Pfizer Swiss subsidiary sold for $2.1 billion in cash Analysts call purchase by Boston Scientific expensive but worth it

Surgical supplies

June 17, 1998|By BLOOMBERG NEWS

NATICK, Mass. -- Boston Scientific Corp., one of the top three U.S. makers of medical devices, said yesterday that it will buy Pfizer Inc.'s Schneider Worldwide unit for $2.1 billion in cash to give it more products for clearing clogged arteries.

Pfizer, one of the world's biggest drugmakers, said in February that it was looking to sell Schneider, which makes stents used to prop open arteries and devices for angioplasty, a procedure to clear blood vessels.

The move will help Boston Scientific compete with Johnson & Johnson, Guidant Corp. and Arterial Vascular Engineering Inc. in the highly competitive market for stents. Schneider sells peripheral stents, which are used in blood vessels in areas outside the heart, such as the kidneys and neck.

"They're buying a future for the next 10 to 20 years," said Sharon di Stefano, an analyst at Josephthal & Co., who gives Boston Scientific a "buy" rating. "They will be a force in minimally invasive procedures in all parts of the anatomy."

Boston Scientific rose $1.75 to close at $62.75. Pfizer rose $1.6875 to $109.6875.

The company expects to get federal approval next month to sell its coronary stent. Buying Schneider gives Boston Scientific wider access to the stent market, along with Schneider's rapid-exchange technology, which allows easier removal and exchanges of balloons used in angioplasty than other methods do.

Schneider, based in Bulach, Switzerland, had sales of about $330 million last year. Though Schneider isn't coming cheap for Boston Scientific, it's worth the price, and Boston Scientific probably will shed some of Schneider's infrastructure, analysts said.

"They can justify the price based on the technology they're going to acquire and the tremendous cost savings they can realize," said Darrell Riley, an analyst at T. Rowe Price, which owns shares in Boston Scientific.

Though Boston Scientific's earnings fell in the fourth and first quarters as a strong U.S. dollar cut into international sales, its shares have risen more than 30 percent this year on expectations of strong domestic sales of NIR coronary stents once the product gets Food and Drug Administration approval.

"Boston Scientific will become the dominant player in peripheral vascular intervention," said Sam Navarro, an analyst at Furman Selz LLC. "Beyond 1998, the peripheral stent market will absolutely grow faster than coronary, and there's less competition."

Kurt Kruger at NationsBanc Montgomery Securities, who has a "buy" rating on Boston Scientific, estimates the worldwide market for peripheral stents at $250 million to $300 million a year. Estimates for the global coronary stent market range from $1.6 billion to $2 billion.

The acquisition, expected to close this year, will reduce earnings for Boston Scientific to $2.47 a share next year, company officials said, down from the $2.60 the company was projecting.

Pfizer has two other divisions in its medical technology group. The Howmedica unit sells orthopedic devices and the American Medical Systems unit sells urologic implants used to treat impotence and incontinence.

Pub Date: 6/17/98

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