Boston: return to heaven?

After several problems, Boston Scientific is returning from hell:

• Reshuffle the board governance.
• FDA warnings.
• Stents quality.

Can we take it for granted? Or the Guidant purchase still is the major obstacle?

Boston: a revolution?

Boston Scientific shares decreased 3.4%, today.

But, today the market recuperated some strength. Then, why Boston decreased so much?

The reason: a significant change in Board Governance.

Take the revolution in Boston:

First: (Boston Scientific) will require its CEO to own at least 240,000 shares. Executive vice presidents must own a minimum of 75,000 shares and senior vice presidents must obtain at least 20,000 shares.

Second: Shares will be worth five times the base salary of the CEO, three times the executive vice presidents' salary and one times the base salary of senior vice presidents.

Third: Executives must reach stock ownership levels within five years from the date the guidelines were adopted or the date they became an executive officer -- whichever one is later.

Forth: The new standard mandates that any director nominee not elected by a majority of votes cast to submit a resignation letter after the shareholder vote. The company's governance committee will then either recommend or reject the letter.

Fifth: The board recommends phasing in annual elections of directors and shareholder approval of an amendment that require directors to be elected annually for a one-year term, instead of the current three-year terms.

This is a real revolution. But, we like this approach. The market is making a NO.

Boston: strong wind

Boston Scientific is loosing today, almost 3%, and this occurs, because of this news: The medical device maker Medtronic is planning three major product launches this year including an implanted device meant to be an early warning system for heart disease patients.

Another "nervous" point for investors is: For 2007, the company has concluded that forecasting the rate of growth in the cardiac rhythm management market and the drug-eluting stent market will be difficult, given the events and volatility in both markets during 2006. Since these two markets are so significant to the company's forecasted results of operations in 2007, the company believes it is appropriate to provide guidance only for the first quarter.

We still believe in Boston.

Boston, again!

We like Boston Scientific. Things were not good, particularly after Guidant take-over. Market makers do not like poor performance, and Boston did not return properly, after Guidant purchase. Boston still is far away from good performance: I suspect they overpaid for Guidant, and their CFO was unhappy with the amount of leverage. Clearly, they need to fix the balance sheet and said they would do so. But that will take some time.

But, current situation is better: The observational study published in the Feb. 1 issue of the American Journal of Cardiology, the company said, showed drug-eluted stents reduced the risk of myocardial infarction, or heart attack, and death by 23 percent and 32 percent, versus 3.7 percent and 4.7 percent in bare-metal stent patients.

Boston II

The trend of Boston Scientific is good: up, with good volume, away from huge volume. More than 20% gain in three months. Sustainable.

Boston

Look to this trend, from Boston Scientific? After the storm....

Dangerous links

We like Boston Scientific, because they are a healthcare company and a specialist in stents. Nevertheless, today we have this: "Six physicians with financial ties to Johnson & Johnson and other heart-device makers will be advising U.S. regulators whether to restrict the use of some products because of potentially lethal side effects" and "The panel members, listed on an FDA Web site Nov. 22, will include Robert Harrington, who runs a Duke University research institute funded by stent makers J&J and Boston Scientific Corp".

We don't like this. To us, this is a bad practice. Let's see, what will say the markets today.

Healthcare stocks

One of the major drivers of services today is healthcare services. We can see a vast horizon of healthcare businesses, but we like particularly the medical devices business: pacemakers, CT, RM, ultrasound, etc.

Boston Scientific is a major medical device's player. Nevertheless, they are in bad shape, even before buying Guidant, another device's company. Sometimes, market makers love mergers and acquisitions, sometimes they don't like.

If we compare Boston Scientific with another medical devices Company, such as Johnson and Jonhson, Boston is a laggard: from 2 years ago, Boston returned - 60% versus Johnson + 10%.

We think future will be better for Boston, particularly because this: "Drug-coated stent makers are confident a Food and Drug Administration advisory panel, convened to examine the safety of the devices, will turn up no new surprises next week" and "Boston Scientific's Taxus and J&J's Cypher are the only two FDA-approved drug-coated stents. The worldwide market for the devices is estimated at more than $5 billion".

Charles Brandes, a billionaire investor, bought Boston some days ago.