Exclusive: Boston Scientific prepares job cuts, split of heart units
CHICAGO (Reuters) - Boston Scientific Corp is preparing another round of job cuts and planning to break up its biggest business, cardiac devices, reversing some of the restructuring put in place by its former chief executive.
A Boston Scientific spokesman confirmed the moves outlined in a letter to employees this month, but said the two actions were unrelated. Some job cuts would stem from manufacturing adjustments in the United States and abroad, he said.
The company's spokesman could not say how many positions would be eliminated or provide details about the rationale for the cardiac unit split.
Boston Scientific has faced weak markets for its key products -- heart stents and implantable heart defibrillators -- for several years as the number of procedures has dropped, partly because of a weak economy and heightened scrutiny over their use.
The medical device maker, which has been struggling since its 2006 acquisition of heart stent maker Guidant Corp, is expected to announce the additional layoffs within the next two months, according to a person close to the company. The number of layoffs was not specified.
The source said details of the changes were included in an internal memo from acting CEO Hank Kucheman earlier this month. The source, who was not authorized to discuss the matter with media, asked to remain anonymous.
In the meantime, Boston Scientific will separate its cardiac rhythm management unit, which makes heart pacemakers and implantable defibrillators, from its interventional cardiology business, which makes stents, the source said.
The units were combined less than three years ago under Elliott, who expected the business to benefit from the expertise of a shared sales force.
"I think this reflects the change in management. By end of year, there will be a new CEO and I think he's trying to configure things in a way that makes most sense. I never understood why they put those two (business units) together in the first place," said Morningstar analyst Debbie Wang.
Electrophysiologists, who treat irregular heart rhythms, and interventional cardiologists, who deal with catheter-based treatment of structural heart disease such as clogged arteries, are very different, Wang noted.
"I'm not surprised they didn't find the kind of synergies they thought they would," she added. "They need to bring down SG&A because revenue growth no longer supports this kind of staffing."
Shares in the company rose 1.3 percent to $5.55 on Wednesday afternoon.
A WEAK MARKET
Former Chief Executive Raymond Elliott, a medical devices industry veteran, joined the company to fanfare in 2009. The company had been floundering under long-time CEO Jim Tobin after it paid some $27 billion for Guidant.
Under a mountain of debt, the company suffered from a series of high-profile product recalls and manufacturing problems. Its key markets turned sluggish as the global economy weakened.
Under Elliott's tenure, Boston Scientific paid down debt, sold non-core businesses, restructured and cut about 2,000 jobs. It currently employs 24,000 people.
He left the company after less than two years at the helm, surprising and disappointing some investors. Its stock, which has been in the doldrums for years, sank below $5 per share in July and has traded below $8 per share since early 2010.
In September 2011, Boston Scientific tapped Michael Mahoney, a top medical device executive at Johnson & Johnson, to be its next chief executive, effective November 1, 2012. Mahoney currently holds the title of president.
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