Just a day after reporting a massive restructuring that includes the loss of 2,300 non-manufacturing jobs (Medical Device Daily, Oct. 19, 2007), Boston Scientific (Natick, Massachusetts) on Friday reported a 3Q07 loss of $272 million, primarily related to acquisitions and asset sales.

The company blamed the losses on a number of one-time charges, driven in part by corporate acquisitions and costs associated with the company’s planned sale of its auditory and drug pump business.

The company’s 3Q07 loss of $272 million, or 18 cents a share, compared with a profit of $76 million, or 5 cents a sahre, in the year-ago quarter.

Sales rose 1% from $2.026 billion a year ago to $2.048 billion, falling short of the $2.057 billion consensus estimate of analysts surveyed by Thomson Financial.

Despite the losses, the performance still beat Wall Street analysts’ profit expectations.

Not counting $435 million expenses related to acquisitions and asset sales, the company’s profit in the latest quarter was 20 cents a share, compared with 10 cents a share a year ago. The latest quarter’s profit, not counting the charges, easily beat the consensus estimate of analysts surveyed by Thomson Financial, who expected a per-share profit of 7 cents.

Despite the precipitous loss, Jim Tobin, president/CEO of Boston Scientific, said during Friday’s conference call that the company exited the quarter in good shape.

“The fundamentals of this market remain strong,” he said, “and I’m optimistic that we’ll see continued improvement and sequential gains next quarter and into 2008.”

Boston Scientific has been struggling as two of its key markets have been pummeled by safety concerns. Demand for DES systems has receded over the past year after reports the devices could cause deadly blood clots long after implantation.

And implantable cardioverter defibrillators (ICD) demand has been weak since 2005, after several high-profile product recalls, mostly by Guidant (Indianapolis), which Boston Scientific acquired last year, specifically to add Guidant’s cardiac rhythm management (CRM) business.

Piling on to those concerns, last week rival Medtronic (Minneapolis) recalled its Sprint Fidelis leads, saying the equipment may have contributed to five patient deaths (MDD, Oct. 16, 2007).

Citing progress in the CRM sector, Tobin noted the resolution in April of warning letters from the FDA that Medtronic inherited with its acquisition of Guidant.

“The successful resolution of the CRM warning letters allowed us to move well into the next phase of our strategy, strengthening the pipeline and resuming our new product cadence,” said Tobin.

The company reported worldwide CRM quarterly sales of $517 million, a 16% increase over the prior year period. U.S. CRM revenue was $343 million, also a 16% increase over 3Q06.

While Tobin expressed optimism that the CRM market opportunity was on the rebound, he acknowledged that Medtronic’s problems with its leads could spill over to hurt the industry as a whole.

“The lead situation is a tough one for the market,” he said. “This is not going to help restore confidence. I don’t view this episode as being helpful to market growth ... This isn’t something that has us dancing in the aisles.”

On the DES front, the company said that it became the global leader in DES sales during the quarter, but that net sales remained flat at a little over $2 billion, about even compared to 3Q06.

Also, the company’s net stent sales declined. DES sales, for example, generated $448 million in global sales during the quarter, compared to $572 million in 3Q06.

Excluding the U.S., international sales experienced a solid increase, jumping to $208 million during 3Q07, compared to $188 million a year ago.

“We saw a number of signs and sentiment towards PCI among referring cardiologists was stable or shifting positively,” said company COO Paul LaViolette.

LaViolette noted that DES penetration in 3Q07 was 63% in the U.S., 48% in Europe and 68% in Japan, “clearly indicating that we have a very steady worldwide DES market.”

Information concerning restructuring initiatives reported by the company on Thursday was not as detailed as analysts had hoped, and company executives declined to provide information on how the layoffs would impact various business units.

Sam Leno, company CFO, said that to make the restructuring decisions, the company did trend analyses of each division, each region and each corporate staff over the past four to five years of and compared that to its five-year strategic plan for each of those segments.

While declining to get into job cut specifics, LaViolette said the company does not intend to sacrifice large numbers of its sales force. “[W]e don’t believe we are going to be a stronger company with significantly smaller sales forces.”

Pressed concerning future opportunities beyond CRM and DES, Leno acknowledged that the company will have to earn back investor confidence.

“[Y]ou are not going to get comfortable with our ability to grow until you see us grow. So, I am not going to spend any time trying to convince you that that’s what’s going to happen,” he said. “If you step back from this thing and think about what we were trying to do strategically, we were trying to take the profitability that we saw with Taxus and redeploy that into growth areas.”

He said the growth Boston Scientific once enjoyed will return “when the pain of DES market readjusting itself is annualized in. So, we’ll get back to reasonable growth in the legacy business and then have growth engines with CRM and Advanced Bionics [Valencia, California] and the reason for that is simply that there is a new product pipeline in both of those businesses as well as DES.”

LaViolette added: “[O]verall ... you have seen in the past couple of years ... a company that’s grown very rapidly from the $3 billions scale to the $8 billions scale, while investing aggressively in warning letter remediation and integration of two very big deals with Guidant and Advanced Bionics — and not really taking a breath anytime along the past 36 months to actually grow more appropriately into our scale and to put efficient business processes in place.”

The company forecast 4Q07 earnings of 14 cents to 19 cents a share, estimating 4Q sales at $2.05 billion to $2.15 billion.