October 14, 2008
According to the Natick, Massachusetts-based company, strong cash flow generation during the third quarter enabled it to prepay $500 million of debt obligations and reduce its debt position to about $6.8 billion. The company noted that the next debt maturity of $825 million is not due until April 21, 2010, which is expected to be met by continuing and improving strong operating cash flows. The company has been saddled with debt following its $27 billion acquisition of Guidant Corp. in 2006.
Boston Scientific added that it continued to manage its debt portfolio, cash investments, cash flow and working capital conservatively amid the turbulent financial markets. Currently, the company has access to about $3 billion of cash, with about $1.7 billion of cash on hand and access to about $1.3 billion of additional cash through its revolving bank credit facility.
Boston Scientific noted that its Debt to EBITDA ratio under its credit facility was 2.8 to 1 at the end of the second quarter, which is expected to remain largely unchanged at the end of the third quarter, and well below the bank covenant requirement of 4.5 to 1. The company said it continued to focus on lowering the ratio by improving operating cash flow and EBITDA, while paying down debt with available cash.
The company has rescheduled its third quarter earnings call a day earlier to Wednesday, October 22 from the previously scheduled October 23. The company rescheduled its earning call as it became aware that two other medical device companies will be conducting earnings calls at the same time. On average, analysts polled by First Call/Thomson Financial expect the company to report earnings of $0.11 per share on revenues of $1.97 billion for the third quarter.
Separately, the company said that based on preliminary data from Millennium Research Group, or MRG, the estimated aggregate U.S. market share for its two drug eluting stents for the third quarter was about 45%, the same as in the second quarter. Stents are tiny metal-mesh scaffolds that prop open heart arteries after they have been cleared.
Boston Scientific estimates a 25% share of the U.S. drug eluting stent, or DES market, for its Promus Everolimus-Eluting Coronary Stent System and a 19% share of the market for its Taxus Express2 Paclitaxel-Eluting Coronary Stent System.
The company said it has introduced its Taxus Atom stent, the only 2.25 mm diameter drug-eluting stent available in the U.S., to more than 500 accounts in the country. The stent was approved by the U.S. Food and Drug Administration, or FDA, in September 2008. The company believes the stent is increasing the use of drug-eluting stents as well as the company's shares of the market.
Boston Scientific also said it has increased inventory supply orders for its Promus stents, solidified supply to existing accounts and has commenced opening new Promus accounts. The company has ordered sufficient additional Promus supply to continue opening new accounts through the remainder of this year and into the beginning of next year. The company added that while expanding into new accounts, it will continue to supply existing accounts as well.
Last week, the company said that it has received approval from the FDA to market its second-generation Taxus Liberte stent. The company plans to launch the Taxus Liberte stent early next month in the U.S., following completion of the introduction of its Taxus Expresss2 Atom stent. The company has already launched the Taxus Liberte stent in Europe and other international markets in 2005. The stent is currently undergoing regulatory review in Japan.
Earlier in October, Boston Scientific said that the U.S. District Court in Delaware made an unfavorable judgment in a case involving a patent owned by rival Johnson & Johnson (JNJ) and its NIR stent product. The original suit was filed in 1997. Since 2004, Boston Scientific has not sold the NIR stent. On account of the unfavorable ruling, the company had said it expects to record an after-tax charge of $266 million, or $0.18 per share in the third quarter.
BSX closed Monday's regular trading at $9.22, up $1.91 on a volume of 26.11 million shares. In Tuesday's pre-market trading, the stock is currently trading at $10.00, up $0.78 or 8.46%. In the 52-week period, the stock has been trading in a range of $6.34-$15.25.
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