Boston Scientific (BSX) stock toppled to a six-week low Thursday after the medtech-maker said it will delay its Lotus heart valve amid mechanical issues, giving rivals Medtronic (MDT) and Edwards Lifesciences (EW) a boost.
In the stock market today, Boston Scientific stock fell 2.7% to 24.47, after plunging as much as 7.4%. But Edwards Lifesciences stock jumped 3.8% to 95.71, and Medtronic climbed 1.4% to 80.76.
Needham analyst Mike Matson argued that investors overreacted. According to an 8-K filed by Boston Scientific early Thursday, the removal was voluntary and would enable the company to deal with the premature release of a pin connecting Lotus to the delivery system.
The company noted "excess tension in the pin mechanism introduced in the manufacturing process." Boston is expected to relaunch Lotus in Q4.
IBD'S TAKE: Boston Scientific is taking on Edwards Lifesciences and Medtronic with a key acquisition. Read on in Sector Leaders for details of its recent buy and how the new business could help Boston take on its rivals.
Matson estimates that Boston will be taking a 3-cent hit to earnings in 2017. Boston earlier guided to $300 million in structural heart sales in 2017. Matson sees $120 million of that at risk. He had modeled $327 million in structural heart sales, with $142 million from Lotus and $185 million from Watchman.
"We still expect Lotus to be a differentiated share-taker and think today's sell-off (reducing Boston's market cap by about $2 billion) is overdone," he wrote. "We are buyers on the weakness."
Evercore analyst Vijay Kumar expects "Boston Scientific's woes to be an unexpected boon to Medtronic and Edwards Lifesciences."
For Medtronic, this increases confidence that 4% organic top-line growth seen in fiscal Q3 is sustainable, he said, while Edwards could boost sales by one or two percentage points in 2017.
Still, Kumar sees Boston as the third player in the transcatheter aortal valve replacement (TAVR) market. He has a buy rating and 27.50 price target on Boston stock. Matson kept his buy rating and 29 price target on shares.
"While the delay in Lotus is no doubt disappointing, we continue to believe that Lotus could be a meaningful opportunity for Boston Scientific over the medium term," Kumar wrote in a report. "Success in Europe adoption gives us confidence that there is room for a third player in the fast-growing TAVR market."
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