Recently, Boston Scientific (BSX) received good news with respect to its Cardiovascular portfolio. The company’s 2.25 mm Promus Everolimus-Eluting stent has received approval from the US Food and Drug Administration (FDA). The company expects to launch the product immediately in the US. With this approval, Boston Scientific’s Promus stent portfolio includes ones of 2.25−4 mm in diameters and 8−28 mm length.
Clinical studies have shown that about 10% of patients undergoing percutaneous coronary interventions have small vessels (<2.5 mm). Consequently, the recent approval would be of immense benefit to this patient population. Boston Scientific’s stent portfolio also includes the 2.25 mm Ion Paclitaxel-Eluting Platinum Chromium Stent targeted towards patients with small vessels.
Boston Scientific has an agreement with Abbott Laboratories (ABT) through which it markets Abbott’s everolimus eluting stent Xience V under the brand name Promus in the US and Japan till the second quarter of 2012. While Cardiovascular is the biggest segment at Boston Scientific, it has been witnessing several challenges such as pricing pressure and lower penetration rates for the past few quarters. During the first quarter of fiscal 2011, worldwide coronary stent sales ($409 million) declined 7.9% driven by lower sales of both drug-eluting stents (6.9% to $379 million)and bare metal stents (18.9% to $30 million).
Boston Scientific had launched internally developed and self- manufactured Promus Element stent in the EMEA region and certain Inter-Continental countries in the fourth quarter of 2009. In September 2010, the company received CE Mark approval for expanded use of the Promus Element stent system in diabetic and heart attack patients. Taxus Element was launched in the US (commercialized as Ion) in April 2011 and is expected to be launched in Japan in late 2011 or early 2012. Furthermore, Promus Element is expected to be launched in the US and Japan in mid-2012.
As a result of the agreement with Abbott, the gross and operating margins of stents supplied by Abbott are significantly lower than Taxus, Taxus Element and Promus Element stents. Therefore the approval and subsequent launch of Promus Element in the US and Japan should improve the company’s margins.
We are currently Neutral on Boston Scientific, which also corresponds to Zacks #3 Rank (hold) in the short term.
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