Boston Scientific Corporation (BSX - Analyst Report) has launched the Promus Element stent in Japan following its recent approval by the Ministry of Health, Labor and Welfare. The company plans to begin marketing the product immediately. This launch comes much ahead of the company’s expectation of a mid-2012 approval. Boston Scientific’s portfolio in Japan got a further fillip with this latest inclusion.
Under an agreement with Abbott Laboratories (ABT - Analyst Report) , Boston Scientific markets its everolimus eluting stent Xience under the brand name Promus in Japan until the second quarter of 2012. However, with the launch of the internally-developed and self-manufactured stent, the company could expand its gross margin.
Defibrillators and stents are the company’s core businesses. However, global sales of coronary stent system at $381 million, during the most recent quarter, declined 6.8% year over year due to disappointing performance from both drug-eluting stents (“DES”) that declined 5.6% to $356 million and bare-metal stents that dropped 21.8% to $25 million. Revenues fell short of the company’s guidance due to continued softness in procedure volumes.
However, the approval of Promus Element Plus stent in the US last year came well ahead of the original expectation of a mid-2012 timeline.Boston Scientific expects that the approval of Promus Element represents $200 million in additional annualized gross margin contribution from the US and Japan at the end of 2012. This is a part of the targeted $650–$750 million opportunity for improvement in operating profit over the next few years. The success of Promus Element Plus in the US along with its launch in Japan and Johnson & Johnson’s (JNJ - Analyst Report) decision to exit the DES business should enable the company to improve its DES market share.
The Element platform continues to perform well in the emerging markets, primarily in India and Brazil. With the recent launch of Promus Element in China and some anticipated pricing approvals in India, contribution from these regions is expected to rise further in 2012.
Based on the investments made in sales representatives, dealers and infrastructure, the company is well placed to increase its single-digit market share in China and India. The combined DES market is estimated at $700 million with a 20% growth rate. Boston Scientific is also making headway in Brazil following the launch of Promus Element in late 2010. Ever since the Promus to Promus Element conversion, market share has expanded by almost 800 basis points, exiting 2011 with more than 60% of the pie. We believe the strategies implemented by the company would help reap the immense potential embedded in the emerging markets.
We have a Neutral recommendation on Boston Scientific. The stock retains a Zacks #3 Rank (Hold) in the short term.