Dive Brief:
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Boston Scientific's sales totaled approximately $2 billion during the second quarter, a decline of roughly 29% on an organic basis. Those results reported Wednesday topped analyst expectations by about $320 million.
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As anticipated, Boston Scientific saw sequential business improvement across April, May and June. That trend was helped along by the fact that many of its procedures “can’t be deferred forever,” CEO Mike Mahoney said on an earnings call, and by the company’s positioning in outpatient care settings.
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Despite optimism in how hospitals are now managing COVID-19 caseloads alongside elective procedures, Boston Scientific did not reinstate financial guidance for 2020 and cautioned that infection “flare-ups” in states like Texas and Florida may impact recovery.
Dive Insight:
Boston Scientific entered the second quarter in a tough spot, with U.S. revenues in April down 55%. By June, those year-over-year declines were about 12%, and all businesses have continued to “improve nicely” in July, Mahoney said. Those closer-to-normal sales allowed a return to pre-pandemic manufacturing levels throughout most of its network and ended a broad four-day work week policy it imposed as a cost-saving measure this spring.
Although sales in the Asia-Pacific region were down 14% during the quarter, in China they grew 2%. Europe, on the other hand, lags the U.S. recovery.
The cardiovascular division fared the best during the quarter, seeing a 25% decline in organic sales, followed by MedSurg (down 28%) and Rhythm and Neuro (down 33%).
Change in average daily organic sales by business vs. 2019
| Business | April | June | Q2 |
|---|---|---|---|
| Core Interventional Cardiology & Structural Heart | -43% | -24% | -29% |
| Peripheral Interventions | -28% | -9% | -17% |
| Cardiac Rhythm Management | -45% | -21% | -29% |
| Electrophysiology | -59% | -28% | -39% |
| Neuromodulation | -84% | -11% | -43% |
| Endoscopy | -43% | -10% | -26% |
| Urology/Pelvic Health | -58% | -12% | -32% |
| TOTAL COMPANY | -47% | -17% | -29% |
SOURCE: Boston Scientific
The neuromodulation and urology and pelvic health businesses saw the most dramatic recoveries following April lows. Boston Scientific noted most procedures across its product lines can be performed outpatient, excluding most of the cardiovascular portfolio. That positioning is a long-term tailwind, Mahoney said, calling it "strategically the direction we're headed in" as the company sees hospitals shifting more procedures to ambulatory surgery centers or office settings.
Overall, the company’s recovery has tracked with the outlook given following the first quarter. Mahoney said Boston Scientific still expects the third quarter to be better than the second, although it will likely still be down when compared to 2019, with hopes to return to growth in the fourth quarter.
The recovery in certain businesses like neuromodulation, or for procedures implanting its Watchman device to prevent stroke in atrial fibrillation patients, has been helped by doctors working extra hours or weekends to get through a backlog. But it’s been bolstered by new patients in the pipeline too.
“We have seen a healthy new funnel,” Mahoney said, citing internal company insights, and that trend has reportedly persisted for high-margin products like Watchman, for example, despite COVID-19 headwinds in certain regions.
The U.S. rollout of Watchman FLX, the newest version of the key structural heart product that received FDA approval last week, is happening now and will transition into a full launch in the fourth quarter.
On a relative basis, the Watchman FLX launch is “far less impacted by COVID,” Mahoney described, given its lesser need for new in-person proctoring or training. But another big Boston Scientific launch this year, the Exalt D single-use duodenoscope, saw a clear slowdown in new centers opening in the second quarter due to the capital equipment and training involved.
Asked about how Boston Scientific may look different in a post-pandemic world, Mahoney said the experience of COVID-19 has accelerated the company's embrace of new tools for virtual physician education and remote proctoring and service capabilities. Many cases will still require clinical salespeople, Mahoney said, but Boston Scientific intends to leverage digital platforms.
