulmonary intervention devices; and products for urinary tract intervention and bladder disease, prostate intervention, pelvic floor reconstruction and urinary incontinence, gynecology, and oncology. The Neuromodulation group comprises Precision Spinal Cord Stimulation system for the treatment of chronic pain of the lower back and legs, and HiResolution 90K Cochlear Implant system to restore hearing to the profoundly deaf. Boston Scientific Corporation markets its products through direct sales force, and a network of distributors and dealers.
Ultimately, Boston Scientific's continued success will depend heavily on how well it manages to maintain its market share in the face of increasingly tough competition and its serious quality-control issues, while continuing to invest in its strong development pipeline so that it will be able to compete in the next generation of medical devices.
Contents
1 Corporate Overview
1.1 Business and Financial Metrics
1.2 Business Segments[3]
1.2.1 Cardiac Rhythm Management
1.2.2 Electrophysiology
1.2.3 Interventional Cardiology
1.2.4 Peripheral Interventions
1.2.5 Neurovascular
1.2.6 Endoscopy
1.2.7 Urology/Women’s Health
1.2.8 Neuromodulation
2 Market Penetration
3 Clinical trials
4 Product diversification and innovation
5 Quality control
6 Competition
7 References
Corporate Overview
Business and Financial Metrics
Second Quarter 2010 Results[2]
During the second quarter of 2010 Boston Scientific achieved sales of $1.928 billion, reporting GAAP earnings of $0.06 per share with adjusted EPS of $0.12. The company maintained its leadership position in the global drug-eluting stent (DES) market with 38 percent market share worldwide. The company also launched the third-generation TAXUS Elemen Paclitaxel-Eluting Coronary Stent System in the European Union and other CE Mark countries.
Net income for the quarter was $98 million, compared to $158 million in the second quarter of 2010.
Business Segments[3]
Cardiac Rhythm Management
The Company develops, manufactures and markets a variety of implantable devices that monitor the heart and deliver electricity to treat cardiac abnormalities, including implantable cardiac defibrillator (ICD) systems used to detect and treat abnormally fast heart rhythms (tachycardia) that could result in sudden cardiac death, including implantable cardiac resynchronization therapy defibrillator (CRT-D) systems used to treat heart failure, and implantable pacemaker systems used to manage slow or irregular heart rhythms (bradycardia), including implantable cardiac resynchronization therapy pacemaker (CRT-P) systems used to treat heart failure. A component of many of its implantable device systems is its remote LATITUDE Patient Management System, which enables physicians to monitor device performance remotely, while patients are in their homes, allowing for more frequent monitoring in order to guide treatment decisions. During 2009, the Company launched its LATITUDE Patient Management System in its Europe/Middle East/Africa (EMEA) region and certain Inter-Continental countries.
Electrophysiology
Within the Company’s Electrophysiology business, Boston Scientific offers medical devices for the diagnosis and treatment of cardiac arrhythmias. Included in its product offerings are RF generators, intracardiac ultrasound and steerable ablation catheters and diagnostic catheters. Its brands include the Blazer cardiac ablation catheter, the Chilli II cooled ablation catheter and the MAESTRO 3000 Cardiac Ablation System.
Interventional Cardiology
Coronary stents are tiny, mesh tubes used in the treatment of coronary artery disease, which are implanted in patients to prop open arteries and facilitate blood flow to and from the heart. The Company markets the PROMUS everolimus-eluting stent system, which is supplied by Abbott Laboratories, as well as its internally-manufactured everolimus-eluting stent system, the PROMUS Element stent system, which it launched in its EMEA region and certain Inter-Continental countries in 2009. The Company markets a range of products used to treat patients with atherosclerosis. The majority of its products in this market are used in percutaneous transluminal coronary angioplasty (PTCA) procedures and include bare-metal and drug-eluting stent systems; PTCA balloon catheters, such as the Maverick balloon catheter; the Cutting Balloon microsurgical dilatation device; rotational atherectomy systems; guide wires; guide catheters, and diagnostic catheters. The Company markets a range of intraluminal catheter-directed ultrasound imaging catheters and systems for use in coronary arteries and heart chambers, as well as certain peripheral vessels. The iLab Ultrasound Imaging System is available in the United States, Japan and other international markets. This system enhances the diagnosis and treatment of blocked vessels and heart disorders.
