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Boston Scientific Boosts Portfolio

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Boston Scientific’s (BSX - Analyst Report) coronary stent portfolio was boosted with the CE Mark approval of its Synergy everolimus-eluting platinum chromium stent. The product features everolimus drug coating which dissolves in three months, thus improving post-implant vessel healing. This eliminates exposure to polymer over a long-term period, which is a possible cause of adverse events at a late stage.

The CE Mark approval of Synergy was backed by positive data from the six-month EVOLVE study demonstrating its non-inferiority to the Promus Element stent with respect to in-stent late loss. Subsequently, Boston Scientific plans to initiate a limited market release of the Synergy stent by early 2013, while the commercial launch is slated for early 2014. While the stent is yet to receive approval in the US or Japan, enrollment in the EVOLVE II trial is expected to begin later this year. Data from this trial, which will enroll 1,684 patients across 160 sites globally, will be used to gain approvals in these two regions.

While we are encouraged with the approval of Synergy in Europe, Boston Scientific’s Interventional Cardiology segment has been recording declining sales over the past few quarters primarily owing to disappointing performance of the coronary stent franchise. This is significant as the company in the recently reported third quarter derived 17% of its total revenues from coronary stents.

During the recently reported third quarter, global sales of coronary stent system declined 24.4% to $304 million due to disappointing performances from both drug-eluting stents (“DES”) that declined 24.5% to $283 million and bare-metal stents that plunged 22.2% to $21 million. The company’s DES business in the US has been struggling due to several headwinds – lower pricing, softness in percutaneous interventional volume and share losses following the launch of Medtronic’s (MDT - Analyst Report) Resolute Integrity stent.

Given the several headwinds currently at play, Boston Scientific continues to focus on strategic initiatives to drive growth and profitability. These include strengthening its portfolio, targeting suitable acquisitions in areas of unmet medical needs and focus on emerging markets. The company also plans to invest approximately $150 million in China, one of the world’s fastest growing and largest medical devices markets, over the next 5 years to build a local manufacturing operation. We are impressed with Boston Scientific’s recent acquisitions of Rhythmia Medical and BridgePoint Medical, which reflects its focus on new therapies to drive top line.

We expect these factors to benefit the company over the long term and as such we have a ‘Neutral’ recommendation on Boston Scientific. The stock retains a Zacks #3 Rank (“Hold”) in the short term.

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