Medical device maker Boston Scientific, vying with Johnson & Johnson (J&J) to buy Guidant, yesterday said quarterly sales fell short of analysts' estimates, underscoring a weakness in its product line that it hopes a deal with Guidant will fix.
Some investors and analysts see Boston Scientific emerging as the victor in the contest with J&J. On Sunday, it made a formal offer to buy Guidant for $25 billion (€20.6 billion) in cash and stock, topping J&J's current bid of $22.3 billion, based on Friday's closing prices.
Slowing sales at Boston Scientific prompted the company to pursue heart-device maker Guidant in a bid to expand into the high-growth market for devices to treat irregular heartbeats. Both have operations in Ireland, as does J&J. Yesterday, Boston Scientific said fourth-quarter sales would total $1.54 billion. The disappointing figure reflects continued market share losses for the company's Taxus drug-coated stent, said Deutsche Bank analyst Tao Levy.
"Clearly, Taxus is not a sustainable long-term growth driver, and management is looking at Guidant to provide the necessary growth and diversification," Mr Levy said in a note.
Drug-coated stents are tiny wire mesh tubular devices coated with medicine. They prop open diseased coronary arteries that have been cleared of plaque, and keep them from reclogging.
Guidant's implantable defibrillators and pacemakers have come under fire in recent months because of product malfunctions and recalls, problems that prompted J&J to reduce its offer price for the company.
Guidant also has been the subject of shareholder lawsuits and US government probes.
After taking a close look at Guidant's financial statements, Boston Scientific chief executive Jim Tobin said yesterday that a deal would start to add to his company's earnings in 2009, about a year later than had been anticipated.
Executives on a conference call said Guidant's cardiac rhythm management sales force and engineering capabilities remain largely intact, despite months of turmoil. Boston Scientific is banking on the strength of that unit to provide steady sales growth as sales of its cardiac stents have slowed. - (Reuters)
