Q1 2020 Earnings Call
Ladies and gentlemen think we're standing by and welcome to the Boston Scientific Q 12020 earnings call now at this time. All participants are in a listen-only mode later. We will conduct a question-and-answer. If you wish to place yourself in Q4 questions at any time, please press one and zero now repeating the 1-0 command will remove you from Q&A. But once again, please press one and zero and then press one zero repeat the command to remove yourself from the queue as a reminder. Today's call is being recorded. I will now turn the call over to your host Suzanne Lisa, please go ahead Thursday much Kevin and for those explicit directions, good morning everyone and thanks for joining us with me on today's call are Mike Mahoney chairman and chief executive officer and Dan Brennan Executive Vice President and Chief Financial Officer. We issued a press release earlier this morning announcing our q1 2020 results, which included reconciliations with a non-gaap measures used in the release. We have posted a copy of that release as well as reconciliation mean
The non-gaap measures used in today's call to the investor relations section of our website under the heading financials and filing the duration of this morning's called the approximately one hour Michael Focus the majority of his comment about the impact of covid-19 inclusive of April Trends and procedural Acuity by business. Dan will review the financials for the quarter and our liquidity Outlook and then we'll take your questions during today's Q&A session Mike and Dan will be joined by our chief medical officer's dr. Ian Meredith and dr. Kent Stein before we begin. I'd like to remind everyone that on the call operational Revenue excludes the impact of foreign currency fluctuation range and organic Revenue further excludes the impact of certain Acquisitions, including vertiflex. And in the relevant. For which there are no prior. Related net sales as well as the divestiture of the global embolic microspheres portfolio on this call all references to sales and revenue unless otherwise specified are organic also have note this call contains forward-looking statements within the meaning of federal wage.
Securities laws which may be identified by words, like anticipate expect believe estimate and other similar words. They include among other things the impact of the covid-19 outbreak on the company's results of operations statements about our growth and market share new product approvals and launches clinical trials cost savings and growth opportunities are cash flow and expected use our financial performance package in sales margins and earnings as well. As our tax rates are indeed spend and other expenses. April Trends refer to month-to-date results and actual results May differ materially from those discussed involved in any forward-looking statements factors that may cause such differences include those described in the risk factors section of our most recent 10-K and subsequent 10-q filed with the SEC these statements speak only took today's date and we disclaim any intention or obligation to update them at this point. I'll turn it over to Mike for his comment. Thank you, Susie. And thank you everyone for joining us today. I hope that you and your families are healthy birth.
maybe in the covid-19 pandemic is
Well as possible, I'm truly honored to be part of Boston Scientific as I see everyday the resilience of our employees are across the globe. We're helping us to navigate the crisis and emerge stronger on the other side effects were humbled that be able to continue to serve our customers patience employees and Community needs in the covid-19 pandemic. Our focus is to communicate with transparency and take a bath consistent with our core values while keeping employees safe informed providing patient support to customers and effectively managing our operations. We've expanded our capabilities in Virtual Office in education remote clinical support digital sales enablement and training. We're also partnering with our customers to enable a fast recovery a while also acting to reduce operational expenses and preserving our cash position. We have taken these immediate actions with the goal to preserve as many jobs and strategic programs as possible. We've also leveraged our capabilities to develop counter off.
For Technologies such as the Cove interpersonal respirator, which was developed and approved in just four weeks as well as face Shields and donations of personal protective equipment.
And I'll provide some highlights on first-quarter 20 and we'll focus most of my comments on the impact of covid-19 while we're not providing specific revenue and EPS guidance at this point. We will offer insights into our walk ins one with recent businesses and Geographic sales Trends and highlight some twenty twenty launches all then wrap up with some key sustainability updates as our teams continue their dedication to Innovation and long-term commitment to the environment and our communities the first quarter of 2020 total company sales grew 3.2% on an operational basis with Up 3 and met up with in asia-pac down 5% operationally total sales declined 2.9% on an organic basis reflecting the impact from covid-19 and in line with our April 2nd, June sales were tracking to expectations that both January and February before significant negative Trends kicked in and mid-march. These first quarter sales results were led by low-wage.
