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Boston Scientific

Boston Scientific. Guidant Acquisition Strategy. Aaron Black Adam Okurowski Peter Serra Ian Seely Anatoliy Chistov. February 13, 2006. Recent Acquisitions. Precision Vascular Systems, Inc. April 4, 2004 Advanced Bionics Corporation June 1, 2004

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Boston Scientific

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  1. Boston Scientific Guidant Acquisition Strategy Aaron Black Adam Okurowski Peter Serra Ian Seely Anatoliy Chistov February 13, 2006

  2. Recent Acquisitions Precision Vascular Systems, Inc. April 4, 2004 Advanced Bionics Corporation June 1, 2004 Advanced Stent Technologies, Inc. March 4, 2005 Trivascular, Inc. April 18, 2005 Rubicon Medical Corporation June 14, 2005 Data provided by: Thomson Financial/First Call

  3. Health Care Supplies Sector Peers Data provided by: Thomson Financial/First Call

  4. BSX and GDT

  5. Strengths Global leader R & D Abbot Labs Tracking System Weaknesses Product Recall J & J Deal Break Fee Debt Load SWOT Analysis

  6. Opportunities Patent Protection Heart Device Market Demographics Threats New drugs J & J acquisition SWOT Analysis (cont)

  7. BSX & GDT - Shapiro • The availability of economies of scale in production - questionable • The possibility of product differentiation • Cost advantages - Combined R&D efforts, patent cross sharing • Monopolistic access to distribution channels -relationship marketing • Protective government regulation - strong regulation of medical products

  8. Porter’s Five Forces of Competitive Position: Healthcare – Medical Instruments & Supplies • New Market Entrants: • VERY high cost of entry • Size & scale • Learning/ Experience Curve • Strong Gov’t Regulation • High Specialization / Differentiation • Access to distribution channels • High R&D Costs • Patent Protection • Competitive Rivalry: • High concentration of wealth • Large industry / high innovation • High fixed & variable costs • Highly Specialized Products • Substitute devices • Low cost foreign imports • Supplier Power: • Powerful brand reputation • Global coverage • Level of quality • Customer relationships fragmented • Possibility of forward integration • Buyer Power: • High – large players • Value conscious customers • Low frequency of change • Specialized purchases • Volumes / Quality • Lower Budgets / Less Vendors • Threat of Substitutes: • Alternatives price/quality • Market distribution changes • Proven technology addresses problem • Substitution of need – obsolescence • New technology

  9. Formulation of Competitive Strategy: Porter ViewA Focus on the External Factors What economic opportunities are there?(need for medical supplies as population ages) What do we do well? Internal Factors External Factors Competitive Strategy What do our customers / regulators expect?(high quality effective devices and supplies) What is the goal of our management?

  10. Barriers and ProfitabilityA Closer Look at One of Porters Five Forces Exit Barriers Low High Low, Stable Returns Low, RiskyReturns Low Entry Barriers High, StableReturns High, RiskyReturns High • As is the case with both Boston Scientific and Guidant, substantial economies of scale in production are usually associated with specialized assets – the presence of proprietary technology and patents.

  11. BSX & GDT - Kauppi Model • Combined Revenues of BSX & GDT > BSX Revenues + GDT Revenues • Achieved by focus on integration and implementation of Kauppi’s acquisition strategies

  12. BSX Strategies– Kauppi Model • Improve or Complete a Product Line • Technology – Build or Buy? • Capitalize on a Company Strength • Past Acquisition Success • Focus on Integration

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