Boston Scientific misses view as stent sales slide

CHICAGO (Reuters) - Boston Scientific Corp. (BSX.N) posted lower-than-expected quarterly profit on Friday as sales of its flagship drug-eluting heart stents fell by 32 percent.

Boston Scientific, whose shares sank to their lowest level in more than three months, derives most of its revenue from stents, tiny tubular devices that prop open diseased heart arteries, and implantable heart devices that manage abnormal heart rhythms.

It said those markets did not perform as well as expected in the latest quarter, and it issued a third-quarter profit forecast that analysts said was below Wall Street estimates.

"It is clear to us that the (drug-eluting stent) and (cardiac rhythm management) markets are not recovering as fast as we expected," Chief Executive Jim Tobin said.

The company, which also makes products used in urology, oncology and gynecology, said second-quarter profit, excluding one-time items, was $271 million, or 18 cents per share, down from $412 million, or 31 cents per share, a year ago.

The consensus estimate on Wall Street was for a profit of 19 cents per share, according to Reuters Estimates.

Quarterly sales dipped to $2.07 billion from $2.11 billion, off Wall Street's consensus forecast of $2.09 billion. Drug-eluting heart stent sales declined to $437 million from $647 million.

Sales of implantable cardioverter defibrillators, or ICDs -- part of the Cardiac Rhythm Management business acquired when Boston Scientific bought Guidant in 2006 -- were $377 million. The year-earlier total, if Boston Scientific had owned the business at that time, would have been $383 million.

David Heupel, portfolio manager of Thrivent Investment Management, which holds shares of rivals St. Jude Medical Inc. (STJ.N) and Medtronic Inc. (MDT.N), said the real disappointment was Boston Scientific's ICD sales.

He said St. Jude reported relatively strong ICD sales earlier this week.

Boston Scientific's ICD sales total "implies the market is not growing as fast as we had hoped, or they are losing share, or probably both," Heupel said.

Sam Leno, on the job as Boston Scientific's chief financial officer for six weeks, noted the need to reduce expenses and head count. That will be the focus through 2008, he said.

Boston Scientific, based in Natick, Massachusetts, forecast third-quarter sales of $2.0 billion to $2.1 billion and net earnings of 3 cents to 8 cents per share.

In a research note to clients, Glenn Reicin, an analyst with Morgan Stanley, called the second-quarter results "basically a worst-case scenario."

He said the weak third-quarter profit forecast "underscores the extent to which the bottom line is dependent on high-margin stent and ICD sales."

Boston Scientific shares were down 20 cents, or 1.3 percent, to $14.97 in midday trade on the New York Stock Exchange in a broadly weaker market. The shares, languishing near five-year lows for the past year, fell as low as $14.91 earlier in the session.