Did you grow thin our med-surg segment with Europe Public Health up three Endo up to in both our cardiovascular and Rhythm and neuro segments declined organically within a vascular Interventional Cardiology sales were down 3% purple interventions is down 2% operationally within pibg Interventional medicines contributed 398 points to to Total company growth led by theraspheres which grew mid-teens in the quarter and Rhythm and neuro CRM sales declined 10% drop 5% off and neuromodulation declined 7% neuromod did grow 3% operate operationally with a 70 basis-point contribution to company sells from vertiflex and Specialty cocktails at forty 1 million in the quarter was ahead of forecasts and contributed a hundred sixty basis points to told a company growth.
despite taking
Need actions to reduce costs overall sales levels led to a challenging p&l for the quarter as adjusted operating margin felt at 21.6% down four hundred basis points of your year and adjusted EPS of $0.28, which is a 21% decline versus q1 nineteen Now to turn the outlook for the rest of the year as I mentioned Faith tracking the expectations until mid-march when we started to see significant to clients in us and European Revenue as a result of procedure deferrals and those geographies across all of our businesses. Generally those negative Trends in the second half of March have continued in the first three three weeks of April. We are currently planning for the most significant negative impact of covid-19 in Q2 and with it. We expect April to be the toughest month with global revenue for the month of April down approximately forty-five to fifty percent from a regional perspective. We see varying results based on Thursday.
From phases of recovery to the first three weeks of April Regional sales results have trended down 15% in asia-pac down 45% and Europe Middle East East Africa off and down 55% in the prior-year importantly we've seen a very recent slight Improvement. April sales trends at some some facilities to varying degrees. I began to reopen for elective procedures. We anticipate some sequential monthly Improvement throughout Q2, but with net sales results still down significantly year-over-year for the second quarter month. We also expect Q3 Revenue will likely contract and a year-over-year basis but improved from Chuchu rates of Decline and then we aim to return to growth in Q4, but they're obviously still many uncertainties.
Despite the procedure volume impact from covid-19 the global pipeline across our businesses. Remain very strong will several ongoing launches and recent approvals now poised for commercialization a soon as the broader environment improves. I'll also provide color on procedural urgency along with friends in April. We've framed our major product lines across the Spectrum from emergent which is measured in our town days to semi emergent which is measured in weeks to elected which is measured a month in months and note that several product families crossover categories and majority of conditions. We treat have a relatively high level of Acuity including those that are elective and that's generally can't be deferred for extended periods.
In addition when estimating the overall pace of recovery site of service is an important consideration and the recent guidelines for reopening from a range of Physicians societies enable elective outpatient procedures restart before inpatient procedures site of service varies by business, but overall based on 2018 Medicare claims data our 2019 Revenue split with a birth family 1/3 in patient and 2/3 outpatient the 2/3 mix with in the outpatient setting spans across Hospital outpatient Physician Office labs and Ambulatory Surgery centers. Please refer to slide twelve of our investor relations website for supporting details to the commentary for Urology Public Health given the high mix of deferrable procedures transmission. First, three weeks of April were down roughly 60% versus prior year with sales from our Stone franchise and space or products showing better resilience and more pressure and are prostate health project.
Urology and pelvic or franchise
We Believe Europe, eh may have one of the faster potential recovery curves aided by a higher office for a most elective procedures as well as specific products playing a key role such as the recent launch of the tree of sense in the US and Europe and list of you which is our single-use ureteroscope could benefit as the current environment supports the speed and utility of space or is also an important technology for the recovery as treatments for cancer patients will be prioritized and hydrogel spacing is now included in any guidelines and BPH resume, which is an entirely office-based procedure recently reported five-year clinical data in which the surgical treatment rate through five years was 4.4% off importantly. This is unchanged from the published results of resumes for your data and it compares to a 13.6 Retreat minute rate for competitive Mis technology. Finally given the multiple choice.
To do priorities and investment opportunities within the broad European portfolio. We're announcing today that we've reached a definitive agreement to divest our commercialized intrauterine Health portfolio to maneuver service. In addition. We've made a decision at least for the near term to stop funding additional clinical or are indeed work for site to 80 psi. Tivity is a potential platform for ovarian cancer diagnosis that we acquired from Envision in 2018. Unfortunately why we recognized the strong need for improved ovarian cancer detection options simply for women who have a high risk off our view of the clinical evidence necessary to establish practical utility that product as well as the current reimbursement landscape have extended the cost and time Horizon to realize the commercial potential website to 80.
