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Boston Scientific Staying With Guidant Deal Despite FDA Warnings

By Reuters
Published | Updated

BOSTON – Boston Scientific Corp. (BSX) said on Tuesday it will continue with its plans to acquire rival medical device maker Guidant Corp. (GDT) despite Guidant's issuance last week of a profit warning and a warning letter from the FDA.

"We continue to move forward with our due diligence with the goal of reaching a definitive agreement with Guidant," said Paul Donovan, a Boston Scientific spokesman.

Guidant said last Friday that its fourth-quarter profit would fall short of analysts' expectations because of a June recall of its implantable defibrillators.

The company's shares fell 2.4 percent to $65.40 on Tuesday on the New York Stock Exchange.

"This is going to test Boston Scientific a little," said Benjamin Andrew, an analyst at William Blair & Co. "The pressure on Guidant's cardiac rhythm management franchise that we're seeing and its lack of recovery will have a dramatic impact on earnings."

Theoretically, Boston Scientific could use this and any other bad news to negotiate a price cut, but if it cuts its $25 billion offer made earlier this month, it would come close to a reduced previous offer of $21.5 billion made by Johnson & Johnson (JNJ), Andrew said.

Guidant on Friday said it expects to earn a profit of 17 cents to 23 cents a share in the fourth quarter, including one-time items of 8 cents a share. Analysts had on average expected the company to make a profit, excluding one-time items, of 49 cents a share, according to Reuters Estimates.

Guidant on Tuesday also said it received a warning letter from the Food and Drug Administration related to quality-control issues at a facility in Minnesota. The agency had already requested certain actions by the company and last week it asked for more, Guidant said.

Until Guidant fully complies with the FDA's requests the agency will not grant requests for exportation certificates to foreign governments or approve certain products in development, the company said.