Peripheral Interventions
The Company sells various products designed to treat patients with peripheral disease (disease which appears in blood vessels other than in the heart and in the biliary tree), including a line of medical devices used in percutaneous transluminal angioplasty and peripheral vascular stenting. Its peripheral product offerings include vascular access products, balloon catheters, stents and peripheral vascular catheters, wires and accessories, as well as products used for peripheral embolization procedures. It also sells products designed to treat patients with non-vascular disease (disease which appears outside the blood system). The Company’s non-vascular suite of products includes biliary stents, drainage catheters and micro-puncture sets designed to treat, diagnose and ease various forms of benign and malignant tumors.
The Company markets the PolarCath peripheral dilatation system used in CryoPlasty Therapy. Its FilterWire EZ Embolic Protection System is a low profile filter designed to capture embolic material that may become dislodged during a procedure, which could otherwise travel into the microvasculature, where it could cause a heart attack or stroke. It is commercially available in the United States, its EMEA region and certain Inter-Continental countries for multiple indications, including the treatment of disease in peripheral, coronary and carotid vessels. It is also available in the United States for the treatment of saphenous vein grafts and carotid artery stenting procedures.
Neurovascular
The Company markets a range of coated and uncoated detachable coils, micro-delivery stents, micro-guidewires, micro-catheters, guiding catheters and embolics to neuro-interventional radiologists and neurosurgeons to treat diseases of the neurovascular system. It markets the GDC Coils (Guglielmi Detachable Coil) and Matrix systems to treat brain aneurysms. It also offers the NeuroForm stent for the treatment of wide neck aneurysms and the Wingspan Stent System with Gateway PTA Balloon Catheter. The Wingspan Stent System is designed to treat atherosclerotic lesions or accumulated plaque in brain arteries. Designed for the brain’s fragile vessels, the Wingspan Stent System is a self-expanding, nitinol stent sheathed in a delivery system that enables it to reach and open narrowed arteries in the brain. The Wingspan Stent System is the only device available in the United States for the treatment of intracranial atherosclerotic disease (ICAD).
Endoscopy
The Company markets a range of products to diagnose, treat and ease a variety of digestive diseases, including those affecting the esophagus, stomach and colon. Common disease states include esophagitis, portal hypertension, peptic ulcers and esophageal cancer. It also offers the Radial Jaw 4 Single-Use Biopsy Forceps, which are designed to enable collection of large high-quality tissue specimens without the need to use large channel therapeutic endoscopes and, in 2009, began offering this product in a variety of sizes. The Company’s line of RX Biliary System devices provides greater access and control for physicians to diagnose and treat challenging conditions of the bile ducts, such as removing gallstones, opening obstructed bile ducts and obtaining biopsies in suspected tumors.
The Company also markets the Spyglass Direct Visualization System for direct imaging of the pancreatico-biliary system. The Spyglass System is the first single-operator cholangioscopy device that offers clinicians a direct visualization of the pancreatico-biliary system and includes supporting devices for tissue acquisition, stone management and lithotripsy. It also offers the WallFlex biliary stent system and WallFlex esophageal stent, and Resolution Clip Device used to treat gastrointestinal bleeding. Its product line includes pulmonary biopsy forceps, transbronchial aspiration needles, cytology brushes and tracheobronchial stents used to dilate narrowed airway passages or for tumor management.
Urology/Women’s Health
The Company sells a variety of products designed to treat patients with urinary stone disease, benign prostatic hyperplasia (BPH), stress urinary incontinence, pelvic organ prolapse and excessive uterine bleeding. It offers the Prolieve Thermodilatation System, a transurethral microwave thermotherapy system for the treatment of BPH, and distributes and markets the DuoTome SideLite holmium laser treatment system for treatment of symptoms associated with BPH. It offers a range of mid-urethral sling products, sling materials, graft materials, pelvic floor reconstruction kits, suturing devices and injectables.
