Shares of Boston Scientific (NYSE:BSX) closed up nearly 3% yesterday after executives from the medical device company reassured investors over its long-term tax outlook and a pending lawsuit brought by Johnson & Johnson (NYSE:JNJ) after its jilting in Boston’s 2006 acquisition of Guidant Corp.
Boston Scientific, which reported a tax rate of 10.6% for 2013, has said it expects its tax rate to be between 12% and 14% this year and 13%-15% in 2015. CEO Mike Mahoney and CFO Dan Brennan, speaking at the annual Morgan Stanley healthcare conference, said they expect the rate to grow by about 1% a year after that.
"Post- that 2-year time frame, you’d see more likely 100-basis-point increments," Brennan told Morgan Stanley analyst David Lewis, calling the increase "very manageable" in terms of earnings.
"That 100-basis-point potential headwind per year, which is very gradual, is about 1 cent of EPS," Mahoney added. "We certainly bake that in when we look at our long-range forecast."
As for the Johnson & Johnson lawsuit, kept alive in July by a New York federal judge, Brennan said the company believes J&J has a high bar to proving it claims for damages estimated at $3 billion to $5 billion.
"I would say we feel very comfortable with our defense case. We’ve already paid about $700 million in terms of a break-up fee years ago," Brennan said. "The market’s contracted significantly since that acquisition. The business now is performing quite well based on our pipeline. We feel very strong about the defense that we have for this case."
Boston is preparing to release more data on its Watchman anti-stroke device at the Transcatheter Cardiovascular Therapeutics conference next week, Mahoney said, ahead of its record 3rd appearance before an FDA advisory panel in October.
"We are panel-prepped," the CEO quipped. "We are very confident over the totality of the data that we’ll present [to the FDA panel]. There will be additional data that will be presented at TCT on Monday next week. … Our team is very well prepped and we’re forecasting a downside scenario of approval in the 2nd quarter of 2015."
BSX shares closed up 2.6% at $12.32 apiece yesterday and were trading at $12.36 as of about 11:30 a.m. Eastern today, up 0.3%.