Boston Scientific cuts 8% of staff
Effect on Mass. is unclear; 2,300 jobs slashed worldwide
Boston Scientific Corp., facing flagging sales for its two key product lines, said late yesterday it will eliminate 2,300 jobs, or 8 percent of its worldwide workforce, restructure parts of its business, and go forward with plans to shed some less-critical assets.
The Natick maker of medical devices said it expects the cuts, set to begin this month and be substantially completed by 2008, will help it reduce annual expenses by 12 to 13 percent, boost profits, and make it easier to cope with the firm's crushing $8 billion in debt.
Wall Street analysts had expected the company to jettison 7 to 12 percent of its workforce. In after-hours trading, Boston Scientific's stock rose 1 percent, to $14.30.
"The expense and head count reductions we are announcing today are intended to bring our expenses back in line with our revenues, while preserving our ability to make investments in quality, R&D, capital, and our people," said chief executive Jim Tobin. "While difficult, these reductions are in the best interest of the company."
Boston Scientific, the state's third-largest life sciences company, behind Thermo Fisher Scientific Inc. and Biogen Idec Inc., did not say where the job cuts will be made. But only 2,400 of its 28,000 workers are in Massachusetts, suggesting that a fraction of the layoffs will be in the Bay State. If the company cuts 8 percent of its employees in the state, that would amount to 192 jobs.
Some analysts think Minnesota, where the company's stent business is based, could bear the brunt of the layoffs. Stents are tiny wire-mesh tubes used prop open cleared arteries.
"I don't think it will have a significant impact at all on total employment in the medical device industry in Massachusetts," said Thomas J. Sommer, president of the Massachusetts Medical Device Industry Council.
Boston Scientific said it expects the moves to save $475 million to $525 million next year, and up to $575 million in 2009. But the company said the cutbacks will also result in pretax charges of $450 million to $475 million, more than half of which will be taken in the fourth quarter of this year, with the rest expected to be spread out through 2009.
The company also plans to combine its peripheral interventions and interventional cardiology businesses, restructure its oncology business, put its electrophysiology business under the umbrella of its cardiac rhythm management business, and reduce its international division from three regions to two.
In addition, Boston Scientific said it is "making good progress" with its previously announced plan to sell most investments and several divisions outside its core business. The company has already said it is seeking buyers for its fluid management, cardiac surgery, and vascular surgery businesses, and has reached an agreement to sell its auditory business.
Besides the layoffs, Boston Scientific said it expects another 2,000 employees to leave as part of the divestitures, reducing its worldwide workforce to under 24,000.
The cuts come at a time when Boston Scientific is facing anemic sales for its two main businesses, drug-coated stents and defibrillators. Tomorrow, it is expected to report third-quarter revenue of $2.06 billion, up just 1 percent from the same quarter a year ago.
The market for drug-coated stents has wilted since several medical studies raised questions about their safety and benefits, prompting some doctors to instead use cheaper bare-metal stents or avoid inserting stents altogether. Boston Scientific and Johnson & Johnson are the only two companies with approval from US regulators to sell stents coated with drugs to help keep arteries from narrowing again.
Although more recent stent studies have been more positive, the market has continued to shrink. On Tuesday, Johnson & Johnson reported its sales of drug-coated stents fell 44 percent, while its market share remained steady, implying that Boston Scientific will suffer a similar decline.
At the same time, Boston Scientific's other main business, implantable defibrillators that help regulate the heart, has been hurt by a series of recalls, making doctors and patients more cautious about using them.
Boston Scientific acquired the cardiac rhythm management business, which includes defibrillators and related products, when it bought Guidant last year.
Earlier this year, Boston Scientific cut 500 to 600 jobs in its cardiac rhythm management business. And it cut 55 jobs in Marlborough, after deciding to pull the plug on its Endovations program, which tried to develop a new endoscope for use in colonoscopies.
In Massachusetts, Boston Scientific employs nearly 1,000 at its corporate headquarters in Natick and about 1,000 at its endosurgery unit in Marlborough, which makes products for minimally invasive surgery. Another 500 employees work at the Quincy distribution center.
Boston Scientific said it will offer severance and other assistance to employees who lose their jobs.
Todd Wallack can be reached at twallack@globe.com. 