Neuromodulation
Within the Company’s Neuromodulation business, it markets the Precision Spinal Cord Stimulation (SCS) system, used for the management of chronic intractable pain of the trunk and/or limbs. This system delivers pain management by applying an electrical signal to mask pain signals traveling from the spinal cord to the brain. The Precision System utilizes a rechargeable battery and features a programming system.
Boston Scientific Corporation competes with Johnson & Johnson, Cordis Corporation, Medtronic, Inc., Abbott Laboratories and St. Jude Medical, Inc.
Market Penetration
Market penetration for a medical device is the percentage of the total population that is using any brand of the device. When a new medical device is introduced, the initial growth is primarily due to the increase in the number of patients that use the device. Once the device becomes standard and the majority of patients that require it use it, the market becomes saturated and growth will slow.
Boston Scientific's Taxus drug-eluting stent (DES) drove a 24% growth in the company's overall revenues since its launch in 2001 until 2005. The market penetration of coronary stents is expected to be slow for the next few years due to the following factors:
Loss of consumer and physician confidence due to uncertainty about the potential for increased risk of clot formation (late stent thrombosis) after use of DES.
A March 2006 clinical trial questioned the efficacy of bare metal stents in reducing rates of death and heart attack (myocardial infarction) compared with medical therapy alone.
Results of a clinical trial by competitor Abbott showed that Abbott's Xience V stent may be clinically superior.
Coronary stents are already the choice method of treatment for most cases of coronary artery shrinkage--patients with more complex problems are still treated by bypass surgery, and so the already high penetration rate (~80%) will not increase unless stents are shown to be at least as effective in these patients.
On the cardiac side, the market for pacemakers, at $3.3 billion, has been mature for a while. On the other hand, the market for higher-powered or more sensitive implantable cardioverter defibrillators (ICD), such as Guidant's product, has grown at a 28% average annual rate from 2001 until 2007. More recently, however, the market has slowed and sales have been declining. Although this may be due to recent concerns about product safety, some analysts believe that the market for ICDs has matured as well and will no longer show rapid growth in terms of new patients.
Clinical trials
Clinical trials of medical devices are extremely important to the future sales of the device. Clinical trials are not only required for FDA approval, but also can affect the perception held by patients and physicians of the effectiveness and safety of the device. This in turn affects both market penetration (the overall percentage of patients using the device) and market share (the overall percentage of device-users that buy Boston Scientific's particular device).
Recently, Abbott Labs conducted a clinical trial that showed that their drug-eluting stent, Xience V, was significantly superior to Boston's flagship Taxus. As a result, analysts expect Taxus to lose significant market share to Abbott's Xience V.
Product diversification and innovation
Product diversification becomes increasingly important for Boston Scientific as the markets for its current products mature. As such, Boston's recent acquisition of Guidant is an important step towards continued Boston's continued diversification.
Meanwhile Boston Scientific continues to invest in a number of novel initiatives including the LATITUDE patient management system, which enables physicians to monitor CRM device performance remotely while patients remain in their homes.
In addition, Boston's Endosurgery and Neuromodulation divisions continue to experience double-digit growth. The Neuromodulation division -- formed with Boston's acquisition of Advanced Bionics in 2004 -- is a promising avenue of growth for Boston, and it continues to make strides in its field of neurostimulators, programmable drug pumps and cochlear implants.
Quality control
For implantable medical devices such as coronary stents and cardiac defibrillators, quality control is extremely important to the recipient patient. Boston Scientific has been plagued by quality control issues and has issued safety advisories and recalls for 56% of its total pacemakers. This resulted in sanctions from the Food and Drug Administration (FDA), including two warning letters and a moratorium on the approval of major new products.
There are two major effects to the quality control issues and FDA actions:
The FDA moratorium could have a major detrimental impact on Boston Scientific's product development pipeline, the continued strength of which is essential to strong performance in the future.
Patients and physicians have lost confidence in the quality and reliability of Boston's products and--especially given the scale of Guidant's recalls and safety advisories--in pacemaker and pacemaker-like devices in general. These have played a significant part in the declining market share and market penetration experienced by Boston since the news.
