Cardiology Implantables Neuro

Boston Scientific sees April sales cut in half amid coronavirus

Dive Brief:

  • Boston Scientific’s organic sales declined 2.9% during the first quarter as health systems worldwide gradually reacted to the coronavirus, according to results shared Wednesday. But like many of its medtech peers, the worst hit is expected during the second quarter, with April figures suggesting a nearly 50% cut to revenues. U.S. business is showing the steepest trend, falling roughly 55%.
  • Still, CEO Mike Mahoney projected one cause for optimism is the fact that about two-thirds of procedures using the device giant’s products can take place in ambulatory surgery centers, physician offices and other healthcare settings more likely to resume elective procedures sooner than hospitals.
  • Boston Scientific called out neuromodulation devices and its Watchman implant for reducing stroke risk as among those suffering most from procedure deferrals, whereas transcatheter aortic valve replacements and emergent procedure devices have a better outlook for recovery.

Dive Insight:

When Boston Scientific shared its 2020 outlook on a Feb. 5 earnings call, execs acknowledged the novel coronavirus’ potential to negatively impact first quarter sales by $10 million to $40 million, eyeing possible disruptions to supply chains and procedure volumes in China. At the time, the company forecast 5% to 7% organic growth in the first three months of the year.

But by the end of March, business had fallen 6.4% in the Asia-Pacific region, declined 10.1% in emerging markets, and was down 1.6% in Europe, the Middle East and Africa. Growth remained up in the U.S. at 3.5%, but per commentary from management, the impact of canceled procedures in April has been significant.

The MedSurg division, which houses endoscopy, urology and pelvic health, stayed in the green, growing 1.1% as reported and 2.2% organically. Cardiovascular, accounting for 40% of Boston Scientific’s overall business during the quarter, fell 2.5%​. And the Rhythm & Neuro division’s cardiac rhythm management, electrophysiology and neuromodulation devices saw the steepest sales decline, collectively decreasing 7.2% as reported and 8.6% on an organic basis.

The company on March 30 formally withdrew prior guidance targeting 6.5% to 8.5% growth during 2020. While noting continued uncertainty, execs said Wednesday they expect a sharp decline in adjusted operating margin during the second quarter; sequentially improving growth in the third quarter; and a return to positive growth during the fourth quarter.

Boston Scientific has disclosed a number of measures to cut costs during the pandemic. They include freezing travel and hiring, shifting most employees to a four-day work week, cutting exec pay, closing some manufacturing sites and reducing inventory on hand, as well as halting “longer payoff” R&D efforts.

The company expects its facilities in Minnesota and Massachusetts may begin to reopen in mid-May, with plans to prioritize the return of product development and release teams.

Boston Scientific also announced it’s divesting its intrauterine health franchise — which CFO Dan Brennan said generates about $35 million in yearly revenue — to Minerva Surgical.

Amid reported slowdowns in ongoing clinical trial enrollments, Boston Scientific temporarily suspended its product pipeline timelines.

The previously touted launch of the Exalt D single-use duodenoscope slowed as sales rep access to hospitals fell, Mahoney said, but the company still predicts that single-use scopes represent a multibillion-dollar opportunity. The company expects U.S. clearance and launch of a pancreatic and bile duct visualization device, called Spyglass, in the second half of this year.

The integration of BTG, a $4.2 billion deal closed last August, proved to be a bright spot during the quarter. Interventional oncology procedures are less deferrable, protecting sales of newly acquired radiotherapy product TheraSphere.​

Shares in Boston Scientific reached a high of $45.67 on Jan. 10, falling to $25.83 on March 23 and closing at $35.92 on April 28.


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