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Boston Scientific seeks ways to grow

Overseas markets, new niches are keys, chief says

CEO Mike Mahoney: “A new era”

CEO Mike Mahoney: “A new era”

Facing sluggish sales in its largest businesses, Boston Scientific Corp. must be prepared to grow faster than the overall industry, wrest market share from competitors, and expand into more rapidly growing niches, its top executive told investors Tuesday.

Mike Mahoney, who joined the Natick-based medical device maker in 2011 and was elevated to chief executive in November, outlined his strategy at a New York meeting with investors and stock analysts that was webcast to shareowners.

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“We really do see this as a new era for the company,” Mahoney said. “Clearly, these are challenging markets, but they are the markets we have to compete in. We believe that the innovations in the portfolio that we have will improve patients’ lives.”

Mahoney said the markets Boston Scientific serves — notably its interventional cardiology and cardiac rhythm management segments, which account for almost 60 percent of its sales — shrank 1 percent in 2012 after growing 3 percent in 2010. At the same time, the company’s revenue slipped to $7.2 billion from $7.8 billion in that period as it lost ground to rivals.

But Mahoney said Boston Scientific’s core markets should stabilize this year, and grow by 2 percent in 2015 and by 4 percent in 2017. He said the company will have to outpace its rivals in slow-growing markets while boosting its business in adjacent markets that are expanding faster, such as endoscopy, urology, and women’s health.

Beyond those areas, Boston Scientific will roll out new products to treat severe asthma, hypertension, atrial fibrillation, and other conditions, Mahoney said.

Boston Scientific shares, which have been climbing steadily since December, dropped 5 cents to $7.58 Tuesday, a 0.6 percent decline on the New York Stock Exchange.

Mahoney, who formerly headed the medical device and diagnostics business for rival Johnson & Johnson, acknowledged Boston Scientific still faces strong headwinds, including a new federal medical device tax that will help pay for President Obama’s health care overhaul. The tax will cost Boston Scientific about $75 million this year, Mahoney said.

But the company also sees some trends moving in its favor, he said, including an aging US population, an expanding product line, and strong growth in emerging markets such as China, India, Brazil, and Russia. Those markets accounted for just 4 percent of Boston Scientific revenue last year, but should make up 10 percent of sales by 2017, he said.

“We really are acting like a global company now,” Mahoney said.

The company’s push into developing countries like India and China, where health care systems are modernizing quickly, is helping to offset slower growth in the United States and other advanced economies, said Maria Shepherd, founder of Data Decision Group, a market research firm in Lincoln. That is especially true in mature markets such as heart rhythm management, where Boston Scientific sells products such as catheters and defibrillators.

“When the market’s only growing at 2 or 3 percent a year, you have to find places where it’s growing at a faster rate in order to get some value out of a mature business,” Shepherd said.

Boston Scientific has also been revamping its management and commercial structure in response to the changes transforming the health care industry worldwide.

As hospitals and doctors increasingly consolidate into “accountable care organizations” that purchase medical supplies in bulk, Mahoney said, Boston Scientific has been working to align the incentives of its sales force with those of customers — health care systems facing cost pressures from government cutbacks and insurance companies that are pushing them to accept fixed budgets for patient care. To succeed in that environment, he said, the company must convince customers that its products will save them money by keeping patients healthy.

On the financial front, Mahoney said Boston Scientific planned to boost its store of cash from $200 million at the end of last year to $6.5 billion over the next five years, enabling the company to buy back stock and acquire companies with complementary medical technologies.

Boston Scientific has eliminated more than 1,000 jobs over the past three years, and last month said it expects to cut another 900 to 1,000 worldwide as part of an ongoing restructuring.

The company now has about 24,000 employees globally, including between 2,000 and 3,000 in Massachusetts where it is planning to sell its Natick property off Route 9 and move its headquarters to a campus in nearby Marlborough.

Mahoney hinted Tuesday that he could order even more cuts down the road.

“We still believe there’s a lot of room for Boston Scientific to become leaner,” he said.

Robert Weisman can be reached at weisman@globe.com.
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