Turn into endoscopy. April month-to-date friends are down 45% year-over-year reflecting a higher mix of non deferrable procedures within our medsearch business e r c p procedures the pancreas and bile ducts are deferrable. However, patients typically can't wait longer than four to six weeks for stone removal tumor biopsies and other related procedures and single-use off the exalt be launched is progressing albeit slowly due to covid-19 restricted Hospital access and capacity and the current pandemic certainly emphasizes the need for infection prevention. And we continue to believe that therapeutic Imaging portfolio of single-use Scopes represents a multibillion-dollar market opportunity over time. We're also pleased with the next scope in this franchise Spyglass discover received approval in early April. We're working toward a second half clearance and a global launch.
Also in April received FDA clearance for the wallflex colonic and duodenal soft scent systems in our next Generation. He must taste his clip rest 360 Ultra remains on track for that approval and Q3 turning to see Iran sales in April are down approximately 50% year-over-year with the Nova Brady implants in Replacements holding up slightly better than I am and this reflects a slightly higher a mix of non deferrable procedures and Pacers including the majority of patients suffering from heart block and those who more urgently need Replacements and defibrillator procedures, including secondary prevention therapy and a subset of replacements.
Sierra
Will be led by heart logic Replacements as well as the ongoing us launches of our ingevity plus lead and 3300 programmer with remote service offerings you shortly we continue to expect mid-year FDA launch and clearance of our Luck's DX implantable cardiac monitor. We also look forward to to Virtual HRS late Breakers in RCM franchise that page here in and in touch trials, which should continue to support the global growth of our franchise.
What's your physiology sales in April are down approximately 65% year-over-year is this franchise has a higher deferrable mix with a low double-digit percentage of Highly systematic and unstable arrhythmias considered non deferrable repe recovery will be driven by a strengthening portfolio including polar X, which is our second generation single shot cryoablation cather's that were resumed its European launch in Q3 when access to Labs improves direct sense, which monitors the effect of our Energy Delivery via changes in local impedance took the catheter tip received approval in mid-april. We also anticipate Q3 approval in Europe for a Ford sensing stable Point Therapeutic catheter.
Neuromodulation the first three weeks of April up seen a decline of 90% in sales versus prior year it given that very high rates of elective deferral ability for them. So to offset this we continue to leverage our digital competencies to maintain connectivity with patients and Physicians that we're ready to serve them as procedures resume give that a majority of all trial procedures occur in the office setting and that many implanting Physicians have access to and we believe SES procedure will likely experience in earlier and faster recovery, which is typically a hundred percent hospital-based for Interventional Cardiology. April sales are turning down about 40% versus prior year with coronary therapy sales team has structural heart sales more impacted which reflects a higher mix of non deferrable procedures within coronary Therapies.
Similarly with structural heart Tavern procedures are generally less preferable than Watchmen and overall the relatively low April sales decline in ICU reflects. That is one of our highest mixed franchises. Both terms of emergent and a cute procedures. We believe this will drive the recovery curve as the procedures may be deferrable near-term, but pose a significant threat for future morbidity or mortality importantly. We're planning for eight coronary therapy launches across our major markets later in 2020 highlighted by synergy synergy Megatron and our Synergy 48 millimeter M to enhancements to our rotablator are directed me platform and enhancements to our PCI guidance platform. We're also a very proud of the team that achieved are accurate Neo to see Mark approval earlier this month and we plan to begin a limited market religion Europe as the Healthcare Systems resumed a more regular Cadence of have ER procedures.
Suddenly the ongoing launch.
Lotus Edge in the u.s. And Japan has been challenged by covid-19 restrictions that limit Proctor travel and the delivery of training but we do look forward to the recovery and procedure volumes. We also took you to plan for a second half 2020 launch of Watchmen Flex in a way presentation of the Pinnacle Flex results in May as an HRS, late-breaking clinical trial and off procedures are largely deferrable patients seeking this therapy are eligible based on their need for an alternative to blood thinners and physician operators. We've surveyed are confident that postponed procedures will be rescheduled with facility capacity and our protocols allowed for increased elective procedures.
