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New Buyouts Aid Boston Scientific Amid Dull Pacemaker Sales

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On Aug 28, we issued an updated research report on Boston Scientific Corporation (BSX - Free Report) . Boston Scientific’s recent acquisitions have added various new products (though many are under development) with immense potential to its portfolio. However, declining worldwide pacemaker sales in the recent past continued to weigh on the company's Cardiac Rhythm Management (CRM) results. The stock carries a Zacks Rank #3 (Hold).

This leading manufacturer of medical devices and products used in various interventional medical specialties worldwide has been outperforming its industry for the past three months. The stock has gained 15.7% compared with the industry's 7.5% growth.

Boston Scientific’s strategy to augment existing portfolio through inorganic means has been progressing well. This, in turn, should help boost the top line in the long term. During the first quarter of 2018, the company announced four compelling tuck-in acquisitions — Claret, Cryterion, nVision and Securus. All these acquisitions target high-growth markets, enhance the company’s category leadership strategy, leverage existing capabilities and further enhance the company’s short-term and long-term growth profile.

Earlier to that, the company announced acquisitions of NxThera and nVision in Urology and Pelvic Health, EmCision in Endoscopy, Securus in EP, and Millipede in Structural Heart. According to Boston Scientific, these acquisitions will open up opportunities of more than $16 billion in new markets by 2021.

 

We are also upbeat about Boston Scientific’s structural heart programs that are rapidly building momentum banking on strong performance of the WATCHMAN left atrial appendage closure device and ACURATE TAVR valve. This apart, the company’s major investment in inorganic expansion is also achieving fruitful results.

In this regard, the company is quite positive about its Claret Medical acquisition plan, which will bring Claret’s Sentinel to its structural heart portfolio.

Boston Scientific is gradually strengthening its presence in the emerging markets, in countries like Brazil, Russia, India and China (BRIC). In second-quarter 2018, business from the emerging markets registered an impressive growth led by strong performance in China.

However, declining global pacemaker sales continue to weigh on Boston Scientific's CRM results. In the second quarter, the company witnessed significant declines in pacemaker performance due to certain product gaps between CRT-D pacing and MRI line. Although, the company has taken several measures lately to rebound this trend (including the launch of RESONATE platform), the near-term outlook is bleak.

Further, we are concerned about the company’s recall of one of its prime offerings — the Lotus range of heart devices.

Key Picks

Some better-ranked stocks in the broader medical space are Integer Holdings Corp. (ITGR - Free Report) , Intuitive Surgical (ISRG - Free Report) and Masimo Corp. (MASI - Free Report) .

Integer Holdings’ expected long-term earnings growth rate is 15%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Intuitive Surgical’s long-term expected earnings growth rate is 14.7%. The stock carries a Zacks Rank #1.

Masimo’s long-term expected earnings growth rate is 14.8%. The stock has a Zacks Rank #2 (Buy).

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