Dive Brief:

• Boston Scientific's preliminary fourth-quarter sales of about $2.71 billion, a 6.8% decline on a reported basis, missed Wall Street expectations of $2.86 billion, citing impacts of the global COVID-19 surge.  
• CEO Mike Mahoney, who presented at the virtual J.P. Morgan healthcare conference Tuesday, said while the company saw low-single-digit growth in October that positive trend gave way to flat to down slightly sales in November and a worsening downward pandemic-related slide in December that offset earlier gains in the quarter.  
• J.P. Morgan analysts in a note following Mahoney’s presentation said they believe the deceleration in December "points to further softness in 1Q given the rise of COVID around the globe" and they expect Wall Street forecasts to "move slightly lower" for the first quarter and potentially the second quarter of the year.

Dive Insight:

Among a handful of other medtechs that preannounced this week to coincide with the J.P. Morgan conference, Boston Scientific emerged as a laggard as the earnings season begins to heat up. The disappointing quarter was driven by falling sales across several of its businesses, including a 12% decline in its cardiovascular franchise and a 6.1% decline in Rhythm-Neuro on a reported basis.   

By comparison, Baxter on Monday preannounced a fourth-quarter beat, $3.18 billion versus the Street consensus of $3.04 billion, driven by strong performance from most of its businesses led by acute therapies and medication delivery. J.P. Morgan analysts said they continue to see Baxter as one of the best positioned medtechs to "provide stability into rising COVID-19 infection rates."

Becton Dickinson also released preliminary results for its fiscal year 2021 first quarter, projecting sales growth that beat Wall Street expectations by over $600 million. While performance was fueled by its COVID-19 testing, multiple business lines beat expectations due to solid elective care volumes and increased demand.

Medtronic CEO Geoff Martha on Monday at the J.P. Morgan conference said due to the coronavirus surge the medtech giant now expects business to be "roughly flat this quarter, on an organic basis, instead of flat to slightly up." However, Martha believes the COVID-19 headwinds will be short lived.     

Similarly, Boston Scientific expects a rebound in procedure volumes this year. However, the company did not provide 2021 guidance on Tuesday.

Nonetheless, Mahoney noted the company's "multi-year financial track record pre-pandemic" grew faster than its peer group. "We believe we're well positioned for the recovery," he added.

It's an optimism shared by Stifel analysts who contend Boston Scientific made a good case that a return to above-average growth is likely as COVID-19 headwinds subside. In a Tuesday note, the analysts argued Boston Scientific's "portfolio mix shift toward higher-growth markets" such as endoscopy, urology, and the Watchman left atrial appendage closure device "should help drive 6-8% long-term ex-COVID organic growth."

Boston Scientific's cardiovascular segment continued to feel the impacts in the fourth quarter of converting U.S. Watchman users to a consignment inventory model, as well as the transition to the newer Watchman FLX product. Still, J.P. Morgan analysts pointed out that Watchman posted stronger underlying growth of 18% in the quarter than its forecast of about 12% "although the $106M headwind related to Watchman consignment reserves came in above expectations for closer to $70M." 

SVB Leerink analysts noted that a lack of 2021 guidance and the fourth quarter sales miss "could drive some weakness" for Boston Scientific in the short term. However, they contend that strong underlying Watchman and MedSurg growth (1.5% reported) in the fourth quarter signals the company's ability to "better manage these procedures through COVID resurgences, with growth ex-COVID likely even faster."  

Boston Scientific will hold its fourth-quarter earnings conference call on Feb. 3.