Boston Scientific Corp (BSX.N) plans further layoffs in its biggest business unit for pacemakers and other heart devices, the company told Reuters, and a source said the layoffs will affect about 5 percent of staff within the unit's clinical division.
The move is the latest by Boston Scientific to shore up its business in the face of slow growth and price pressure on many of its products. Last week, larger rival Medtronic Inc (MDT.N) said it would cut 2,000 jobs.
A source close to Boston Scientific said on Wednesday the layoffs will affect about 5 percent of employees in the clinical division of its cardiology, rhythm and vascular (CRV) business and about 2 to 3 percent of sales people in that business unit.
After the Reuters report, a spokesman for Boston Scientific confirmed there will be layoffs, but declined to provide details. Shares in the company fell as much as 4 percent.
During a conference call with employees on Wednesday, Chief Medical Officer Keith Dawkins said the job cuts were necessary to be competitive.
We have to be responsible to our shareholders, he said, adding that management hopes to increase shareholder value by 70 percent over the next three years. Everyone at leadership level thinks it's doable.
Tim Nelson, analyst with Nuveen Asset Management, said Boston Scientific would do well to reinvest some of the savings into research & development to see new avenues of growth.
So when I hear they're cutting sales (staff), I say that makes sense, Nelson said. You cut back and take those incremental dollars and put them in R&D.
He noted that Boston Scientific spends about $1 billion annually in R&D and probably should spend more.
About a year ago, Boston Scientific, in the throes of a massive turnaround, combined its cardiac rhythm management and vascular units to achieve greater efficiency.
Under Chief Executive Raymond Elliott, who took the helm in July 2009, the medical device maker has been selling unprofitable units and acquiring new businesses to counter slow growth in its key markets for pacemakers, implantable heart defibrillators and heart stents.
Elliott has said his strategic plan -- which also includes paying down debt, investing in emerging markets and placing a sharper focus on research and development -- may not bear fruit until early 2012.
Boston Scientific had about 25,000 employees at the end of 2010, according to the company's 10k annual report.
Boston Scientific shares were down 2.5 percent at $7.33 in afternoon trading on Wednesday after falling as much as 3.9 percent.
(Reporting by Debra Sherman; Editing by Derek Caney, Matthew Lewis, Gary Hill)