Competition
Competition in the advanced medical devices industry is limited by two factors:
Competitors have similarly high costs in development and manufacturing, and thus it is difficult for a company to gain a large advantage by cutting costs.
Competitors all have large enough capacity that meeting demand is not an issue.
Thus, the main factor that will affect the performance of Boston Scientific and its competitors is its ability to capture market share through improving the technology and performance of its devices. In this sense, Boston Scientific compares favorably to its competitors, as it has strong pipelines in both its core DES and CRM businesses, and it continues to innovate in other fields. In the CRM business, its main competitors include Medtronic (MDT) and St. Jude Medical (STJ).
Boston's heavy dependence on coronary stents leaves it vulnerable to the prospect of two new competitors, and recent studies which suggest that stents are not as useful as they were thought to be. As such, last year was especially important for Boston Scientific, as it saw the successful acquisition of Guidant, a major provider in the area of cardiovascular medical products. With this merger, Boston Scientific now has a new venue of growth that will take it away from its traditional dependence on the coronary stent market. However, Guidant has been plagued with quality issues in the past, and the ability of Boston to deal with these and its own pre-existing problems, will play a major role in the performance of the company.
However, what matters most is how well Boston's technology performs when compared with that of its competitors, specifically in clinical trials.
Boston’s products will have to compete with those of its competitors in clinical trials. A study conducted by Abbott Labs found that Abbott’s new product Xience V was more effective than Boston Scientific’s Taxus. Medtronic has also introduced a new entry into the DES market, Endeavor.
Pharmaceutical and Biotech Industry — Competitive Operating Metrics (2007)
Johnson & Johnson (JNJ)
Pfizer (PFE)
Novartis (NVS)
Abbott Laboratories (ABT)
Merck (MRK)
Wyeth (WYE)
Bristol-Meyers Squibb (BMY)
Eli Lilly (LLY)
Amgen (AMGN)
Schering-Plough (SGP)
Boston Scientific (BSX)
Biogen Idec (BIIB)
Revenue (in billions of USD)
Total Revenue
$61.10
$48.42
$38.95
$25.91
$24.20
$22.40
$19.35
$18.63
$14.77
$12.69
$8.36
$3.17
Gross Profit
$43.34
$37.18
$27.04
$14.49
$18.06
$16.09
$13.13
$14.38
$12.22
$8.29
$6.02
$2.84
Revenue Growth from 2006
14.57%
0.10%
10.94%
15.30%
6.90%
10.07%
12.12%
18.75%
3.53%
19.78%
6.85%
18.21%
Income
Net Income
$10.58
$8.14
$11.95
$3.61
$3.28
$4.62
$2.17
$2.95
$3.17
-$1.47
-$0.50
$0.64
Net Profit Margin
17.31%
17.05%
16.79%
13.92%
13.54%
20.61%
14.12%
15.85%
21.43%
-11.61%
-5.92%
20.12%
Operating Income
$13.28
$9.28
$6.78
$4.58
$3.37
$6.46
$3.53
$3.88
$3.98
-$1.22
-$0.01
$0.78
Return on Average Equity
25.60%
12.06%
14.43%
22.66%
18.33%
28.09%
19.15%
23.96%
17.19%
-22.17%
-3.26%
10.05%
Other
Employees
119,200
86,600
98,200
68,000
59,800
50,527
42,000
40,600
17,500
55,000
27,500
4,300
Boston Scientific is well known for the development of the Taxus Stent, a drug-eluting stent which is used to open clogged arteries. This product was at the center of a claim of patent infringement on the part of Boston Scientific, which was found liable for $431 million in damages.[1]
Boston Scientific's main competitors are Johnson & Johnson, Medtronic, and St. Jude Medical. The company recently acquired longtime competitor Guidant for approximately $27 billion. The former Guidant was split between BSC and Abbott Laboratories. [2] [3]
Navilyst Medical was formed in February 2008 from Boston Scientific's Fluid Management and Vascular Access business units. [4]
Beginning in 2003, Johnson & Johnson and Boston Scientific have been involved in a series of litigation involving patents covering heart stent medical devices. Both parties claimed that the other had infringed upon their patents. The litigation was settled once Boston Scientific agreed to pay $716 million to J&J in September 2009 and an additional $1.73 billion in February 2010.[5]
Boston Scientific (NYSE: BSX) makes cardiology products such as drug-eluting stents and pacemakers, which each respectively accounting for 21% and 16% of total revenues. Drug-coated stents are used to prop up coronary arteries to help prevent heart attacks, but their effectiveness have been questioned after they were linked to a risk of blood clots, as well as competition from Abbott's stent Xience.[1]
Boston Scientific also makes Endosurgery and Neuromodulation products. The Endosurgery group includes esophageal, gastric, and duodenal intervention products; colorectal, pancreatico-biliary, and pulmonary intervention devices; and products for urinary tract intervention and bladder disease, prostate intervention, pelvic floor reconstruction and urinary incontinence, gynecology, and oncology. The Neuromodulation group comprises Precision Spinal Cord Stimulation system for the treatment of chronic pain of the lower back and legs, and HiResolution 90K Cochlear Implant system to restore hearing to the profoundly deaf. Boston Scientific Corporation markets its products through direct sales force, and a network of distributors and dealers.
