WASHINGTON (AP) — Medical device maker Boston Scientific Corp. reported Thursday that its third-quarter profit fell 25 percent on a combination of lower product sales and thinner profit margins.
Revenue fell to $1.87 billion from $1.92 billion, mainly because of falling demand for implantable heart defibrillators. Sales of the devices declined to $503 million from $550 million in the most recent period.
The company's stock slid 25 cents, or 4.4 percent, to close at $5.39 Thursday.
Like other medical device makers, Boston Scientific has struggled in recent years to make up for lower sales of those products like defibrillators and heart stents, amid cost-cutting efforts by hospitals and medical studies suggesting the implants are overused. Company executives said sales were further pressured by seasonal factors, including summer vacations when hospitals perform fewer procedures.
"We are optimistic that a modest recovery will emerge as built-up demand for elective procedures begins down the line," said acting CEO Hank Kucheman, the company's president for cardiology, on a call with investors and analysts.
The company reported third-quarter net income of $142 million, or 9 cents per share, down from $190 million, or 12 cents per share, in the same period last year. The latest quarter's results were weighed down by $81 million in one-time expenses, including costs from the company's restructuring efforts and debt payments.
Excluding one-time costs, the company would have earned $223 million, or 15 cents per share. Analysts polled by FactSet expected 9 cents per share on revenue of $1.91 billion, though that estimate included certain one-time expenses.
Revenue from the company's interventional cardiology business, including drug-coated stents, was flat for the period. Stents are mesh-wire tubes used to prop open arteries after they have been cleared of fatty plaque.
Boston Scientific's share of the global drug-eluting stent market slipped a percentage point to 36 percent amid increased pricing competition among the four companies that market the devices. In June, Johnson & Johnson announced it would phase out its drug-coated stent program after steadily losing market share for years. Although J&J pioneered the devices, its Cypher stents have fallen behind newer offerings from Boston Scientific, Abbott Laboratories and Medtronic.
The Natick, Mass.-based company announced last month it had hired Michael Mahoney, J&J's chairman for medical devices, to become its next CEO. Because of a non-compete agreement with J&J, Mahoney will not formally become CEO until Nov. 1, 2012. Until then he will serve as a company president. He faces the challenge of increasing the company's sales when the market for its best-selling products is shrinking. The market for implantable defibrillators is expected to decline 2 percent worldwide next year, driven by a 7 percent decline in the U.S., according to estimates by Cowen and Co. analyst Josh Jennings.
"I have made a very long-term commitment to Boston Scientific, I'm excited by this opportunity and I intend to make the most of it," Mahoney told analysts on a teleconference Thursday morning. Mahoney formally joined the company on Monday.
Boston Scientific and other device makers have seen profits squeezed by a downturn in elective procedures, as patients delay surgery due to economic hardship. Company executives said procedures appeared to pick up in September after a seasonal slump during the summer, but long-term gains remain to be seen.
"Despite continued pressure on global health care cost, the opportunity in this industry continues to be significant," Kucheman said. "Economic realities dictate that companies like Boston Scientific not only continue to develop technology that improves health care, but do so in ways that contribute to reducing the overall episode of treatment cost."
For full-year 2011, the company estimates sales between $7.62 to $7.72 billion and earnings in the range of 27 to 33 cents per share, or a range of 67 cents to 70 cents per share excluding items. Analysts expect full-year earnings per share of 45 cents and sales of $7.76 billon, on average.
Boston Scientific has not recorded a net annual profit since 2005, before its $27 billion dollar purchase of defibrillator maker Guidant.