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Boston Scientific suspends ICD sales; shares slump
(Reuters) – Boston Scientific Corp said it has suspended sales of its implantable heart defibrillators after failing to notify regulators of changes in how it manufactures the devices. It said patient safety was not at risk.
The company’s shares fell 16.45 percent to $6.50 in midday trading on the New York Stock Exchange.
Boston Scientific said it had voluntarily stopped shipments and was retrieving all inventory of its implantable cardioverter defibrillators (ICDs) and cardiac resynchronization therapy defibrillators (CRT-Ds). The devices coordinate heart pumping through electrical pulses.
“We are acting voluntarily and expeditiously to resolve this situation, and we have seen no evidence of any risk to patient safety,” Boston Scientific Chief Executive Ray Elliott said in a statement.
The company said it found two errors in its filing procedures with the U.S. Food and Drug Administration for changes made to its manufacturing processes.
In the first instance, the company’s regulatory department did not see the need for a supplemental filing, said Boston Scientific spokesman Paul Donovan. In the second error, a filing was incomplete, he said.
The company has informed the FDA of the errors and plans to work closely with the agency to quickly resolve the situation.
Analysts said the suspension of sales of ICDs and CRT-Ds, which generate about 15 percent of Boston Scientific’s revenue, is a blow to the company’s attempts to regain momentum as it works to pay down debt, settle costly legal issues and accelerate growth.
Last month, the company announced a restructuring of its cardiovascular and cardiac rhythm management divisions and said it would cut its work force by as much as 10 percent.
“We believe today’s announcement will have a longer-term effect on the company’s ability to drive market share gains and brand loyalty among the physician community,” Goldman Sachs analyst David Roman said in a note to clients.
Products affected by the sales suspension include the Cognis, Confient, Livian, Prizm, Renewal, Teligen and Vitality device brands. Pacemakers are not affected, and the company is not recommending removal of any of the devices.
The actions could have a material impact on the company’s previously issued guidance, including revenue, operating profit and cash flow for the first quarter and full year 2010, Boston Scientific said.
Donovan declined to elaborate on how long the sales suspension would last or how removing the products from the market may impact the company’s earnings.
Yields on Boston Scientific bonds widened sharply as their prices fell. Yields on its 4.5 percent notes due in 2015 rose to 280 basis points over U.S. Treasuries from 230 basis points at Friday’s close, according to MarketAxess. The bonds were some of the day’s worst performers.
Shares of rival heart device makers St Jude Medical and Medtronic Inc rose amid speculation that those companies stand to pick up market share from Boston Scientific. St Jude stock was up 6.85 percent to $40.07, while Medtronic rose 4.19 percent to $45.78.
(Reporting by Susan Kelly, additional reporting by Dena Aubin, Debra Sherman and
, Maureen Bavdek and John Wallace)