Turn into peripheral interventions April to date revenue is down approximately 30% in the estimated mix of deferrable to non deferrable procedures ranges by therapy category wage Venus and Interventional oncology, in order of highest to lowest mix of deferrable procedures. We have a strong Cadence of product launches coming in this business in arterial. We plan choices of the Rangers and Athletics balloon along with a China launched for lubia in in China in Venus who you received approval for the Venus indication for walk-ins and anticipate approval for a new controller for the ecos, thrombectomy system and a new items catheter.
Also the Vici Berto reversed Deployable stance and the n g o clock Hunters system all will be launched in 2020 and an Interventional oncology. We plan to launch the new home FX microwave ablation system and the true select micro catheter so a very rich pipeline of launches in in 2020.
So turning out a lessons learned from our Asia team and the region declined 5% year-over-year mainly driven by declines in China and Korea which were partially offset by wage growth in Japan Australia and New Zealand in China. We estimate that the covid-19 impacts procedures was close to seventy million dollars in the first quarter and since the government announced on March 18th, the country has passed Topeka, then the epidemic we continue to see Improvement each week in China.
Leading Physicians are also citing concerns that patient deaths from deferral of elective procedures could outnumber covid-19 related patient deaths in bands are now starting to lift on international travel and this is helping larger City hostels recover as patient flow from lower-tier cities is restored. We are leveraging the time teams experience including customer engagement via online seminars and remote case support and overall. We believe that China could recover back to its pre covid-19 trajectory in Q3 and potentially be above planting key for our Japanese business has been less impacted year-to-date but remains uncertain in Japan. We look forward to launching range of synergy and Lotus Edge in the 2nd, June 2020.
So turning the balance.
As we announced last week, we believe that we are in a strong liquidity position with our recent bank deal results in over two point six billion and near-term liquidity and Dan will provide more details on the transaction as well as Cog in a cost-cutting and cash preservation initiatives consistent with the deferral of elective procedures. We've witnessed a Slowdown in ongoing clinical trial enrollments. And that's with expect to delay your delay too many of our clinical time lines of approximately six months. We're also temporarily suspending the quarterly update to our pipeline chart in our financial highlights tax, but will reinstate at one of our Dodge Journeys calls instead this quarter. We have provided a summary of our important 2020 new product Launches on page thirteen of the deck.
I'd also like to highlight the the Online release of our 2019 integrated performance report, which combines Financial disclosures with our sustainability report updates on our 2030 carbon-neutral pledge and Reporting on a diversity inclusion goals recall that in 2017. Boston Scientific was the first medical device company to pledge carbon neutrality took in neutrality by 2030 in a portly we've made significant progress toward this goal with the latest that being last week's announcement that we have finalized our first virtual power purchase agreement, which is 15 year solar energy purchased deal to provide one hundred percent renewable energy electricity for our us operations. We've more than doubled the percent of energy use from certified renewable sources in 2019 alone to 11% and achieved a reduction of nearly 34,000 tonnes of greenhouse gas emissions since 2015.
We recycle 80% of all solid waste and Manufacturing sites and in ninety-five percent rate of landfill avoidance. So in closing I'm incredibly proud of our team at Boston Scientific our faith is a long-term Outlook remains strong given our people our pipeline are high rate of Acuity in our portfolio in our category leadership strategy across Diversified markets. I'd like to thank our employees for any spirit and commitment to emerge stronger and the recovery postcode and I also like to thank the front-line workers for their unwavering commitment dedication and selflessness during this time now, I'll turn the call over to them.
Thanks, Mike and allow me echo my gratitude and respect for all the front-line health-care workers and members of the Boston Scientific team. The focus of my prepared remarks today will be to provide high-level q1 Financial results insight into our p&l cash controls and leverage as well as an overview of our strong financial position given the challenges the covid-19 pandemic has brought on the Healthcare Community and Unser you regarding the duration and the impact we will not be issuing or full year 2020 guidance at this time. But as Mike said we will try to provide as much transparency and disclosure as possible first quarter Consolidated revenue of 2543000000 dollars represents 2% reported Revenue growth and reflects a $29 million-dollar headwinds from foreign exchange on an operational basis. Revenue growth was 3.2% in the quarter sales from the vertiflex and Acquisitions contributed 70 and 560 basis points to Total company grown.
partially offset by the
Tear of our Legacy embolic beads portfolio for a net 610 basis point contribution this resulted in an organic Revenue decline of 2.9% driven by the negative impact of Kobe on elective procedures as Mike detail.
