Boston Scientific is cutting up to 1,000 more jobs as it deals with a new medical device tax from the U.S. health care overhaul, limited growth prospects in certain markets and pressure to cut prices on its products in other countries.
Still, the Natick, Mass., company's shares jumped Tuesday after the maker of pacemakers and heart stents reported fourth-quarter results and a 2013 profit forecast that exceeded Wall Street expectations.
In a push to trim costs, Boston Scientific Corp. plans to cut 900 to 1,000 jobs this year, which will include layoffs as well as the elimination of unfilled positions. That comes on top of a restructuring plan started in 2011 that included 1,200 to 1,400 planned job cuts. The company employs roughly 24,000 people worldwide, and the additional cuts could amount to as much as 4 percent of the company's workforce. Boston Scientific hasn't decided where the additional cuts will be made, said spokesman Steven Campanini.
Boston Scientific expects to reduce annual operating expenses, before taxes, by about $340 million to $375 million by the end of this year. That includes expected savings of $100 million to $115 million from the additional restructuring measures announced Tuesday. The company expects to reinvest a big portion of that savings in areas where it expects future growth, like the emerging markets of China and Brazil.
In the United States, meanwhile, the health care overhaul calls for a tax on medical devices to help pay for coverage of millions of uninsured people. While the industry strongly opposes this, a 2.3 percent tax on sales of devices used mainly by doctors and hospitals, like pacemakers and CT scan machines, is starting this year. The tax is expected to collect more than $29 billion from the industry over 10 years.
Device makers argue that it would make it harder for companies to develop innovative new devices.
In the fourth quarter, Boston Scientific's net income shrank 44 percent to $60 million, or 4 cents per share, as it absorbed charges for restructuring and litigation. Not counting these charges, earnings were 18 cents per share. Revenue slipped 1 percent to $1.82 billion.
Analysts forecast, on average, earnings of 11 cents per share on $1.76 billion in revenue, according to FactSet.
For the year, Boston Scientific expects adjusted earnings of 64 to 70 cents per share on revenue of $7.05 billion to $7.35 billion. Wall Street predicted a profit of 43 cents per share on revenue of $7.11 billion.
Last year Boston Scientific reported a loss of $4.07 billion — or an adjusted profit of $933 million, or 66 cents per share — on revenue of $7.25 billion.
In the current quarter, Boston Scientific expects adjusted profit of 14 to 17 cents per share on revenue of $1.74 billion to $1.82 billion. Analysts expected profit of 10 cents per share on revenue of $1.79 billion.
The company's shares rose 24 cents, or 3.5 percent, to close at $7.10 Tuesday. The stock peaked earlier in the morning at a 52-week high of $7.43.