Rank: #10 (Last year: #11) $16.75 Billion
Prior Fiscal: $14.24 Billion
Percentage Change: +17.6%
R&D Expenditure: $1.61B
Best FY24 Quarter: Q4 $4.56B
Latest Quarter: Q1 $4.66B
No. of Employees: 53,000
Global Headquarters: Marlborough, Mass.

Boston Scientific is a cardiovascular powerhouse, with a wide variety of technologies to address cardiac rhythm management, electrophysiology, structural heart, and related fields. However, the company has not had good fortune when seeking entry into the transcatheter aortic valve replacement (TAVR) market.

Its TAVR woes began in November 2020, when the company recalled its Lotus Edge aortic valve system over issues with its delivery system and retired Lotus Edge. Instead, the company devoted its resources to the Acurate neo2 aortic valve system and other high growth areas across the portfolio. Acurate neo2 entered the European market in September 2020.

Its TAVR business looked sunnier with August 2024’s CE marking of the Acurate Prime aortic valve system, which built on its Acurate neo2 TAVR with an additional valve size. However, a U.S. clinical trial the company funded that compared Acurate neo2 to Medtronic’s Evolut and Edwards’ Sapien TAVRs failed to demonstrate non-inferiority.

This led to the company’s decision in May of this year to cease sales of the Acurate neo2 and Acurate Prime TAVRs. The company said in an SEC filing that it no longer plans to seek FDA approval for the Acurate portfolio, or approval in other geographies. This decision came about because of recent discussions with regulators resulting in more stringent clinical and regulatory requirements to maintain approvals in global markets and gain approvals in new regions. The company said the resources and investments needed to satisfy the requirements were “prohibitive for the company.”

Fortunately, Boston Scientific mentioned in the SEC filing that it still plans to achieve Q2 and full-year 2025 sales per its share guidance. Since Acurate was the company’s second failed attempt to establish market share in TAVR, it remains to be seen whether it will continue pursuing the sector given strong competition from companies like Medtronic, Edwards, and Abbott.

TAVR notwithstanding, the Cardiology business is Boston Scientific’s largest and reported revenues of $8.34 billion in 2024, growing $1.64 billion (24.4%) over the previous year. The strong performance was led by the Electrophysiology business and its Farapulse pulsed field ablation system and access solutions portfolio, as well as the Watchman FLX and Watchman FLX Pro left atrial appendage closure (LAAC) devices and percutaneous coronary intervention guidance franchise.

January 2024 witnessed Boston Scientific’s entry into the lucrative pulsed field ablation (PFA) market with the FDA approval of its Farapulse PFA system. The system helps isolate pulmonary veins to treat drug-refractory, recurrent, symptomatic, paroxysmal atrial fibrillation (AFib).

Farapulse PFA utilizes tissue-selective, non-thermal electric fields to ablate heart tissue and avoid damage to nearby structures. The system is comprised of the Farawave ablation catheter, Farastar ablation generator, and Faradrive steerable sheath for access to the heart’s left side during PFA procedures. The Farawave catheter treats a range of pulmonary vein anatomies with an over-the-wire catheter with variable basket and flower shapes, so the device can adapt to each patient anatomy.

The company earned Pharmaceuticals and Medical Device Agency (PMDA) approval in Japan for the Farapulse PFA system in September, where it was launched in the succeeding weeks.

ANALYST INSIGHTS: “One of the most aggressive medtech acquirers in the past decade, BSC is poised for sustainable double-digit growth led by their cardiovascular, vascular, and urology solutions. With that stated, as they don’t seem to ever rest on their laurels, it will be interesting to see what their next acquisition is!”

—Dave Sheppard, Co-Founder and Managing Director, MedWorld Advisors

A month later the company grabbed FDA approval for the navigation-enabled Farawave NAV ablation catheter and 510(k) clearance for new Farawave software. The ablation catheter added magnetic navigation to enable cardiac mapping and PFA delivery in one integrated catheter. Farawave software magnetically tracks the catheter so physicians can see where pulsed fields were applied and visualize cumulative therapy delivery to guide ablation strategy. PFA delivery with the Farawave NAV catheter can be tracked through automated tagging.

The Agent drug-coated balloon (DCB) obtained FDA approval in March 2024. The Agent DCB treats coronary in-stent restenosis (ISR)—obstruction or narrowing of a stented vessel thanks to plaque or scar tissue—in patients with coronary artery disease. The paclitaxel-coated balloon catheter transfers the drug to the vessel wall to prevent ISR from reoccurring. The technology had previously received FDA breakthrough device status in 2021.

September saw FDA approval to expand the indication of the company’s Ingevity pacing leads to include conduction system packing and sensing of the left bundle branch area (LBBA) when connected to a single- or dual-chamber pacemaker. Pacing of the LBBA is an alternative to traditional right ventricular pacing to treat symptomatic bradycardia.

The expanded indication follows launch of the company’s CSP portfolio, which includes the OneLINK splitter cable, INGEVITY+ Helix locking tool and site-selective pacing delivery catheters.

An acquisition deal for Cortex (an Ajax Health company) began in November. Cortex developed a diagnostic mapping solution to identify triggers and drivers outside of pulmonary veins that are foundational to AFib. The recently finished FLOW-AF clinical trial had data demonstrating that OptiMap-guided treatment of AFib sources in patients with persistent AFib improved freedom from AFib a year after an ablation by 51%, compared to patients who received only conventional pulmonary vein isolation therapy.

Cortex’s OptiMap system uses a basket catheter and algorithm to spot possible active Afib sources so physicians can deliver an individualized ablation strategy. The OptiMap system won FDA approval in 2023.

Boston Scientific’s total sales for its fiscal year 2024 (ended Dec. 31) reached $16.75 billion, a $2.51 billion increase (17.6%) over the previous fiscal year. Organic net sales rose 16.4% and the company had a positive impact of 210 basis points driven by its acquisitions and divestitures. The revenue increase was also driven by commercial success in all businesses, mainly in the Electrophysiology business unit.

Peripheral Interventions grabbed $2.4 billion of revenue last year, ascending $300 million (14.2%) over the prior year. The interventional oncology business led by the Embold fibered coil and Therasphere Y-90 radioactive glass microspheres, along with the vascular drug-eluting portfolio led by the Ranger drug-coated balloon, were the main sources of organic sales growth. A positive impact of 460 basis points arose from the company’s majority stake in Acotec in Q1 2023 and acquisition of Silk Road Medical in Q3 2024.

Boston Scientific purchased Silk Road Medical for about $1.18 billion ($27.50 per share) in September, adding the minimally invasive transcarotid artery revascularization (TCAR) procedure to its arsenal for stroke prevention and treating carotid artery disease.

A deal to acquire Intera Oncology began in November 2024. Its Intera 3000 hepatic artery infusion pump and chemotherapy drug floxuridine administers hepatic artery infusion (HAI) therapy to treat liver tumors mainly caused by metastatic colorectal cancer. The pump is implanted under the skin and a connected catheter is placed in the hepatic artery, providing a continuous flow of floxuridine into the liver to treat tumors that have metastasized from the colon. The Intera 3000 pump is the only constant flow implantable pump for HAI therapy approved in the U.S.

The Neuromodulation business pocketed $1.11 billion in sales, increasing $130 million (13.3%) over the previous year. 2023’s acquisition of Relievant Medsystems drove the growth with a positive impact of 1,100 basis points, augmented by strong sales in the company’s deep brain stimulation franchise and radiofrequency ablation portfolio.

The WaveWriter spinal cord stimulation (SCS) system earned FDA approval for an expanded indication to treat chronic low back and leg pain in people without previous back surgery—known as non-surgical back pain (NSBP)—in February 2024. The new indication was backed by one-year data from the company’s SOLIS trial, which showed over 50% pain relief in 84% of patients as well as a mean 25-point improvement in disability measured by the Oswestry Disability Index.

The Urology business posted $2.2 billion in 2024, rising $236 million (12%) over the prior year. Sales growth came mainly from stone management led by the Lumenis Pulse holmium laser systems with Moses technology, prosthetic urology, and prostate health portfolio led by the Rezum systems. The 2024 acquisition of Axonics had a positive impact of 330 basis points.

Boston Scientific began its acquisition of Axonics in January 2024. Axonics provides devices to treat urinary and bowel dysfunction. The deal’s enterprise value was about $3.4 billion—$71 in cash per share.

Axonics’ portfolio includes the R20 and F15 systems that deliver sacral neuromodulation (SNM) therapy a minimally invasive procedure to treat overactive bladder and fecal incontinence. It delivers mild electrical pulses to the sacral nerve to restore communication between the brain and bladder. The fourth-generation R20 neurostimulator, which is rechargeable and touts a battery life of 20 years or more, won FDA approval in January 2023. Axonics also provided the Bulkamid urethral bulking system to treat female stress urinary incontinence.

The acquisition, which closed in November, granted about 330 basis points of positive impact to Boston Scientific.

Upon completion of the deal, the company assumed pending litigation against Axonics. The company had been embroiled in patent infringement litigation with Medtronic—Medtronic asserted that part of Axonics’ SNM systems infringed Medtronic patents. In December, Boston Scientific settled all pending litigation between Axonics and Medtronic in the federal district courts, the federal appellate courts, the Patent, Trial, and Appeal Board, and the International Trade Commission.

The Endoscopy business generated $2.69 of revenue, growing $205 million (8.3%) compared to the previous year. A positive impact of 100 basis points was seen from the company’s acquisition of Apollo, divestiture of its pathology business in Q2 2023, and acquisition of B. Braun’s endoluminal vacuum therapy portfolio in Q1 2024. Sales growth was driven by the endoluminal surgery franchise, single-use imaging led by the Exalt Model D single-use duodenoscope, and biliary franchise led by the Axios stent and delivery system.

$14.24 Billion
Prior Fiscal: $12.68 Billion
Percentage Change: +12.3%
R&D Expenditure: $1.41B
Best FY23 Quarter: Q4 $3.73B
Latest Quarter: Q1 $3.86B
No. of Employees: 48,000

Year after year, Boston Scientific has been one of the most active companies in terms of inorganic growth through acquisition. The trend of consolidation that’s so prevalent throughout the medical device industry, with firms gobbling up other companies in order to broaden product portfolios, gain access to new market segments, or acquire proprietary technology, is a strategy Boston Scientific clearly aligns with. While 2023 was a bit quieter in terms of the execution of this approach, it still generated several noteworthy headlines for the firm.

At the start of the new year, the 45-year-old organization had a couple of deals still pending. Curiously, they each went in a different direction in 2023.

An agreement to acquire Apollo Endosurgery was announced a month before the end of the 2022 fiscal. The transaction, valued at approximately $615 million, would bring devices used during endoluminal surgery (ELS) procedures to close gastrointestinal defects, manage gastrointestinal complications, and aid in weight loss for patients suffering from obesity into the fold. Revenue for the firm was about $76 million in 2022 with the expectation for that amount to grow.

“Endoluminal surgery is an emerging field and a core focus for our Endoscopy business,” said Mike Jones, senior vice president and president, Endoscopy. “We intend to expand our global capabilities in ELS with the differentiated innovation that Apollo Endosurgery offers, and we will continue to focus on procedural adoption as well as professional education in this exciting space. This acquisition also enables us to enter a new adjacency—the endobariatric market—and deliver strong, continued growth across our business.”

The deal closed in early April without any major concerns or issues.

Such was not the case for the deal involving the purchase of a majority stake of M.I.Tech Co. Ltd. from Synergy Innovation Co. Ltd. Upon its announcement in June 2022, the agreement was for Boston Scientific to acquire approximately 64% for a price of $230 million. M.I.Tech is the creator of the HANAROSTENT technology, a family of conformable, non-vascular, self-expanding metal stents, which had been distributed by Boston Scientific in Japan since 2015.

Instead, following the involvement of the Federal Trade Commission (FTC), the deal was closer to a 10% minority purchase in the firm. “I am pleased that Boston Scientific and M.I.Tech have abandoned their proposed transaction in response to investigations by FTC staff and our overseas enforcement partners. The FTC will not hesitate to take action in enforcing the antitrust laws to protect patients and doctors. I would like to thank the entire FTC team for their excellent work on this matter,” explained FTC Bureau of Competition Director Holly Vedova.

The FTC action didn’t squelch Boston Scientific’s appetite for acquisition, however. In September, the organization announced it was making a deal for Relievant Medsystems Inc. The purchase price was declared to be $850 million as well as undisclosed additional contingent payments based on sales performance over the following three years. Relievant offers the Intracept Intraosseous Nerve Ablation System, used to treat vertebrogenic pain—a form of chronic low back pain.

“We anticipate this novel, clinically-backed technology can support our category leadership strategy while expanding access to care for individuals who need personalized treatment,” said Jim Cassidy, president of Neuromodulation. “Upon close, we look forward to working with the Relievant team to explore opportunities to bring this high-growth therapy to a wider population of people living with chronic low back pain.”

The deal closed in November 2023, ahead of the anticipated schedule and without FTC interference.

The Relievant products join an already healthy portfolio of healthcare innovations at Boston Scientific that address a number of clinical areas. In addition to Relievant’s offerings being brought into the fold, a variety of new technologies were the focus of additional headlines made by Boston Scientific.

February saw the U.S. FDA 510(k) clearance of the LithoVue Elite Single-Use Digital Flexible Ureteroscope System, the first ureteroscope system with the ability to monitor intrarenal pressure in real-time during ureteroscopy procedures. Ureteroscopy is a common procedure performed by urologists to diagnose and treat a variety of problems in the urinary tract, most commonly kidney stones.

The EMBOLD Soft and Packing Coils also gained clearance from the U.S. FDA. This product, along with its sister technology—the EMBOLD Fibered Coil—make up the EMBOLD Detachable Coil System. This combined offering is a peripheral embolization platform that provides three coils to address the needs of all cases.

The next month, the organization gained U.S. FDA approval for the Vercise Neural Navigator 5 Software, which when used as part of the Vercise Genus Deep Brain Stimulation Systems, can provide clinicians with simple and actionable data for efficient programming in the treatment of people living with Parkinson’s disease or essential tremor.

Boston Scientific nabbed a U.S. FDA approval for the POLARx Cryoablation System in August. The product is indicated for the treatment of patients with paroxysmal atrial fibrillation. It features the POLARx FIT Cryoablation Balloon Catheter, a device with the unique capability of enabling two balloon sizes—28mm and 31mm—in one catheter.

In the latest-generation WATCHMAN FLX Pro Left Atrial Appendage Closure (LAAC) Device (as of September 2023), the technology featured a polymer coating, visualization markers, and a broader size matrix to treat a wider range of patients. This version gained U.S. FDA approval at that time. The WATCHMAN technology is indicated to reduce stroke risk in patients with non-valvular atrial fibrillation who need an alternative to oral anticoagulation therapy.

Within the same month, the firm gained both U.S. FDA clearance and EU CE mark for the AVVIGO+ Multi-Modality Guidance System. This intravascular ultrasound (IVUS) and fractional flow reserve solution offers advanced software and hardware features designed to provide high-quality IVUS vessel imaging during percutaneous coronary intervention procedures.

In October, the company launched its LUX-Dx II+ insertable cardiac monitor (ICM) for long term monitoring of arrhythmias linked to atrial fibrillation, cryptogenic stroke, and syncope. The ICM’s dual-stage algorithms locate and verify potential arrhythmias before an alert is sent to clinicians to offer actionable data. A remote programming feature enables event detection settings and record systems to be adjusted without an in-person visit.

An expanded indication of the WaveWriter Alpha Spinal Cord Stimulator (SCS) System for the treatment of painful diabetic peripheral neuropathy was also granted in October. Diabetic neuropathy is a type of nerve damage throughout the body, often impacting the nerves in the legs and feet. As a non-opioid treatment option, the system was developed for chronic intractable pain of the lower extremities associated with diabetic peripheral neuropathy.

This breadth of new innovations joins a portfolio that’s already well established across multiple markets and provides a growing pool of revenue to Boston Scientific’s annual tallies. Its 2023 total reflected a 12.3% gain over the prior year to finish at $14.24 billion.

Between the two businesses, Cardiovascular was responsible for producing the larger revenue contribution. Its $8.82 billion represented a 12.6% increase over 2022. Cardiology led the division with $6.71 billion in sales, which was 47% of the company’s consolidated net sales in 2023, according to its annual report. Positive sales growth as well as the integration of the products from the Baylis Medical acquisition that occurred in Q1 2022 were credited for the increase.

Peripheral Interventions also enjoyed double-digit growth during the fiscal. Its 11.1% rise was seen in a $2.11 billion revenue total. Sales growth was driven primarily by interventional oncology products and the vascular franchises’ drug-eluting portfolio. In addition, the positive impact of the majority stake in Acotec assisted with the gains.

The three units in MedSurg combined to create a 10.4% inflation in revenue year-over-year. The business finished the year at $5.42 billion. Its leading segment—Endoscopy—posted an 11.7% increase over the previous fiscal, ending with $2.48 billion in revenue. Both positive sales growth and the incorporation of Apollo products into the portfolio mix were credited for the rise. Urology grew by 11.8% to contribute $1.96 billion to the company’s coffers. The cause of this growth was attributed to gains in the stone management and prosthetic urology franchises. Rounding out the trio, Neuromodulation rose by 6.4% to end the year with $976 million. The deep brain stimulation (DBS) franchise led by the Vercise Genus DBS System was said to be the primary cause behind the gains.

To help further accommodate the annual growth the company has been experiencing, in July 2023, the organization announced plans to build a $170 million facility in Maple Grove, Minn. The 400,000-sq.-ft. location would house R&D labs, office support areas, and training spaces.

Heidi Nelson, Maple Grove’s city administrator, said the following of the project: “[It’s] kind of a game changer for that area. It’s a very significant project. We’ve been working on it for quite some time.”

The facility would add to an already substantial presence the company has in the region.

Boston Scientific also announced an agreement with Scivita Medical Technology Co. Ltd. involving the latter’s Single-Use Percutaneous Choledochoscope. Through the distribution agreement, the firms planned to establish a long-term partnership in the commercialization, marketing, and promotion of the product in China. As a result of the growing demands of mitigating the risks of cross-contamination and hospital-acquired diseases, particularly amid the outbreak of the COVID-19 pandemic, the global single-use videoscope market is rapidly growing.

$12.68 Billion
Prior Fiscal: $11.89 Billion
Percentage Change: +11.1%
R&D Expenditure: $1.32B
Best FY22 Quarter: Q2 $3.24B
Latest Quarter: Q1 $3.39B
No. of Employees: 45,000

Over the course of a number of years, Boston Scientific has used an aggressive strategy for its evolution. While mixing in some degree of organic growth with a number of new product releases, the primary driver for the organization’s revenue increase has been achieved through acquisition. In 2022, with one exception that will be covered later in this report, this plan continued.

The firm started the year with the completion of the $1.75 billion Baylis Medical Company purchase, a deal announced at the start of the fourth quarter of 2021. Conclusion of this agreement saw the expansion of Boston Scientific’s electrophysiology and structural heart product portfolios to include the radiofrequency NRG and VersaCross Transseptal Platforms, as well as a family of guidewires, sheaths, and dilators used to support left heart access. At the time of the initial notice, it was expected procurement of Baylis would result in net sales of $200 million for the 2022 fiscal. In its 2022 report, however, it was stated Baylis represented less than 1% of total assets as of Dec. 31, 2022, and approximately 1% of net sales for the year then ended.

The organization then started the summer with another acquisition announcement. This time, the target involved grabbing a majority stake of M.I.Tech Co. Ltd. from Synergy Innovation Co. Ltd. M.I.Tech is the creator of the HANAROSTENT technology, a family of conformable, non-vascular, self-expanding metal stents, which have been distributed by Boston Scientific in Japan since 2015. The agreement was valued at approximately $230 million.

Unfortunately, not all transactions are meant to be. Almost a year after the announcement of the deal, Boston Scientific stated it was canceling the plan to make the majority buy. Instead, the firm explained it would purchase a minority stake in the Korean company. A Boston Scientific representative cited global regulatory approvals that would have been required to finalize the deal, which were not able to be obtained.

Federal Trade Commission Bureau of Competition Director Holly Vedova issued the following statement at the time of the abandonment of the deal. “I am pleased that Boston Scientific and M.I.Tech have abandoned their proposed transaction in response to investigations by FTC staff and our overseas enforcement partners. The FTC will not hesitate to take action in enforcing the antitrust laws to protect patients and doctors. I would like to thank the entire FTC team for their excellent work on this matter.”

Returning to the 2022 fiscal year, the transactions didn’t end with these two arrangements. Rather, three more deals would be announced in the second half of the annual period.

Obsidio was a privately-held company that developed the Gel Embolic Material technology for the embolization of blood vessels in the peripheral vasculature. While the terms of the agreement were not disclosed, it was stated the acquisition would strengthen the company’s interventional oncology and embolization portfolio with a differentiated solution to address hemorrhages, cancer, and other debilitating conditions.

Then, following on the heels of the Thanksgiving weekend, it was declared Apollo Endosurgery would be brought into the fold for approximately $615 million. The company’s product portfolio includes devices used during endoluminal surgery procedures to close gastrointestinal defects, manage gastrointestinal complications, and aid in weight loss for patients suffering from obesity. The impact to Boston Scientific’s bottom line in fiscal 2022 was expected to be approximately $76 million in net sales, as a result of the anticipated growth in its endoscopic suturing system franchise—OverStitch Endoscopic Suturing System, OverStitch Sx Endoscopic Suturing System, and X-Tack Endoscopic HeliX Tacking System.

In July 2022, Apollo received de novo clearance from the FDA for its Apollo ESG, Apollo ESG Sx, Apollo REVISE, and Apollo REVISE Sx Systems. According to the company, these represent the first devices authorized by the FDA for endoscopic sleeve gastroplasty (ESG) and endoscopic bariatric revision procedures. The company’s endobariatric portfolio also includes the Orbera Intragastric Balloon for endoscopic weight management.

The deal was completed near the close of the first quarter 2023.

Boston Scientific’s final transaction of the year involved the investment in a majority stake (up to a maximum of 65%) in Acotec, a Chinese medical technology company that offers solutions designed for a variety of interventional procedures. The approximate value of the purchase was about $523 million. Acotec’s product portfolio includes drug-coated balloons, radiofrequency ablation technologies, thrombus aspiration catheters, and more than 20 other products in various stages of development across a range of specialties. During its latest fiscal, which ended June 30, 2022, the organization reported sales of approximately $53 million.

These companies join a firm that already enjoys a healthy product catalog as well as a deep innovation pipeline. That commitment to internal development resulted in a number of noteworthy announcements during the 2022 fiscal.

FDA approval was gained for image-guided programming software—Vercise Neural Navigator with STIMVIEW XT—in April. Developed in collaboration with Brainlab AG, a software-driven medical technology company, STIMVIEW XT enables clinicians (in real-time) the ability to visualize both lead placement and stimulation modeling of the brain anatomy of their patients living with Parkinson’s disease or essential tremor. The software provides patient-specific 3D visualization of the anatomy for clinicians to better personalize therapy to meet each patient’s needs. It seamlessly integrates into the Vercise Genus programming interface, designed to help localize lead placement, reduce programming time, and enable more informed treatment decisions.

That same month, the EMBOLD Fibered Detachable Coil, which is indicated to affect blood flow in the peripheral vasculature, was granted FDA clearance. The coil was designed for use in a variety of embolization procedures, a minimally invasive treatment intended to block one or more blood vessels to obstruct or reduce blood flow. Occlusion in this manner is a technique used to stop hemorrhaging, prevent aneurysm ruptures, reduce the size of certain tumors, and treat a variety of venous abnormalities.

Another approval was achieved in September to expand the instructions-for-use labeling for the current-generation WATCHMAN FLX Left Atrial Appendage Closure Device to include a 45-day dual anti-platelet therapy (DAPT) option as an alternative to 45-day oral anticoagulation (OAC) plus aspirin for post-procedural treatment of patients with non-valvular atrial fibrillation. The labeling in Europe has included the choice of either OAC or a DAPT post-procedural drug regimen for WATCHMAN technology since 2017.

These new products, along with the portfolios of the acquired organizations, join existing Boston Scientific offerings that were responsible for producing $12.68 billion in net sales in 2022. That figure represented an 11.1% increase over the prior fiscal.

Between its two main segments, Cardiovascular reported the majority of the revenue (61.7%) with a tally of $7.83 billion (+10.1% versus 2021). Between the two businesses, that broke down to an almost three-to-one split. Cardiology posted $5.93 billion, a year-over-year gain of 10.4%, while Peripheral Interventions saw a 9.1% rise to finish with $1.9 billion.

Boston Scientific’s other segment—MedSurg—recorded a 7.7% elevation, which translated to $4.91 billion. That amount was garnered from the sales of its three businesses. Endoscopy led the group at $2.22 billion (+8.1%). Urology finished second in terms of total with $1.77 billion, a 9.7% expansion. Rounding out the trio, Neuromodulation closed with $917 million, which represented a 3.5% leap compared to the previous year.

Boston Scientific’s 2022 revenue wasn’t the only expansion for the company. It also announced plans for increasing the footprint of two facilities—one in Maple Grove, Minn., and another in Ireland.

The plan in Maple Grove involved a two-story, 74,000-square-foot expansion of the manufacturing space for the Watchman device. According to CEO Mike Mahoney, the product represents one of the firm’s most important offerings and 75% of its components are made within the state. The location would produce the nitinol wire used within the technology, as well as for two stent product lines.

On the Emerald Isle, at Ballybrit in Galway, the company committed $118 million for the expansion of its location there. According to IDA Ireland, the project was anticipated to create more than 300 jobs over the course of several years and add 40,000 square feet of medical device manufacturing space to a facility that will be powered by renewable energy.

What couldn’t be done to advance innovation in-house, Boston Scientific looked to team with an expert organization that could supply the needed component. In 2022, it sought to collaborate with Truveta, a collective of U.S. health systems with a shared vision of saving lives with data. Truveta’s data is licensed for healthcare research; in this arrangement, Boston Scientific planned to use it to improve long-term patient care and gain insights into healthcare disparities. The organization gained access to de-identified medical records from more than 65 million U.S. patients.

According to Michael R. Jaff, D.O., vascular medicine specialist and chief medical officer and vice president, Medical Affairs, Innovation and Technology, Peripheral Interventions at Boston Scientific, “The first analysis will focus on gaining a deeper understanding of the long-term patient outcomes relating to the use of our products indicated for treatment of peripheral artery disease and will enable us to further our commitment to addressing the disparities in access to healthcare that exist across various patient populations and demographics.”

Unfortunately, against the backdrop of an overall positive year, there were a couple of negative aspects to the 12-month period. The firm said farewell to its co-founder and former CEO Peter M. Nicholas. The man who led the organization from 1979 to 1999 passed on May 14 at the age of 80. Even after leaving the top spot at the organization, he remained chairman of the board until 2016. He and fellow founder, John Abele, saw their startup comprised of 50 employees, a $500,000 loan, and $300,000 in investor money turn into the organization it is today.

Of the co-founder, Mahoney said, “As a pioneer who helped shape the field of minimally invasive surgery, Pete Nicholas is remembered worldwide for his contribution to vastly improved patient outcomes and equally impressive increases in healthcare efficiency.” He added, “Within the Boston Scientific family, Pete was also a lifelong mentor, motivator, and friend to hundreds of employees.”

Boston Scientific also ended all intellectual property disputes with Nevro, but it cost the company a net payment of $85 million. As a result, Nevro granted Boston Scientific a worldwide, non-exclusive, non-transferable license to practice paresthesia-free therapy at frequencies below 1,500 Hz and a covenant not to sue for any features embodied in any current Boston Scientific products for frequencies below 1,500 Hz. Boston Scientific also granted Nevro a worldwide, non-exclusive, non-transferable license under Boston Scientific’s asserted patent families and a covenant not to sue for any features embodied in any current Nevro products.

$11.89 Billion
Prior Fiscal: $9.91 Billion
Percentage Change: +19.9%
R&D Expenditure: $1.2B
Best FY21 Quarter: Q4 $3.13B
Latest Quarter: Q1 $3.03B
No. of Employees: 41,000

The medical device industry has been experiencing significant consolidation of both OEMs and their supply chain partners. While not always at the top of the price list in terms of deal value, Boston Scientific has been one of the more active M&A participants among its peers in sheer number of transactions. Of particular note was its acquisition of BTG Specialty Pharmaceuticals finalized in 2019—a roughly $3.7 billion net purchase.

Following that closing, the organization moved to divest the Pharmaceutical Licensing royalties segment of BTG in the fourth quarter of 2019. Then, at the very end of 2020, Boston Scientific announced it would shed itself of another non-medical-device segment. Specialty Pharmaceuticals, which had been formed as a business unit, was on the chopping block with an $800 million price tag. The buyers were Stark International Lux S.A.R.L., and SERB SAS, affiliates of SERB, a European specialty pharmaceutical group. At the start of March 2021, the agreement was final. That transaction, however, was hardly the only one for Boston Scientific during its latest fiscal year. After a couple years of cooler than average M&A activity, it jumped right back into the scrum in 2021.

In the first month of the year, Boston Scientific declared it would purchase Preventice Solutions, a privately-held company that offers a full portfolio of mobile cardiac health solutions and services. The deal, which had a potential value as much as $1.2 billion, would bring in an array of monitoring products, ranging from ambulatory cardiac monitors (including short and long-term Holter monitors) to cardiac event monitors and mobile cardiac telemetry. Preventice’s 2020 sales totaled $158 million.

Just six weeks later, Boston Scientific announced it was involved in another deal. This time, the arrangement involved the acquisition of the global surgical business of Lumenis LTD, a developer of energy-based medical solutions. This transaction involved an upfront cash payment of just over $1 billion and included premier laser systems, fibers, and accessories used for urology and otolaryngology procedures. Lumenis’ aesthetics and ophthalmology businesses, however, remained with the original owner.

“The MOSES laser technology, paired with our LithoVue Single-Use Digital Flexible Ureteroscope and comprehensive kidney stone management portfolio, will enable execution of our strategy for our stone franchise,” said Meghan Scanlon, senior vice president and president, Urology and Pelvic Health at Boston Scientific.

The closing of the deal was announced on Sept. 1, 2021.

In June, Boston Scientific announced a move for a company it had financial interest in since 2014 and at the time, held a 27% equity stake. The firm exercised its option to acquire the remaining shares of Farapulse, supplier of the FARAPULSE Pulsed Field Ablation System—a non-thermal ablation system to treat atrial fibrillation and other cardiac arrhythmias. Boston Scientific would spend approximately $295 million for the remaining 73% of shares and pay an additional $92 million based upon achievement of specific clinical and regulatory milestones. Additional revenue-based payments were also incorporated into the deal for a three-year period.

Continuing the shopping spree in September, the organization entered an agreement to purchase Devoro Medical. Devoro is the developer of the WOLF Thrombectomy Platform, which targets and rapidly captures blood clots using finger-like prongs that retrieve and remove thrombi in the arterial and venous systems. Like Farapulse, Boston Scientific was already an investor in Devoro (since 2019) and held a 16% stake at the time of the announcement. The remaining 84% cost the firm approximately $269 million, with achievement payments for clinical and regulatory milestones tacking on an additional $67 million.

Finishing with a bang, Boston Scientific announced its largest deal in October, valued at $1.75 billion (upfront payment). Baylis Medical Company offers the radiofrequency NRG and VersaCross Transseptal Platforms, as well as a family of guidewires, sheaths, and dilators used to support left heart access. These platforms have advanced transseptal puncture and are clinically proven to enhance safety, efficacy, and efficiency when crossing the atrial septum to deliver therapies in the left side of the heart, such as atrial fibrillation ablation, left atrial appendage closure, and mitral valve interventions. Baylis is expected to generate net sales approaching $200 million in 2022, having achieved double-digit year-over-year sales growth during each of the past five years.

In addition to a flurry of M&A activity to spur growth and expand its product offerings, Boston Scientific also offered information on a number of newsworthy product developments.

Its WaveWriter Alpha portfolio of spinal cord stimulator (SCS) systems was given a limited market release in January 2021. The unified portfolio of four MRI conditional, Bluetooth-enabled rechargeable and non-rechargeable implantable pulse generators provides personalization, and for the first time in SCS, Fast Acting Sub-perception Therapy (FAST) designed to deliver paresthesia-free pain relief in minutes. The systems are supported by the Cognita Solutions’ suite of digital tools for patients and physicians.

FDA approval was gained for the fourth-generation Vercise Genus Deep Brain Stimulation System. The portfolio, approved for conditional use in an MRI environment, consists of a family of Bluetooth-enabled, rechargeable and non-rechargeable, implantable pulse generators that power Cartesia Directional Leads, designed to provide symptom relief.

In March, the firm announced another FDA approval—the TheraSphere Y-90 Glass Microspheres, developed to treat patients with hepatocellular carcinoma (HCC). The approval expands access to the life-prolonging therapy for a greater number of patients, which, at the time, had been utilized under a humanitarian device exemption. The approval made TheraSphere the only radioembolization technology indicated for the treatment of unresectable HCC in the U.S. at the time.

The organization’s EXALT Model B Single-Use Bronchoscope, designed for bedside procedures in the ICU and OR, completed its CE mark in May, then obtained FDA 510(k) clearance in August. The scope can be used for a wide range of bronchoscopy procedures such as secretion management, airway intubation, percutaneous tracheostomy, double lumen endotracheal tube placement, and biopsies. The device is offered in three sizes—slim, regular, and large—each designed to deliver suction performance and direct, precise imaging.

Also in August, CMS granted a New Technology Add-on Payment for single-use duodenoscopes, applicable to the EXALT Model D Single-Use Duodenoscope, as part of its Fiscal Year 2022 Hospital Inpatient Prospective Payment System. As of Oct. 1, 2021, CMS would provide hospitals with additional device reimbursement when Boston Scientific’s duodenoscope was used for eligible cases in the hospital inpatient setting.

In the last month of its 2021 fiscal year, the organization initiated the MODULAR ATP clinical trial to evaluate the safety, performance, and effectiveness of the mCRM Modular Therapy System. The mCRM System consists of two cardiac rhythm management devices intended to work together to coordinate therapy: the EMBLEM MRI Subcutaneous Implantable Defibrillator System and the EMPOWER Modular Pacing System, which is designed to be the first leadless pacemaker capable of delivering both bradycardia pacing support and antitachycardia pacing.

These products, whether developed in-house or acquired through an M&A transaction, will help ensure future growth. They expand an already robust product offering that resulted in substantial gains as it saw the return of elective procedures following the decreases experienced in fiscal 2020 due to the COVID-19 pandemic. In fact, every unit of Boston Scientific reported double-digit growth (with the exception of Specialty Pharmaceuticals, which only contributed $13 million before completion of its divestiture). Further, every unit finished ahead of 2019’s totals as well. As a whole, Boston Scientific finished its 2021 fiscal having gained 19.9% in revenue over 2020, translating to $11.89 billion in sales.

In its MedSurg segment, the tally was $3.72 billion, reflecting a 21.4% expansion. Within the group, Endoscopy increased by 20.3% to contribute $2.14 billion to the firm’s total. Sister unit Urology and Pelvic Health ballooned by 23.1% to end with $1.58 billion in sales.

The three units that make up the Rhythm and Neuro segment joined to post $3.29 billion in revenue. Cardiac Rhythm Management led the trio with $2.02 billion in revenue, a rebound of 18.5%. Electrophysiology offered $365 million to the company’s coffers, reflecting an impressive 27.4% growth over the prior year. The remaining division, Neuromodulation, brought in $909 million, which was 19.5 percent higher than 2020.

The pair of Cardiovascular units coupled for a company leading $4.86 billion contribution. This was an outstanding 25.3% gain. Interventional Cardiology saw an incredible 32.2% explosion in sales compared to the year prior. It posted $3.04 billion, which represented the highest total of any one single business unit. Its partner within the segment, Peripheral Interventions, grew 15.4% to finish with a revenue figure of $1.82 billion.

Unfortunately, Boston Scientific didn’t see all positives in 2021. In March, it settled pending legal claims made by most U.S. states regarding surgical mesh devices and alleged deceptive marketing. According to a Reuters article, the firm will pay $188.7 million as part of the agreement with 47 states and Washington, D.C. It also stated it would provide a more accurate description of the product to consumers, as well as share the safety and risks of using mesh.

$9.91 Billion
Prior Fiscal: $10.73 billion
Percentage Change: -7.6%
No. of Employees: 38,000

Last November, Boston Scientific began a global, voluntary recall of its Lotus Edge aortic valve system. The company cited “complexities associated with the product delivery system” and the recall was related solely to that. According to the company, the valve continues to achieve positive, clinically effective results and there isn’t a safety issue for patients currently implanted with Lotus Edge.

As a result, the company chose to retire the entire Lotus platform and all related commercial, clinical, R&D, and manufacturing operations.

“While we have been pleased with the benefits the LOTUS Edge valve has provided to patients, we have been increasingly challenged by the intricacies of the delivery system required to allow physicians to fully reposition and recapture the valve,” Boston Scientific chairman and CEO Mike Mahoney told the press. “The complexity of the delivery system, manufacturing challenges, the continued need for further technical enhancements, and current market adoption rates led us to the difficult decision to stop investing in the Lotus Edge platform. We will instead focus our resources and efforts on our ACURATE neo2 Aortic Valve System, Sentinel Cerebral Embolic Protection System and other high growth areas across our portfolio.”

Shortly thereafter, the company notified the state of Minnesota via WARN letter that it would permanently lay off 106 employees—who were part of the Lotus operational unit—at its Maple Grove location beginning Jan. 19 of this year.

A few weeks later, the Beverly Hills-based Schall Law firm filed a class action lawsuit against Boston Scientific accusing the firm of overstating continued Lotus Edge profitability despite it suffering from a defective delivery system. Lawyers alleged the company made false and materially misleading statements, causing investors who bought securities between April 24, 2019, and Nov. 16, 2020, to incur damages.

“We dispute these allegations and will vigorously defend the company against this lawsuit,” Kate Haranis, Boston Scientific’s senior manager for corporate PR, said in an emailed statement. No new developments in this lawsuit have come to light at the time of writing.

Also last December, stipulation for dismissal in the California Nevro patent infringement case against the company was filed. Nevro sought preliminary and permanent injunctive relief against further infringement, as well as damages and attorney fees. The case ended with Nevro receiving no relief. Separately, Boston Scientific-initiated patent infringement and trade secret misappropriation cases in Delaware against Nevro have continued, with the first trial scheduled this October.

ANALYST INSIGHTS: While initially hit by COVID, BSC is now rebounding as patients need to return for deferred care during the past year. In the meantime, BSC has continued to be aggressive with M&A to position themselves to be a stronger company on the other side of the pandemic. Expect BSC to continue to be aggressive across its entire portfolio.

—Dave Sheppard, Co-Founder and Managing Director, MedWorld Advisors

In happier news, last April as the pandemic was in its worst U.S. throes, the company began manufacturing a roughly $1,000 emergency resuscitator branded Coventor, authorized by the FDA for use when no other means of mechanical ventilation are available. Working with the University of Minnesota and Medtronic also providing input, the firm helped build a device 7 percent of the ventilator price Philips charged in the U.S. Coventor is the size of a desktop and doesn’t need pressurized oxygen or air supply to operate. Its frame and mechanical actuator stabilize and compress commercially available ventilation bags, which are connected to the patient’s endotracheal tube and external compressed oxygen—or the device can compress ambient air if oxygen is unavailable.

Boston Scientific was atypically quiet in M&A activities last year, no doubt due to continued financial pressures from the pandemic. Last September, the firm began an investment agreement with exclusive option to acquire Farapulse, which develops a pulsed field ablation (PFA) system to treat atrial fibrillation and other arrhythmias. The PFA system earned FDA breakthrough status in May 2019, and Farapulse aims to begin a pivotal U.S. IDE trial and pursue CE mark approval. The PFA system consists of a sheath, generator, and catheters, and ablates heart tissue via a therapeutic electric field, rather than radiofrequency ablation or cryoablation.

The only other M&A activity last year occurred in December. The firm began the sale of its BTG Specialty Pharmaceuticals business for $800 million to Stark International Lux S.A.R.L. and SERB SAS, a European specialty pharmaceutical group. Following the close of the transaction, Boston Scientific will have shed both BTG non-medical device portions after the company bought BTG for $3.7 billion in 2019. The agreement includes the transfer of five facilities and approximately 280 employees.

The COVID-19 pandemic was tough on the Marlborough, Mass.-based device manufacturer. Boston Scientific’s revenue dropped 7.6 percent to $9.91 billion after typically rising year over year.

Endoscopy sales dropped 6 percent from the prior year with $1.8 billion in revenue, driven by declines in elective or semi-emergent upper endoscopy and colonoscopy procedures due to the pandemic environment. This loss was partially reclaimed by growth in the firm’s infection prevention franchise. Urology and pelvic health proceeds fell 9 percent to $1.3 billion due to reduced prosthetic urology and pelvic floor franchise sales as a result of the pandemic environment, partially offset by growth in the prostate health portfolio.

With $1.7 billion in sales, cardiac rhythm management revenue declined 12.1 percent as a result of lower defibrillator and pacemaker procedures brought on by the pandemic.

Last June saw FDA clearance for the LUX-Dx insertable cardiac monitor (ICM). The long-term diagnostic device spots arrhythmias associated with atrial fibrillation (AF), cryptogenic stroke, and syncope. Its dual-stage algorithm—which can be programmed to spot AF, atrial flutter, rhythm pause, bradycardia, and tachycardia episodes—detects, then verifies potential arrhythmias before the alert is sent to a clinician, gathering actionable data. The LUX-Dx ICM’s remote programming ability allows adjustment of detection settings without an in-person appointment.

Electrophysiology proceeds decreased 12.8 percent with $287 million posted last year due to lower sales of mapping and navigation products, as well as core diagnostic and therapeutic devices. This was, once again, due to the pandemic environment causing a deferral of elective electrophysiology procedures.

Last June the firm launched DirectSense technology in the U.S., a tool to monitor radiofrequency energy delivery’s effect during cardiac ablation. Available on the Rhythmia HDx Mapping System, the tool monitors changes in local impedance around the tip of the IntellaNav MiFi OI ablation catheter. It provides data on the impedance around the catheter tip to measure tissue’s ability to respond to RF energy before therapy is delivered, reducing chances of over-ablation and avoiding complications.

Neuromodulation sales also fell 12.8 percent, coming to rest at $761 million. Sales declines in spinal cord stimulation (SCS) systems were the main cause, due to deferral of elective procedures. Higher Superion indirect compression system (gained in the 2019 purchase of Vertiflex) and deep brain stimulation (DBS) sales were able to somewhat offset this franchise’s losses.

European launch of the Vercise Genus DBS system came last September. The full-body, MRI conditional and Bluetooth-enabled implant treats symptoms of Parkinson’s, essential tremor, and dystonia. The firm’s fourth-generation DBS offers the option of abdominal placement and contains programming with integrated visualization via patient imaging thanks to an exclusive relationship with Brainlab. It also touts an option for a 25-year rechargeable battery.

