Medical device maker Boston Scientific Corp (BSX.N) reported a quarterly net loss due to charges and lower sales in its two largest businesses on Thursday, and warned of continued weakness in the fourth quarter, when sales usually get a seasonal boost.
The company lost market share in its key heart stent and heart defibrillator markets, which together make up 55 percent of its total sales. It also makes products used in cardiology, urology, gynecology and gastroenterology.
The company's top executives said they are taking action to broaden the company's business mix and improve results, but analysts were not convinced the company was on the right track to reinvigorate its business.
Shares tumbled 3 percent to $5.45 on the New York Stock Exchange at midday.
Boston Scientific lowered its 2012 sales outlook to a range of $7.168 billion to $7.243 billion, from $7.2 billion to $7.4 billion. Boston Scientific now expects earnings from 63 cents to 66 cents per share, excluding items, versus 62 cents to 68 cents previously.
Company Scientific President Michael Mahoney, who will become chief executive on November 1, said in a telephone interview that he hopes to grow the company's smaller businesses so it is less reliant on its cardiovascular and cardiac rhythm management businesses, which are affected by weak markets worldwide.
"Those businesses, PI (peripheral interventions), endoscopy, and urology, are doing well. They have less headwind," he said.
Chief Executive Hank Kucheman added that he believes the leadless implantable defibrillator Boston Scientific acquired when it bought Cameron Health earlier this year will help turn around its cardiac rhythm management business.
"This company is doing what it always does, which is meandering along. I'm not convinced they have figured out what they need to do next. Their pipeline is not near as strong as their competitors'," said Morningstar analyst Debbie Wang, who characterized Boston Scientific's latest results as "underwhelming."
In the third quarter, it recorded a net loss of $725 million, or 52 cents per share, compared with a net profit of $142 million, or 9 cents per share, in the year-ago period.
Excluding items, profit was 16 cents per share. On that basis, the average Wall Street estimate was for a profit of 11 cents.
Per-share figures were based on fewer outstanding shares as the company repurchased about 46 million shares under a 2011 repurchase authorization.
Quarterly sales were $1.735 billion, down from $1.874 billion a year ago.
Sales of interventional cardiology products, such as heart stents, fell 20 percent in the quarter, while sales of cardiac rhythm management products, such as pacemakers and implantable defibrillators, dropped 8 percent. Those are the company's two largest businesses, making up more than half of total sales.
Company executives told a conference call they expect continued weakness in the markets for their main cardiology products.
Some of the declines can be blamed on weakness in Europe, said Danielle Antalffy, an analyst with Leerink Swann, noting soft sales of cardiac rhythm management products from competitor St. Jude Medical Inc (STJ.N).
But Boston Scientific clearly has its own problems.
"Their pipeline is filled with mostly me-too products. It's hard to get excited about it," she said.
Third-quarter earnings included goodwill and other intangible asset impairment charges, acquisition- and divestiture-related net credits, restructuring- and litigation-related charges, tax items and amortization expense, of $946 million, or 68 cents per share.
(Reporting by Debra Sherman; Editing by Maureen Bavdek, Jeffrey Benkoe and Leslie Adler)