Boston Scientific Corp. got a boost from Leerink Swann analyst Rick Wise, who upgraded his rating for the Natick, Mass.-based medical devices giant to “outperform.”
“We believe CEO Ray Elliott’s fresh look at the business and relentless focus on driving profitable sales growth will yield significant operating margin expansion and above-average [earnings per share] and cash flow growth,” Wise wrote in a note to investors. “BSX already has made substantial progress towards resolving past challenges, including: 1) reducing debt, 2) stabilizing and even slightly expanding [drug-eluting stent] and [cardiac rhythm management] market share, and 3) completing important steps to resolve its FDA corporate warning letter. With Elliott at the helm, BSX’s progress should accelerate. By 2012, we believe BSX can be a much more prof itable company than today and possibly more profitable than currently reflected in [Wall] Street projections.”
Calling Elliott, who took over at the end of Jim Tobin’s controversial, 10-year reign, a “proven winner,” Wise cited the former Zimmer Holdings CEO’s “long and successful track record.” At Zimmer, Elliott worked closely with Sam Leno, now BoSci’s CFO, and “engineered a major turnaround at [Zimmer] via product innovation, sales force expansion, and relentless focus on consistent execution,” Wise wrote.
“At BSX, we expect more of the same,” he wrote. “Elliott seems set to dial-up the pace of positive change at BSX and already has a number of concrete plans to accelerate product innovation, cost reduction, margin expansion, and cash flow generation — all with a ‘flawless execution’ mindset.”
Predicting an earnings-per-share compound annual growth rate of about 23 percent from 2009 to 2012, Wise wrote that the challenges facing Boston Scientific “seem manageable,” provided it engineers a smooth transition from the Promus stent to the Promus Element stent outside of the United States. And even the roughly $3.75 billion debt payment that comes due during the first half of 2011 is manageable, Wise wrote, if BSC can re-finance and generate enough cash internally.
The Promus line, which is a private-label version of the Xience stent made by Abbott Labs, is sold by Boston Scientific under an agreement it inherited in its 2006 buyout of Guidance Corp.