Last September also saw release of the WaveWriter Alpha SCS in Europe. The portfolio consists of four MRI conditional, Bluetooth-enabled implantable pulse generators. The systems feature combination therapy that can layer paresthesia and paresthesia-free options simultaneously with up to 32 contacts to target specific spinal cord nerves to treat chronic, intractable pain. Faster programming while maintaining a distance of 10 feet can be done thanks to the Bluetooth platform. WaveWriter Alpha gained FDA approval last December.

The interventional cardiology business posted $2.3 billion in revenue last year, an 18.4 percent plummet from 2019. The pandemic stifled coronary stent and other percutaneous coronary intervention procedures. Watchman left atrial appendage closure (LAAC) sales were also impacted by COVID-19, and the previously mentioned Lotus Edge recall and discontinuation further hurt the business.

FDA approval for the latest generation of the Watchman FLX LAAC device came last July. The new LAAC treatment device’s new, fully rounded design lets surgeons safely enter and maneuver in the left atrial appendage. It is also the first LAAC device that can be fully recaptured, repositioned, and redeployed. The new frame design promotes optimal device engagement with tissue for long-term stability and a faster, more complete seal. Watchman FLX comes in more sizes than the previous generation, as well.

The Acurate neo2 aortic valve system rolled out in Europe last September. The TAVI technology has expanded indication for aortic stenosis with no specified age or risk level for appropriate candidates. Its new annual sealing technology conforms to irregular, calcified anatomies to further minimize paravalvular regurgitation. The delivery system simplifies smaller and complex vessel access, and allows accurate valve positioning. Top-down deployment supports stable placement and release, as well.

Peripheral interventions revenue posted the only gain within any franchise, rising 13.3 percent to $1.6 billion. The interventional oncology franchise was the main driver, including TheraSphere Y-90 radioactive glass microspheres acquired from BTG.

The Ranger drug-coated balloon achieved FDA approval last November to treat peripheral artery disease in the superficial femoral artery and proximal popliteal artery. Its low therapeutic drug dose and proprietary coating helps with high primary patency rates and low systemic drug exposure. Its low-profile design also helps perform streamlined procedures and navigate through challenging anatomy.

Specialty pharmaceuticals accrued $219 million last year. The transaction to sell the business is expected to take place during the middle of this year.

Rank: #11 (Last year: #11) $10.74 Billion
Prior Fiscal: $9.82 Billion
Percentage Change: +9.3%
No. of Employees: 36,000

After a year of aggressive M&A activity in 2018, which included a rumor alleging the company had made a bid for Stryker to create what would have resulted in one of the largest medical device firms in the world (on the MPO Top Company list, it would have come in at third by some estimates), Boston Scientific relaxed a bit by comparison in 2019. Perhaps the firm was adjusting as it onboarded one of the largest acquisitions within medtech during the prior year—its $4.2 billion purchase of BTG. The deal officially closed in August 2019.

BTG developed and commercialized products used in minimally invasive procedures targeting cancer and vascular diseases, as well as specialty pharmaceuticals. The company encompassed three key businesses, the largest of which—Interventional Medicine—was focused on interventional oncology therapeutic technologies for patients with liver and kidney cancers, as well as a vascular portfolio for the treatment of deep vein thrombosis, pulmonary embolism, deep venous obstruction, and superficial venous disease.

“The addition of the BTG Interventional Medicine portfolio reinforces our category leadership strategy and enables us to offer best-in-class technologies, unparalleled clinical evidence and a strengthened commercial infrastructure to support physicians treating some of the most challenging diseases impacting patient health around the world,” Mike Mahoney, chairman and CEO of Boston Scientific, said upon the closing.

Although the BTG deal was the most significant transaction for Boston Scientific in 2019, it wasn’t the only one. While both the number of deals and value decreased compared to 2018, the company’s other purchase was still noteworthy.

In May, Boston Scientific announced it was acquiring Vertiflex, developer and provider of the Superion Indirect Decompression System. The Superion is a minimally invasive device used to improve physical function and reduce pain in patients with lumbar spinal stenosis, a condition as many as 6 million people in the U.S. suffer from. The system was approved in the U.S. in 2015. The procedure is a treatment option for patients who have not responded positively to first-line therapies such as oral pain medication and steroid injections, but do not have severe enough symptoms to require spinal fusion or laminectomy.

“The acquisition of Vertiflex and the Superion System will further our category leadership strategy by expanding the breadth of our pain management product offerings,” said Maulik Nanavaty, president of Neuromodulation at Boston Scientific. “The addition of this differentiated technology, along with our leading spinal cord stimulation and radiofrequency ablation technologies, will provide physicians with the widest variety of solutions available to manage the growing number of patients suffering from chronic pain.”

ANALYST INSIGHTS: BSC was hit hard by COVID and needed to shore up its financing due to its debt load created by its extraordinary M&A of recent years. While successfully executed, the cashflow hit of COVID created a short-term “re-trenching,” which may delay larger M&A activity for another year or two. With that stated, expect BSC to continue to expand its market share with opportunistic M&A.

—Dave Sheppard, Co-Founder and Managing Director, MedWorld Advisors

Boston Scientific expected the technology to achieve $60 million in sales in 2019. The deal was closed for $465 million in an upfront cash payment with additional payments contingent on commercial milestones over the subsequent three years.

The purchased firms join a bevy of other recently acquired companies that have been incorporated into the Boston Scientific organization over the past few years. This has led to fantastic growth over that time period. Over a five-year period ending 2019, the firm has enjoyed an average growth rate of 8 percent in sales (and that’s including only 1 percent in 2015). In 2019, Boston Scientific saw a 9.3 percent elevation over the prior year to finish at $10.76 billion in sales.

The almost $1 billion in increased sales was reflected in all but one business within the firm. In the MedSurg group, Endoscopy rose 7.5 percent over the prior year, reporting $1.89 billion in sales. The segment primarily provides products for the diagnosis and treatment of gastrointestinal and pulmonary conditions. The Urology and Pelvic Health unit, which develops devices to treat various urological and pelvic conditions for both male and female anatomies, ballooned to $1.41 billion in 2019, an impressive 13.4 percent gain.

Rhythm and Neuro experienced a more modest 3.3 percent increase, stifled by the aforementioned only business to experience a decrease compared with the prior year—Cardiac Rhythm Management (CRM). That division was down 0.6 percent to end the fiscal at $1.94 billion. CRM is comprised of a variety of implantable devices that monitor the heart and deliver electricity to treat cardiac abnormalities. Electrophysiology and Neuromodulation, on the other hand, enjoyed gains of 5.5 percent and 12 percent respectively. Electrophysiology, which reported 2019 sales of $329 million, encompasses less-invasive medical technologies used in the diagnosis and treatment of rate and rhythm disorders of the heart. The Neuromodulation business finished at $873 million; it offers devices to treat various neurological movement disorders and manage chronic pain.

Cardiovascular is represented by two businesses—Interventional Cardiology and Peripheral Interventions. The former produces technologies for diagnosing and treating coronary artery disease and other cardiovascular disorders including structural heart conditions. It tallied $2.82 billion in 2019 sales, 8.7 percent more than 2018. The latter, which grew in size as a result of the incorporation of BTG’s Interventional Medicine portfolio, develops and distributes products to diagnose and treat peripheral arterial and venous diseases, as well as products to diagnose, treat, and ease various forms of cancer. It noted $1.39 billion for the fiscal, an impressive 17.3 percent expansion versus the prior year.

With the close of the BTG deal, Boston Scientific created an eighth business unit. It formed Specialty Pharmaceuticals, which develops and manufactures acute care antidotes to treat overexposure to certain medications and toxins. While the unit only accounted for less than 1 percent of the organizations total sales for the year, it still contributed $81 million to the firm’s 2019 fiscal.

Having developed a strong strategy to achieve growth through acquisition, Boston Scientific also looked to the future in 2019 with an eye toward organic growth. The company announced news regarding a number of products and initiatives that should help future net sales figures.

At the start of 2019, the organization launched the Vercise Primary Cell and Vercise Gevia Deep Brain Stimulation Systems (DBS) featuring the Vercise Cartesia Directional Lead. The technology was developed to allow physicians to control the range, shape, position, and direction of electrical stimulation to treat the symptoms of Parkinson’s disease through highly personalized therapy. In addition, near the end of the summer, ImageReady MRI labeling was approved for the system to be used in a full-body magnetic resonance imaging environment.

Boston Scientific’s WATCHMAN FLX Left Atrial Appendage Closure Device was granted CE mark status in Europe and the firm started a limited market release of it. The device is intended to reduce the risk of stroke in people with non-valvular atrial fibrillation. Designed for simplified implantation to fit a wider range of patients, it enables flexibility in placement with different frame styles and allows the physician to reposition the device during the procedure.

Adding to the previously obtained clearance in Europe, the organization’s LOTUS Edge Aortic Valve System gained U.S. Food and Drug Administration (FDA) approval. The transcatheter aortic valve replacement technology could be indicated for patients with severe aortic stenosis considered at high risk for surgical valve replacement via open heart surgery.

Another product gaining the FDA’s OK in 2019 was the VICI VENOUS STENT System, which would be used for the treatment of iliofemoral venous obstructive disease. According to Boston Scientific, venous obstructive disease affects nearly 40 percent of the population in the U.S. and can be caused by conditions such as deep vein thrombosis, post-thrombotic syndrome, and compressive diseases such as May-Thurner syndrome.

Before the year-end holidays hit, Boston Scientific received an early gift from the FDA in the form of a clearance of its EXALT Model D Single-Use Duodenoscope for use in endoscopic retrograde cholangiopancreatography procedures. According to the company, the device was the first FDA-cleared single-use duodenoscope on the market and was granted Breakthrough Device Designation from the agency. Due to previous issues with reusable scopes, the FDA has worked with device manufacturers to address the concerns.

“With the EXALT Model D Duodenoscope, I can perform the same high-quality ERCP procedure with the added benefit of using a brand-new sterile device for each patient,” said Dr. Raman Muthusamy, medical director of Endoscopy, professor of Clinical Medicine, David Geffen School of Medicine at UCLA. “I believe the development of this device is a significant advancement in the evolution of endoscopy.”

Boston Scientific also saw the 2019 fiscal as an opportunity to start with a clean slate with regard to litigation in which it had been involved with Edwards Lifesciences. As such, two weeks into the new year, the two companies agreed to settle all outstanding patent disputes that had been lingering between them. There were a number of cases involving current portfolios of transcatheter aortic valves, certain mitral valve repair devices, and left atrial appendage closure devices around the world, but the arrangement saw all of them dismissed. The settlement resulted in a one-time payment of $180 million from Edwards to Boston Scientific.

In less fortunate news for the organization, in April, the FDA ordered manufacturers of surgical mesh to stop selling and distributing the products intended for transvaginal repair of pelvic organ prolapse (POP). The firm took part in the FDA’s general issues panel on transvaginal surgical mesh for POP in February. The decision was limited to mesh for the transvaginal repair of POP and not for mesh used to treat stress urinary incontinence or transabdominal repair.

AT A GLANCE
$9.82 Billion
Prior Fiscal: $9.0 Billion
Percentage Change: +8%
No. of Employees: 32,000

When it comes to M&A activity, Boston Scientific seemed to be well ahead of its peers in terms of number of transactions and overall value of those acquisitions in 2018, but ironically, the biggest headlines were spawned by a deal that never even took place. On June 11, 2018, The Wall Street Journal reported that Stryker made a takeover attempt of Boston Scientific. Although representatives from neither firm would comment on the report, the news sent shockwaves through Wall Street as trading in both stocks was temporarily halted that day. The deal would have birthed the third largest medical manufacturing firm in terms of annual device revenue; Wells Fargo Securities analyst Lawrence Biegelsen predicted yearly sales would be approximately $24 billion. There was discussion of complementary product lines, talk of whether antitrust concerns were valid, and explanations of how mega-deals were the ways in which device manufacturers offered value to healthcare provider customers.

Alas, the ballyhoo was all for naught.

Two days after the report broke, Stryker issued a statement via a regulatory filing with the U.S. Securities and Exchange Commission. It stated plainly that the firm was not in discussions to acquire Boston Scientific. While the company’s announcement squelched the majority of the conjecture over the deal, it didn’t completely eliminate it.

“The filing from Stryker states that the company is not in discussions with Boston Scientific. It does not deny that prior discussions took place,” explained Jason Benowitz, senior portfolio manager at Roosevelt Investment Group.

Even without the merger, Boston Scientific’s M&A activity in 2018 was quite noteworthy. Of the transactions that did actually take place during the year, the firm was on the buying side of the largest in terms of purchase price with its November offer of $4.2 billion for BTG plc. The U.K.-headquartered company developed and commercialized products used for minimally invasive procedures to address cancer and vascular diseases through its three business units. Its largest unit—Interventional Medicine—which housed its interventional oncology franchise and vascular portfolio, boasted products including the TheraSphere Y-90 radiotherapy microspheres, the GALIL cryoablation system, and EKOS Endovascular System. BTG also maintained a pharmaceutical business comprised of acute care antidotes to treat overexposure to certain medications and toxins.

“The acquisition of BTG and its rapidly growing peripheral interventional portfolio is an exciting extension of our category leadership strategy that will augment our capabilities in important areas of unmet need such as cancer and pulmonary embolism,” Mike Mahoney, chairman and CEO of Boston Scientific, said in a company statement regarding the transaction. “We are confident that the addition of these therapies to our portfolio will ultimately advance patient care in ways that could not be realized by either company alone, while also allowing us to realize substantial revenue and cost synergies and provide a strong return for investors.”

Although greatest in dollar amount, the BTG buy only served as the exclamation point to what had already been a very active year for Boston Scientific. Just two months earlier, Augmenix was targeted for acquisition. The developer of the SpaceOAR System, a therapy used to reduce common and debilitating side effects men may experience after receiving prostate cancer radiotherapy, was purchased for an upfront cash payment of $500 million, and up to $100 million for reaching sales-based milestones.

Prior to radiation therapy, the SpaceOAR hydrogel is injected to create additional space between the rectum and prostate during treatment, thereby reducing rectal radiation dose and associated side effects. At the time of the announcement, the hydrogel was CE marked, cleared by the FDA, and had already been used in more than 30,000 patients worldwide. Product sales were estimated to reach $50 million in 2018, and approach $90 million in 2019.

There were many more purchases in 2018, though. In fact, Boston Scientific had started with its M&A activity right at the start of the year. In January, it announced it was going to invest in Millipede, a privately-held company that developed the IRIS Transcatheter Annuloplasty Ring System for the treatment of severe mitral regurgitation. The agreement also included an acquisition option. For $90 million, Boston Scientific purchased a portion of the firm’s outstanding shares along with newly issued shares of Millipede.

Bookending the company’s fiscal year with the Millipede transaction, Boston Scientific announced just a few days before the close of the year that it would exercise its option to purchase the remaining shares of the Santa Rosa, Calif-based firm. The company had a successful completion of a first-in-human clinical study. The deal resulted in the additional payment of $325 million for the company’s remaining shares, along with a $125 million payment becoming available upon achievement of a commercial milestone.

Another on Boston Scientific’s shopping list for the year was EMcision, a privately held company with locations in the U.K. and Canada. Its flagship product was the Habib EndoHPB probe—a novel endoscopic bipolar radiofrequency device that coagulates tissue in the gastrointestinal (GI) tract for the treatment of pancreaticobiliary cancers. Patients with pancreaticobiliary cancers often develop jaundice as a result of tissue ingrowth that blocks ducts that enable bile to drain out of the GI tract. The Habib probe coagulates this tissue to help ensure fluids are able to drain, which can result in an improvement in a patient’s quality of life. The financial details of the deal were not disclosed.

Later that same month (March), Boston Scientific put up a cash payment of $306 million, and up to an additional $100 million in potential commercial milestone payments over the next four years for NxThera. The privately held firm located in Minnesota developed and sold a minimally invasive therapy for men with symptoms arising from benign prostatic hyperplasia. The firm’s Rezum system had FDA clearance and a CE mark, which had allowed it to be used to treat more than 20,000 patients.

Just a month later, Boston Scientific announced it was gobbling up two more entities. The first was Securus Medical Group, which Boston Scientific already had a stake in going back to 2016. The price for the remainder of the firm not already owned was $40 million in cash upfront and up to $10 million in contingent payments based on regulatory achievements and commercial milestones.

ANALYST INSIGHTS: BSC continues to be one of the most $100 million USD (Plus) acquirers of new technologies to bolster their key market segments in Cardio and Vascular. Interestingly, they also recently moved into spine with an acquisition. As most of their M&A investments have been performing well, watch for this trend to continue. Something interesting to speculate is whether or not BSC will ultimately be acquired by a larger player (MDT, J&J, Stryker, or even Apple or Google Verily).

—Dave Sheppard, Co-Founder and Managing Director, MedWorld Advisors

Securus Medical Group, a privately held company headquartered in Cleveland, Ohio, developed a thermal monitoring system for the continuous measurement of esophageal temperature. Physicians monitor the temperature of the esophagus, which is located behind the area of the heart where hot or cool energy is applied to treat an arrhythmia, during an ablation procedure to avoid thermal injury. The integrated catheter-based probe and imaging system generates real-time images of the temperature of the esophagus.

The other deal involved nVision Medical Corporation for an upfront cash payment of $150 million, and up to an additional $125 million in potential clinical and commercial milestones over four years. The privately held company focused on women’s health, with the first and only device cleared by the U.S. FDA to collect cells from the fallopian tubes, offering a potential platform for earlier diagnosis of ovarian cancer.

According to a company statement regarding the transaction, Boston Scientific plans to conduct additional clinical research with the nVision device to further establish how the cells it collects from the fallopian tubes can be used to render a diagnosis prior to surgery and help in the decision-making process for women at increased risk for ovarian cancer.

The summer didn’t slow Boston Scientific’s spending spree down, as it announced three more purchases over July and August. Already an investor in the first firm since its inception in 2016, Boston Scientific paid an additional $202 million for the remaining 65 percent of Cryterion Medical’s shares it didn’t own. The firm was developing a single-shot cryoablation platform for the treatment of atrial fibrillation. Through the acquisition, Boston Scientific became the first company to have both cryothermal and radiofrequency single-shot, balloon-based ablation therapies in its portfolio. At the time of the announcement, the system was being investigated in a clinical study in Europe, the results of which would then be leveraged in a CE mark submission.

Claret Medical was next on the summer hit list and its cerebral embolic protection system (Sentinal), which gained a CE mark in 2014 and FDA clearance in 2017. For the $220 million upfront cash purchase price, as well as a potential reimbursement-based milestone payment of up to $50 million, Boston Scientific gained the firm’s Sentinal System, which is used to protect the brain during certain interventional procedures, predominately in patients undergoing transcatheter aortic valve replacement (TAVR). According to a company statement, in clinical studies, the Sentinel System captured debris flowing toward the brain in 99 percent of TAVR cases, regardless of the type of replacement valve used.

VENITI Inc. was grabbed for $108 million upfront cash (Boston Scientific already held a 25 percent stake), as well as up to $52 million in payments contingent upon U.S. FDA approval of the VICI stent system. The Fremont, Calif.-based firm’s VICI VENOUS STENT System was developed for the treatment of venous obstructive disease, a condition that affects more than 1.1 million people in the U.S. and Western Europe annually. The technology had received a CE mark in 2013 but had only submitted an application for a PMA in June. At the time of the announcement, there were no stent technologies specifically indicated for use in the peripheral venous system in the U.S.

The sheer number of new technologies being brought into the fold through the numerous acquisitions will undoubtedly add to the company’s sales revenue in 2019. In the meantime, Boston Scientific enjoyed another positive fiscal period. The year’s sales total of $9.82 billion was an 8.6 percent increase over 2017’s $9.05 billion. Further, the contributions were spread somewhat evenly across all three segments.

Top among the businesses was Cardiovascular, posting $3.78 billion to the company’s almost $10 billion in sales for the year. That represented a 7.9 percent increase over 2017. The two units that comprise the segment each enjoyed high single digit gains. Interventional Cardiology provided $2.59 billion in sales, a 7.1 percent increase, while Peripheral Interventions posted $1.19 billion, 9.8 percent higher than 2017’s figure.

Second in contributions to the overall sales total in 2018 was Rhythm and Neuro at $3.04 billion, an 8.3 percent increase over the prior fiscal. Within that segment, Cardiac Rhythm Management was clearly dominant with $1.95 billion in sales, rising just 2.9 percent, but also representing the lowest percentage increase across all units. Neuromodulation was second within the segment at $779 million, an enormous 22.7 percent increase over 2017 and the largest percentage increase for the year for the company. Rounding out the segment was Electrophysiology’s $311 million, reflecting a 12.1 percent rise.

MedSurg finished just a bit over $3 billion in 2018, which was an almost 10 percent gain over the prior year. Endoscopy provided $1.76 billion to that—an 8.8 percent increase year-over-year. Seeing 10.8 percent growth over 2017, Urology and Pelvic Health finished the year at $1.25 billion in sales.

