Boston Scientific CEO “Disappointed” by Q1 Results in CRM Business

Shares of Boston Scientific slipped more than 6% Tuesday on the news that the company had a mixed quarter where revenue of its second-largest segment came in well short of Wall Street expectations.

The Natick, Massachusetts company said that its cardiac rhythm management business had revenue of $466 million, down from $478 million in the same period a year ago and lower than Wall Street estimates of $483 million, according to an analyst research note issued Tuesday.

In answering an analyst’s question Michael Mahoney, Boston Scientific’s CEO addressed the lower CRM revenue in the quarter, according to a transcript of the call.

“We are disappointed in the Q1 results. It’s really driven in the U.S. because we had some excellent performance outside the U.S. where we likely gained share in [defibrillators] outside the U.S. and also at minimum held share globally in [pacemakers], said Michael Mahoney, CEO, in a conference call with analysts on Tuesday.

In the U.S., revenue from sales of ICDs fell to $208 million in the quarter from $221 million a year ago. The weakness in ICDs stems from two sources - unlike St. Jude Medical, Boston Scientific didn’t have a quadripolar CRT-D device in the U.S. until recently. [In fact, on April 15, the company announced approvals of the Dynagen X4 and Inogen X4 CRT-Ds that allow quadripolar pacing]

And the second factor is better longevity of batteries ironically means that patients don’t immediately need replacement devices, which hurts revenue in the short term, Mahoney explained.

An analyst with JPMorgan Chase believes that the poor results in U.S. ICDs mean that Boston Scientific is losing ground to a competitor.

“US revenues came in $15M below the Street at $208M (-6%) as Boston ceded market share to St. Jude despite the ongoing S-ICD launch, while [outside U.S.] sales of $131M (+2%) were in line,” wrote Michael Weinstein in a research note Tuesday.

S-ICD refers to the company’s novel subcutaneous ICD system that has no leads in the heart for which the company has had high hopes. In the call, Mahoney said that the device raked in more revenue in the quarter than expected.

He expects the device to add a minimum $75 million to overall revenue in 2014.

[Photo Credit: Boston Scientific]

-- By Arundhati Parmar, Senior Editor, MD+DI
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