Boston Sci to pay $296 mln to settle US probe
CHICAGO (Reuters) - Boston Scientific Corp (BSX.N) will pay $296 million to settle a U.S. Department of Justice investigation into product recalls issued by its Guidant subsidiary, and will record a third-quarter charge of $294 million, the company said in a government filing.
In a separate filing, the company said it received a subpoena from the U.S. Department of Health and Human Services, Office of Inspector General, requesting certain information relating to contributions made by cardiac rhythm management to charities with ties to physicians or their families. The company said it is working with the government to understand the scope of the subpoena.
Under the terms of the DOJ settlement, Guidant will plead to two misdemeanor charges related to failure to include information in reports to the U.S. Food and Drug Administration.
Boston Scientific, a maker of heart pacemakers, implantable heart defibrillators, heart stents and other medical devices, now expects 2009 net earnings of 23 cents to 28 cents per share, or 75 cents to 79 cents per share, excluding items.
"I'm a little relieved that this is over," said Tim Nelson, an analyst with FAF Advisors, whose fund does not own Boston shares.
He said he sees limited downside for the shares, but does not advise buying them either, even at current levels.
He noted losses may be limited in the near-term by talk on Wall Street that the company is about to roll out a big restructuring, including layoffs and the replacement of key managers in its cardiac rhythm management business.
The company was not immediately available to comment.
On Thursday, Boston Scientific said in another filing that William McConnell Jr, the company's senior vice president for sales and marketing for its Cardiac Rhythm Management business, would retire by the end of the year.
"At first glance, we don't believe these three events will have a material impact on the company but it's too early to draw a firm conclusion regarding the HHS subpoena given the limited information available at this time," Wells Fargo analyst Larry Biegelsen wrote in a research note.
"We believe the new CEO, Ray Elliott, is conducting a strategic review of all businesses at Boston Scientific and we think there is a good chance that the company will announce a significant restructuring this quarter. Until we see the details of any plan, it's premature to predict how the stock will react," he added.
Earlier this week, Johnson & Johnson (JNJ.N), which competes with Boston Scientific in the cardiovascular and other markets, announced plans to cut up to 7 percent of its workforce.
"Everyone's doing it," added Nelson. "The reality is that (product) pricing is more competitive, it's more expensive to bring products to the market, it's harder to differentiate products, and it only makes sense to look for ways to get costs out of the system and prepare for an uncertain future."
Boston Scientific shares were up 10 cents or 1.2 percent at $8.15 on the New York Stock Exchange at midday on Friday.
(Reporting by Debra Sherman; Editing by Derek Caney, Dave Zimmerman and Matthew Lewis)
