Boston Scientific’s Robust Product Portfolio Should Bolster Its Narrow Economic Moat

Boston Scientific BSX has solidified its footing as one of three major cardiac device makers and significantly improved its innovation and operational chops. We think the firm’s ability to emerge strongly from nearly a decade of acquisition and management upheaval underscores just how tough a competitor Boston is as well as how difficult it is for any new competitors to establish a foothold in these highly consolidated device markets. Under CEO Michael Mahoney, the firm has focused on introducing meaningful innovation and leveraging its historically formidable sales and marketing resources.

Mahoney has shifted Boston to be less reliant on the traditional cardiac rhythm management and stent businesses, which are mature at this point, to focus on new technologies. Boston has tapped into novel platforms, including its Eluvia stent for peripheral use, subcutaneous implantable defibrillator, and left atrial appendage closure and atrial fibrillation products. Even in the markets facing slower growth, Boston has bolstered its significant presence by consistently introducing new products. For example, Boston has maintained its strong position in drug-coated coronary stents and has introduced a line of single-use endoscopes, building on its footprint in the cardiac and gastroenterology markets. Despite trailing Medtronic on cardiac rhythm management, Boston remains in the game there with launches of comparable technologies and respectable market share.

The firm recently retrenched in the transcatheter aortic valve market after discontinuing its Lotus device. Though we’re not particularly optimistic about its new Acurate Neo TAVR franchise, we think Boston’s extensive and differentiated product portfolio can maintain growth. The big question is whether Boston’s wide-ranging presence across device categories will be enough to maintain its competitive position, especially as rivals (including Medtronic, Stryker, Johnson & Johnson, and Abbott) seek further consolidation to solidify their place as hospital vendors. We would not be surprised if competitive medical technology companies may be eyeing Boston.