STJ ST. Jude Medical, Inc.

Boston Scientific Corporation (BSX) has strengthened its Peripheral Interventions (PI) business with the recent launch of Charger percutaneous transluminal angioplasty (PTA) balloon catheter. The device is meant for a wide range of peripheral angioplasty procedures including post-stent dilatation.

This is the third new peripheral balloon catheter launched in 2011. Earlier launches include Mustang percutaneous transluminal angioplasty balloon (June 2011) and the Coyote balloon catheter (September 2011). Both resulted in increased market share for the company.

During the most recent quarter, PI segment sales were $182 million, up 9% year over year (up 4% at CER) despite a slowdown in US procedures that led to a 2.5% decline in US sales ($77 million). Growth in PI stent systems was driven by the Epic self-expanding nitinol stent system in certain international markets and the Carotid Wallstent stent system in Japan. The company expects to launch the Epic stent system in the US in late 2012 or early 2013.

Under PI, management is also seeing robust uptake in its interventional oncology franchise. Products slated to be launched in 2012 are expected to drive the top line further.

Boston Scientific has resorted to a diversification through acquisition strategy.  To this end the company acquired S.I. Therapies and ReVascular Therapeutics in February 2011. These acquisitions further expanded the PI portfolio with a re-entry catheter and intraluminal chronic total occlusion (CTO) crossing device, enabling endovascular treatment in cases that typically cannot be treated with standard endovascular devices. The launch of Offroad re-entry catheter system in certain international markets is expected in early 2012 with a limited release of the Truepath intraluminal CTO device in the US and certain other international markets, pending regulatory approval.

These are trying times for MedTech companies when the core segments of stents and defibrillators are struggling for growth due to pricing pressure and a loss of market share. Boston Scientific is not alone and its peers Medtronic (MDT) and St Jude Medical (STJ) are also witnessing similar challenges. In this scenario, the company is working on reviving its top line by expanding its product portfolio, either through pipeline development or strategic acquisitions.

We are currently Neutral on the stock, in line with the short-term Zacks #3 Rank (Hold).

 
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