Boston Scientific Corp. (NYSE:BSX) revealed plans to lay off up to 1,300 workers worldwide, even as it announced higher sales and lower net losses for both the fourth quarter and full year 2009.
The Natick, Mass.-based medical devices giant said the layoffs of 1,000 to 1,300 employees — 8 percent to 10 percent of its non-direct labor force* — are part of a larger restructuring effort that will see dramatic changes to its corporate structure and management and a program of divestitures and acquisitions designed to “further rationalize and refocus its business portfolio.”
Sales rise, losses decline
Boston Scientific reported sales of $2.08 billion for the three months ended Dec. 31, 2009, up 3.8 percent compared with $2 billion during Q4 2008 and at the mid-point range of its prior guidance. Net losses were $1.08 billion, or 71 cents per share, compared with $2.39 billion, or $1.59 per share, during the same period in 2008.
Excluding $1.38 billion in various impairment charges, acquisition and divestiture and other expenses — including a $1.27 billion contribution to its $1.7 billion settlement of several stent patent infringement spats with Johnson & Johnson (NYSE:JNJ) — fourth-quarter adjusted net income was $304 million, or 20 cents per share.
Boston Scientific’s two flagship divisions, cardiac rhythm management and coronary stents, fared differently during the quarter. Sales for the CRM operation were up 6.1 percent to $645 million worldwide, but worldwide stent sales slid 4.8 percent to $453 million.
For the full year, BSX 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. Adjusted for various expenses and a $1.77 billion charge for legal bills including the J&J settlement and another, $716 million settlement with J&J subsidiary Cordis Corp. inked last year, net income was $1.18 billion, or 78 cents per share.
The 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.
Boston Scientific said it expects net sales of between $2 billion and $2.1 billion for the first quarter and adjusted earnings per share of 13 cents to 17 cents. For full-year 2010, BSX predicted sales of $8.1 billion to $$8.5 billion and adjusted EPS of 62 cents to 72 cents.
Re-shuffling the deck
The long list of restructuring changes begins with the integration of Boston Scientific‘s cardiovascular and cardiac rhythm management businesses (the latter comprised of its $26 billion Guidant Corp. acquisition). Former cardiovascular group president Hank Kucheman was named president of the new cardiology, rhythm and vascular group, which will focus on devices to treat structural heart, disruptive, primary prevention implantable cardiac defibrillators, atrial fibrillation and hypertension. Within the new group, the company’s endovascular business — peripheral solutions, neurovascular, imaging, electrophysiology and BSX’s Canadian operations — will be led by senior vice president Joe Fitzgerald.
Boston Scientific is also renewing its focus on research and development, promoting former CRM group president Fred Colen to chief technology officer. Colen will oversee a centralized R&D operation which will “change its allocation of R&D resources to incorporate its newly established growth priorities, create technology Centers of Excellence, drive improved product development timing and efficiency, and expand the spectrum of new product opportunities,” according to a press release.
And say goodbye to Boston Scientific’s international headquarters. Its Japanese, European and emerging markets operations will now report directly to new CEO Ray Elliott. The emerging markets group will also get a bigger piece of the pie, including “greater investment and infrastructure” and “the pursuit of selective offshore manufacturing, research, a variety of support services and individual country growth vehicles.” The company has not yet named a new leader for that group.
BSX is also canning its endosurgery group, which oversaw its endoscopy, urology and women’s health divisions. Those units will also report straight to Elliott, with the urology/women’s health operation led by senior vice president John Pedersen, who’s been charged with “significantly increas[ing] investment in its franchise in order to more aggressively pursue the substantial opportunities for device-related solutions for unmet women’s health needs.” Michael Phalen will continue to lead the endoscopy division, concentrating on devices for endoluminal surgery, bariatrics, diabetes and asthma.
As for the layoffs, aimed at helping reduce expenses by between $200 million to $250 million over the next two years, Boston Scientific said it expects to incur pre-tax cash charges of $180 million to $200 million. The layoffs do not include any production-dependent manufacturing positions.
Other changes include:
- Former endosurgery president Steve Moreci will lead a new, expanded global sales team team, which will include BSX’s corporate sales group;
- CFO Sam Leno will be promoted to COO effective March 1, overseeing finance, IT, manufacturing and operations;
- Former chief accounting officer Jeff Capello will be promoted to CFO effective March 1;
- General counsel and secretary Tim Pratt added chief administrative officer to his title. Boston Scientific will consolidate its legal, communications, government affairs, HR, quality and regulatory affairs under Pratt;
- Chief compliance officer Jean Lance was promoted to senior vice president and named to the company’s executive committee;
- Dan Brennan was promoted to senior vice president and corporate controller;
- Former head of corporate tax, business development and investor relations Larry Neumann was named senior vice president of restructuring and integration;
- Andy Milani was named senior vice president of human resources.