Boston Scientific Investors Jump Ship After Recall

Investors are bailing out of Boston Scientific Corp.'s stock. Again.

The company says it is recalling two of its heart devices after failing to notify the Food and Drug Administration about changes in the way the products were manufactured. To assure safety, device makers have to get FDA clearance for the way they make their products.

While the company says there are no safety concerns with the devices, implantable defibrillators, investors heard enough. The shares plunged 19 percent to $6.32 in midday trading.

"We are acting voluntarily and expeditiously to resolve this situation, and we have seen no evidence of any risk to patient safety. We apologize for the inconvenience these actions will cause patients and physicians," CEO Ray Elliott says in a statement.

The company adds in a release that it "plans to fully evaluate the impact of these actions on its financial results and provide an update when the evaluation is completed. Given the financial uncertainty involved, these actions could have a material impact on the company's previously issued guidance, including revenue, operating profit and cash flows for the first quarter and full year of 2010."

Lawrence Neibor, an analyst at Robert W. Baird & Co., predicts the lost revenue from the recall will decrease Boston Scientific's 2010 earnings per share by 14 cents. The average EPS estimate of 23 analysts for full-year earnings is 45 cents, according to Thomson Reuters.

This bit of bad news follows last month's announcement that the company will cut 1,300 jobs, reshuffle management and restructure. That news followed a report of weak quarterly earnings and led to another selloff of shares. Much of the company's troubles (and the products involved in today's recall) trace back to the $27 billion takeover of Guidant, which is considered one of the worst acquisitions ever.