Ultimately, Boston Scientific's continued success will depend heavily on how well it manages to maintain its market share in the face of increasingly tough competition and its serious quality-control issues, while continuing to invest in its strong development pipeline so that it will be able to compete in the next generation of medical devices.
Contents
1 Corporate Overview
1.1 Business and Financial Metrics
1.2 Business Segments[3]
1.2.1 Cardiac Rhythm Management
1.2.2 Electrophysiology
1.2.3 Interventional Cardiology
1.2.4 Peripheral Interventions
1.2.5 Neurovascular
1.2.6 Endoscopy
1.2.7 Urology/Women’s Health
1.2.8 Neuromodulation
2 Market Penetration
3 Clinical trials
4 Product diversification and innovation
5 Quality control
6 Competition
7 References
Corporate Overview
Business and Financial Metrics
Second Quarter 2010 Results[2]
During the second quarter of 2010 Boston Scientific achieved sales of $1.928 billion, reporting GAAP earnings of $0.06 per share with adjusted EPS of $0.12. The company maintained its leadership position in the global drug-eluting stent (DES) market with 38 percent market share worldwide. The company also launched the third-generation TAXUS Elemen Paclitaxel-Eluting Coronary Stent System in the European Union and other CE Mark countries.
Net income for the quarter was $98 million, compared to $158 million in the second quarter of 2010.
Business Segments[3]
Cardiac Rhythm Management
The Company develops, manufactures and markets a variety of implantable devices that monitor the heart and deliver electricity to treat cardiac abnormalities, including implantable cardiac defibrillator (ICD) systems used to detect and treat abnormally fast heart rhythms (tachycardia) that could result in sudden cardiac death, including implantable cardiac resynchronization therapy defibrillator (CRT-D) systems used to treat heart failure, and implantable pacemaker systems used to manage slow or irregular heart rhythms (bradycardia), including implantable cardiac resynchronization therapy pacemaker (CRT-P) systems used to treat heart failure. A component of many of its implantable device systems is its remote LATITUDE Patient Management System, which enables physicians to monitor device performance remotely, while patients are in their homes, allowing for more frequent monitoring in order to guide treatment decisions. During 2009, the Company launched its LATITUDE Patient Management System in its Europe/Middle East/Africa (EMEA) region and certain Inter-Continental countries.
Electrophysiology
Within the Company’s Electrophysiology business, Boston Scientific offers medical devices for the diagnosis and treatment of cardiac arrhythmias. Included in its product offerings are RF generators, intracardiac ultrasound and steerable ablation catheters and diagnostic catheters. Its brands include the Blazer cardiac ablation catheter, the Chilli II cooled ablation catheter and the MAESTRO 3000 Cardiac Ablation System.