We delivered q1 adjusted earnings per share of $0.28 which includes two cents of inventory charges related to near-term lower demand and $0.01 charge related to a discrete tax items adjusted gross. Margin for the first quarter of a 70.5% and reflects the impact of the inventory charge as we face top-line headwinds related to covid-19 opportunity to leverage cost of goods sold, but not as many as other lines of the p&l which I will detail shortly. Our tax rate for the first quarter was 10% on an adjusted basis and includes an $11,000 discreet tax charge. Our tax rate may have some variability for the remainder of this year as covid-19 uncertainties and different Regional and National Recovery timelines could materially impact our Geographic mix of profits and therefore the tax rate adjusted free cash flow for the quarter was $218 as of March 31st, 2020. We had cash-on-hand of 300 off.
How many million dollars a purpose-built increase of 150 million dollars over the prior quarter?
Given the uncertain environment we intend to maintain approximately three hundred million dollars of cash on hand throughout the remainder of the Year. Roughly one hundred million dollars higher than recent historical Trends turning our p&l leverage and Cost Containment initiatives at a high level in the short-term. Our spend is roughly 70% fixed 30% variable. This is based on operating expense structure. That's approximately 1/3 fixed with cost of goods sold slightly higher than that. We're currently focused on cutting back approximately two-thirds of the targeted variable spend while preserving critical investment spend money as Mike mentioned to offset the lower expected Revenue spend reductions are already in place including cutbacks and travel hiring clinical programs and certain longer pay off research and development projects. We've also shifted to a temporary four-day work week for most salaried employees sales rep compensation has been evaluated with teaching flexibility and named executive chef.
Is there a board salaries have been reduced by 50% while Mike is for going nearly his entire base salary for up to the next six months.
In addition, we've temporarily closed from manufacturing sites in an effort to align are billed plans to the current demand environment thus reducing inventory on hand and freeing up working capital. We believe these proactive initiative to whether the short-term storm while still being in a strong position to build momentum. Once the recovery begins. However, given the relatively High fixed-cost nature of our business, we would expect a huge margin rate on Lost Revenue including a sharp decline in adjusted operating margin in Q2 versus q1 improving sequentially into Q3 and then Thursday we're our goal is to return to revenue growth and ultimately more normalized margins. Although certainly uncertain at this time. I can use the month of April using round numbers to illustrate the month in general terms for April the north of 70% adjusted gross margin with effects being sg&a R&D and royalties in the mid-40s as a percentage of wage.
resulting in an adjusted operating
Margin in the mid 20% range as Mike said April Revenue was down forty-five to fifty percent versus April 2019, which implies roughly five hundred million dollars lower reps vs. Our pre-owned of slightly less than a billion for the month with lower production due to the lower demand. We're not fully absorbing the fixed overhead and the manufacturing plants wage a result. The overall adjusted gross margin rate will be negatively impacted by unfavorable production variances, which will hit the p&l instead of being capitalized with an inventory on the balance sheet pre covid-19 spected to spend approximately four hundred and fifty million dollars in topics with three hundred million being fixed and a hundred and fifty million being variable given the lower sales we've taken actions to reduce the variable depending by 2/3 or roughly one hundred million dollars in the month. So you're left with 350 million dollars of Optics, which would be roughly 70% of April sales.
When you combine this with an all in gross margin that's likely to be below 70% then that is that the month of April could actually see a negative operating margin. We've implemented the same level of spending actions for each month April May and June. So as Revenue increases as is planned to each of those months as per our recovery scenario, the monthly margin should improve correspondingly. We're working hard to age like the right balance of short-term actions to reduce costs while preserving the development of the long-term portfolio and pipeline to enable us to capitalize as the recovery gains momentum, but there's no doubt operating margins will be under pressure. Again. Our expectation is for sequential Improvement as Revenue increases resulting in more normalized margins bike you for our other key area of focus on a finance perspective has been available liquidity as a reminder. Our largest source of liquidity is our 2.75 billion dollar revolving credit facility, which matures in 20 23. We ended the first log
With 1.36 billion dollars borrowed against the revolver. Mostly related to refinancing commercial paper earlier in the quarter due to Market volatility this left 1.39 billion capacity resulting in q1 total available liquidity of 1.76 billion, including the 370 million dollars cash on hand.
