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Boston Scientific Cuts Pay and Withdraws Revenue Guidance

Image by Gerd Altmann on Pixabay Boston Scientific Cuts Pay and Withdraws Revenue Guidance
While medical technology is front and center in the fight against COVID-19, medical device companies are far from immune to the economic impact of the pandemic.
Boston Scientific is "significantly reducing" the salaries of its CEO, board of directors, and executive committee members as part of its mitigation plan for managing the financial impact of COVID-19. The company has also reduced weekly hours of employees where appropriate.

As expected, medical device companies are feeling the financial impact of the new coronavirus – and it's only going to get worse.

Boston Scientific was already expecting the virus to lower first-quarter revenue by $10 million to $40,000 as early as Feb. 5, when the company hosted it's last earnings call. Then, as COVID-19 reached a global pandemic level in March, procedure volumes took a nose dive. The Marlborough, MA-based company now expects first quarter 2020 revenue growth to be flat to "up slightly" compared to first quarter 2019 revenue, and an organic revenue decline of about 2% to 3%.

As the second quarter impact of the pandemic is expected to be more significant than the first quarter impact, Boston Scientific reported cost-cutting measures, including "significantly" reducing the salaries of CEO Mike Mahoney, board of directors and executive committee members, and where appropriate, temporarily reducing work week schedules for employees. The company said it has also strategically decreased discretionary spending and implemented precautionary measures to ensure business continuity in its supply chain and manufacturing facilities, including rotational shifts, segregating buildings, and limiting movement across building sites.

"We are focused on the safety and well-being of our people, who continue to find innovative solutions to support critical procedures and time-sensitive patient needs," Mahoney said in a company statement. "As healthcare systems respond to the increasing demands of managing COVID-19, emergent procedures need to be prioritized to help enable increased hospital capacity, and therefore elective procedures are being delayed. While we expect this to negatively impact short-term performance, we continue to believe in the excellent, long-term fundamentals of our company and will continue to manage through these challenges with strategic focus and the winning spirit of our talented global team."

Many Boston Scientific employees are lending their time and expertise to collaborate with hospitals, universities, and industry peers to find new ways to address the urgent demand for personal protection equipment (PPE) and ventilators, and the company reported that several initiatives are underway. For example, the company is working with the University of Minnesota Bakken Medical Device Center and industry collaborators to bring a ventilator alternative to market. The machine is intended to work as a one-armed robot to pump an Ambu bag, replacing the need for manual respiration in emergency settings. Boston Scientific is also collaborating with a global manufacturer of commercial ventilators to source and produce product components to enable its increased production of transportable ventilators.

Three of the Boston Scientific's U.S. manufacturing sites are collaborating with the nonprofit and plastic packaging company Prent, based in Janesville, WI, to make face shields. The company also said it is working with the University of Minnesota and others to develop a reusable personal respirator. The joint team intends to design and build prototypes, collect clinical feedback, obtain regulatory approval, and distribute "a significant quantity" of reusable PPE that can be used in place of the combination N95 respirator and face shield.

"Boston Scientific is committed to working alongside its global stakeholders to emerge from this challenging time stronger, together, so we can continue to deliver innovative medical solutions and improve the health of patients around the world," Mahoney said.

Other medtech companies suffering from procedure decline

Conformis recently furloughed one-third of its workforce (about 80 employees) and withdrew its 2020 guidance. Previously the Billerica, MA-based company was expecting to see a product revenue growth this year between 3% and 6%.

Second Sight Medical Products is laying off 84 of its 108 employees and said it intends to wind-down operations. The Sylmar, CA-based company develops implantable visual prosthetics that are intended to create an artificial form of useful vision for blind individuals. Additional layoffs are also expected to come at a later date, depending on the extent of its wind-down activities.

Weight-loss company Obalon Therapeutics is exploring financial and strategic alternatives. Such alternatives could include equity or debt financing; a sale of the company; a business combination; or a merger or reverse merger.

For more of MD+DI's ongoing coverage of resources, regulatory support, and solutions for responding to the COVID-19 pandemic, visit our COVID-19 News Central page.

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