Interventional Cardiology
Coronary stents are tiny, mesh tubes used in the treatment of coronary artery disease, which are implanted in patients to prop open arteries and facilitate blood flow to and from the heart. The Company markets the PROMUS everolimus-eluting stent system, which is supplied by Abbott Laboratories, as well as its internally-manufactured everolimus-eluting stent system, the PROMUS Element stent system, which it launched in its EMEA region and certain Inter-Continental countries in 2009. The Company markets a range of products used to treat patients with atherosclerosis. The majority of its products in this market are used in percutaneous transluminal coronary angioplasty (PTCA) procedures and include bare-metal and drug-eluting stent systems; PTCA balloon catheters, such as the Maverick balloon catheter; the Cutting Balloon microsurgical dilatation device; rotational atherectomy systems; guide wires; guide catheters, and diagnostic catheters. The Company markets a range of intraluminal catheter-directed ultrasound imaging catheters and systems for use in coronary arteries and heart chambers, as well as certain peripheral vessels. The iLab Ultrasound Imaging System is available in the United States, Japan and other international markets. This system enhances the diagnosis and treatment of blocked vessels and heart disorders.
Peripheral Interventions
The Company sells various products designed to treat patients with peripheral disease (disease which appears in blood vessels other than in the heart and in the biliary tree), including a line of medical devices used in percutaneous transluminal angioplasty and peripheral vascular stenting. Its peripheral product offerings include vascular access products, balloon catheters, stents and peripheral vascular catheters, wires and accessories, as well as products used for peripheral embolization procedures. It also sells products designed to treat patients with non-vascular disease (disease which appears outside the blood system). The Company’s non-vascular suite of products includes biliary stents, drainage catheters and micro-puncture sets designed to treat, diagnose and ease various forms of benign and malignant tumors.
The Company markets the PolarCath peripheral dilatation system used in CryoPlasty Therapy. Its FilterWire EZ Embolic Protection System is a low profile filter designed to capture embolic material that may become dislodged during a procedure, which could otherwise travel into the microvasculature, where it could cause a heart attack or stroke. It is commercially available in the United States, its EMEA region and certain Inter-Continental countries for multiple indications, including the treatment of disease in peripheral, coronary and carotid vessels. It is also available in the United States for the treatment of saphenous vein grafts and carotid artery stenting procedures.
Neurovascular
The Company markets a range of coated and uncoated detachable coils, micro-delivery stents, micro-guidewires, micro-catheters, guiding catheters and embolics to neuro-interventional radiologists and neurosurgeons to treat diseases of the neurovascular system. It markets the GDC Coils (Guglielmi Detachable Coil) and Matrix systems to treat brain aneurysms. It also offers the NeuroForm stent for the treatment of wide neck aneurysms and the Wingspan Stent System with Gateway PTA Balloon Catheter. The Wingspan Stent System is designed to treat atherosclerotic lesions or accumulated plaque in brain arteries. Designed for the brain’s fragile vessels, the Wingspan Stent System is a self-expanding, nitinol stent sheathed in a delivery system that enables it to reach and open narrowed arteries in the brain. The Wingspan Stent System is the only device available in the United States for the treatment of intracranial atherosclerotic disease (ICAD).
Endoscopy
The Company markets a range of products to diagnose, treat and ease a variety of digestive diseases, including those affecting the esophagus, stomach and colon. Common disease states include esophagitis, portal hypertension, peptic ulcers and esophageal cancer. It also offers the Radial Jaw 4 Single-Use Biopsy Forceps, which are designed to enable collection of large high-quality tissue specimens without the need to use large channel therapeutic endoscopes and, in 2009, began offering this product in a variety of sizes. The Company’s line of RX Biliary System devices provides greater access and control for physicians to diagnose and treat challenging conditions of the bile ducts, such as removing gallstones, opening obstructed bile ducts and obtaining biopsies in suspected tumors.
The Company also markets the Spyglass Direct Visualization System for direct imaging of the pancreatico-biliary system. The Spyglass System is the first single-operator cholangioscopy device that offers clinicians a direct visualization of the pancreatico-biliary system and includes supporting devices for tissue acquisition, stone management and lithotripsy. It also offers the WallFlex biliary stent system and WallFlex esophageal stent, and Resolution Clip Device used to treat gastrointestinal bleeding. Its product line includes pulmonary biopsy forceps, transbronchial aspiration needles, cytology brushes and tracheobronchial stents used to dilate narrowed airway passages or for tumor management.
