By Susan Kelly
CHICAGO (Reuters) - Boston Scientific Corp. , which expects shortly to complete its acquisition of Guidant Corp. , on Tuesday said quarterly earnings fell 7.3 percent on slower sales of devices used to treat clogged heart arteries.
But the leading maker of drug-coated stents -- the small wire mesh devices inserted into coronary arteries to keep blood flowing -- said sales beat Wall Street expectations, and the company's shares initially rose 2 percent.
A slowdown in the drug-coated stent market was expected, now that most patients needing the devices have received them.
Natick, Massachusetts-based Boston Scientific is buying Guidant for about $27 billion to reinvigorate growth by expanding into the lucrative market for heart rhythm devices. Executives told investors on a conference call that anti-trust approval of the deal from the U.S. Federal Trade Commission could come "at anytime."
"People are looking for, 'Are they on track to get Guidant pulled into the fold?' And it looks like they are on track," said Morningstar analyst Debbie Wang.
Boston Scientific said its first-quarter net earnings declined to $332 million, or 40 cents a share, from $358 million, or 42 cents a share, a year ago. Net sales in the first quarter were $1.620 billion, compared with $1.615 billion in the year-ago period.
Net income included a 3-cents-a-share charge for stock-based compensation and a 3-cents-a-share charge for terminating a gene-therapy trial.
Analysts on average had expected first-quarter earnings of 44 cents a share, including stock expense, and revenue of $1.59 billion, according to Reuters Estimates.
"They had decent revenue. EPS is a little weak. There was some weakness in their gross margin, which was probably tied to their quality-control issues," said Jeff Jonas, a portfolio manager with Gamco Medical Opportunities Fund.
Boston Scientific is currently trying to resolve quality-control issues cited in a warning letter from the U.S. Food and Drug Administration that threatens to hold up approval of its next-generation heart stent as well as its carotid stents to prevent stroke.
"I think there was some spending there to bring things up to speed," Jonas said.
Boston Scientific's sales were helped by strength in its endosurgery and neuromodulation businesses. The company makes endoscopy products and implantable pain-management devices in addition to stents.
Worldwide sales of the company's Taxus drug-coated coronary stent fell to $633 million from $686 million a year ago, while U.S. sales of the device fell to $419 million from $494 million.
Boston Scientific and Johnson & Johnson are the only two companies that sell drug-coated stents on the U.S. market, though others are preparing to enter the profitable business.
Boston Scientific, whose growth has slowed following dramatic gains after the March 2004 launch of the blockbuster Taxus stent, announced its plans to acquire Guidant in January, winning a bidding war against J&J for the heart device maker.
Shares in Boston Scientific were last up 24 cents to $21.72 on the New York Stock Exchange.
The stock is down about 18 percent since the start of the year, compared with an 8 percent decline in the Standard & Poor's medical equipment index .
