Boston Scientific Faces $470 Million Shortfall, Considers Business Unit Sale

Boston Scientific Corp.'s shutdown of its defibrillator operation is projected to result in a significant $470 million shortfall over the next two years. According to analysts, the company may need to sell one of its non-core business units to make up for the losses. Wells Fargo Securities analyst Larry Biegelsen estimates that the halt is costing Boston Scientific $5 million a day, while St. Jude Medical Inc. and Medtronic Inc. pick up market share from the stalled competitor.

Key Takeaways:

Boston Scientific faces a projected $470 million shortfall due to the shutdown of its defibrillator operation over the next two years.
Wells Fargo Securities analyst Larry Biegelsen estimates the halt is costing Boston Scientific $5 million a day.
Analysts suggest selling the pain management (neuromodulation) or neurovascular intervention businesses to cover the losses.
The neuromodulation business alone could fetch up to $1.6 billion, with possible buyers including Johnson & Johnson or Abbott.
Selling the neuromodulation business would be a logical move, given its relatively low profitability and potential for quick fundraising.
BSX CEO Ray Elliott is likely to face pressure to consider reducing debt or improving liquidity, given the company's $2.7 billion in debt due in 2011.
The recall issue could be the catalyst for Elliott to consider selling a business unit.

Statistics:

Boston Scientific's projected $470 million shortfall over the next two years.
Wells Fargo Securities analyst Larry Biegelsen's estimate of $5 million a day in losses due to the defibrillator halt.
Estimated value of the neuromodulation business: up to $1.6 billion.
Estimated value of the neurovascular intervention business: up to $1 billion.
Boston Scientific's debt: approximately $2.7 billion due in 2011.

Sources:

Boston Globe - citing a report from Bloomberg News
Reuters news service
Gabelli Health and Wellness Trust Mutual Fund portfolio manager Jeff Jonas
FAF Advisors analyst Tim Nelson