By Jon Kamp
Of DOW JONES NEWSWIRES
BOSTON -(Dow Jones)- Shares of Boston Scientific Corp. (BSX) dropped Tuesday after the company pointing to challenges facing markets for its top heart devices, implantable defibrillators and drug-coated stents.
The Natick, Mass., company issued weaker results than Wall Street expected late Monday while it sliced its full-year earnings guidance. On a long conference call Tuesday, the company noted pressure on device prices and the potential negative impact of recent stent studies, plus a softened growth outlook within the market for heart-rhythm devices.
The company also said a beefed up sales force for heart-rhythm devices hasn't helped the business as much as expected thus far, and it talked about the potential negative business impact of U.S. health reform.
"The global economy issues remain a challenge," said Samuel R. Leno, the company's chief financial officer, on the call with analysts.
Shares of Boston Scientific recently traded down 16.7% to $8.46.
Wells Fargo analyst Larry Biegelsen cut his rating on Boston Scientific to market perform from outperform on Tuesday while citing "the growing number of headwinds" facing the company's key markets and its market-share position.
On those fronts, Boston Scientific said that while it expects to continue taking market share from rivals within the heart-rhythm market, it now sees slower market growth than it previously expected both globally and in the U.S. The company also cited some pressure on heart-rhythm device prices.
The company shares this $11 billion market with Medtronic Inc. (MDT) and St. Jude Medical Inc. (STJ). The latter company recently issued a weak preliminary third-quarter report that sparked questions about pressure on the market for implantable defibrillators. While Boston Scientific has downgraded its outlook, it said it hasn't seen the slowdown in hospital product stocking that St. Jude described.
The $4 billion market for drug-coated stents is under pressure in general due to weakening product prices, and specifically for Boston Scientific because of studies released at a recent cardiology conference. One in particular, called "Compare," showed an Abbott Laboratories (ABT)-made stent called "Xience" outperforming Boston Scientific's "Taxus Liberte" stents.
While Boston Scientific sells a version of Xience, it has to share profits from that device with Abbott, and the study poses a threat to Boston Scientific's more profitable home-grown devices. President and Chief Executive Ray Elliott acknowledged this during the call by saying new guidance assumes a Taxus franchise decline in the near term.
But he also went right after the Compare study by noting it was a one-hospital study (which can be less robust than multi-center studies) with results that weren't consistent with other Taxus-related studies.
"It is simply inappropriate to draw any definitive conclusions let alone instruct the practice of medicine" based on this study, Elliott said on the call.
-By Jon Kamp, Dow Jones Newswires; 617-654-6728; jon.kamp@dowjones.com