A worse-than-expected dip in sales of pacemakers and implantable defibrillators is leaving its mark on Boston Scientific, but the situation is expected to improve for the device maker later this year with new product launches.
The Massachusetts-based med-tech manufacturer, which employs more than 5,000 people in Plymouth and Arden Hills, saw its stock price fall more than 3 percent at one point Thursday after announcing that revenue from heart-rhythm devices fell short of expectations for the quarter.
The Cardiac Rhythm Management division was the only one at the company to see a sales decline in the quarter.
Boston Scientific reported $1.98 billion in total sales for the quarter that ended Dec. 31, which was 5 percent higher than the same period last year after removing the effect of acquisitions and divested businesses, which is known as organic growth.
“Our overall performance as a company was quite good,” Chief Executive Mike Mahoney said. “We grew at 5 percent organically and about 10 percent per quarter with the impact of acquisitions. CRM was a little bit slower, and that was in line with what we thought it would be.”
Analysts had been expecting the sales of pacemakers and defibrillators to slip by about 2 percent during the quarter. Instead, the tally fell by about 6 percent, to $440 million during the quarter.
Boston Scientific executives had predicted the sales decline, following Medtronic’s launch of pacemakers and defibrillators that are compatible with magnetic resonance imaging scanners. St. Jude Medical, in Little Canada, has reported a similar slowdown in its non-MRI-compatible heart-rhythm machines.
Mahoney said Boston Scientific plans to launch a MRI-safe pacemaker system in the second quarter of 2016, among other product approvals are expected later in the year that will benefit the division.
For the fourth quarter 2015, the company reported a net loss of $142 million. But that includes the effect of setting aside $456 million during the period for increased legal expenses.
In late January, the Court of Special Appeals of Maryland declined Boston Scientific’s appeal to throw out a jury verdict for unpaid royalties totaling $309 million. The verdict went in favor of Mirowski Family Ventures, LLC, a group that receives royalties allegedly owed to Dr. Michel Mirowski, the now-deceased owner of the patent to the implantable defibrillator.
Boston Scientific also set aside an undisclosed amount to cover potential settlement costs related to some of the 35,000 lawsuits filed against the company by women who say they were injured by its pelvic-mesh products.
More than 135,000 such lawsuits have been filed against a half-dozen companies that sell the devices. Boston Scientific now has $1.9 billion in accumulated legal reserves.
Removing the fourth-quarter expenses related to litigation, debt payments, and changes from acquisitions and divestitures, the company reported adjusted net income of $362 million for the quarter, which was about 10 percent higher than the same period last year. On a per share basis, the company’s adjusted earnings of 26 cents was a penny above what analysts had been expecting.
For the full year of 2016, the company is projecting between $7.9 billion and $8.1 billion in revenue, which would represent growth of 6 to 8 percent.
That would compare with 2015 net sales of $7.5 billion, which was 8 percent growth over the prior year.
The company predicts adjusted earnings per share in a range of $1.03 to $1.07 for 2016. Adjusted earnings per share were 93 cents last year, 10 percent above the prior year.