Medical device major, Boston Scientific Corporation (BSX) recently won a lawsuit for patent infringement, brought up by Johnson & Johnson (JNJ). As part of a 2007 suit, Johnson & Johnson alleged that Boston Scientific's Promus Everolimus-Eluting Coronary Stent System infringed its four patents which are also known as the Wright/Falotico patents.
However, the U.S. Court of Appeals for the Federal Circuit upholds the decision of the U.S. District Court on finding all the four patents in the suit to be invalid. The decision now allows Boston Scientific to continue offering the product to its US customers once again.
Boston Scientific’s maximum contribution comes from Cardiovascular, which recorded a 5% year-over-year decline in sales to $811 million during the first quarter of fiscal 2011. While sales from Interventional Cardiology declined 8% to $635 million, Peripheral Interventions increased 7% to $176 million.
Global sales of coronary stent system (within Interventional Cardiology) at $409 million declined 7.9% driven by lower sales of both drug-eluting stents (DES, 6.9% to $379 million) and bare-metal stents (18.9% to $30 million). It is encouraging to note that the company has retained its leadership position in the global DES market with 36% share.
DES sales in the US declined 12% to $184 million in the reported quarter primarily due to an overall decrease in the size of the market that was influenced by the pricing pressure (decline of almost 8%), lower penetration rates and the establishment of product transition reserve of $10 million for the April 2011 launch of the Ion (Taxus Element) stent system.
Despite continued competition and pricing pressures resulting in a decline in sales of coronary stent products, Boston Scientific maintained a strong position with a 46% share (excluding the Ion reserve) in the US DES market in the reported quarter compared to 45% in the year-ago period.
However, the penetration rate of DES in the US declined by 2 percentage points to 76%. Given the success of Promus Element platform in Europe, Boston Scientific is confident that it is well placed to capture market share in the US with the introduction of the Ion stent. Moreover, this will also place the company in a comfortable position for the anticipated launch of Promus Element, most likely in mid-2012.
Boston Scientific continues to focus on strategic initiatives to drive growth and profitability. Recent acquisitions made by the company along with promising new technologies are expected to boost the company’s pipeline. The restructuring initiatives undertaken should also lead to improvement in bottom line.
However, we continue to remain concerned with its core business where Boston is witnessing significant pricing pressure. Moreover, economic uncertainty is impacting procedure volume. We are currently Neutral on the stock.
BOSTON SCIENTIF (BSX): Free Stock Analysis Report
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