In addition to the positive results of its financials in 2018, Boston Scientific also saw several successes in pending litigation with Edwards Lifesciences over a patent dispute involving the companies’ TAVR technologies. In a series of decisions that took place throughout the year, courts in the U.K., Germany, and the U.S. sided with Boston Scientific over Edwards in questions over infringement of patents. In the U.K., the Court of Appeal dismissed an appeal by Edwards Lifesciences, upholding a prior court’s decision that the Sapien 3 infringes Boston Scientific’s patent EP 2,926,766 and that all claims of that patent are valid. In Europe, the firm (along with several other opponents) successfully opposed Edwards’ European patent EP 2,399,550 in the European Patent Office, resulting in a revocation of the patent. In another decision, a German court found that Edwards’ Sapien 3 Ultra device infringed a Boston Scientific patent specific to the fabric used on the valve seal. Finally, a jury in Delaware determined a Boston Scientific patent to be valid and Edwards’ Sapien 3 Aortic Valve infringed the patent. Further, the jury decided Edwards owed Boston Scientific infringement damages through the end of 2016.

While the company enjoyed a fantastic year overall, it wasn’t all roses. It encountered a PR debacle due to a “60 Minutes” report, which reflected other concerns being brought to bear against the medtech community and the FDA’s oversight of it during other times in 2018. The “60 Minutes” report in question aired in May and was one of the first “hits” against the medical device industry. The report claimed Boston Scientific’s transvaginal mesh products contained counterfeited and smuggled materials.

Understandably, the firm saw the report as significant enough to warrant a response regarding the accusations made in the broadcast. In a statement issued by Boston Scientific and signed by Dave Pierce, executive VP of MedSurg, and Mahoney following the episode’s airing, the company stated “the broadcast resurfaced outdated and previously disproven allegations first made by attorneys in 2016. Our rigorous testing and investigation have shown that the resin currently used in our products matches a formulation from the original U.S. produced resin. This information was also reviewed by the U.S. Food and Drug Administration (FDA) and was part of the basis of their conclusions.”

The statement went on to accuse the story of being irresponsible and misleading. It also noted the firm’s perspective was not fully reflected in the broadcast, but instead, those from clinicians and plastic experts involved with litigious actions were. The statement accused the program of showing documents and photos taken out of context.

Unfortunately, for the medical device industry, the “60 Minutes” episode was just the start of the PR nightmare that snowballed in 2018, which picked up considerable steam with the release of “The Bleeding Edge” documentary and the published results of an international investigation into the FDA’s oversight of the medical device industry.

$9 Billion
NO. OF EMPLOYEES: 29,000

Transcatheter aortic valve replacement (TAVR, also called TAVI—transcatheter aortic valve implantation) is one of the more exciting technologies to hit the market in recent years. The minimally invasive surgical procedure to replace a narrowed aortic valve that fails to open properly is a much safer option for higher-risk cardiac patients. Rather than cutting the chest open, the valve can be delivered via catheter through the femoral artery or a small incision in the chest through a large artery.

The TAVR market is poised to exceed $5 billion by 2021, according to Reuters. Edwards Lifesciences has long been considered the leader of this market. (Check out the full report on Edwards later in the Top Companies listing.)

However, the interventional cardiology market can be unforgiving for product missteps, as global medical device firm Boston Scientific learned as its Lotus range of TAVR devices struggled to perform and compete in the lucrative market.

For instance, last February, the company recalled its Lotus heart devices, citing issues with the locking mechanism—specifically, excess tension in the pin mechanism introduced during manufacturing. The Massachusetts-based firm had suspended European implants of its Lotus Edge TAVR in October 2016 due to similar concerns, though claimed last January that it had found a fix. Further, Boston Scientific delayed the submission of its marketing application for Lotus Edge in late 2016. The company had intended to submit the application last May, and receive an approval by the end of 2017. Analysts previously forecasted between $100 million and $125 million in 2017 global sales for Lotus devices. J.P. Morgan analysts predicted the short-term Lotus withdrawal would benefit Edwards’ 2017 revenues thanks to delaying the competitive threat.

Boston Scientific was also embroiled in patent litigation with Edwards over its Lotus Valve System at the time. The patent in question concerned the Lotus Valve Adaptive Seal, which creates an external seal to prevent paravalvular leak. Both the Patents Court of the High Court Justice of England and German District Court of Düsseldorf, however, ruled in favor of Boston Scientific. Edwards’ Sapien 3 device was determined to infringe on one Boston Scientific Scimed Inc. patent in the United Kingdom, and two German patents. The two companies continued to battle over TAVR patents this year. Boston Scientific has prevailed in the majority of European cases—culminating in the European Patent Office revoking an Edwards patent for Sapien 3. Edwards, however, came out on top in U.S. litigation. The U.S. Patent and Trademark Office determined Boston Scientific’s claims against Edwards patents were invalid.

As the year went on, Boston Scientific’s Lotus woes continued to deepen. Following the medical device maker’s sudden cancellation of an appearance at the annual Piper Jaffray conference last November, the company declared its Lotus Valve heart devices would not be marketed in the United States and Europe in early 2018 as planned.

Boston Scientific gave no reason for the delay, according to the Boston Business Journal. The company only said it “implemented manufacturing process and design specification changes to the Lotus Edge delivery system” following February’s recall.

“We continue to see value in the benefits of the Lotus Valve platform in treating patients with aortic stenosis,” CEO Mike Mahoney said in a statement. “While we are disappointed in this delay to our timelines, we are working to carefully analyze and implement necessary modifications to pass our rigorous internal quality standards.”

ANALYST INSIGHTS: After the Stryker acquisition/takeover “rumors,” it will be interesting what direction Boston Sci takes. It is no surprise that they remain an attractive target for the top OEMs in the med device world.

—Mark Bonifacio, Founder and President, Bonifacio Consulting Services

By the time markets closed the day Boston Scientific made the delay announcement, shares had plummeted 7.5 percent, slashing the company’s market cap from $39.1 billion to $36.2 billion.

Whatever worries Lotus’ mishaps gave investors, however, were assuaged upon the report of the company’s 2017 sales. Continuing its pattern of growth, Boston Scientific posted $9 billion of revenue last year, rising 8 percent from the year prior. Part of this is attributed to operational net sales of about $105 million derived from the acquisition of EndoChoice Holdings during the fourth quarter of 2016.

Boston Scientific’s Cardiovascular franchise is composed of Interventional Cardiology and Peripheral Interventions. The Interventional Cardiology portfolio consists of technologies for coronary artery disease and other cardiovascular disorders, including structural heart conditions. The Peripheral Interventions franchise consists of products to diagnose and treat peripheral arterial diseases, including devices used in percutaneous transluminal angioplasty (PTA) and peripheral vascular diseases. The segment also includes products to diagnose, treat, and ease various forms of cancer.

Despite Lotus’ failings, the Interventional Cardiology franchise rose 6.1 percent from the previous year to garner $2.4 billion in 2017 sales. The modest increase primarily resulted from sales of the Watchman left atrial appendage closure technology, growth in complex percutaneous coronary interventions product offerings, and last May’s acquisition of Swiss structural heart company Symetis SA.

The purchase of Symetis for a cool $435 million helped Boston Scientific further penetrate the TAVR/TAVI market it is so eagerly pursuing by adding to its portfolio the Acurate TA and Acurate neo/TF valve systems to treat high-risk patients with severe and symptomatic aortic valve stenosis. These devices are already sold in Europe and other area outside the United States, and the Acurate TAVI platform is recognized for ease of use during valve implantation.

“The steps we are taking reflect our commitment to being a leader in TAVI and structural heart technologies now and over the long-term, as we broaden our portfolio and pipeline to address the needs of our global healthcare providers and their patients,” said Ian Meredith, M.D., executive vice president and global chief medical officer of Boston Scientific. “The Acurate family of valve products is strongly complementary to our cornerstone Lotus valve platform, and this compelling combination of technologies will allow us to provide interventional cardiologists and cardiac surgeons with multiple TAVI offerings for varying patient pathologies and anatomy.”

Though the transaction was immaterial in 2017, Boston Scientific expects it to be slightly accretive this year as the company integrates Symetis into its Interventional Cardiology business.

Peripheral Interventions products generated $1.1 billion in sales, rising 6.8 percent from the year prior. The year-over-year increase was largely provoked by growth in the company’s core franchises—in particular, the stent portfolio, drug eluting products, and atherectomy (removal of plaque from blood vessels) systems.

Boston Scientific’s Rhythm Management business consists of Cardiac Rhythm Management (CRM) products—implantable devices to monitor the heart and deliver electricity to treat cardiac abnormalities—and Electrophysiology—less-invasive medical technologies for diagnosis and treatment of heart rate and rhythm disorders, including a broad portfolio of therapeutic and diagnostic catheters and a variety of equipment used in the Electrophysiology lab.

CRM products spawned $1.9 billion of revenue, growing 2.5 percent, and was fueled by growth in defibrillators and pacemakers. Continued Emblem S-ICD sales stimulated defibrillator sales expansion, as did the European launch of the Resonate family of ICDs (implantable cardioverter defibrillators) and CRT-Ds (cardiac resynchronization therapy defibrillators) and favorable impact from U.S. MRI-safe conditional labeling approved by the FDA last September. Pacemaker growth came as a result of the annualized impact of the company’s U.S. MRI pacemaker launch in the first half of 2017.

ANALYST INSIGHTS: Mike Mahoney—CEO (voted the 2nd most liked CEO in the US in 2018!) has done an excellent job of positioning BSC as a leader in the medical device industry, specifically in Cardio and Vascular therapies. The good news/bad news is that it does now make BSC a potential target for a larger strategic to acquire. In the meantime, watch for BSC to continue to be aggressive in its core markets.

—Dave Sheppard, Co-Founder and Principal, MedWorld Advisors

Following last February’s European launch, the Resonate ICDs and CRT-Ds gained FDA approval last May. Resonate devices feature SmartCRT technology with Multisite Pacing capability for multi-electrode pacing, and are also compatible with the HeartLogic heart failure diagnostic service to help clinicians improve heart failure management. Further, Resonate devices are powered by battery technology with nearly two times the usable capacity as a number of competitive devices—one of which, according to internal research, is Medtronic’s Evera XT VR. Boston Scientific also initiated a series of clinical trials to demonstrate improved response to CRT therapy using the proprietary SmartCRT technology to help physicians optimize where, when, and how to pace the lower heart chambers.

Additionally, the U.S. launch of the Resonate portfolio accompanied last September’s FDA approval of MR-conditional labeling for high-voltage devices. The MRI-safe capability extends beyond the Resonate devices; patients previously implanted with Autogen, Dynagen, and Inogen ICDs and CRT-Ds can now receive full-body MR scans in 1.5 Tesla environments under correct conditions of use.

Electrophysiology sales ballooned 14.5 percent to reach $278 million, driven by stronger sales of the Rhythmia Mapping System, Rhythmia HDx, Rhythmia related disposables, and expanding arsenal of navigation-enabled therapeutic catheters. To further bolster the business, last October, Boston Scientific also entered negotiations to purchase Apama Medical for up to $300 million.

Campbell, Calif.-based Apama Medical added the Apama Radiofrequency (RF) Balloon Catheter system to treat atrial fibrillation to Boston Scientific’s Electrophysiology franchise. The Apama RF balloon is a single-shot, multi-electrode technology that combines the benefits of RF point-by-point and balloon-based ablation approaches, particularly by delivering differentiated levels of energy and shortened procedure times. Built-in digital cameras with LED lights and sensing electrodes on the balloon provide real-time visualization and catheter electrode contact assessment. The Apama RF balloon is currently being studied in European clinical trials.

The MedSurg division consists of the Endoscopy, Urology and Pelvic Health, and Neuromodulation franchises. The Endoscopy business develops and manufactures devices to diagnose and treat a broad range of gastrointestinal and pulmonary conditions with less invasive technologies. The Urology and Pelvic Health business makes devices to treat various urological and pelvic conditions for both male and female anatomies, including kidney stones, benign prostatic hyperplasia, erectile dysfunction, male incontinence, pelvic floor disorders, abnormal uterine bleeding and uterine fibroids and polyps. The Neuromodulation segment touts devices to treat various neurological movement disorders and manage chronic pain.

Endoscopy products garnered $1.6 billion in 2017, escalating 12.4 percent from the year prior. The expansion resulted from healthy performance of the hemostasis franchise featuring the company’s Resolution 360 clips, the biliary franchise with the SpyGlass DS Direct Visualization system, and infection prevention offerings gained from EndoChoice. In 2017, Boston Scientific substantially completed integration of EndoChoice into the Endoscopy portfolio.

The Urology and Pelvic Health business rose 11.8 percent from the previous year to garner $1.1 billion in 2017 revenue. Growth of sales in kidney stone products (particularly the LithoVue Digital Flexible Ureteroscope), pelvic floor products, and men’s health products were largely responsible for the expansion. Further, a competitor that exited the market in 2016 provided Boston Scientific with share gains in the urology and pelvic health market.

The Neuromodulation franchise’s sales swelled 14.2 percent to $635 million. The growth was derived from the continued adoption of the company’s Precision Montage and Precision Spectra with MultiWave technology spinal cord stimulation systems in the United States, as well as heightened international sales. A number of regulatory approvals within the Vercise deep brain stimulation (DBS) product line also contributed to growth within this area.

DBS therapy involves placement of a device to stimulate specific brain areas with electrical signals. The Vercise Gevia DBS system earned CE mark approval last June. With a 25-year battery life, the rechargeable, MR-conditional device is intended to treat movement disorder symptoms in patients with Parkinson’s disease, dystonia, and essential tremor. The system also features programming software that lets clinicians visualize how stimulation will be distributed in the brain while configuring patients’ DBS stimulation programs. Usually, physicians chiefly rely on patient feedback to complete the program, but the software provides another source of information.

The Vercise DBS system to treat Parkinson’s disease achieved FDA approval last December. First launched in Europe in 2012, it was developed from cochlear implant technology. The Vercise IPG (implantable pulse generator) is currently the smallest rechargeable DBS device available in America. In the landmark VANTAGE study, 40 patients treated with the Vercise DBS system demonstrated a 63 percent improvement in motor function at 52 weeks from baseline as measured by the Unified Parkinson’s Disease Rating Scale III, as well as improvements in quality of life and medication usage.

“This approval marks an important step for patients who will now have the choice to be treated with one of the most innovative neuromodulation technologies available today,” said Maulik Nanavaty, Boston Scientific’s president and senior vice president of Neuromodulation. “Our system stands apart from the field in its approach and is changing the traditional definition on how we can leverage technology to treat patients with Parkinson’s disease.”

$8.4 Billion
NUMBER OF EMPLOYEES: 27,000

Fiscal 2016 was the very definition of an “up” year for Boston Scientific. The company enjoyed a net sales increase of almost a billion dollars, a 12 percent increase over the prior year. It reported total net sales for the company of almost $8.4 billion compared to the $7.5 billion figure posted in 2015. Similarly, every segment and business unit also reported an increase over the prior year. While some were more substantial than others, they all enjoyed a positive growth in sales.

The Cardiovascular segment saw a 12 percent increase over 2015’s sales figure ($3.3 billion versus $2.9 billion). Reflecting that exact percentage, both business units—Interventional Cardiology and Peripheral Interventions—had the same percentage growth in sales. Interventional Cardiology had an increase from $2 billion in 2015 to $2.3 billion in 2016, which was, according to the company, led primarily by strong sales of the Synergy Bioabsorbable Polymer Drug-Eluting Stent System. The Peripheral Interventions business was successful in gaining market share as it invested in both a drug-coated balloon and drug-eluting stent to treat peripheral artery disease, growing sales from $904 million to just over $1 billion.

Further, the company was able to secure Medicare coverage for its Watchman Left Atrial Appendage Closure Devices used to reduce the risk of stroke in eligible patients.

Within the Rhythm Management segment, sales increases were more modest, but still pointed in the right direction. Overall, an increase of 3 percent was enjoyed over the prior year, translating to more than $2 billion in 2015 to just under $2.1 billion in 2016. Approvals for the Emblem MRI S-ICD System and the OEM’s portfolio of MR conditional pacemakers and leads (see Expanded Offerings below for more information) were a couple of the positives coming from the Cardiac Rhythm Management business, which saw a 2 percent increase over the prior year ($1.8 billion to $1.85 billion). New products in the Electrophysiology business helped sales come in at $243 million, a 4 percent increase over 2015.

ANALYST INSIGHTS: Analyst Insights: Boston Scientific eschewed large scale M&A in recent years in favor of a refresh of its core product lines. The strategy is playing out well and the company’s execution in bringing product to market promptly is commendable.

—Tony Freeman, President, AS Freeman Advisors LLC

The most impressive gains were seen in Boston Scientific’s MedSurg segment, which boasted a 20 percent increase, going from $2.5 billion in 2015 to $3 billion in 2016. The company states that continued investments over the previous five years, along with several strategic acquisitions in 2016 were primarily responsible for the growth the segment saw. Endoscopy, which saw a 10 percent growth over the prior year and contributed more than $1.4 billion in sales to the company, was bolstered in part by the OEM’s SpyGlass DS Direct Visualization System—technology used for the diagnosis and treatment of the pancreas and bile ducts. The Urology and Pelvic Health business breached the $1 billion sales mark with a substantial 45 percent jump from 2015. Contributing to the gains was the synergies realized from the AMS Men’s Health business—a $1.65 billion buy in 2015—in addition to new product launches. Rounding out the segment, Neuromodulation saw an 11 percent increase over 2015, going from $501 million to $556 million. Again, new products in both the United States and Europe helped drive organic growth of the business.

Looking to the future and continuing the growth the company enjoyed in fiscal 2016, Boston Scientific made a number of strategic acquisitions during the course of the year. One of the more notable M&A announcements was the Cosman Medical buy. The privately held manufacturer of radiofrequency ablation (RFA) systems, based in Burlington, Mass., provided a technology portfolio that bolstered Boston Scientific’s Neuromodulation business. RFA works by applying heat to small areas of nerve tissue to interrupt pain signals.

“This acquisition is a natural extension of our current product portfolio and will help us provide physicians and patients more options to address chronic pain with non-opioid therapeutic treatments,” Maulik Nanavaty, senior vice president and president of the Neuromodulation business, said in a release that first announced the transaction. “The addition of the Cosman Medical product line, which is built on industry-leading technology and known for its high quality, expands our capability to provide innovative solutions for the treatment of chronic pain.”

The move marked an obvious attempt by the company to gain share within a device sector that addresses the very public opioid battle currently being waged within healthcare, as well as drawing attention from politicians and anti-opioid advocates. The Cosman technology provides a complement to Boston Scientific’s spinal cord stimulator system, giving doctors more opioid-free options from which to choose to address pain management.

“We are pleased to join the Boston Scientific team and help expand access to leading treatments for chronic pain,” Eric Cosman Jr., Ph.D., scientific director at Cosman Medical, said in the same press release. “This acquisition comes at a time when our society is recognizing the impact of relying extensively on opioids to treat pain and is looking for additional approaches. Our mutual commitment to innovation and quality will help us deliver solutions.”

ANALYST INSIGHTS: Boston Scientific, Direct Flow Medical, and St. Jude Medical are all running pivotal trials for their TAVR devices, and these companies are expected to enter the U.S. market as early as 2017 (Boston Sci’s trial has completed enrollment already). Each device has unique characteristics that could help it gain share in the U.S. market.

—Mark Bonifacio, Founder & President, Bonifacio Consulting Services

In a buy that seeks to supplement the products within the Endoscopy business, Boston Scientific announced in September that it would acquire EndoChoice. The firm developed products and services for specialists treating a wide range of gastrointestinal conditions. Its primary product portfolio included single-use devices, such as resection and retrieval devices, needles, graspers, and infection control kits. The deal, which closed in late November 2016, was valued at $210 million.

“The addition of EndoChoice products and services to our portfolio supports our strategy to provide comprehensive solutions to gastroenterology caregivers and the patients they serve,” Art Butcher, senior vice president and president of the Endoscopy business, said in a release issued to announce the deal. “We expect the acquisition to expand our leadership into new categories in the endoscopy market, and to drive strong, continued growth of our endoscopy business.”

Further bolstering the company’s product offerings for endoscopic procedures, Boston Scientific also purchased the LumenR Tissue Retractor System from LumenR LLC. While still in development at the time of the acquisition, the system was designed for use during endoscopic resection of lesions in the colon, esophagus, or stomach. Once completed, the technology was expected to improve endoscopic sub-mucosal dissection (ESD) and endoscopic mucosal resection (EMR) procedures.

“We have seen promising outcomes in reducing both procedure times and patient complications during our evaluation of the LumenR system,” Dr. Gregory Piskun, founder and CEO of LumenR LLC, said in the release announcing the purchase. “We are excited by this investment by Boston Scientific to acquire the LumenR system and bring it to market.”

Rounding out Boston Scientific’s 2016 transactions were the acquisition of the gynecology and urology portfolio of Distal Access LLC, and the $75 million buy of certain manufacturing assets and capabilities of Neovasc’s advanced biological tissue business. The purchase from Distal Access included the notable Resectr Tissue Resection Device, a single-use solution designed to effectively remove uterine polyps. The Neovasc advanced biological tissue business produces components used in transcatheter heart valves, including Boston Scientific’s Lotus Valve System. That deal also resulted in Boston Scientific gaining a 15 percent equity stake in Neovasc.

ANALYST INSIGHTS: Under Mahoney’s leadership, BSC is rapidly becoming an investor’s dream—a solid company with consistently increasing revenue and even better earnings growth. Its focus on category leadership in Cardiovascular, Rhythm Management and MedSurg will continue to pay dividends.

—Dave Sheppard, Co-Founder and Principal, MedWorld Advisors

Expanded Offerings

Boston Scientific enjoyed a significant year in terms of the expansion of its product portfolio. In total, the OEM saw 450 regulatory approvals and clearances worldwide, while also launching 93 products. Following are the more notable successes throughout fiscal 2016.

