Boston Scientific seeks new markets

Boston Scientific Corp. wants investors to look beyond its cardiac stents.

The tiny wire-mesh tubes have become the hottest-selling medical device in Boston Scientific's history, and were the main reason the Natick company yesterday reported its fourth-quarter profit more than doubled.

But at an investor conference in New York, Boston Scientific executives also outlined an aggressive agenda to expand into new markets that should pay off by 2007, underwritten with profits from the widely used Taxus stent.

''We're looking at areas where revolutionary technology can create immediate business potential for us," said chief operating officer Paul A. LaViolette in a telephone interview yesterday. ''As a company with revenue of $6 billion, we need to enter larger markets that have solid growth rates to sustain our growth."

Now the task is to convince investors the company will succeed. LaViolette mentioned areas such as implantable cardiac defibrillators that help the heart sustain its rhythm, and tiny spinal implants that use electrical stimulation for pain management.

Boston Scientific also showed off an endoscopy system with a disposable catheter that includes a digital camera, which the company predicted would replace current cumbersome instruments used for colonoscopies. Other areas like pacemakers aren't growing fast enough to justify a big effort, LaViolette said.

While Boston Scientific has talked about its expansion strategy before, the details rolled out yesterday motivated investors to bid up shares $1.75, or 5.3 percent, to close at $34.81. AG Edwards analyst Jan Wald said he was encouraged by the confidence the company expressed in its earnings outlook and the schedules it discussed for its new products, though some of its guidance was below what Wald had forecast.

''We know more about their timelines, and that's important from the standpoint of tracking their execution," Wald said.

The shares are still below the July 15 closing price of $40.49, just before Boston Scientific began a series of recalls of its Taxus stents to fix a potentially life-threatening manufacturing flaw. Although it suffered a slight dip in market share amid the recall, the company quickly regained its lead over a competing stent made by Johnson & Johnson.

But some investors still worry that Boston Scientific won't repeat the success of Taxus any time soon. Also, Johnson & Johnson has been cutting prices and is buying another large devices maker, Guidant Corp., which could give it new traction.

''It is going to take a heart-stopping performance for Boston Scientific to replicate the success they had over J&J in the drug-coated stent arena to other markets," wrote Jake Dollarhide, a Tulsa, Okla., money manager, in an e-mail after listening to a webcast of Boston Scientific's conference.

Dollarhide manages funds that own shares of Johnson & Johnson and Medtronic Inc., another devices company, and holds Boston Scientific shares in a few accounts. ''Nothing that transpired today will change our holding strategy," he wrote.

Much of Boston Scientific's message was aimed at countering such arguments. Lawrence Best, Boston Scientific's chief financial officer, spent much of his talk addressing what he called the ''disconnect" between the company's internal expectations and skeptics on Wall Street.

In particular, Best argued the company will be able to meet its ambitious revenue target for 2007 of $7.7 billion to $8.9 billion, even as others try to develop better drug-coated stents and work on their own new technologies. Wall Street analysts expect the company to have revenue of $7.2 billion in 2007, according to Reuters. But those analysts aren't giving the company enough credit for its work refining drug-coated stents or its investments in other areas, Boston Scientific executives said.

''Our pipeline is aimed at big opportunities, things that will really matter," said chief executive James R. Tobin. ''These are enormous opportunities where, for whatever reason, we find ourselves most likely to succeed."

In the fourth quarter, Boston Scientific said it had net income of $297 million, or 35 cents a share, up from $137 million, or 16 cents, a year earlier. Revenue rose 70 percent to $1.6 million, from $939 million a year earlier. Stent sales, chiefly Taxus, rose 374 percent to $730 million, the company said.

For all of 2004, Boston Scientific reported net income of $1.06 billion, up from $472 million. Sales rose 61 percent to $5.6 billion, from $3.48 billion in 2003.

Ross Kerber can be reached at kerber@globe.com.