- Boston Scientific executives said the company will likely miss the low end of third-quarter guidance after a significant hit to businesses from the recent delta variant surge.
- CEO Michael Mahoney, speaking at an investor day Wednesday, said after having "minimal COVID impact" in the second quarter, a surge in COVID-19 hospitalizations and a drop in procedure volumes unexpectedly hit the company in the third quarter.
- During the event, Boston Scientific outlined growth projections for the next three years, which Mahoney said should be less impacted by the pandemic. The company projects organic revenue growth of 6% to 8% between 2022 and 2024, with double-digit earnings growth over the same period.
Boston Scientific is the most recent medtech to signal a third-quarter hit from the pandemic after many companies in the industry recovered to pre-pandemic levels in the first half and, in some instances, began growing above 2019 marks.
Medtronic was one of the first to report pressure from the delta surge as the medtech giant's comparable quarter extends to the end of July rather than June, like most of the industry. NuVasive and Zimmer Biomet followed, saying regional surges have once again led to a shutdown in procedures.
Mahoney said there was a six- to seven-week impact from the delta surge beginning in August, with an "unprecedented shutdown" in elective care. The largest hit came in the southern region of the U.S., according to the CEO, but the northwest was also hit as was Europe and the Asia Pacific region.
"July looked good," CFO Daniel Brennan said. "Then all of a sudden, August and September have been significantly more impacted than I think everybody thought."
The update comes after Boston Scientific had a fairly strong rebound in the second quarter, with results growing above 2019 and Mahoney projecting a "manageable level of COVID impact in the second half of the year" during a July earnings call.
Boston Scientific previously projected third-quarter revenue growth of 5% to 7% compared to 2019, when the company brought in $2.7 billion of sales. Mahoney said that the company is likely to miss the bottom end of the growth projection over 2019.
Wall Street analysts said the update was not terribly surprising given commentary from across the industry over the last several weeks.
"We think investors have largely already begun to realize the risk to Q3 numbers across the MedTech space," Truist Securities analysts wrote in a Wednesday report. J.P. Morgan analysts wrote the update is below analyst expectations but not unexpected and view it as "a very minor negative."
While Boston Scientific is likely to miss third-quarter guidance, Mahoney said that achieving full-year guidance of 6% to 7% organic sales growth compared to 2019 is "still possible."
The CEO added that COVID-19 pressures have begun to improve, and Jefferies analysts wrote that the company's projection to hit full-year guidance is "a positive sign that trends are reversing."
Multiple analysts also agreed that the company's long-term growth projection of 6% to 8% was achievable behind the company's product line and as it brings on recent acquisitions like Preventice Solutions, Devoro Medical and Farapulse.
Jefferies analysts did caution that 8% top-line growth is "unprecedented among large-cap medtech peers."
A key product for Boston Scientific going forward is the Watchman left atrial appendage closure device. The company has traditionally held a monopoly over the left atrial appendage closure market; however, that position has recently changed with the emergence of Abbott Laboratories' Amulet device.
Abbott gained FDA approval for the device in August, and SVB Leerink surveys project it could quickly steal market share from Watchman.
Boston Scientific contends that the market will thrive from having two products, driving the LAAC space to grow from about $900 million in 2021 to $2 billion by 2024.
However, Boston Scientific attempted to throw cold water on results that led to Abbott's approval despite a slight nod to the company for helping grow the market and validate the therapy.
Nick Spadea-Anello, president of Boston Scientific's structural heart business, noted Amulet's trial showed comparable results to an earlier version of the Watchman device, but the company is no longer selling that version in the U.S. Spadea-Anello argued the newest version of the heart device is safer
The PINNACLE FLX trial for the device showed a 100% closure rate of the left atrial appendage, which was measured after 12 months and was the primary effectiveness endpoint of the trial. Amulet's trial showed 98.9% of patients had closure at day 45, compared to 96.8% of people who received the earlier Watchman device.
"Although Amulet and Watchman FLX data are not directly comparable, the nominally better data for FLX coupled with BSX's inventory consignment play likely provides a degree of insulation from significant share erosion out of the gate," Jefferies analysts wrote.
Watchman FLX now makes up approximately 95% of global Watchman revenue and 99% of U.S. centers have now transitioned to the newer version of the device, Spadea-Anello said.