Urology/Women’s Health
The Company sells a variety of products designed to treat patients with urinary stone disease, benign prostatic hyperplasia (BPH), stress urinary incontinence, pelvic organ prolapse and excessive uterine bleeding. It offers the Prolieve Thermodilatation System, a transurethral microwave thermotherapy system for the treatment of BPH, and distributes and markets the DuoTome SideLite holmium laser treatment system for treatment of symptoms associated with BPH. It offers a range of mid-urethral sling products, sling materials, graft materials, pelvic floor reconstruction kits, suturing devices and injectables.
Neuromodulation
Within the Company’s Neuromodulation business, it markets the Precision Spinal Cord Stimulation (SCS) system, used for the management of chronic intractable pain of the trunk and/or limbs. This system delivers pain management by applying an electrical signal to mask pain signals traveling from the spinal cord to the brain. The Precision System utilizes a rechargeable battery and features a programming system.
Boston Scientific Corporation competes with Johnson & Johnson, Cordis Corporation, Medtronic, Inc., Abbott Laboratories and St. Jude Medical, Inc.
Market Penetration
Market penetration for a medical device is the percentage of the total population that is using any brand of the device. When a new medical device is introduced, the initial growth is primarily due to the increase in the number of patients that use the device. Once the device becomes standard and the majority of patients that require it use it, the market becomes saturated and growth will slow.
Boston Scientific's Taxus drug-eluting stent (DES) drove a 24% growth in the company's overall revenues since its launch in 2001 until 2005. The market penetration of coronary stents is expected to be slow for the next few years due to the following factors:
Loss of consumer and physician confidence due to uncertainty about the potential for increased risk of clot formation (late stent thrombosis) after use of DES.
A March 2006 clinical trial questioned the efficacy of bare metal stents in reducing rates of death and heart attack (myocardial infarction) compared with medical therapy alone.
Results of a clinical trial by competitor Abbott showed that Abbott's Xience V stent may be clinically superior.
Coronary stents are already the choice method of treatment for most cases of coronary artery shrinkage--patients with more complex problems are still treated by bypass surgery, and so the already high penetration rate (~80%) will not increase unless stents are shown to be at least as effective in these patients.
On the cardiac side, the market for pacemakers, at $3.3 billion, has been mature for a while. On the other hand, the market for higher-powered or more sensitive implantable cardioverter defibrillators (ICD), such as Guidant's product, has grown at a 28% average annual rate from 2001 until 2007. More recently, however, the market has slowed and sales have been declining. Although this may be due to recent concerns about product safety, some analysts believe that the market for ICDs has matured as well and will no longer show rapid growth in terms of new patients.
Clinical trials
Clinical trials of medical devices are extremely important to the future sales of the device. Clinical trials are not only required for FDA approval, but also can affect the perception held by patients and physicians of the effectiveness and safety of the device. This in turn affects both market penetration (the overall percentage of patients using the device) and market share (the overall percentage of device-users that buy Boston Scientific's particular device).
Recently, Abbott Labs conducted a clinical trial that showed that their drug-eluting stent, Xience V, was significantly superior to Boston's flagship Taxus. As a result, analysts expect Taxus to lose significant market share to Abbott's Xience V.
Product diversification and innovation
Product diversification becomes increasingly important for Boston Scientific as the markets for its current products mature. As such, Boston's recent acquisition of Guidant is an important step towards continued Boston's continued diversification.
Meanwhile Boston Scientific continues to invest in a number of novel initiatives including the LATITUDE patient management system, which enables physicians to monitor CRM device performance remotely while patients remain in their homes.
In addition, Boston's Endosurgery and Neuromodulation divisions continue to experience double-digit growth. The Neuromodulation division -- formed with Boston's acquisition of Advanced Bionics in 2004 -- is a promising avenue of growth for Boston, and it continues to make strides in its field of neurostimulators, programmable drug pumps and cochlear implants.