January 12—U.S. and European launch of the LithoVue Single-Use Digital Flexible Ureteroscope for minimally invasive endoscopic procedures to diagnose and treat stones and other conditions of the kidney, ureter, and bladder. The system is designed to deliver high-quality digital visualization and seamless navigation for consistent clinical performance during each patient procedure.

February 22—CE mark for the Eluvia Drug-Eluting Vascular Stent System, designed to restore blood flow in the peripheral arteries above the knee (specifically the superficial femoral artery and proximal popliteal artery). The stent features a unique drug-polymer combination intended to facilitate sustained release of the drug (paclitaxel) that can prevent narrowing (restenosis) of the vessel.

February 23—FDA approval of the Acuity X4 Quadripolar Left Ventricular leads, the wires that connect cardiac resynchronization therapy (CRT) devices to the heart. The product represented the first time the company offered a full X4 CRT system—both the device and the leads—to the U.S. market.

March 10—FDA approval of the Blazer Open-Irrigated radiofrequency ablation catheter to treat Type I atrial flutter, an abnormal rhythm of the upper chambers of the heart. The catheter features Total Tip Cooling technology intended to cool the catheter tip consistently during the ablation procedure.

March 22—U.S. launch of the Axios Stent and Electrocautery Enhanced Delivery System to help physicians manage two serious complications from pancreatitis—pancreatic pseudocysts and certain types of walled-off pancreatic necrosis—using a minimally invasive endoscopic approach.

April 20—CE mark (and subsequent FDA approval/U.S. launch announced August 9) for Emblem MRI Subcutaneous Implantable Defibrillator Systems (S-ICD), as well as magnetic resonance conditional labeling for all previously implanted Emblem S-ICD Systems. The systems are treatment options for patients at risk of sudden cardiac arrest that leave the heart and vasculature untouched.

April 25—FDA approval of several products deemed safe for use in an MRI environment, such as the ImageReady MR-Conditional Pacing System (which includes Accolade MRI and Essentio MRI pacemakers) and the Ingevity MRI pacing leads.

May 3—FDA approval of two catheters that can be used with the company’s Rhythmia Mapping System. The IntellaNav XP and the IntellaNav MiFi XP navigation-enabled ablation catheters—designed to map and ablate—were approved to treat Type I atrial flutter.

May 19—FDA approval and launch of the Precision Montage MRI Spinal Cord Stimulator System. The system offers customized relief to patients with chronic pain while also enabling safe access to full body magnetic resonance imaging in a 1.5 Tesla environment.

September 19—CE mark for the Lotus Edge Valve System, the company’s next generation transcatheter aortic valve implantation (TAVI) technology. The system is indicated for aortic valve replacement in patients with severe aortic stenosis who are considered at high risk for surgical valve replacement.

October 17—Launch of the Resolution 360 Clip, a novel technology developed to improve hemostatic clipping by providing physicians controlled rotation designed for more accurate clip placement.

November 8—U.S. and European launch of the Dakota Nitinol Stone Retrieval Device with OpenSure Handle. This kidney stone retrieval device is designed to allow physicians to release and capture kidney stones of multiple sizes, from complex stones as large as 10 millimeters to fragments as small as one millimeter.

$7.5 Billion
NUMBER OF EMPLOYEES: 25,000

Sometimes the point of a medical device business’s operations can be lost amid the muddle of fiscal facts and figures—I’m talking, of course, about the patients actually receiving the devices. According to Boston Scientific Corp. (or, at least, according to a rounded average based on company sales and estimated usage patterns), the company has helped more than 22 million patients in 2015, a point President and CEO Michael Mahoney takes care to mention in the opening paragraph of his letter within the annual report. And while the remaining 99 percent of a company report dictates where, how, and why money was made, it’s nice to see at least a small nod to the patients whose lives have been improved.

Naturally, a company cannot make lifesaving products without the cash to back them up, and fiscal year 2015 (ended Dec. 31) proved to be successful for Boston Scientific in that regard. The company continued to see an upward trend in revenue, with full-year sales of $7.47 billion, an 8 percent operational revenue growth, 5 percent organic revenue growth, and 1 percent revenue growth from 2014. Adjusted earnings per share in 2015 were 93 cents, compared to 84 cents in 2014, representing an 11 percent increase year over year. The company reported a GAAP loss of 18 cents per share, as compared to both 2013 and 2014’s 9 cents. Boston Scientific continues to invest in new opportunities in emerging markets—where operational revenue has grown by 13 percent—especially highlighted in China, where the company experienced 20 percent growth. In addition, Boston Scientific funneled $876 million (about 11.7 percent of total sales) into research and development.

“2015 was an excellent year for Boston Scientific as we continued to build global momentum and adapted to meet the needs of our customers,” Mahoney said. “Our strong business results reflect the winning spirit of our employees, diversification of our portfolio, focus on meaningful innovation, and globalization efforts.”

It must be mentioned that early 2016 saw the departure of a Boston Scientific legend. It was announced in late February that board chairman Peter Nicholas—who co-founded the company along with John Abele in 1979—would retire following the company’s annual stockholders meeting in May. Nicholas led Boston Scientific as CEO and co-chairman from its founding until 1995, when he stepped down and became chairman. Upon Nicholas’ retirement, the board appointed Mahoney as chairman.

Business Sector Activity

Boston Scientific’s medical device offerings are divided into seven units: Interventional Cardiology, Peripheral Interventions, Cardiac Rhythm Management, Electrophysiology, Endoscopy, Urology and Pelvic Health, and Neuromodulation. These units are grouped within three segments: Cardiovascular, Rhythm Management, and MEDSURG.

The Cardiovascular segment demonstrated an operational revenue growth of 9 percent in 2015. This segment contains the interventional cardiology and peripheral interventions portfolios, which grew in operational sales by 7 percent and 13 percent respectively. The revenue increase was largely a result of two factors: U.S. Food and Drug Administration approval of the SYNERGY bioabsorbable polymer drug-eluting stent system, which treats coronary artery disease, and the commercial launch of the WATCHMAN left atrial appendage closure device, which reduces stroke risk in eligible high-risk non-valvular atrial fibrillation patients. On the back end of 2015, the integration of Bayer AG’s interventional division grew shares of the atherectomy and thrombectomy sections.

The Rhythm Management segment exhibited a 1 percent operational and organic revenue increase in 2015, with the cardiac rhythm management and electrophysiology divisions growing 1 percent and 9 percent in operational sales, respectively. Revenue grew in pacemakers and implantable cardioverter-defibrillators (ICDs), with new, longer-lasting ICD batteries. Largely responsible for this increase were the market share gains from the EMBLEM subcutaneous implantable defibrillator in the United States and Europe, as well as the continued launch of the Rhythmia mapping and navigation system, which diagnoses and treats complex arrhythmias. The company’s portfolio of differentiated diagnostic and therapeutic catheters for electrophysiologists also continued to develop in 2015.

The MEDSURG section experienced an operational revenue growth of 13 percent in 2015. The endoscopy, urology and pelvic health, and neuromodulation divisions grew in operational sales by 6 percent, 36 percent, and 8 percent respectively, according to Boston Scientific’s 2015 annual report. The significant increase in urology and pelvic health sales results from the urology portfolio inherited from the acquisition of American Medical Systems’ (AMS) Men’s Health and Prostate Health businesses in August 2015. Growth in the endoscopy business was largely driven by the launch of the SpyGlass DS direct visualization system, used to diagnose and treat complex bile duct and pancreas disorders, as well as the transgastric or transduodenal drainage products gained through the April 2015 acquisition of Xlumena Inc. The neuromodulation business’ growth was largely attributed to sales of the Spectra spinal cord stimulation system, and global expansion of the company’s deep brain stimulation technologies for treatment of Parkinson’s, dystonia, and essential tremor.

Acquisitions and Alliances

Completed on Aug. 29, 2014, Boston Scientific’s acquisition of Bayer AG’s Interventional business continues to enhance the company’s ability to offer physicians and healthcare systems a more complete set of solutions to treat difficult vascular conditions. So far, the transaction has yielded the AngioJet thrombectomy system and the Fetch 2 aspiration catheter, both used to remove blood clots from arteries and veins during endovascular procedures. In 2015, the company continued to integrate Bayer’s operations with its peripheral interventions and interventional cardiology divisions, which was expected to be completed by mid-2016.

Furthering the company’s peripheral interventions sector, it completed the acquisition of CeloNova Biosciences’ interventional radiology business on Dec. 31, 2015, for a total of $70 million—adding additional payments based on regulatory and sales goals. The deal added drug-eluting microspheres for chemotherapeutic drug delivery to the company’s portfolio, as well as spherical embolic products to treat uterine fibroids, among other conditions.

The $1.6 billion acquisition of AMS’ male urology portfolio from Endo International plc has shown to be fruitful—operational sales in the urology and pelvic health division increased by 36 percent in 2015.  The division was formerly known as urology and women’s health, but was then changed to the gender-neutral urology and pelvic health to account for the company’s foray into male urology devices. The deal complimented Boston Scientific’s urology portfolio with such devices as the minimally invasive GreenLight XPS and HPS Laser Therapy Systems for treating benign prostatic hyperplasia, the AMS 800 Urinary Control System for male incontinence and the AMS 700 Inflatable Penile Prosthesis for erectile dysfunction.

Strengthening the company’s endoscopy division, Boston Scientific acquired Xlumena—developer of minimally invasive devices for endoscopic ultrasound-guided transluminal drainage of targeted GI tract areas. Boston Scientific executives said the move strengthens the company’s bid to become a market leader in the endoscopic ultrasound segment by coupling its Expect family of fine needle aspiration needles with the leader in therapeutic EUS.

$7.4 Billion
NO. OF EMPLOYEES: 24,000

Sometimes, hard work doesn’t pay off. Year after year of sweat and tears can sometimes yield nothing more than bitterness towards the parent (usually) who told you that “slow and steady wins the race.” But other times, one finds that parents actually do know what they’re talking about once in a while. Sometimes, hard work, plus smarts and a little bit of good fortune, really does bring success.

This has proven true for Boston Scientific Corp., which, after a handful of years of slow growth, layoffs (1,000 jobs in 2011 and another 1,000 positions in early 2013), and a “restructuring” at the end of fiscal year 2013, finally has seen a financial year that by any measure was a resounding success. Fiscal 2014 brought in consolidated revenue of $7.46 billion, which represented a 6 percent increase in operational revenue compared to 2013, and 3 percent revenue growth on a reported basis. This was above and beyond the company’s guidance for the year, which predicted growth of 2 to 5 percent on a reported basis and 3 to 5 percent on an operational basis. Six percent growth was a win. Adjusted earnings per share in 2014 were 84 cents in 2014, compared to 73 cents in 2013, representing a 15 percent increase year over year. The company reported a GAAP loss of 9 cents per share for both 2014 and 2013. It also expanded gross profit margin to 70.1 percent from 69.6 percent in 2013. In addition, Boston Scientific is investing in ongoing growth opportunities, and it invested $817 million, or approximately 11 percent of sales, into funding research and development.

“We believe the momentum we generated in 2014 will continue because our strategy is working,” said President and CEO Michael Mahoney. “We place patients first, have strong global businesses and a differentiated pipeline of meaningful innovation. We expect to continue to deliver strong shareholder value by growing revenue faster than the market, improving our operating margins and achieving double-digit adjusted EPS growth.”

Business Sector Activity

Boston Scientific divides its medical device offerings into seven business units: Electrophysiology, Endoscopy, Interventional Cardiology, Neuromodulation, Peripheral Interventions, Rhythm Management, Urology and Women’s Health. These units are further broken down into three reporting segments.

The Cardiovascular segment, consisting of the interventional cardiology and peripheral interventions businesses, grew operational revenue 5 percent in 2014 and improved adjusted operating margin year-over-year by more than 200 basis points. Interventional Cardiology delivered exceptional performance, driven by strong sales of drug-eluting stents and products from the company’s complex coronary interventional portfolio and emerging structural heart franchise. Peripheral Interventions added market-leading capabilities in thrombectomy and atherectomy with Boston Scientific’s acquisition of the Bayer AG interventional business in September 2014. The Bayer buy added Angiojet thrombectomy system and the Fetch 2 aspiration catheter, which are used in endovascular procedures to remove blood clots from blocked arteries and veins, to the company’s portfolio; as well as the Jetstream atherectomy system, used in fast-growing therapy to remove plaque and thrombi from diseased arteries. The deal was valued at $414 million in cash.

The Rhythm Management segment, made up of the Cardiac Rhythm Management and Electrophysiology businesses, grew operational revenue 6 percent in 2014, while adjusted operating margin improved more than 300 basis points year-over-year. Cardiac Rhythm Management increased global sales of its defibrillation and pacer products throughout the year, and accelerated demand for the subcutaneous implantable defibrillator (S-ICD) platform, which exceeded 2014 revenue expectations. According to Boston Scientific, the S-ICD system is the only implantable defibrillator that provides protection from sudden cardiac arrest while leaving the heart and vasculature untouched. This technology currently is being introduced in Asia and South America.

Additionally, the Electrophysiology business expanded its commercial impact with the launch of the Rhythmia mapping system, which enables physicians to diagnose heart arrhythmias and assess appropriate intervention. The system earned the CE mark in May 2013, and was cleared by the U.S. Food and Drug Administration the following August 2013. This contributed to the blockbuster 48 percent growth the EP business brought.

The MedSurg (medical-surgical) segment, comprised of the Endoscopy, Urology and Women’s Health and Neuromodulation businesses, grew operational revenue 5 percent in 2014, and adjusted operating margin improved more than 100 basis points year-over-year. Endoscopy posted operational sales growth of 5 percent in 2014, and Urology and Women’s Health delivered double-digit operational sales growth in the international markets. Neuromodulation delivered strong results with 5 percent operational sales growth and expanded the clinical application of its deep brain stimulation platform to assist in the treatment of Parkinson’s disease.

Big Buys

Urology promises to be a strong growth area for Boston Scientific in 2015. In March this year, the company announced a deal to acquire the urology portfolio of Endo International plc, which includes the Men’s Health and Prostate Health businesses of American Medical Systems. The strategic acquisition, which is expected to be completed in the second half of 2015 subject to customary closing conditions, will add technologies for treating benign prostatic hyperplasia, male stress urinary incontinence and erectile dysfunction, complementing the kidney stone, pelvic organ prolapse, female stress urinary incontinence and abnormal uterine bleeding treatment portfolios of Boston Scientific’s Urology and Women’s Health business.

Also expected to have a continued impact on the Urology and Women’s Health business is the company’s acquisition of IoGyn Inc. in May 2014. At the time, IoGyn was a pre-commercial stage company that had developed and received U.S. Food and Drug Administration (FDA) clearance for the Symphion system, a system for hysteroscopic intrauterine tissue removal including fibroids and polyps. This acquisition enabled the pairing of the Symphion system with Boston Scientific’s Genesys HTA system for abnormal uterine bleeding to create what the company called a “compelling” set of gynecologic surgery products. During 2014, Boston Scientific recognized gains of $19 million associated with the acquisition of IoGyn. Overall, the acquisition was valued at $510 million.

$7.14 Billion
No. of Employees: 23,000

After several years of sluggish sales and legal wrangling (patent cases, U.S. government litigation and patient lawsuits), Boston Scientific has been working to reverse its fortunes. Toward the end of its 2013 fiscal year (ended Dec. 31), the company went through a self-described period of restructuring—its third in two years. Results from the company’s third quarter seemed to suggest that the efforts worked. The end of the year seemed to bring with it improved performance and, dare Boston Scientific officials say it, a possible turnaround, exceeding Wall Street’s expectations.

“I am pleased with our results for the quarter and our return to operational revenue growth for the full year 2013,” said Mike Mahoney, president and CEO. “This marks our third consecutive quarter of accelerated operational revenue growth and we look forward to continued improvement of our annual sales and earnings performance in 2014.”

In 2013, the company reorganized its business units into three reporting segments: MedSurg, which consists of endoscopy, neuromodulation, and urology and women’s health businesses; Rhythm Management, which consists of cardiac rhythm management and electrophysiology (EP) businesses; and Cardiovascular, which includes the firm’s interventional cardiology and peripheral interventions businesses.

Across all three segments in FY13, the company achieved full-year sales of $7.14 billion, representing 2 percent operational revenue growth and 1 percent revenue decline on a reported basis. The company recorded full-year adjusted earnings per share of 73 cents, compared to 66 cents in 2012, and reported a GAAP loss of 9 cents per share, compared to a GAAP loss of $2.89 per share in the prior year period.

Morgan Stanley analyst David Lewis told investors at the beginning of 2014 that things were looking up for Boston Scientific based on the strength of the company’s product pipeline and its “numerous opportunities” to expand margins.

“Over the past several years, the company has targeted investments across several markets to accelerate growth and drive leverage,” Lewis said. “We believe better recognition of this strategy will drive future outperformance even after a robust 2013 as accelerating sales and earnings growth drive improving financial performance over the next several years.”

According to Lewis, the company’s strengths are its revenue growth, “solid” stock price performance and “compelling growth” in net income.

“However, as a counter to these strengths, we find that the company’s cash flow from its operations has been weak overall,” he noted.

News of the improved numbers at the end of FY13 also came with the announcement of 1,100 to 1,500 job cuts worldwide—part of the restructuring plan noted above—along with the company’s ongoing plant network optimization strategy, continued focus on driving operational efficiencies and ongoing business and commercial model changes.

The company previously cut 1,000 jobs in 2011 and another 900 to 1,000 positions in early 2013. The third round of layoffs was thought to be a cost-cutting tactic to speed up the company’s improving performance, saving $150 to $200 million in operating costs. In October of FY13, Boston Scientific’s chief financial officer, Jeffrey Capello, announced his resignation. The position was filled by Daniel Brennan, senior vice president and controller, who is credited with helping steer Boston Scientific over the bumps of the last five years.

Also toward the end of the 2013 fiscal year, the company began its transition from its former headquarters in Natick, Mass., to a new facility 14 miles west to the town of Marlborough.

Sectors by the Numbers
Sales for the firm’s Cardiovascular sector fell 6 percent to $2.79 billion. Within that corporate silo, interventional cardiology product sales dropped 8 percent to just shy of $2 billion, while peripheral intervention products sales were up 2 percent to $789 million. The haul for Rhythm Management business was sales of $2.04 billion, down 1 percent. Within the business segment, sales of cardiac rhythm management devices yielded $1.89 billion, a drop of about 1 percent, and sales of electrophysiology products were up 5 percent to $155 million. Boston Scientific’s MedSurg business grew sales by 7 percent to reach $2.26 billion. Under the MedSurg umbrella, endoscopy product sales rose 4 percent to $1.3 billion; neuromodulation devices were the company’s big winner with a 23 percent sales increase to $453 million; and urology and women’s health products eked out minor gains of 1 percent growth to reach $505 million.

For the company overall, on a consolidated GAAP basis, net loss for the full year 2013 was $121 million, or 9 cents per share, which included goodwill and other intangible asset impairment charges, acquisition and divestiture-, restructuring- and litigation-related charges, discrete tax items and amortization and debt extinguishment expenses, of $1.1 billion (after-tax) or 82 cents per share. Adjusted net income for the full year 2013, excluding these net charges, was $991 million, or 73 cents per share. By comparison, on a consolidated GAAP basis, net loss for the full year 2012 was $4.1 billion, or $2.89 per share. Adjusted net income for the full year 2012, was $933 million, or 66 cents per share.

In a move to increase market share, Boston Scientific acquired the electrophysiology business of Murray Hill, N.J.-based C. R. Bard for $275 million in cash. Bard’s EP business, based in Lowell, Mass., had nearly $111 million in sales in 2012. Boston Scientific merged the unit with own rhythm management business, which is best known for making pacemakers and implantable defibrillators. According to company officials, there is a $2.5 billion worldwide market for electrophysiology that is growing 10 percent annually. Analysts seemed to agree. In a note to investors, Kevin Strange, an analyst for Wells Fargo, wrote that the acquisition would give Boston Scientific 11 percent market share and move up in the global electrophysiology market from fourth to third position.

“We expect [Bard’s] strong portfolio of diagnostic catheters to be complementary to [Boston Scientific’s] portfolio of therapeutic catheters, and geographically, [Bard] has a strong presence outside the U.S., whereas [Boston Scientific] has a stronger presence in the U.S, which we expect to also be complementary,” Strange wrote. “Overall, we think the acquisition is strategically sound and consistent with [Boston Scientific’s] stated desire to reinvigorate their EP business.”

