It was time to pay the piper for Stryker Corp. (NYSE:SYK) during the first quarter, as it ponied up about $46 million toward its $1.5 billion buyout of Boston Scientific’s (NYSE:BSX) neurovascular business.
The Kalamazoo, Mich.-based company posted net earnings of $307.4 million, or 78 cents per diluted share, on sales of $2.02 billion during the three months ended March 31. That’s a bottom-line decline of 4.4 percent (or 2.5 percent, if you slice by diluted EPS) compared with the same period last year, when Stryker recorded profits of $321.7 million, or 80 cents diluted EPS, on sales of $1.80 billion.
The good news for Stryker is that sweet 12.0 percent top-line increase, and the knowledge that excluding the BSX buyout tab adjusted net earnings were up 9.9 percent to $353.4 million, or 90 cents adjusted EPS.
“Our first quarter results reinforce the strength provided by our balanced portfolio of products and services across many key segments of medical technology. Additionally, we continue to leverage our strong balance sheet and cash flow to maximize shareholder returns through targeted acquisitions, buybacks and dividends,” chairman, president and CEO Stephen MacMillan said in prepared remarks. “And as evidenced by the significant increase in R&D, our commitment to innovation remains intact while simultaneously investing in our comprehensive quality and compliance programs.”
Stryker agreed last October to pay $1.5 billion for Boston Scientific’s neurovascular business, confirming a deal that had been swirling through the rumor mill for months. The cash deal includes $100 million in milestone payments, contingent in part on the commercialization of the next iteration of Boston Scientific’s Target coils, which are delivered via catheter to treat hemorrhagic stroke. The milestones also depend on the transfer of manufacturing operations, expected to take about two years.
The BSX unit posted sales of about $348 million in 2009, but revenues have been on the slide for the better part of two years. At the time, Stryker officials said the acquisition would make the company a major player in the nearly $1 billion neurovascular market.
Stryker said it expects 2011 sales to rise between 11 percent and 13 percent on the strength of its reconstructive, med-surg, spine and neurotechnology businesses. Full-year adjusted diluted EPS should fall between $3.65 ad $3.73, up 10 percent to 12 percent. That excludes anticipated acquisition expenses of between 28 cents and 30 cents per share from the BSX deal, up from a previous estimate of 21 cents to a quarter.
SYK shares rose 1.8 percent to $61.10 today before sliding roughly the same amount in after-hours trading, to $60.