Boston Scientific to spend over $200M in restructuring

Dive Brief:

Boston Scientific said Thursday it expects to cut up to $150 million in annual expenses over three years through a global restructuring program. Termination benefits and consultant fees are expected to incur an additional $100 million to $150 million in costs.
The Marlborough, Massachusetts-based company anticipates "limited" headcount reductions and some employee attrition from the plan, it said in a regulatory filing.
The cuts are intended to improve operating performance, and a substantial portion of the savings are expected to be reinvested in strategic growth initiatives, Boston Scientific said.

Dive Insight:

Boston Scientific has been on a mission to accelerate growth, as evidenced by its eight tuck-in acquisitions of smaller medtech companies over the past year. The aggressive strategy has kept Boston on solid footing in a fiercely competitive industry, but so much investment comes at a cost.

On its third-quarter earnings call, Boston Scientific executives said the company was investing to support growth particularly with initiatives related to its recent acquisitions. Adjusted earnings rose 12% year over year in the quarter, at the high end of company projections, but some analysts questioned whether the level was sustainable.

"If there is one hitch in the story, it is leverage," Jefferies analyst Raj Denhoy wrote in a note to clients last month. "BSX is spending to support the pipeline, and while the company endorsed double-digit EPS growth for 2019, it sounds closer to 10% than 15%."

In its SEC filing, Boston Scientific said the restructuring would include changes to the supply chain network to boost global manufacturing and distribution capacity, and building other capabilities to support business growth.

The company said it expects its overall employee base to be relatively unchanged by the end of the restructuring program, as new jobs are created in areas of growth and resources are deployed to support an expanding portfolio. Implementing the plan will result in total pre-tax charges of about $200 million to $300 million, Boston Scientific said.

The restructuring is expected to start in 2019 and be mostly complete by the end of 2021. Gross annual pre-tax operating expenses are expected to be reduced by about $100 million to $150 million by the end of 2022 as benefits of the program are realized.