What is the status of the TAXUS stent system and its impact on future sales?

Boston Scientific has submitted its Pre-Market Approval (PMA) application to the FDA for the TAXUS stent system and expects a U.S. launch in the first quarter of 2004, and in Japan mid-2005, subject to regulatory approvals. The company is making significant investments in manufacturing and inventory to prepare for the U.S. launch, anticipating it to be a major growth driver, especially as the market transitions from bare metal stents to drug-eluting stents.

What are the main financial risks or concerns highlighted in this report?

Key financial concerns include ongoing significant litigation, particularly patent infringement cases with competitors like Johnson & Johnson, Guidant, and Medtronic, and a Department of Justice investigation. The company is also navigating the dynamic and competitive coronary stent market, where the introduction of drug-eluting stents by competitors is impacting bare metal stent sales. Additionally, the company has increased its debt levels and is undergoing substantial investment in R&D and inventory for the TAXUS launch, which could impact short-term profitability.

How is the company managing its debt and liquidity?

The company's cash and cash equivalents have increased significantly due to non-U.S. operations. It has access to $1.2 billion in revolving credit facilities and has increased its commercial paper outstanding to support operations and strategic initiatives like share repurchases and acquisitions. The company expects its current liquidity and borrowing capacity to be sufficient for its projected needs over the next twelve months.

BSX 10-Q Quarterly Report Q3 FY2003 — Revenue, Net Income, EPS

Q: What is driving the revenue growth for Boston Scientific?

Revenue growth is primarily driven by strong performance in the Cardiovascular and Endosurgery segments, particularly international sales. The success of the TAXUS Express2 paclitaxel-eluting coronary stent system in Europe and Inter-Continental markets is a major contributor, alongside increased sales of the Express2 coronary stent system in the U.S. and growth in Endosurgery product lines.

Summary

Boston Scientific Corporation reported a significant increase in net sales for the third quarter and the first nine months of 2003, driven by strong performance in its Cardiovascular and Endosurgery segments, particularly in international markets. The company saw substantial growth in coronary stent sales, largely due to the success of its TAXUS Express2 paclitaxel-eluting coronary stent system in Europe and Inter-Continental markets, with a U.S. launch anticipated in early 2004. While net income saw a decrease in the third quarter compared to the prior year, this was largely attributed to specific charges and credits. Year-to-date net income shows an increase. The company is actively managing its debt, with a notable increase in commercial paper outstanding, and is investing heavily in R&D, especially for its TAXUS stent program, anticipating it to be a key growth driver. Significant litigation remains a factor, with ongoing patent disputes and investigations, although the company believes its risk management practices are adequate.

Key Highlights

1Net sales increased by 21% to $876 million for Q3 2003 and by 21% to $2,537 million for the nine months ended September 30, 2003, compared to the prior year periods.
2International revenues saw a significant increase of 36% for Q3 and 29% for the nine months, driven by the launch of the TAXUS Express2 stent in Europe and Inter-Continental markets.
3Worldwide coronary stent sales increased by 100% for Q3 and 95% for the nine months, fueled by the Express2 stent in the U.S. and the TAXUS stent internationally.
4Gross profit margin improved to 72.3% for both the three and nine-month periods, attributed to a favorable product sales mix and operational cost improvements.
5Research and Development expenses increased significantly, reflecting continued investment in the TAXUS stent program and other cardiovascular projects.
6The company's cash and cash equivalents increased to $537 million as of September 30, 2003, up from $277 million at the end of 2002, primarily due to growth in non-U.S. operations.
7Significant legal proceedings, including patent infringement cases and a Department of Justice investigation, continue to be a factor, with an accrued amount of $18 million for litigation-related costs.

BOSTON SCIENTIFIC CORP Quarterly Report for Q3 Ended Sep 30, 2003

Summary

Key Highlights

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