Boston Scientific said Tuesday it will prune another 900 to 1,000 jobs from its global workforce as it tries to manage the effects of the new medical device tax while investing in new products and geographical markets.
Boston Scientific to cut up to 1,000 more jobs
The new layoffs will bring total cuts to 10 percent of the workforce. Cuts in Minnesota aren't yet known.
January 30, 2013 at 5:30PM
The job cuts, part of a broader restructuring program started in 2011, will bring the total number of reductions to 2,400, or 10 percent of the company's workforce. What remains unknown is how many of those cuts will happen in Minnesota, where Boston Scientific, one of the world's largest medical device companies, employs about 5,000 people in Maple Grove, Arden Hills and Plymouth.
So far, the company hasn't calculated the cuts by business unit or state, said Michael Mahoney, the company's president and CEO. During an interview with the Star Tribune, he sought to reassure Minnesota workers that their jobs will play key roles in Boston Scientific's newer technologies.
"I think the investor community and our employees want to see a path to growth," said Mahoney, speaking of the company's Twin Cities operations.
Boston Scientific's Maple Grove facility will help develop the company's latest aortic valve technology, as well as implement new ways to treat chronic hypertension, Mahoney said. The company's Arden Hills operations will play a critical role in the development of a defibrillator that can connect to the heart without wires.
"I am optimistic that those businesses will fuel future growth," Mahoney said.
The job reductions, announced as the company released its latest quarterly financial results Tuesday, are expected to save an additional $100 million to $115 million for Boston Scientific, which posted some $7.25 billion in sales for 2012. The Natick, Mass.-based firm plans to redirect its cost savings toward investments in faster-growing regions and technologies.
Mahoney said the new medical device tax, which the federal government has begun collecting from Boston Scientific and competitors such as St. Jude Medical and Medtronic, played a role in Boston Scientific's decision to cut jobs. The tax on medical device makers' revenues is expected to help pay for changes in the federal health care overhaul.
The major trade association for America's medical technology companies, AdvaMed, reported Tuesday that the first semimonthly payment of the new tax came to $97 million. Medical device companies in Minnesota and nationwide lobbied extensively but unsuccessfully to kill the tax before it took effect Jan. 1. Opponents still hope to repeal or reduce it.
In recent years, Boston Scientific has had to contend with a number of challenges -- from the economic crisis in Europe to fast-moving, innovative competitors. The slowing of the medical technology marketplace has made it difficult for companies to "right-size" their operations -- prompting some to make a string of jobs cuts, said Thom Gunderson, a senior analyst with Piper Jaffray Co.
"Then the business goes down more, and they have to cut more," Gunderson said. "What don't you know is a rough question to answer."
Any further loss of medical device jobs could hamper the Twin Cities economy, said Steve Hine, director of Minnesota's Labor Market Information Office. Such workers typically command high salaries, driving spending in areas ranging from retail to housing.
"Losing jobs at the top of the income distribution is in many ways an even greater blow to the economy than losing jobs in the middle," Hine said.
"Losing our position of prominence is this area is a bit disconcerting because of what it might mean in the future, for when this sector is likely to be even more important than it is now," he added.
Still, Boston Scientific's latest moves were greeted with some optimism Tuesday; its stock price rose nearly 4 percent. Some analysts credited the company's fourth-quarter sales, which beat expectations, as well as its optimistic outlook for 2013. The company said sales will improve over the next several months through the introduction of new products.
In a note to investors, Danielle Antalffy, an analyst with Leerink Swann Research, said Boston Scientific's financial report has raised expectations.
"Given that investors are focused intently on [Boston Scientific's] ability to return to top-line growth, we view initial 2013 guidance positively."
Business writer Dee DePass and Bloomberg contributed to this report.
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Health care spending rose by 15%, driven by higher prices. Officials say solutions are needed to prevent Minnesotans from being priced out or delaying care they need.
