Boston Scientific shares drop on profit warning

CHICAGO (Reuters) - Boston Scientific Corp. shares tumbled to a four-year low on Friday after the company issued a profit warning for the third quarter, prompting at least one major Wall Street firm to raise questions about the company's management and cash situation.

The late-Thursday profit warning sparked several broker downgrades and led to the biggest one-day share-price decline in about 5-1/2 years.

The sell-off reflects not just weaker-than-expected profits, but also concerns about an impending cash crunch, said Citigroup analyst Matt Dodds.

"Is there something worse lurking here? They've got a lot of debt and not a lot of wiggle room. This company is on a tight rope," said Dodds, who until this week was the only Wall Street analyst who had a "sell" rating on the stock.

The company was not immediately available to comment.

Boston Scientific earlier this year took on about $9 billion in debt to help pay for troubled cardiovascular device maker Guidant Corp.

Fueling investors' concerns was the lack of clarity about the company's long-term prospects.

The company is scheduled to report its third-quarter results on October 18 and will provide another update to Wall Street on November 6 when it holds an analyst meeting at its headquarters.

RELIANT ON TAXUS

The acquisition of Guidant, Dodds added, has served to make Boston Scientific more reliant on Taxus drug-coated stent sales. That market is slowing amid growing concerns that the newer generation of stents carry a higher risk of developing sometimes deadly blood clots.

"Where is the board?" he said. "This board has allowed this company to implode."

Late Thursday, the company said adjusted earnings excluding acquisition charges, third quarter sales and worldwide sales for its top-selling Taxus drug-coated stent would fall well short of estimates.

The stock was down $1.66, or 10.2 percent, at $14.70 in heavy midday New York Stock Exchange trade after touching a low of $14.45 earlier in the session.

Prudential Financial analyst Lawrence Biegelsen cut his investment rating to "underweight," citing deteriorating fundamentals, and lowered his share-price target to $14.

Banc of America, RBC Capital Markets, Morgan Stanley and

UBS also reduced their ratings, and Citigroup dropped its price target to $14 from $15. CIBC also cut its price target, to $28 from $29.

"The (implantable cardioverter defibrillators) and stent markets are each contracting, competition is increasing in stents, and on both sides of the business there are important outstanding issues to be resolved with the FDA," JP Morgan analyst Michael Weinstein wrote in a research note.

"This outlook must improve before the stock starts working again, and before the Street can gain any confidence that Boston Scientific has in it the ability to earn at least $1 a share," he added.

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