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Boston Scientific's 4Q04 (Dec) results were somewhat anticlimactic considering the medical device maker preannounced sales on January 11, but they were still a positive confirmation of the company's growth. EPS soared 188% to $0.49 (consensus of $0.48) thanks to the contribution of its drug-eluting stent. Taxus was not introduced until late 1Q04 (Mar), so Boston Scientific benefited from easy comparisons.


Although growth rates in 2005 will undoubtedly slow (particularly as the company laps its Taxus introduction), Wall Street projections still call for 34% in EPS growth and 17% in revenue growth. The REALITY trial, scheduled to be released in March, should help maintain Taxus' 65-70% market share as it pits Taxus against Johnson & Johnson's (JNJ) Cypher. Previous studies have demonstrated Taxus' better restenosis rate (which measures the rate of artery reblocking). Finally, the follow-up drug-eluting stent to Taxus contines to progress through development with enrollment scheduled to end this year and approval for mid-2006.

Trading at a low 15.4x estimated FY05 earnings (a noticeable discount to peers and the S&P 500), BSX is arguably undervalued considering its growth prospects and high rate of cash generation. Growth-oriented investors should consider adding positions to BSX as a leveraged play on the medical device space.
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