New Product OKs
Given Boston Scientific’s varied product categories, new product rollouts, study results and technology milestones are frequent throughout the year, and FY2013 was no exception. Here are a few notable new tech highlights:

• In the first quarter of 2013, the company received CE mark approval in Europe for the Promus Premier everolimus-eluting platinum chromium coronary stent system. U.S. Food and Drug Administration (FDA) approval followed in the fourth quarter. The device is designed to improve drug-eluting stent performance in treating patients with coronary artery disease, featuring a unique customized platinum chromium alloy stent architecture and an enhanced stent delivery system.
• The company also received CE mark for its X4 line of quadripolar cardiac resynchronization therapy defibrillator (CRT-D) systems, including the Autogen X4, Dynagen X4, and Inogen X4 CRT-Ds, a suite of Acuity X4 quadripolar left ventricle leads and the Acuity PRO lead delivery system.  The small, implantable devices are used to treat heart failure and sudden cardiac arrest.
• The FDA’s Circulatory System Devices Panel of the Medical Devices Advisory Committee voted 13-1 to recommend the company’s Watchman left atrial appendage closure device for approval. The device is used to treat atrial fibrillation. Agency approval is expected this year. The device received CE mark in Europe in 2005.
• Further bolstering its portfolio of peripheral embolization technologies, Boston Scientific received FDA clearance and CE mark approval for its Direxion Torqueable Microcatheter. Peripheral embolization is a technique used primarily by interventional radiologists to treat liver cancer, uterine fibroids and other challenging conditions. It involves deliberately blocking a blood vessel to prevent blood flow to an area of the body, which can effectively shrink a tumor or block an aneurysm.
• In November, CE mark was granted for the Vercise deep-brain stimulation (DBS) system for the treatment of intractable primary and secondary dystonia, a neurological movement disorder characterized by involuntary muscle contractions. Earlier in the year, CE mark also was issued for the Guide DBS system, which the company claims is world’s first DBS visualization system—providing clinicians with 3-D visualization information that simulates stimulation output, which may reduce programming time and enable more precise targeting of therapy. Using Guide DBS, physicians are able to visualize the relative position of lead location and utilize stimulation field models within the brain. Guide and Vercise can be used in combination.
• October brought another CE mark, this time for the Lotus valve system, the company’s entry into the highly competitive transcatheter aortic valve replacement (commonly referred to as TAVR) market. This device is designed for patients with severe aortic stenosis at high risk for traditional open-heart surgical valve replacement. The company also is pursuing FDA approval.
• Also in October, the company kicked off a key clinical trial expected to serve as the foundation for global regulatory approvals of the Innova drug-eluting stent system. The trial, dubbed Majestic, is designed to evaluate the safety and performance of the first Boston Scientific peripheral drug-eluting stent system. The Innova system is designed to restore blood flow in arteries above the knee, specifically the superficial femoral artery and proximal popliteal artery.  The stent features a unique drug-polymer combination, intended to facilitate optimal release of the drug and prevent restenosis (narrowing) of the vessel. “The complex anatomy of the superficial femoral artery above the knee and the dynamic forces created by flexion of the knee create a challenging environment for implants like stents, leading to the potential risk of stent fracture and higher rates of restenosis,” said Professor Stefan Muller-Hulsbeck, M.D., Ph.D., deputy chairman Vascular Center Diako Flensburg and head of the Department of Diagnostic and Interventional Radiology/Neuroradiology, Academic Hospitals Flensburg, Germany. Innova DES consists of a paclitaxel-coated, nitinol, self-expanding stent loaded on an advanced, low-profile delivery system.  The innovative stent architecture features a closed-cell design at each end of the stent for more consistent deployment, and an open-cell design along the stent body for improved flexibility and fracture resistance. Deployment accuracy is facilitated by a tri-axial catheter shaft designed to provide added support and placement accuracy.
• In August, the FDA approved the company’s IntellaTip MiFi XP catheter and cleared the Zurpaz 8.5F steerable sheath. The products joined the company’s growing portfolio of electrophysiology tools designed to redefine ablation technology. Catheter ablation, a procedure in which localized electrical energy is delivered into the heart tissue and is aimed at restoring the continuous normal rhythm, has become a first-line treatment approach for patients with certain kinds of irregular heartbeats.
• The FDA granted 510(k) clearance of the Rhythmia mapping system, a next-generation 3-D mapping and navigation solution for use in cardiac catheter ablations and other electrophysiology procedures to diagnose or treat a variety of conditions in which the heart beats abnormally. Cardiac mapping has become a standard tool for the diagnosis and treatment of arrhythmias. Current mapping systems require a manual, labor intensive process to create maps, making tradeoffs between accuracy and speed. Current systems also offer limited indication of therapy success. Rhythmia is designed to intelligently automate map creation, increasing the speed and improving the density of mapping compared to existing systems. CE mark was granted earlier in the year.
• The company received FDA 510(k) clearance and CE mark for the Guidezilla guide extension catheter, which is designed to make complex percutaneous coronary intervention procedures easier by more efficiently delivering interventional devices, including balloons and stents, in situations where extra backup support is needed.
• Boston Scientific launched a new family of pacemakers in Europe that monitor respiration, adjust pacing accordingly, and support insight into the patient’s overall heart failure status. The new line comprises the Inliven cardiac resynchronization therapy pacemaker (CRT-P) that synchronizes the heart chambers, and the Vitalio and Formio pacing systems. Pacing systems are designed to treat bradycardia, a condition in which the heart beats too slowly, depriving the body of sufficient oxygen, whereas CRT-P systems are designed to treat heart failure patients. Inliven, Vitalio and Formio received the CE Mark. Vitalio and Formio also are approved in the United States.
• In April, Boston Scientific acquired the fiXate Tissue Band and launched the product in the United States. The fiXate Tissue Band is a suturing device designed for quick and simple placement of a suture to help secure a spinal cord stimulator lead or pain pump catheter. The product was purchased from Anulex Technologies, Inc. Designed to manage chronic pain, spinal cord stimulators deliver electrical pulses from an implantable pulse generator to leads with stimulating contacts in order to mask pain signals traveling to the brain. More than 100 million Americans suffer from chronic pain, according to the Institute of Medicine.

Emerging Markets
Tapping into the sleeping giant that is China’s medical device market, Boston Scientific opened a China branch of its Institute for Advancing Science (IAS) as well as a new Innovation Center in Shanghai. The company expects to foster local talent while sustainably developing innovative technologies uniquely suited to the China market.

“China is key to our ongoing global expansion, and we believe that initiatives such as the IAS and Innovation Center will help us to continue adapting to the unique demands of the China market,” Mahoney said.

The IAS offers Chinese medical practitioners training in clinical practice and multidisciplinary programs in interventional cardiology, cardiac rhythm management and electrophysiology, endoscopy, peripheral interventions, and urology and women’s health.

Boston Scientific established its China headquarters in Shanghai in 1997 and now has branches and R&D centers in Beijing, Shanghai and Guangzhou. Other IAS locations include France, Germany, Japan and the United States.

A total of 47 percent of the company’s sales in 2013 were generated overseas (10 percent in Japan and 37 percent in other markets).

In 2013, Boston Scientific’s sales in Brazil, Russia, India and China grew on a constant currency basis by nearly 30 percent and in our total emerging markets by 20 percent.

At the end of fiscal year, the company had six international manufacturing facilities, including three in Ireland, two in Costa Rica and one in Puerto Rico. Approximately 57 percent of products sold worldwide during 2013 were manufactured at these facilities.

$7.6 Billion
NO. OF EMPLOYEES: 24,000

Boston Scientific Corp. executives may have experienced a bit of déjà vu last year as they embarked upon the next phase of the company’s protracted odyssey toward long-term financial stability.

Not long after entering that new chapter of corporate governance, history began repeating itself: There was the high-profile retirement, the lucrative sale of a non-strategic business, the market debuts of several new stents, and a restructuring aimed at reducing costs and increasing overall efficiency. The developments were eerily reminiscent of 2008, when the Natick, Mass.-based firm bid farewell to President and CEO Jim Tobin, streamlined operations through layoffs, sold five non-strategic businesses and unleashed a torrent of new stents to the market, among them the Taxus Liberté and Taxus Express Atom paclitaxel-eluting stent systems.

The science-fiction-like time loop that recycled these incidents in 2011 replaced Tobin with CEO J. Raymond Elliott, who retired from the firm on Dec. 31 after serving less than two years in the position. He was replaced by Michael F. Mahoney, former worldwide chairman of Johnson & Johnson’s medical device business (he currently is president and will officially assume the duties of CEO in November).
The time loop also substituted Promus Element stents for the Taxus devices, and sacrificed the company’s neurovascular business unit for future prosperity’s sake.

Despite such superficial discrepancies, however, (and the sandwiching of a crushing recession between the two time periods), the time loop kept Boston Scientific’s 2011 earnings mostly in line with its 2008 financial performance.

Last year’s net sales, for example, fell 2 percent to $7.6 billion while gross profit tumbled 4.7 percent to $4.96 billion. While they were not precise matches to the 4 percent sales slip and corresponding 7.2 percent decrease in gross profit that occurred four years ago, the numbers nevertheless similarly trend downward.

In spite of its overall losses in net sales and profit, the company reported some notable gains in several of its business units during fiscal 2011 (year ended Dec. 31). Neuromodulation sales rose 11 percent to $336 million, and Endoscopy product sales jumped 10 percent to $1.18 billion.

Executives attributed the increase in U.S. nueromodulation sales (which comprised the bulk of product revenue, at $317 million) primarily to higher procedure volumes and positive momentum from product launches. In the second quarter of 2011, the company received CE Mark approval of the Clik Anchor for its Precision Plus SCS (Spinal Cord Stimulation) System, a device for chronic pain relief that features multiple independent current control. The design gives each electrode contact on the lead its own, dedicated power source, allowing clinicians to precisely target pain by moving the electric field between simultaneously active contacts.

During the fourth quarter of 2011, the U.S. Food and Drug Administration (FDA) approved Boston Scientific’s Infinion 16 Percutaneous Lead for its Precision Plus SCS System. Infinion offers double the number of contacts and is designed to “offer more coverage of the spinal cord for the management of chronic pain,” a condition that afflicts more than 75 million U.S. residents, data from the American Pain Foundation show. Researchers claim that tens of thousands of chronic pain patients successfully have managed their pain through SCS systems.

The increase in 2011 Endoscopy sales—aided by a $39 million boost from favorable foreign exchange rates—came primarily from robust sales of stents. Growth drivers included the WallFlex product line, particularly the WallFlex Biliary RX Fully Covered Stent, which received CE Mark approval in late 2010 for the treatment of benign biliary structures. The WallFlex Biliary RX Stent is constructed of braided, Platinol (platinum-cored Nitinol) wire and features three key attributes: radial force to help maintain duct patency and resist migration; flexibility to aid in conforming to tortuous anatomies; and full-length radiopacity to enhance stent visibility under fluoroscopy.

The company’s Advanix Biliary Plastic Stent System and the Expect Endoscopic Ultrasound Aspiration Needle, which debuted in the United States and in certain international markets in the second quarter of 2011, also helped improve overall Endoscopy sales last year. Higher sales of hemostasis devices contributed as well, thanks to continued adoption and utilization of the Resolution Clip Device, an endoscopic mechanical clip designed to treat gastrointestinal bleeding.

Peripheral Interventions (PI) and Urology/Women’s Health products proved popular last year too, respectively earning $731 million, a 9 percent spike compared with 2010, and $498 million, a 4 percent hike over the previous year. Main sales drivers included the Epic self-expanding nitinol stent system in certain international markets and the Carotid WALLSTENT stent system in Japan. The Epic system—approved by the FDA in May 2012—helps open blocked arteries in patients with iliac artery stenosis, a form of peripheral vascular disease characterized by severe leg pain from insufficient blood flow. The Carotid WALLSTENT device is a self-expanding stent with a closed-cell design to provide increased scaffolding for improved lesion coverage and a smooth inner lumen. It features a highly flexible, low-profile stent delivery system that moves easily through difficult anatomy, according to Boston Scientific.

The company’s core PI franchise gained market share last year through the introductions of its next-generation Mustang percutaneous transluminal angioplasty (PTA) balloon, the Charger PTA Balloon Catheter (launched in December) and the Coyote balloon catheter, an ultra-low profile balloon dilatation device designed for various peripheral angioplasty procedures. New products also spurred growth in Boston Scientific’s interventional oncology franchise; specific standouts were the Renegade Hi-Flo Fathom microcatheter and guidewire system (used to treat uterine fibroids and liver cancer) and the Interlock-35 Fibered IDC Occlusion System for peripheral embolization, a device containing a 0.035-inch detachable coil with an interlocking connection between the coil and delivery wire. The Interlock system improves placement control as well as the ability to advance, retract and reposition the coil before final deployment in a blood vessel.

A “softness” in elective procedures and controversy over the safety of vaginal mesh implants negatively impacted sales of Women’s Health products in 2011. The vaginal mesh brouhaha—quietly brewing for months—finally boiled over in July after an FDA report discovered a fivefold increase in deaths, injuries or malfunctions from vaginal mesh devices that treat pelvic organ prolapse and stress urinary incontinence. Less than six months later, in January 2012, the FDA announced it would require manufacturers to conduct studies of surgical mesh implants due to safety and efficacy concerns. The federal agency also said it was considering reclassifying the devices from moderate-risk (Class II) to highest risk (Class III), which would require clinical data to be submitted for approval.

Still, the company managed to partially offset lower-than-expected sales with increased market share and robust growth of its Genesys Hydro Therm-Ablator system, a next-generation device designed to ablate the endometrial lining of the uterus in pre-menopausal women with menorrhagia (vaginal bleeding). The Genesys HTA System features a smaller and lighter console, simplified setup requirements and an enhanced graphic user interface.

Electrophysiology device sales remained flat last year, earning $147 million, while Interventional Cardiology—which includes proceeds from stents, balloon catheters, rotational atherectomy systems, guide wires, guide catheters, embolic protection devices and diagnostic catheters used in percutaneous transluminal coronary angioplasty procedures—fell 4 percent to $2.4 billion. Cardiac Rhythm Management sales were down as well, slipping from $2.1 billion in 2010 to $2.08 billion last year, encumbered by sluggish sales of both pacemaker systems and implantable cardioverter defibrillator (ICD) systems. Pacemaker revenue decreased 2 percent to $569 million and ICD system sales declined 5 percent to $1.5 billion. Boston Scientific bigwigs blamed the losses on pricing pressures, federal investigations into ICD implant practices at hospitals, the expansion of Medicare recovery audits, and a study that questioned the device’s evidence-based guidelines.

The company tried offsetting the shortfall in ICD revenue with the fourth-quarter market releases of the Incepta, Energen and Punctua line of next-generation defibrillators but the losses by that time most likely were irreversible.

Interventional Cardiology sales tumbled 4 percent due to pricing pressures, procedural volume reductions and market share declines in the company’sintravascular ultrasound imaging systems. A stagnant stent market certainly didn’t help either.

For the second consecutive year, sales of Boston Scientific’s drug-eluting and bare metal stents declined. In fiscal 2011, drug-eluting stent sales totaled $1.5 billion, a 1.8 percent decrease compared with the $1.53 billion the company reported in 2010. Bare metal stents fell 16.5 percent, going from $133 million in 2010 to $111 million last year, according to the 2011 annual report. The declines have become more pronounced since 2009, when drug-eluting stents earned $1.7 billion for the company and their bare-metal counterparts garnered $171 million. Executives attributed the losses to market size contraction, lower average selling prices and a reduction in procedural volume but noted the company’s share of the U.S. drug-eluting stent market climbed to 48 percent from 46 percent in 2010.

That market share gain came mostly from the second-quarter domestic launch of Boston Scientific’s third-generation Taxus Element stent system, a product hailed as the “strongest, most flexible and most visible thin-strut coronary stent” on the market. The Taxus stent comprised less than one-third of the company’s total drug-eluting stent sales, generating $420 million last year.

Other second-quarter stent launches included the Ion Paclitaxel-Eluting Platinum Chromium Coronary Stent System and the Omega Platinum Chromium Bare-Metal Coronary Stent System—devices that incorporate platinum chromium alloy made specifically for stenting purposes.

About a month before the year ended, Boston Scientific debuted its next-generation Promus Element stent system, another platinum chromium device. The Promus stent has less recoil, higher radial strength and employs an advanced low-profile delivery system that features a dual-layer balloon and Bi-Segment inner lumen catheter designed to facilitate precise delivery across challenging lesions.

“Our goal with these launches is to continue to further strengthen our worldwide market positions which, in my view, is growing in accordance in an era where economic buyers have increasing influence and purchasers are considering fewer vendors,” CEO William H. (Hank) Kucheman told analysts in February during a conference call discussion of Boston Scientific’s 2011 earnings. “We have built our pipeline, and we are building commercial capabilities in emerging markets. We are achieving key milestones relating to our cost reduction opportunities and our Priority Growth Initiatives, and we have improved our financial situation so that we now have added flexibility to balance investments in new markets and growth technologies, along with returned capital to shareholders.”

One of the ways Boston Scientific achieved its self-imposed Priority Growth milestones was through acquisition. The company gained a bevy of new devices and technologies through M&A last year, including an aortic stenosis treatment system from Sadra Medical; a wireless cardioverter defibrillator from Cameron Health Inc.; neuromodulation technologies for deep brain stimulation therapy from Intelect Medical Inc.; a left atrial appendage closure device from Atritech Inc.; and two technologies for treating peripheral chronic total occlusions (one originated with S.I. Therapies Ltd. In Israel while the other was developed by Sunnyvale, Calif.-based ReVascular Therapeutics Inc.).

Other avenues to long-term growth were paved last year through a workforce reduction program that is expected to save the company $275 million, and the $1.5 billion sale of its neurovascular unit to Stryker Corp. Boston Scientific planned to use half of the $1.2 billion in after-tax proceeds to retire debt and the rest for acquisitions. The company currently is engaged in a two-year restructuring plan that likely will include more moves to rebalance a portfolio which relies heavily on growth-challenged heart devices.

Boston Scientific entered the neurovascular sector in 1997 with the purchase of Fremont, Calif.-based Target Therapeutics. The business, which stayed in Fremont, employed about 1,150 people and generated revenue of $343 million in 2010.

Overall sales for the global neurovascular market are rising between 9 percent and 10 percent but Boston Scientific has not taken advantage of that potential in recent years. Its neurovascular sales declined 3 percent to $348 million in 2010 and slipped further in the third quarter, to 7 percent.

$7.8 Billion
NO. OF EMPLOYEES: 25,000

POWER.

That was Boston Scientific Inc.’s strategic plan for fiscal 2010. POWER isn’t capitalized just to emphasize the importance of the company’s growth strategy (and how badly it’s needed); it’s an acronym: prepare, optimize, win, expand and realign. In fact, throughout financial and promotional material for the year, you’ll find multiple references to the firm’s “strength” and discussions of how it is “powered for growth.”<

During Boston Scientific’s investor meeting in November, its first in many years, the company played songs such as Van Halen’s “Right Now” and Jesus Jones’ “Right Here, Right Now” over the loudspeakers. Without a doubt, the company has been making aggressive—execs might call them POWERful—predictions about future bottom line growth and new product pipelines. At JP Morgan’s annual healthcare conference in January this year, Boston Scientific titled its presentation “Our Pipeline is no BS(X)”—a playful twist on the company’s stock ticker symbol.

Based on the company’s fiscal 2010 earnings (year ended Dec. 31), Boston Scientific’s predictions of power must still be a few years in the making.

CEO Ray Elliott, who succeeded Jim Tobin in 2009, had been trying to infuse the company with some of the energy that characterized his time as CEO of Zimmer Holdings Inc. However, that energy was short-lived. Elliott announced plans this May that he would retire by the end of 2011. Analysts and industry insiders had been banking on Elliott to turn the company around based on his performance at Zimmer, and they were hoping he would see his new course for the company through. His departure has created even more uncertainty.

Sales for 2010 dropped 5 percent to $7.8 billion from $8.2 billion in 2009. The firm’s bread and butter, sales from its cardiac rhythm management ($2.1 billion) and cardiovascular businesses ($3.3 billion), dropped 10 and 8 percent, respectively. Electrophysiology sales ($147 million) also fell—marginally by 1.3 percent. The company, however, posted top line growth in endoscopy ($1.1 billion, up 7.3 percent), urology and women’s health ($481 million, up 5.5 percent), and neuromodulation ($304 million, up 6.7 percent). The downside is that those businesses combined account for a little less than a quarter of annual revenue. The company took a net loss of approximately $1.1 billion, which was 3.9 percent more than fiscal 2009.

Despite these numbers, company management has said it can generate 11 to 12 percent compound annual earnings growth over the next four years, achieved through a combination of cost cuts, acquisitions, and modest top line growth of two to four percent a year.

The response from the analyst community early this year following the analyst meeting and end-of-year results was lukewarm.

“We question how Boston [Scientific] can acquire growth assets and invest to maintain leadership positions with a depressed balance sheet vs. peers and a stated objective to maintain absolute levels of [research and development] spend,” David Lewis, an analyst with Morgan Stanley, wrote in a research note. “Competition for attractive growth assets is likely to be intense, and competitors continue to invest heavily in internal development programs.”

Matthew Dodds, an analyst with Citigroup wrote: “BSX talked up the opportunity in several cardiovascular, neuromodulation and general surgery markets, but we believe it is sorely lacking in near-term products that can move the needle vs. the competition … BSX has made some effort to build out its pipeline with the recent deals for Asthmatx and Sadra (outlined below), but both deals will take a while to have an impact and the internal programs had little to highlight in the way of clinical [trials].”

Rick Wise, an analyst with Leerink Swann, was more upbeat.

“We had always assumed that turning around and rebuilding BSX would take time. But a challenging pricing and procedure environment—which does not seem to be easing in BSX’s core cardiology markets (drug-eluting stents and cardiac rhythm management)—does not help,” Wise wrote following the release of fiscal 2010 results. “To us, BSX seems to be taking the right actions: realigning the portfolio, taking out cost, redirecting investment toward faster-growing markets and technologies, and looking for more efficient ways to address its sluggish markets. And by 2012-2013, we strongly suspect that many of these actions should begin to pay dividends for BSX, gradually re-accelerating the company’s top-line growth and improving profitability.”

Indeed, Boston Scientific has suffered a string of setbacks in recent years involving two of its best-selling cardiac products: drug-eluting stents and defibrillators.

