Boston Scientific (BSX) announced Monday it is recalling of all of its implantable heart defibrillators as it didn't notify regulators of manufacturing changes. The company stated that the safety of patients was never in question and it doesn't believe that doctors need to remove the defibrillators from patients.

The manufacturing changes are being described as a "documentation problem," and the company said it is working with the Food and Drug Administration to get the problem fixed. Following the news, the stock fell 12.6% to close at $6.80. According to the report, defibrillators made up 15% of BSX's U.S. revenue a year ago. Furthermore, the company stated that this news could have a "material impact" on 2010 earnings.

Boston Scientific (NYSE:BSX) issued a weaker than expected forecast for Q3 2006 revenue and earnings, based primarily on problems associated with its pacemakers and defibrillators. These were the products manufactured by Guidant Corporation which Boston Scientific acquired in April 2006 for $27.5 billion. At the time of acquisition, Boston Scientific knew of at least 500 cases against Guidant in the U.S. The suits have since been consolidated. The suits allege that Guidant's cardiac pacemakers and defibrillators are defective and have the possibility to cause harm or death to patients in whom they have been implanted. Boston Scientific has set aside $381 million for legal defense costs, but still does not have an accurate estimate of the cost to settle all the suits related to Guidant's defective products. Also, Boston Scientific's own product, a drug-coated cardiac stent used to open clogged arteries, has suffered a decline in sales as heart surgeons turn to alternative devices perceived to have a lower risk of causing blood clots.

Q3 sales had originally been estimated at $2.18 billion, but have been revised downwards to just under $2 billion. Q2 stent sales in the US were $429 million, but Q3 sales are forecast to drop to $375 million. Global stent sales for Q2 were $647 million, but Q3 global stent sales are forecast to be approximately $565 million.

Boston Scientific stock lost 9% on Friday, 22 September, closing at $14.85, down $1.51. Do not look for an improvement in Boston Scientific's stock performance until the suits are settled or a ballpark settlement estimate has been made public.