Interesting but we are not changing.
That is largely how Boston Scientific CEO Michael Mahoney's comments on healthcare industry consolidation and its impact on the company' strategy can be interpreted. In Boston Scientific's second-quarter earnings conference call Thursday, an analyst asked Mahoney to comment on the role mergers and acquisitions will have on Boston Scientific's strategy and whether the company's strategy will change given consolidation in the marketplace.
The question while deliberately not identifying a competitor was undoubtedly an allusion to Medtronic's $43 billion acquisition of Covidien. On a slightly smaller scale and not directly in competition with Boston Scientific, is another large recent M&A - Zimmer's plan to buy orthopedics rival Biomet for nearly $20 billion.
Mahoney answered at length:
I would say the recent highly-publicized acquisitions that you've read are certainly interesting news, but I would say it certainly doesn't impact our outlook in '14. Nor do we see it impacting our strategic plan and our initiatives in any significant way.
I mean what's important for investors and our employees is that the company is delivering today. We are building momentum and we have a strategic plan that is compelling, that 's attainable. We are ahead of the investor day presentation that we provided 18 months ago.
I think more importantly, in our existing markets that we play in today, we play in very big markets - well in excess of $30 billion and we have ample opportunity to grow share in those businesses. When we think about how we compete, we want to be the preferred, innovative clinical leader in very large disease states. We have seven of those businesses today.
So we'll continue to provide tuck-in acquisitions and the right innovation bets to be really clinically differentiated and have scale in those specific disease states. And I think you have seen the benefit of that strategy with our second-quarter performance and the guidance that we are reinforcing for the year.
So I think the news is interesting but I think the plan that we have in place is very differentiated in medtech - the ability to grow at or faster than our peer group and the ability we that have we believe to deliver margin improvement faster given the low base the margin is currently at, which will drive consistent sustainable double digit EPS growth. So it's certainly newsworthy but we believe the strategy we have in place is very sound and compelling from investors.
Mahoney of course is steering the Boston Scientific turnaround ship. This quarter the company delivered strong results especially in the drug eluting stent (DES) and the implantable cardioverter defibrillator (ICD) businesses. There is also belated evidence that sales of it breakthrough subcutaneous ICD product that has no leads in the heart is picking up after a slow start. Mahoney plans to top the company's initial guidance that sales of S-ICD will be more than $75 million this year.
So it makes sense that Mahoney is focused on this turnaround, at least in the short term. However, it seems a little hard to imagine that the news of Medtronic's plan to buy Covidien did not make waves across the board rooms of rivals across the country.
If scale is what is valued in the healthcare system these days, and hospitals want fewer and fewer vendors, then companies may be compelled to team up, whatever current strategy may be
[Photo Credit: Boston Scientific]