Last year, Boston Scientific struck the largest legal settlement in its 30-year history, agreeing to pay more than $1.7 billion to rival Johnson & Johnson to resolve three patent disputes in which the companies had accused each other of intellectual property theft in developing stents. That deal followed a 2009 settlement in which Boston Scientific agreed to pay $716 million to resolve 14 other patent suits brought by Johnson & Johnson. In a lawsuit filed against Boston Scientific in January, the U.S. Department of Justice alleged that the company’s Guidant subsidiary knowingly sold defective defibrillators and hid potentially dangerous defects from patients. That complaint was lodged two weeks after a Minnesota judge accepted a Guidant guilty plea on charges of concealing defibrillator problems. Boston Scientific, which acquired Guidant for $28.4 billion in 2006, agreed to pay $240 million the following year to settle more than 8,000 private suits charging that Guidant hid defibrillator problems.

The company began the year in a reorganization mode. In February, management announced the layoffs of roughly 1,300 employees, in addition to a series of management changes as part of a restructuring plan to cut costs. Management said the “restructuring initiatives” were designed to improve the company’s effectiveness and efficiency. Gross expenses were expected to be reduced by $200 million to $250 million (5 to 7 percent) during the following two years.

“The actions … will provide the organizational structure and leadership needed to execute our strategic plan and fulfill the enormous promise of this company,” said Elliott. “They are aimed at driving innovation, accelerating profitable growth and increasing both accountability and shareholder value. Above all else, they will help us better serve our customers and their patients.”

Under the shuffle, Hank Kucheman was promoted to executive vice president and president of the new Cardiology, Rhythm and Vascular Group. The Cardiovascular Group and Cardiac Rhythm Management Group were combined. Kucheman previously served as president of the Cardiovascular Group.

Also as part of the restructuring, the company’s international headquarters were eliminated. The presidents of Japan, Europe and the newly formed Emerging Markets Group now report directly to the CEO. The Emerging Markets Group, composed primarily of India, China, Brazil, Russia, Eastern Europe and parts of the Middle East, Asia and Latin America, will pursue selective offshore manufacturing, research, a variety of support services and individual country growth vehicles, according to the company.

The Endoscopy division and new Urology and Women’s Health division each will report to the CEO, and the Endosurgery Group structure, which currently oversees the Endoscopy and Urology/Gynecology divisions, will no longer exist. The newly named Urology and Women’s Health division, led by new Senior Vice President and Executive Committee member John Pedersen, plans to increase investment in its franchise in order to more aggressively pursue the substantial opportunities for device-related solutions for unmet women’s health needs, the company said. The Endoscopy division, led by new Senior Vice President Michael Phalen, would begin pursuing incremental growth through devices for endoluminal surgery, obesity/diabetes solutions and pulmonary asthma.

For a month, between March and April 2010, Boston Scientific suspended sales of defibrillator implants after failing to keep regulators in the loop about changes it had made in manufacturing the devices. Company officials said the defibrillators were safe but that Boston Scientific failed to meet a requirement to submit documents to the U.S. Food and Drug Administration (FDA) with notification of production process changes. In April, the FDA cleared two manufacturing changes to the Cognis and Teligen implants, which treat irregular heartbeats by delivering electric shocks to the heart. Medical device companies are required to inform the FDA immediately regarding significant changes to the design and/or manufacture of life-sustaining devices. Cognis and Teligen account for nearly all of Boston Scientific’s implantable defibrillator revenue in the United States.

“Boston Scientific’s reputation has been damaged, but not destroyed, by the recall,” Derrick Sung, a New York, N.Y.-based analyst at Sanford C. Bernstein & Co., said in an e-mail to investors at the time. “It appears that it will remain a viable competitor in the market.” Competitors in the defibrillator markets—Medtronic Inc. and St. Jude Medical Inc.—reported increases in sales due to the recall.

In August of 2010, the company cleared up yet some more unfinished business with the FDA. After more than four years, the agency announced that issues cited in a 2006 warning letter had been resolved. The announcement finally cleared the cloud of perceived misgivings from the agency that has hovered over the company longer than expected. The January 2006 warning letter cited “serious deficiencies” at several Boston Scientific facilities throughout the country, including the Maple Grove, Minn., headquarters of its drug-coated stent business. One of the deficiencies cited by the FDA was a failure to promptly and properly report product issues, according to published reports. The letter followed three site-specific warnings in 2005 that Boston Scientific failed to adequately address.

Though they typically are used to force companies to comply with FDA regulations, corporate-wide letters such as the one received by Boston Scientific are relatively rare. When it issued the letter, the FDA gave the company an ultimatum: Fix the regulatory issues or the agency would block approval of all Class III products (which usually are the most novel and highest-risk devices the FDA evaluates).

The FDA made good on its threat, too. For two years, the Class III product approval ban remained in place, delaying the release of Boston Scientific’s much-anticipated Taxus Liberté medicated heart stent. By the time Taxus was approved, the domestic market for stents had become more crowded and competitive. In late 2008, the company showed improved quality systems during an inspection of its facilities, prompting the FDA to note that Boston Scientific was in “substantial compliance” with the agency’s regulations. Since that time, the warning letter had not been an issue, though it still cast a dark cloud of doubt over the company until the letter was officially resolved.

Part of the company’s 2010 restructuring efforts included key acquisitions as well as divestitures.

In October, the company said goodbye to its neurovascular business, selling it to Kalamazoo, Mich.-based Stryker for $1.5 billion in cash. Boston Scientific used about half of the $1.2 billion in after-tax proceeds of the sale for acquisitions and the remainder for retiring debt. Stryker has agreed to pay Boston Scientific $1.4 billion for the business at the closing of the deal and the remaining $100 million after the closing based on certain milestones, including the commercial launch of the business’s new Target detachable coils for treating hemorrhagic stroke. Boston Scientific’s neurovascular business, which employs 1,150 people, is based in Fremont, Calif., and had revenue of $348 million in 2009. The company first acquired the business in 1997 through its purchase of Target Therapeutics Inc. in a deal valued at $1.1 billion. The business is a leading provider of medical technologies such as detachable coils, stents, and guidewires used in the treatment of neurovascular diseases.

In October, in an effort to reshape its portfolio, Boston Scientific purchased Asthmatx Inc. for up to $443.5 million. Asthmatx designs, manufactures and markets the Alair Bronchial Thermoplasty System, a catheter-based asthma treatment system that uses heat to reduce excess smooth muscle in bronchial airways to limit constriction. The treatment, approved by the FDA in April 2010, is performed during three outpatient visits. Under terms of the deal, Boston Scientific paid $193.5 million in cash up front for Sunnyvale, Calif.-based Asthmatx and will spend an additional $250 million through 2019 if certain revenue-based milestones are achieved.

In November, the company purchased Los Gatos, Calif.-based Sadra Medical Inc.

Boston Scientific already owned 14 percent of Sadra, and paid $193 million upfront to acquire the rest of the company. The deal also called for another $193 million if Sadra hits regulatory and sales goals through 2016. By taking over Sadra, which was founded in 2003, Boston Scientific made a play in one of the few areas of cardiology still considered a growth market. Sadra develops technology for percutaneous aortic valve repair, in which interventional cardiologists seek to thread a catheter through the femoral artery of the leg, and up into the chest to repair the heart’s aortic valve without cracking open the chest and doing surgery. The technology is attractive because it’s a new market, in which elderly peoplegenerally considered too frail for heart surgery can become candidates for a minimally invasive valve repair procedure. As many as 3 million people in the United States have narrowing of their aortic valves, according to Sadra’s website. One of Boston Scientific’s rivals, Medtronic, made a move in this sector in February 2009 when it paid $700 million upfront, plus milestones to acquire Irvine, Calif.-based CoreValve Inc. Elliott called Sadra’s technology a “natural fit” with Boston Scientific’s product mix.

The year, of course, wasn’t all struggle and gloom and doom. Boston Scientific released an impressive number of new products throughout fiscal 2010.

Boston Scientific launched its Taxus Element Paclitaxel-Eluting Coronary Stent System in the European Union and other CE Mark countries. The Taxus Element Stent System is the company’s drug eluting stent technology and incorporates a platinum chromium alloy with stent design and an advanced catheter delivery system. The company also received the approval for the specific indication for the treatment of diabetic patients.

Here at home, the FDA gave the company the nod for a number of devices. The agency granted approval for two spinal cord stimulation (SCS) lead splitters for use with its Precision Plus Spinal Cord Stimulator System, a rechargeable SCS device for the management of chronic pain of the trunk, back and/or limbs. The FDA also cleared the Acuity Break-Away Lead Delivery System for use with cardiac resynchronization therapy defibrillators (CRT-Ds) and cardiac resynchronization therapy pacemakers, both of which treat heart failure. The FDA also allowed an expanded indication for Boston Scientific’s CRT-Ds, including the Cognis device. According to the company, this decision makes Boston Scientific’s CRT-Ds the only devices approved for patients in all New York Heart Association classes of heart failure. The FDA also approved the Express LD Iliac pre-mounted stent system for use in iliac arteries. The Express LD Iliac Stent is the low-profile, premounted, balloon-expandable stent approved by the FDA for use in treating iliac artery disease. Atherosclerotic iliac disease occurs when plaque builds within the arteries that supply blood to the legs, which can lead to poor blood flow, leg pain and other complications. The disease can be treated with medication, surgery or angioplasty. The Express LD Iliac Stent already received CE Mark approval and currently is approved for iliac use in a number of international markets.

Boston Scientific also received clearance to market a new balloon-style catheter in the United States and European Union. The NC Quantum Apex PTCA Dilation Balloon Catheter is intended for use in coronary angioplasty and stent procedures, which are designed to open arteries that have been blocked by atherosclerosis. The condition can cause strokes or heart attacks. Also in 2010, the company rolled out the U.S. and European launches of its fourth-generation Neuroform EZ stent system used for the advanced treatment of wide-necked aneurysms. The Neuroform EZ adjunctive stent system expanded the product portfolio of the company’s Neurovascular division, which includes a line of catheters used in thrombolysis and stent delivery technology through over-the-wire and open catheter systems.

“8. Boston Scientific

$8.2 Billion

KEY EXECUTIVES:
Ray Elliott, President and CEO
Jeffrey D. Capello, Exec. VP and CFO
Sam Leno, Exec. VP and COO
Joseph M. Fitzgerald, Sr. VP and President, Endovascular
William H. Kucheman, Sr. VP and President, Cardiology,
Rhythm & Vascular
J. Michael Onuscheck, Sr. VP and President, Neuromodulation
John B. Pedersen, Sr. VP and President, Urology & Women’s Health Division
Michael P. Phalen, Sr. VP and President, Endoscopy

NO. OF EMPLOYEES: 26,000

GLOBAL HEADQUARTERS: Natick, Mass.

Never give up. It sounds like a trite mantra, but they seem to be words that Boston Scientific has lived by during the past few years. Some accused the company of biting off more than it could chew after it acquired Guidant Corp. following a bidding war with Johnson & Johnson in 2006. Subsequently, all the financial burdens of the purchase followed, along with some quality and manufacturing issues, patent lawsuits, government kickback investigations and recalls (though much of the company’s recall angst has happened in FY10).

The goal here isn’t to highlight the negative—to the contrary. The Natick, Mass.-based device giant continues to forge ahead.

For fiscal 2009, the company’s sales were up and its losses went down. Still no profit, but not nearly as deep in the red. Boston Scientific posted sales of $8.19 billion, up 1.7 percent compared with $8.05 billion during 2008. Full-year net losses were $1.03 billion, or 68 cents per share, compared with $2.04 billion, or $1.36 per share, during the prior year. When adjusted for various expenses and a hefty $1.77 billion price tag for legal bills including a legal settlement with Johnson & Johnson (J&J) and yet another $716 million settlement with J&J subsidiary Cordis Corp., net income was $1.18 billion, or 78 cents per share.

The cardiac rhythm management (CRM) and stents divisions both posted sales increases last year, with CRM up 5 percent to $2.56 billion and stent sales up 1.5 percent to $1.88 billion. The company said increased CRM sales (which have posted 10 straight quarters of growth) were due to strong sales of the Cognis cardiac resynchronization therapy defibrillator (CRT-D) and the Teligen implantable cardioverter defibrillator (ICD) systems launched in the United States and Europe in 2008 and Japan in 2009. Growing adoption of the Altrua family of pacemaker systems, launched in 2008, also contributed to the bottom line success of the year. On the stent side, officials boasted having the widest array of stent sizes in a worldwide market the company estimates is worth $4 billion (for drug-eluting stents).

Worldwide net sales from the company’s Endoscopy business grew $63 million, or 7 percent, achieving net sales of $1 billion in 2009, which the company said was due to the continued success of its biliary and hemostasis franchises. Sales from the Urology/Women’s Health business grew $25 million, or 6 percent. Neuromodulation sales also increased—by $40 million, or 17 percent, to $285 million. Officials said growth was due to the Precision Spinal Cord Stimulation system. Net sales from the Neurovascular business decreased $12 million, or 3 percent, to $348 million, but is expected to benefit from product launches this year. International net sales accounted for approximately 43 percent of net sales in 2009. International sales increased 8 percent for the year.

Throughout the year, Boston Scientific released or received regulatory OK for a variety of new devices. In fact, for 2009, 42 percent of revenue came from new products. The company invests $1 billion annually in research and development efforts.

At the beginning of the year, the company’s Taxus Liberte Paclitaxel-eluting coronary stent system was approved and granted reimbursement by Japanese officials. That’s a good market for the company, as approximately 1,300 medical centers perform cardiac catheterization in Japan. The number of coronary stents implanted annually in the country is estimated at 200,000.

In March the company launched its iCross coronary imaging catheter, a product designed to improve the deliverability of its iLab intravascular ultrasound (IVUS) imaging system. IVUS technology enables physicians to see detailed images inside the heart and coronary arteries.

In May, the U.S. Food and Drug Administration (FDA) approved the Taxus Liberte Atom Paclitaxel-eluting coronary stent system for treating vessels as small as 2.25 mm in diameter. FDA approval followed in July for the Taxus Liberte Long Paclitaxel-eluting coronary stent system. At 38 mm, it can provide doctors an option that can potentially reduce the number of stents used in more complex cases, simplifying procedures and reducing costs, according to the company. Officials saidit affords a more efficient treatment option for the estimated 8 to 10 percent of patients with long lesions.

In November, the company received FDA 510(k) clearance and European Union CE Mark for the WallFlex fully covered esophageal stent for the treatment of malignant esophageal obstructions caused by tumors in patients with esophageal cancer. The partially covered version was cleared by the FDA and received CE Mark in 2008. Patients with obstructions due to esophageal cancer may have difficulty swallowing, resulting in severely limited quality of life. Complete blockages of the esophagus can prevent liquid consumption. The WallFlex stent allows physicians to reopen the esophagus.

The end of the year also brought an end to a government investigation into Boston Scientific’s marketing practices. In December, the company settled a U.S. Department of Justice (DOJ) investigation by paying a fee and signing an integrity agreement. The investigation was part of the “corporate baggage” the company took on when it acquired Guidant. The company agreed to pay $22 million in a civil settlement and sign a corporate integrity agreement related to its pacemaker business. As a result the company had to begin disclosing on a Web site any payments to physicians.

The DOJ had been investigating Guidant Corp. for trying to boost sales by paying physicians between $1,000 and $1,500 to participate in one of four studies the company claimed were designed to assess the performance of pacemakers and defibrillators. In reality, the company was paying doctors to select Guidant devices over competing products, the government accused.

Boston Scientific, the world’s biggest maker of heart stents, purchased Guidant in 2006 for more than $27 billion. At the time, Fortune magazine characterized the deal as the “second worst deal ever,” saying that Boston Scientific paid too much for the company. The investigation began in 2005 and included no admission of wrongdoing, Boston Scientific said in a press release.

“Although medical device and pharmaceutical companies can use post-market studies legitimately to obtain information about how their products work in the field, they cannot use those studies, and the honoraria associated with them, to induce physicians to use their products,” said U.S. Attorney Carmen Ortiz.

In November, Boston Scientific agreed to pay $296 million to settle a separate DOJ investigation into product recalls issued by Guidant. In a separate regulatory filing, it said it received a subpoena from the U.S. Department of Health and Human Services, Office of Inspector General, to produce information about donations made by the pacemaker division of the company to charities with ties to physicians and their families.

2009 also brought a significant change to company leadership. In the middle of the year, president and CEO Jim Tobin stepped down, and Ray Elliott was named the new head of the company in July. A medical device industry veteran with more than 35 years of experience, Elliott led the orthopedics company Zimmer Holdings Inc. for 10 years, joining the company as president and rising to become chairman, president and CEO. In 2005 he was named “Best CEO in America” for Health Care (Medical Supplies and Devices), by Institutional Investor magazine.

Elliot inherited a company faced with market and regulatory challenges in 2010 (the company began the year with a voluntary recall of its implantable cardioverter defibrillators and cardiac resynchronization therapy defibrillators). He said that 2010 will be a “rebuilding year.” At the beginning of this year, the firm announced plans to lay off between 1,000 and 1,300 workers, or 8-10 percent of its “non-direct labor force,” which means non-manufacturing jobs. The workforce reduction will help Boston Scientific save as much as $250 million in the next two years, officials said.

The layoffs are only one part of a larger restructuring plan that will see dramatic changes to corporate structure and management, in addition to a program of divestitures and acquisitions designed to “further rationalize and refocus its business portfolio,” according to company officials. As part of the restructuring the Cardiovascular Group and Cardiac Rhythm Management Group (formerly Guidant) will be combined into a single unit called Cardiology, Rhythm and Vascular. Other divisions were restructured and internal reporting hierarchies were streamlined.

Some changes also will come to the company’s manufacturing outside of the U.S. mainland. Boston Scientific has five

international manufacturing facilities in Ireland, two in Costa Rica and one in Puerto Rico. Approximately 50 percent of the firm’s products sold worldwide during 2009 were manufactured at these facilities. In early 2009, the company announced a plant optimization program designed to simplify its network, reduce manufacturing costs and improve gross margins. As a result, the company expects to “rationalize” its international manufacturing plants (i.e., close and/or reorganize some facilities) by the end of 2011.”

$8 Billion
NO. OF EMPLOYEES: 24,800

Boston Scientific Corp. executives made substantial strides in 2008 toward making the company stronger, leaner and more diversified. But that progress did not happen overnight.

The seeds for that progress were planted several years ago, when decision-makers identified five key areas that needed an overhaul, and they mapped a strategy for driving that change and positioning the company for future growth.

“2008 was the year our efforts came together and created a renewed foundation for sustainable, profitable growth,” Pete Nicholas, Boston Scientific chairman, and Jim Tobin, former president and CEO, said at the start of the 2008 annual report. “We have now transformed quality, revitalized our pipeline, streamlined the organization, strengthened our financial fundamentals and diversified our product portfolio.”

Tobin did his part to transform the company by announcing his retirement several months after writing the 2008 annual report with Nicholas. Tobin was replaced by Ray Elliott, who assumed the post on July 13. (Editor’s note: For more details about Tobin’s retirement and the background of his replacement, see People News on page 122).

The U.S. Food and Drug Administration (FDA) helped Boston Scientific reach its quality objective by lifting several restrictions it imposed on the firm in 2006. A corporate warning letter sent to the company by the FDA that year cited insufficient quality management practices and serious regulatory problems at numerous facilities. Since the issuance of that warning letter, however, the company has worked to “shift from correcting problems to preventing them, and from remediation back to innovation,” Nicholas and Tobin said. As a result, the FDA in October lifted several restrictions related to Class III product approvals and certificates to foreign governments. While the warning letter remains in place pending the final resolution of some medical device report filing issues, the FDA’s decision virtually removed the moratorium on new product approvals, enabling the company to release a bevy of new products to the market.

Most of the new devices were launched within the Cardiac Rhythm Management (CRM), Cardiovascular, and Endosurgery sectors. Within CRM, the company released the Cognis cardiac resynchronization therapy defibrillator and Teligen implantable cardioverter defibrillator (the smallest, thinnest high-energy devices currently on the market, according to Nicholas and Tobin). Other CRM products included the Confient implantable defibrillator, which helps protect patients at risk of sudden cardiac death; the Livian CRT-D, which delivers individualized cardiac resynchronization and defibrillation therapies in one device; the upgraded Latitude Patient Management System with enhanced remote monitoring capabilities; the Altrua family of pacemakers; and the Acuity Spiral left ventricular lead.

Boston Scientific’s Cardiovascular sector unleashed a steady flow of stents to the market throughout 2008. The most significant release occurred in April, when Canadian health officials approved the company’s second-generation Taxus Liberté paclitaxel-eluting coronary stent system. The FDA gave the company its blessing in October after a two-year delay, and the Japanese Ministry of Health, Labor and Welfare signed off on the Taxus system in January.

The FDA also approved Boston Scientific’s Taxus Express Atom paclitaxel-eluting coronary stent system, a device designed specifically to treat small vessels.

The Taxus approvals, however, did not come without controversy. At the time of their release, Boston Scientific claimed both Taxus stent systems had been evaluated through an extensive randomized, controlled clinical trial program, with follow-up to five years in certain cases. Trial results, the company contended, were supported by data on more than 35,000 patients enrolled in post-approval registries.

But The Wall Street Journal reported that a study used by Boston Scientific used a flawed equation favoring the Taxus stent. Had the company used one of several other calculation methods, the Liberté clinical trial would have failed, the Journal article stated.

While the cornucopia of new products is expected to help Boston Scientific garner more revenue (about 38 percent of total revenue is expected to be generated by new products this year), the company took several other steps in 2008 to boost its bottom line. It streamlined operations by selling five non-strategic operating businesses and sold its non-strategic public and private portfolio investments. The transactions created more than $1.6 billion in after-tax proceeds.

