BSX: Positive Study Results

Boston Scientific (BSX - Analyst Report) announced that its landmark MADIT-CRT trial has met its primary endpoint -- a reduction in deaths and heart failure when patients were treated with cardiac resynchronization therapy defibrillators (CRT-Ds) as compared to implantable cardioverter defibrillators (ICDs). ICD's have long been the traditional treatment.

The results demonstrated a 29 percent reduction in death or heart failure interventions. It is the world's largest randomized NYHA Class I/II CRT-D trial spanning 110 centers, 14 countries, and over 1,800 asymptomatic or mildly symptomatic patients. The trial's full results are expected later this year.

Approximately 5.5 million Americans and 22 million people worldwide suffer from some form of heart failure. In the first quarter 2009, Boston Scientific's Cardiac Rhythm Management segment (CRT-D's and ICD's) comprised 29% of total revenues. CRM sales grew 4% Y/Y from the same period a year ago (28% of total revenues). Positive full-trial results could help reinvigorate CRM sales, a key growth driver that has been decelerating for a few quarters.

We maintain our projected EPS of $0.58 for fiscal 2009, in-line with the Street and below management's guidance at the beginning of the year. Our figures include the impact of stock options as we believe these are real expenses that impact shareholders over the long-run.

Since we upgraded the stock to a BUY in May 2009, it has increased 11.6%. The stock has not reached our target price of $11.40 and is trading at a forward P/E of 16.6. We continue to feel comfortable holding BSX's stock at these valuations.