Boston Scientific officials provided little new information today on plans to slash as many as 1,300 jobs.
It's still unclear how many of the Natick, Mass.-based company's more than 5,000 Twin Cities employees could get cut. Meanwhile, investors hammered Boston Scientific shares, which fell 10 percent Thursday after the company's profit forecast fell short of analyst estimates.
Boston Scientific has been facing a lot of headwinds lately. They recently had to make a $1.7 billion payment to their competitor Johnson and Johnson over patent disputes and sales of key products are down. They include drug-coated stents, mesh tubes that prop open clogged arteries, and cardiac rhythm devices, which treat irregularly beating hearts.
CEO Ray Eliot joined the company last summer and said during a conference call Thursday that investors should be patient with his efforts to improve the company's results.
"This is a big ship," Eliot said. "I don't care how smart you are, you don't turn this around in a quarter or two, and it...has had some underlying issues that I think we've addressed well. "
But investors appeared to be short of patience. One wall street analyst labelled the financial results a "big miss." Others expressed similar views.
Tim Nelson follows Boston Scientific for FAF advisors and says he's a little disappointed in earnings outlook. But he's encouraged that the company is taking aggressive measures to improve profit margins. Still, he's perplexed by some of the company's issues with slow sales.
"It's a little bit hard to understand, given the demographic trends," Nelson said.
Nelson said it's odd that stent sales are down, given that more people are reaching the age where they may experience heart attacks and need medical devices. Nelson said Boston Scientific could be suffering in the stent market because physicians are more reluctant to use stents, but he said that's just a guess.
"There's no clear evidence yet as to why we're seeing ongoing very slow rate of market growth or no market growth in the stent business," Nelson said.
Debbie Wang, an equity analyst at Morningstar, argues that Boston Scientific is not just subject to industry trends, but is in a particularly vulnerable position--especially with its cardiac rhythm management products. She says they're getting a little old.
"It's not entirely clear that it's just a market issue," said Wang. "And in this business, you really have to be ready for that next product cycle...Boston [Scientific] has really not been quite on top of that," said Wang.
Boston Scientific says that it's going to focus more on research for neuromodulators, a kind of pacemaker for the brain, as well as endoscopic procedures.
And, to improve profit margins, the company will be looking to cut costs through layoffs. On an investor conference call, company Vice President Sam Leno reiterated the company's announcement yesterday that 1,000 to 1,300 positions will be cut.
"Headcount reductions are a key component to achieving these goals," he said. "The reduction activities will be initiated this month, and are expected to be completed over the next 18-24 months.
However, the company will not specify which divisions or geographical locations will be affected.
Boston Scientific employs more than 5,000 people in the Twin Cities area, split between their pacemaker and defibrillator business in Arden Hills and their stent business in Maple Grove and Plymouth.
Analysts say it's odd that the company is not spelling out where the cuts will be. Jan Wald, an analyst at Noble Financial Group, said the impact here in Minnesota could be sizeable.
"Given the numbers of people that work in Minnesota versus the other locations, I think you're looking at a fairly good percentage, but I really can't put a number on it," Wald said.
Boston Scientific's shares fell 82 cents to $7.47. The stock has fallen 15 percent in the past year.