Boston Scientific also completed the integration of its CRM and Neuromodulation businesses in 2008, a move that helped diversify the company’s product portfolio into new markets. Such decisions over the last several years have enabled Boston Scientific to reduce its reliance on coronary stents for its main source of revenue. Since 2005, the company has halved the percentage of revenue generated by stents—from nearly 50 percent to 23 percent in 2008. Other revenue sources came from CRM products (28 percent) and devices representing Endoscopy, Interventional Cardiology, Neuromodulation, Neurovascular, Peripheral Interventions and Urology/Gynecology (49 percent).

The steps Boston Scientific took last year to become a leaner, stronger, more diversified medical device firm generated $8 billion in sales, a 4 percent decrease compared with the $8.35 billion the company posted in 2007. Fluctuations in exchange rates increased net sales by $213 million.

Gross profit fell 7.2 percent to $5.58 billion, and net loss more than quadrupled, going from $495 million in 2007 to $2.03 billion last year. The company prepaid $1.4 billion in debt in 2008 and reduced operating expenses by more than $500 million. It also maintained a $1 billion investment in research and development, a move executives said is necessary to foster new product development and innovation.

Despite its overall losses in net sales and profit, Boston Scientific reported some notable gains in several of its business units. CRM sales rose 7 percent to $2.43 billion, and Endosurgery Group product sales climbed 8 percent to $1.37 billion. Neuromodulation product sales jumped 20 percent, going from $204 million in 2007 to $245 million last year. Neurovascular sales increased 2 percent to $455 million.

For the second consecutive year, sales of Boston Scientific’s drug-eluting and bare metal stents declined. In fiscal 2008 (ended Dec. 31), drug-eluting stent sales totaled $1.63 billion, an 8.6 percent decrease compared with the $1.78 billion the company reported in 2007. Bare metal stents slipped 9 percent, going from $239 million in 2007 to $217 million last year. Executives attributed the losses to increased competition and said the company’s share of the U.S. drug-eluting stent market dropped to 46 percent last year from 55 percent in 2007.

Last year’s losses in stent sales were somewhat offset by gains in sales of implantable cardioverter defibrillators (ICD) and pacemaker systems. ICD sales rose 9 percent to $1.68 billion, while pacemaker revenue increased 3.9 percent to $605 million. Combined sales of ICDs and pacemakers climbed 7.6 percent last year to $2.2 billion.

Litigation-related expenses fell 8.5 percent to $334 million, though Boston Scientific still spent a considerable amount of time in court last year defending itself against patent infringement lawsuits filed by rivals Johnson & Johnson, based in New Brunswick, N.J.; Medtronic in Minneapolis, Minn.; and Tel Aviv, Israel-headquartered Medinol Ltd. A federal district court in Delaware determined that Boston Scientific’s NIR stent (which it no longer sells) infringed upon a J&J patent. The court awarded J&J $296 million in damages, but Boston Scientific is appealing the decision. A Canadian court dismissed J&J’s lawsuit.

In February, a federal jury in Texas decided the company’s Taxus Express and Taxus Liberté stents infringed upon a patent held by Dr. Bruce Saffran, a Princeton, N.J., radiologist. The jury awarded Saffran damages of $431 million, but Boston Scientific appealed that decision also.

Earlier this year, Boston Scientific settled two lawsuits with Medtronic and agreed to stand down in three others. The move stopped all current litigation between both companies in the fields of interventional cardiology and endovascular repair.

$8.4 Billion
NO. OF EMPLOYEES: 24,500 (as of Jan. 31, 2008)

Boston Scientific’s slogan is “Delivering What’s Next.” Many have been wondering exactly what is next for the Natick, MA-based cardiovascular company. Since its acquisition of Guidant two years ago, Boston Scientific has worked to restructure and divest divisions, generate cash, pay down debt, weather a slowdown in the stent and implantable cardioverter defibrillator (ICD) markets, and work its way through FDA warning letters. All that, along with regular research and development and manufacturing activities, makes for a pretty crowded plate.

Despite all the challenges, the company achieved record sales of $8.4 billion, an increase of $536 million, or 7%, compared with 2006. Worldwide sales of the company’s drug-eluting coronary stent systems posted a significant drop in sales—24%— to $1.788 billion, compared with $2.358 billion in 2006. Both US and international markets declined. Bare metal stent systems also slipped 19% from $2.506 billion in 2006 to $2.027 billion for fiscal 2007. US sales of the bare metal stents were down, while international sales rose slightly.

Worldwide sales for the company’s Cardiac Rhythm Management (CRM) business in 2007 were $2.124 billion (including $1.542 billion in ICD sales), compared with $1.371 billion in 2006 (which included $988 million in ICD sales). On a pro forma basis for 2006, although Boston Scientific had acquired Guidant on Jan. 1, 2006 (the actual deal was closed in April), CRM sales were $2.026 billion, which included $1.473 billion of ICD sales. Overall sales for the company’s cardiovascular products were $6.561 billion, up from $6.241 billion in 2006.

Endosurgery sales for 2007 were $1.479 billion, compared with $1.346 billion for the prior year. Neuromodulation sales grew to $317 million, up from $234 million in 2006.

Despite an overall rise in sales, the company once again reported a net loss. For 2007, Boston Scientific was $495 million in the red, though much improved compared with 2006. Reported results for 2007 included acquisition, divestiture, litigation and restructuring-related charges of $1.9 billion, or $1.10 per share. Adjusted net income for 2007, excluding these charges and amortization expense, was $1.2 billion. Reported net loss for 2006 was $3.6 billion, or $2.81 per share. The company said overall total debt was reduced by more than $700 million during the year.

As part of its plan to streamline operations while reducing expenses and personnel, the company divested business units it termed “non-strategic,” including Cardiac Surgery and Vascular Surgery ($750 million to Sweden-based Gettinge Group); Venous Access and Fluid Management ($425 million to private equity firm Avista Capital Partners); and Auditory. The company had explored selling a stake in its Endosurgery division but decided against the move.

For the Auditory business sale, Boston Scientific amended its merger agreement with Advanced Bionics, which it acquired in 2004. Under terms of the new deal, the company sold the Auditory business and drug pump program of Valencia, CA-based Advanced Bionics to principals of the firm for $150 million. Boston Scientific retained the pain-management business (part of its Neuromodulation group), whose shareholders will be paid out in installments—$650 million in January 2008 and $500 million scheduled for March 2009. The new arrangements will save Boston Scientific $500 million in payments that would have been due in 2008 and 2009, and a potential $2.1 billion that might have come due in future years, according to Paul Donovan, a spokesman for Boston Scientific.

The company also sold its 13.3% stake in Houston, TX-based device maker Cyberonics Inc. for $48.6 million.

For 2007, Boston Scientific wasn’t solely in sell mode. It purchased Remon Medical Technologies Inc., a privately held company based in Caesarea, Israel. Remon’s technology uses wireless communications to exchange energy and data with minute devices placed deep inside the body. The devices monitor a variety of physiological parameters, stimulate tissues and organs or activate other devices, creating therapeutic responses. Terms of the deal were not disclosed.

Of course, a leaner Boston Scientific means fewer employees. The company predicts 2,000 fewer workers as a result of its divestitures. Beginning in 2007, the company initiated plans to cut an additional 2,300 jobs, for a total of 4,300 jobs lost. Officials estimate between $475 million and $525 million in savings as a result, the majority of which will be realized in 2008.

In April, the FDA lifted a warning letter that Boston Scientific acquired along with Guidant, freeing the company to introduce products that had been blocked by quality-control problems. Still in force, however, is a company-wide warning letter Boston Scientific received from the FDA in January 2006 that applies to its drug-coated stent business and the rest of the pre-Guidant areas of the company. The resolution of this warning letter has gone on much longer than the company had predicted.

While the warning letter has made it more difficult for the company to move products through the FDA approval process, there was some regulatory success to report in 2007. The FDA gave its nod to
Boston Scientific’s Acuity Steerable left-ventricular lead for use with cardiac resynchronization therapy defibrillators and cardiac resynchronization therapy pacemakers, both of which treat heart failure. The company also launched its Precision Plus Spinal Cord Stimulation System, a small rechargeable neuromodulation device for the treatment of chronic pain of the trunk, back and limbs.

Boston Scientific also racked up European CE Mark approvals for a number of products, including the Livian cardiac resynchronization therapy defibrillator  (CRT-D) and its Taxus Liberte paclitaxel-eluting coronary stent system for use in patients with diabetes.

In addition, though an indirect victory for Boston Scientific, the FDA approved Abbott’s Xience V drug-eluting stent in early July, making the company the fourth player in the US drug-coated stent market along with Johnson & Johnson, Boston Scientific and Medtronic. With the Xience approval, an identical stent, named Promus, made by Abbott but distributed on a private-label basis by Boston Scientific, also will be marketable in the United States. The unique arrangement stems from Boston Scientific’s acquisition of Guidant, the original developer of the Xience V device. As part of the deal, Abbott purchased Guidant’s stent business to assuage antitrust concerns, but Boston Scientific negotiated the right to sell its own version of the stent—although the company will, for the time being, pay a royalty of 40% to Abbott for every Promus stent it sells.

Moving into 2008, Boston Scientific remains in a restructuring mode. In June, the company signed an agreement to sell its investments in a portfolio of companies to Saints Capital, a secondary direct-investment firm. The transaction will raise pre-tax proceeds in excess of $100 million, the majority of which will be in cash, with a portion in a note payable over several years. Separately, the company announced that it has signed a definitive agreement to sell its investments in a portfolio of venture funds and companies, subject to certain closing and other conditions, to Paul Capital Partners, a private equity secondary market, for pre-tax proceeds in excess of $40 million.

Sam Leno, chief financial officer said: “The sale of these investments, which represent the vast majority of our private investment portfolio, is part of our previously announced plans to divest non-strategic assets, while focusing on our core businesses and increasing shareholder value.”

Going forward, the company expects strong growth in the implantable cardiac device market, which together with stents accounts for about half of its total sales. Boston Scientific executives also predict a slow recovery in the stent market, thanks in large part to recent studies that have shown the tiny mesh devices are safe and effective, contrary to earlier conflicting studies that have cast a long and very expensive shadow over the market.

The company’s first-quarter 2008 results showed drug-coated stent sales remain depressed, falling 9% to $428 million. Boston Scientific fared better with implanted defibrillator sales, which rose 3% to $411 million.

“The [drug-coated stent] market hasn’t gone away,” said CEO Jim Tobin at Goldman Sachs’ recent annual healthcare conference. “This is a market that is going to be robust in terms of patient flow for a long time.”

Tobin did note, however, that the market is not what it used to be and may never rise to its $6 billion pre-safety issue levels. But while market penetration may never regain its 88% level, it’s not going to stay at 60%, he said.

Tobin also recently announced that he will remain president and CEO for the foreseeable future and will shift his focus back to day-to-day operations. Tobin, who has held the top spot at Boston Scientific since 1999, also will take over for Chief Operating Officer Paul LaViolette, combining roles while acquiring more direct access to managers who run Boston Scientific’s businesses. As a result, LaViolette is retiring from the company after nearly 15 years of service—three years in his current job. LaViolette will serve as a senior adviser through Dec. 31 and will receive separation payments of $5.44 million next year and $1.81 million in 2010, provided he has complied with all requirements in the separation agreement.

“The time is now right for Jim to turn his full attention and energies back to the core challenges facing the company as a whole, especially those relating to strategy, the development of our human capital, organizational efficiency and effectiveness, and simplifying and streamlining operations,” said Peter M. Nicholas, Boston Scientific chairman and co-founder, in a release.

Fred Colen, who has been executive vice president, operations and technology for the CRM group, will become president of that business. Off to a good start so far this year, the CRM group received a number of FDA approvals during the first half of 2008, including the Altrura family of pacemakers, Acuity Spiral left-ventricular lead for use with cardiac resynchronization therapy, the Cognis cardiac resynchronization therapy defibrillator, the Confient ICD and Livian CRT-D.

$7.8 Billion

Key Executives:
Peter Nicholas, Co-founder and Chairman
Jim Tobin, President and CEO
Sam Leno, Exec. VP of Finance and Information Systems and CFO
Paul LaViolette, COO
James Gilbert, Group President, Cardiovascular

No. of Employees: 28,000

World Headquarters: Natick, MA

Some say it bit off more than it could chew. But Boston Scientific remains steadfast that its $27 billion gamble to outbid Johnson & Johnson for control of Guidant in April 2006 was the right one. Along with Guidant’s technology, the company also purchased high-priced legal headaches. Boston Scientific now is involved in numerous lawsuits related to product recalls of Guidant-designed implantable cardioverter defibrillators (ICDs).

Natick, MA-based Boston Scientific, the No. 3 manufacturer of the implantable heart devices after Medtronic and St. Jude Medical, has estimated that damages and costs to cover legal expenses will be roughly $732 million.

According to analysts who cover the company, critical issues for Boston Scientific in the coming months are progress in resolving a warning letter with the FDA, a turnaround in ICD and drug-eluting stent markets as well as cutting costs.

To reduce costs, Boston Scientific is going to have to announce job cuts, according to market experts. The company also may spin off its Endosurgery business to raise capital. An initial public offering could raise $800 million to $1 billion in much-needed cash for the company. Boston Scientific announced in March it was considering the move. The Endosurgery group had $1.3 billion in sales for 2006.

“The Endosurgery group has a remarkably consistent record of growth and profitability, having achieved leading market shares for most of its key product lines,” said Jim Tobin, Boston Scientific’s president and CEO. “The potential IPO of a minority interest in our Endosurgery group would highlight its success and stability and create a direct investment vehicle in these specialty device markets, while giving us greater financial flexibility. This action would help to achieve our goals of maximizing shareholder value by unlocking the group’s potential, while maintaining our position as a leading diversified medical device company.”

The company also could sell its 15% share of Houston-based Cyberonics to raise additional funds.

In a recent research note, JP Morgan analyst Michael Weinstein said Boston Scientific undoubtedly will seek buyers for several businesses it has acquired in recent years, including the Meadox vascular graft business, which had 2006 sales of around $100 million; Guidant’s cardiac surgery business, which reported 2006 sales of $200 million; the Namic fluid-management business, which recorded 2006 sales of $80 million; and the EP Technologies Cardiac Pathways catheter ablation business, with 2006 sales of $140 million.

“Collectively, these businesses generate just over $500 million in sales and could fetch $1 billion or more from a combination of strategic buyers and private equity,” Weinstein wrote. “Their sale would accelerate the paydown of the company’s $8.9 billion in debt.”

The numbers for 2006 fiscal year (ended Dec. 31) were a mixed bag. Net sales for the year were $7.8 billion, compared to $6.3 billion in 2005. Though sales were robust, they couldn’t stop a reported net loss of $3.6 billion. Reported results for 2006 included net special charges (after-tax) of approximately $4.5 billion, which consisted primarily of costs related to the purchase of Guidant. The company reported net income of $628 million in 2005.

For the first quarter of fiscal 2007 (ended March 31), net sales were $2.1 billion, compared to $1.6 billion for the first quarter of 2006. First-quarter 2007 operating results include the cardiac rhythm management (CRM) and cardiac surgery businesses that were part of the Guidant purchase. CRM group sales for the first quarter of 2007 were $539 million, which included $398 million from ICD sales, as compared to CRM sales of $489 million for the fourth quarter of 2006, which included $356 million from ICD sales.

For comparison purposes—as though Boston Scientific had acquired Guidant on Jan. 1, 2006—worldwide CRM sales for the first quarter of 2006 would have been approximately $562 million, including $419 million of ICD sales. Sales of drug-eluting coronary stent systems for the first quarter also slipped, reported at $468 million, compared to $633 million for the first quarter of 2006 and $506 million for the fourth quarter of 2006. Reported net income was $120 million, compared to $332 million for the same period in 2006.

“While drug-eluting stent sales were lower than we hoped due to market dynamics, our performance within the market remained strong, and we continue to expect market fundamentals to improve over time,” Tobin said. “CRM sales were higher than anticipated, achieving double-digit sequential growth for the second consecutive quarter. We are also continuing to make substantial progress on quality, most notably resolving the deficiencies in the CRM warning letter, which has been the number one priority for our CRM Group. This important milestone is solid evidence we are moving in the right direction.”

During the first quarter, however, the company reduced its CRM staff by almost 600 workers.

In May, in the midst of the financial upheaval that appears to be coming down the pike for the company, Boston Scientific hired a man who will have his hands full in the coming months. Sam Leno was hired as chief financial officer and executive vice president of Finance and Information Systems. From 1971 to 1994, he served in a number of finance, accounting and leadership positions for Baxter International Inc./American Hospital Supply Corp. During his tenure at Baxter, he worked closely with Jim Tobin, who then served as the chief operating officer of Baxter.

Leno replaced Larry Best, who retired to pursue an interest in private investing within the life sciences field.

$6.3 Billion ($74B Total)
No. of Employees: 28,000

Boston Scientific, the aggressor of the industry, doesn’t ever seem to pause for breath. The double-digit (12%) gains in sales for 2005 would have been newsworthy enough on their own—but then the news got even bigger.

With a growth rate (35% over 26 years) unlike many other companies in the top 10 of this report, Boston Scientific made sure its name was heard last year when it went down in history as the company that edged out Johnson & Johnson in its quest to purchase Guidant Corporation. This shakeup now makes Boston Scientific the top maker of cardiovascular devices (Medtronic was formerly the leader in this category).

The strategic move to purchase Guidant for $27 billion shocked many, but those who have followed the company’s aggressive acquisitions over the past few years may not be as surprised. This purchase was Boston Scientific’s move to expand its reach in the lucrative cardiac rhythm management (CRM) market, an area experiencing double-digit growth. Moving forward, the Guidant brand name will be phased out over the next year, partially in a move to help decrease the burden of all the bad press Guidant has received over safety-related product recalls.

Although it had a reputation as a top innovator in the cardiology device sector, Guidant (as detailed in its own profile on page 78) was faced with dwindling consumer confidence and sliding sales after news surfaced that the company withheld information about faulty defibrillators—since June 2005, more than 80,000 of them have had safety warnings or recalls attached to their brands, and warnings were issued about 200,000 pacemakers. As a result of all these issues, Boston Scientific now must deal with the flood of product liability lawsuits that are likely to be filed. Boston Scientific will also keep busy as it spends the next few years removing Guidant from product packaging and the actual medical devices being used. Furthermore, it will reduce Guidant’s Indianapolis, IN headquarters to a regional sales office.

The headaches haven’t quieted down with the inheritance of Guidant’s products, however. In May, Boston Scientific notified doctors that some of the acquired defibrillators, from the Vitality and Contak lines, may be at risk for early battery depletion; this move was followed up by a full-fledged recall in June.

“Clearly, Boston Scientific shareholders are going to be tested once again,” Tao Levy, an analyst at Deutsche Bank Securities Inc., told Reuters news service. “On the outset, this problem could be very significant given the scope of the potential devices affected and leaves us wondering what type of mess Boston Scientific is left to fix.”

While the news in the past year seemed to be all about the Guidant acquisition and resultant problems taken on, some other noteworthy activities were occurring. Boston Scientific inked a $6.4 billion deal with Abbott Laboratories to divest Guidant’s vascular intervention and endovascular businesses while agreeing to share rights to Guidant’s drug-eluting stent program.

In addition to all the acquisitions and sales news of the past year or so, Boston Scientific has been the subject of some other press regarding litigation. It was hit with some hard news in May when a federal judge upheld rulings that several of Boston Scientific’s products had infringed on patents for Palmaz and Gray coronary stents made by Johnson & Johnson’s Cordis unit. The ramifications could be a penalty of up to $1 billion—which certainly could affect the company’s future revenues. However, the same judge also upheld a ruling that Cordis infringed on Boston’s Jang patents (Cordis announced it would appeal the judgment). In addition, it’s unclear yet whether the judge will uphold a prior jury ruling that Cordis infringed on Boston’s Ding patent. Depending how all of these situations shake out, Boston Scientific may be able to fare a little better than first speculated.

In May, Boston Scientific filed a lawsuit in Ireland against Conor Medsystems alleging that its Conor CoStar Paclitaxel-Eluting Coronary Stent System infringes a balloon catheter patent owned by Boston Scientific.

Problems with the company’s quality systems have also plagued the manufacturer. In a warning letter from the FDA in January, three facilities were cited as having serious regulatory problems and the agency told the company in no uncertain terms that its corporate-wide corrective action plan stemming from earlier warning letters was inadequate. In the letter, officials expressed concern regarding six facilities, as well as recent product recalls.

The good news is that the FDA re-inspected the company’s Galway, Ireland facility and found no problems. Last year, there were several problems related to the quality of manufacturing systems for the TAXUS, Liberte and Carotid Wallstent systems.

Boston Scientific’s domination in the stent market has helped solidify its presence in the cardiovascular market. In 2005, first full-year US sales for the TAXUS Express drug-eluting stent largely contributed to the company’s overall 12% growth in sales. With several new product launches expected this year, as well as more than 267 patents on hand, the company plans to capitalize on its success to fuel future growth. The company is currently awaiting approval for products such as the Carotid Wallstent Monorail Endoprosthesis. In June, the company received FDA approval for the Sterling Monorail Catheter.

However, competitors loom in the distance, and they could eventually cut into Boston Scientific’s massive share of the cardiovascular and endovascular markets (among others for which the company makes products).

Cardiovascular sales accounted for nearly $5 billion of the company’s total in 2005, with $2.7 billion stemming from stents. Endosurgery also grew 13% to $1.2 billion. While most of the company’s total sales came from the United States, the company reported that international sales grew an impressive 15% last year.

In spite of all the changes occurring within the company, Boston Scientific is approaching its 2006 projections with optimism. Total revenue is expected to soar to $9 billion. First quarter sales were the best in the company’s history, reaching $1.6 billion.