Quality control
For implantable medical devices such as coronary stents and cardiac defibrillators, quality control is extremely important to the recipient patient. Boston Scientific has been plagued by quality control issues and has issued safety advisories and recalls for 56% of its total pacemakers. This resulted in sanctions from the Food and Drug Administration (FDA), including two warning letters and a moratorium on the approval of major new products.
There are two major effects to the quality control issues and FDA actions:
The FDA moratorium could have a major detrimental impact on Boston Scientific's product development pipeline, the continued strength of which is essential to strong performance in the future.
Patients and physicians have lost confidence in the quality and reliability of Boston's products and--especially given the scale of Guidant's recalls and safety advisories--in pacemaker and pacemaker-like devices in general. These have played a significant part in the declining market share and market penetration experienced by Boston since the news.
Competition
Competition in the advanced medical devices industry is limited by two factors:
Competitors have similarly high costs in development and manufacturing, and thus it is difficult for a company to gain a large advantage by cutting costs.
Competitors all have large enough capacity that meeting demand is not an issue.
Thus, the main factor that will affect the performance of Boston Scientific and its competitors is its ability to capture market share through improving the technology and performance of its devices. In this sense, Boston Scientific compares favorably to its competitors, as it has strong pipelines in both its core DES and CRM businesses, and it continues to innovate in other fields. In the CRM business, its main competitors include Medtronic (MDT) and St. Jude Medical (STJ).
Boston's heavy dependence on coronary stents leaves it vulnerable to the prospect of two new competitors, and recent studies which suggest that stents are not as useful as they were thought to be. As such, last year was especially important for Boston Scientific, as it saw the successful acquisition of Guidant, a major provider in the area of cardiovascular medical products. With this merger, Boston Scientific now has a new venue of growth that will take it away from its traditional dependence on the coronary stent market. However, Guidant has been plagued with quality issues in the past, and the ability of Boston to deal with these and its own pre-existing problems, will play a major role in the performance of the company.
However, what matters most is how well Boston's technology performs when compared with that of its competitors, specifically in clinical trials.
Boston’s products will have to compete with those of its competitors in clinical trials. A study conducted by Abbott Labs found that Abbott’s new product Xience V was more effective than Boston Scientific’s Taxus. Medtronic has also introduced a new entry into the DES market, Endeavor.
Pharmaceutical and Biotech Industry — Competitive Operating Metrics (2007)
Johnson & Johnson (JNJ)
Pfizer (PFE)
Novartis (NVS)
Abbott Laboratories (ABT)
Merck (MRK)
Wyeth (WYE)
Bristol-Meyers Squibb (BMY)
Eli Lilly (LLY)
Amgen (AMGN)
Schering-Plough (SGP)
Boston Scientific (BSX)
Biogen Idec (BIIB)
Revenue (in billions of USD)
Total Revenue
$61.10
$48.42
$38.95
$25.91
$24.20
$22.40
$19.35
$18.63
$14.77
$12.69
$8.36
$3.17
Gross Profit
$43.34
$37.18
$27.04
$14.49
$18.06
$16.09
$13.13
$14.38
$12.22
$8.29
$6.02
$2.84
Revenue Growth from 2006
14.57%
0.10%
10.94%
15.30%
6.90%
10.07%
12.12%
18.75%
3.53%
19.78%
6.85%
18.21%
Income
Net Income
$10.58
$8.14
$11.95
$3.61
$3.28
$4.62
$2.17
$2.95
$3.17
-$1.47
-$0.50
$0.64
Net Profit Margin
17.31%
17.05%
16.79%
13.92%
13.54%
20.61%
14.12%
15.85%
21.43%
-11.61%
-5.92%
20.12%
Operating Income
$13.28
$9.28
$6.78
$4.58
$3.37
$6.46
$3.53
$3.88
$3.98
-$1.22
-$0.01
$0.78
Return on Average Equity
25.60%
12.06%
14.43%
22.66%
18.33%
28.09%
19.15%
23.96%
17.19%
-22.17%
-3.26%
10.05%
Other
Employees
119,200
86,600
98,200
68,000
59,800
50,527
42,000
40,600
17,500
55,000
27,500
4,300
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