Update: Bullish Case For Boston Scientific

May.10.12 | About: Boston Scientific (BSX)

April 30th, I detailed out my Bullish Case for Boston Scientific (NYSE:BSX), on May 8th, BSX announced FDA approval of their new pacemaker line-up.


To varying degrees, BSX has been hindered in the pacemaker market for a few years due to lack of home monitoring capabilities. Home monitoring has given St Jude (NYSE:STJ) and Medtronic (NYSE:MDT) a way to differentiate their product.

With the approval on Monday, the landscape has changed and now BSX has the newest most compelling pacemaker products on the market. These leading-class products will help our bullish case for BSX and provide for competitive advantages over STJ and MDT products.

Note: Medical devices are extremely complicated. I plan on highlighting the big picture functionality and not detailing out why one algorithm is better than another.

So, let us review some of the positive developments that could result in a larger market share for BSX.

First, remote monitoring levels the playing field between BSX, STJ and MDT.

In the past, when a physician wanted to decrease the number of in-office follow-ups have or the ability to monitor the patient's pacemaker status from home, a BSX device was not an option. They were simply out of the game. The new devices have "remote monitoring capabilities". This means the patient simply transmits pacemaker data over a phone line for the physician / clinician to review without ever going to the hospital or doctor office. Remote monitoring can significantly reduce healthcare related costs by proactively monitoring a patient's condition.

The home monitoring system, once fully approved by the FDA, is wireless and allows for "passive communication" of relevant pacemaker data. A communication box, placed at the patient's home, wirelessly communicates with the pacemaker and forwards that information to the clinic without the patient ever doing anything - called "passive communication". Other competing pacemakers are not "passive" and require the patient to initiate the necessary communication.

Second, the new BSX pacemakers utilize technology that is clinically proven. The BSX pacemakers are the only devices clinically proven to be more effective on patients with chronotropic incompetence (CI). CI is the inability of the heart to regulate its rate appropriately in response to physical activity, which may cause patients to feel tired or short of breath during daily activities such as walking or climbing stairs. The BSX pacemakers use their proprietary minute ventilation (MV) sensor. This MV sensor has been clinically proven to restore chronotropic competence.

Size of the pacemaker market

Various sources estimate the world-wide pacemaker market at about $4 billion. BSX, utilizing their old generation devices, is estimated to have 12-14% pacemaker market share. With a market this large a 5% increase in market share, if achieved, would be significant.

Disclosure: I am long BSX.

Disclaimer: This work is based on public filings, public events, interviews, corporate press releases, and what I have learned as financial journalists. It may contain errors and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility.