Boston Scientific Cuts Staff as Costs Persists

Boston Scientific Cuts Staff as Costs Persists

From Associated Press (February 11, 2010)

WASHINGTON -- Medical device maker Boston Scientific on Wednesday posted a $1.1 billion loss in the fourth quarter after settling a patent dispute with Johnson & Johnson, and said it will cut as many as 1,300 jobs.

The company, based in Natick, Mass., said it will eliminate between 1,000 and 1,300 employees, or 8 to 10 percent of its work force. The move is part of a larger reorganization that will combine the company's heart implant division -- acquired with Guidant in 2006 -- with its stent business. The two units previously operated separately, with different managers.

Boston Scientific said it expects charges between $180 million to $200 million in connection with the cost-cutting effort.

CEO Ray Elliot said in a statement the changes are needed "to fulfill the enormous promise of this company."

Boston Scientific's staff reductions follow similar moves across the industry. Last spring Medtronic, the largest device firm in the world, said it would eliminate at least 1,500 workers. In August, Minnesota rival St. Jude Medical eliminated 200 positions.

Device makers have seen their sales squeezed by safety recalls of top-selling products, as well as cutbacks at hospitals reeling from the economic downturn.

Boston Scientific has focused on managing its debt in recent years, especially costs tied to the $27 billion acquisition of medical device rival Guidant. Earlier this month the company added a massive payment to rival Johnson & Johnson to its expenses.

The fourth-quarter results were weighed down by the $1.3 billion legal charge, which settled yearslong patent disputes over drug-coated stents. The devices are used to brace arteries after they have been cleared of fatty plaque

The company posted a net loss of $1.1 billion, or 71 cents per share, for the last quarter of 2009, compared with 2.4 billion, or $1.59 per share, in the prior-year period.

The narrower loss was not enough to assuage investors, however, who dropped the company's stock in after-hours trading. The shares fell 20 cents, or 2.4 percent, to $7.98.

Excluding one-time charges the company would have earned $304 million, or 20 cents per share.

Analysts polled by Thomson Reuters expected earnings of 13 cents per share.

Revenue rose to $2.1 billion for the period, up from $2 billion in 2008's fourth quarter. The company posted higher sales from implantable cardiac defibrillators, its largest franchise. Sales of defibrillators and pacemakers combined rose 6 percent to $645 million for the period.

Defibrillators use powerful electric jolts to correct irregular heart rhythms. They differ from pacemakers, which use low-voltage electrical currents to keep hearts beating.

Sales of stents fell about 5 percent to $453 million. Two studies released last year showed the company's Taxus stent was inferior at preventing safety problems compared with those from competitor Abbott Laboratories.

The company's full-year loss for 2009 was $1 billion, or 68 cents per share, on revenue of $8.19 billion.

Looking ahead the company forecast full-year 2010 earnings between 62 and 72 cents per share, excluding one-time charges. Wall Street expects earnings of 57 cents per share.

 

Posted: February 2010


View comments

Hide
(web2)