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A Look at Boston Scientific’s Operating Margin in 2019

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Operating margin guidance

On its first-quarter earnings conference call, Boston Scientific (BSX) reiterated its 2019 adjusted operating margin guidance of 26%–26.5%, a rise of 50–100 basis points YoY (year-over-year). This guidance was in line with the company’s long-term adjusted operating margin of more than 30%.

In the first quarter, the company reported an adjusted operating margin of 25.6%, in line with its guidance of 25%–26%. In the second quarter, the company guided for an adjusted operating margin of 25%–26%.

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Headwinds

Boston Scientific has reduced its 2019 revenue expectations for its Eluvia DES (drug-eluting stent) by 50%. The company expects the concerns raised by the FDA about paclitaxel-coated balloons and paclitaxel-eluting products to continue to affect the uptake of Eluvia in the United States and Europe in the second quarter. The company is also focused on discussing Eluvia’s unique design characteristics with the FDA. However, it expects Eluvia’s commercial launch to continue at a normal pace in Japan.

According to the company’s first-quarter earnings conference call, Boston Scientific expects the 50% fall in Eluvia’s revenue forecast for 2019 to be offset by a tax benefit that will accrue from the second quarter to the fourth quarter of 2019.

On April 16, 2019, the FDA issued a notice requiring all manufacturers to stop the sale and distribution of surgical mesh products indicated for the transvaginal repair of pelvic organ prolapse in the United States. In the aftermath of this announcement, on its first-quarter earnings conference call, Boston Scientific guided for a negative impact of $30 million on its 2019 revenue and a negative impact of $0.02 on its 2019 adjusted EPS. The company had already reported a $5.0 million revenue impact and a $0.01 adjusted EPS impact in the first quarter.

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