As announced last week, we've successfully negotiated a one point two five billion dollar Term Loan and amendments to the maximum leverage covenants on our existing 1 billion dollar term loan due 2021 and our revolver. The new Term Loan was used to pay down eight hundred and fifty million dollars of borrowings from the revolver as well as the four hundred million dollar remaining balance on the existing Term Loan do this December Us increasing our available liquidity and clearing all twenty20 maturities as of this completed Bank deal. We have two point six billion dollars in available liquidity with 2.3 billion dollar capacity on the revolver and three hundred million dollars cash on hand.
the revolver in our term loans, which comprise approximately
5% of our outstanding debt are the only debt instruments subject to debt covenants. Another important aspect of last week's transaction was the amendment of these Covenant calculations to use an average of 2015 and 2019 quarterly ebitda or approximately $670 million dollars regardless of reported ebitda for the remaining three quarters of 26 as well as to increase the leverage ratio to 4.75 times for the remainder of twenty-twenty. The term loans will come due in February and April of 2012 for the revolver which extends through 2023. This Max leverage ratio will continue to step down by a quarter turn to five times starting in q1 2012 one continuing each quarter thereafter until reaching 3.75 times in Q4 2021.
The remaining 75% of our outstanding debt is comprised of public bonds, which are not subject to any Financial covenants related to our operating performance. Our next Bond maturity is not until June 2022 and it's five hundred million dollars. Therefore. They're after our Bonds mature at various times over the next twenty nine years and no years Bond debt maturities took it to exceed more than 50% of available cash flow in any one year with most significantly less than 50% of expected available cash flow for no 2027 has the highest maturity with approximately 1.01 billion dollars. Do we believe this represents a very prudent debt maturity profile?
With no remaining debt maturities this year as a result of these transactions. We are prioritizing cash preservation and optimization activities Beyond The Cost Containment and inventory initiatives previously discussed. Am I able to delay a material amount of capital expenditures without impacting current business performance of our original four hundred and fifty million to four hundred seventy-five million dollars in twenty-twenty expected Cafe Thursday. We estimate a roughly fifty-fifty split between maintenance and investment which we can delay given the temporary reduce need for capacity expansions. We have no plans to initiate a share repurchase or a dividend dead and with respect to our mesh litigation. There's no change to our Reserve nor two are having settled over 95% of mesh related claims for those claims that have not yet settled. We will like a slow the pace of reaching new settlements with plaintiffs attorneys and thus now expect remaining payments into the qualified settlement fund of approximately one hundred million dollars to extend into twenty twenty one month.
Despite current unprecedented challenges. Our team has worked diligently and effectively to pursue a prudent strategy to minimize risk and preserve our strong financial profile. We believe we are in a good position with our rating agencies in our lenders based upon frequent communication and our proactive risk mitigation plans as well as our commitment to our investment grateful for profile. We believe we are striking the right balance between the need for short-term missions and spend and preservation of cash with the ability to capture fully and emerge stronger for the recovery opportunity. Thank you for your time. And thank you again to our stakeholders our employees and the global Finance team. Please check our investor relations website for q1 2020 financial and operational highlights, which outlines more detailed q1 results are debt maturity and liquidity profile and the schedule like referenced for procedure Acuity with that. I will turn it back to Susie who moderate the Q&A. Thanks, Dan, Kevin. Let's open up the questions for the next 25 minutes or so in order to enable us to take as many questions as possible.
Please limit yourself to one question and one related follow-up Kevin, please. Go ahead. Have you wish to ask a question, please. Press one and zero on your telephone keypad. You may withdraw your life eating the 1-0 command. If you're in a speakerphone, please pick up your handset before pressing the numbers. We will go to the first question.
I had questions from the line of David Lewis Morgan Stanley, please go ahead good morning. And thanks for taking the questions. Michael just have a couple of here on recovery. So I think for all the detail this morning very much appreciate wage by Austin investors. So it's pretty clear based on your internal budgeting your forecasting, you know growth in the fourth quarter. I wonder if I could you sure this when you're thinking about from budgeting perspective about quote normal see you can that occur in the wage first quarter 21 the first half of 21 and you know, some companies have discussed this notion of her capturing procedures or running higher than normal either in the fourth quarter or next year. Wanted to get your thoughts on that and had a quick follow-up. Yeah. Good morning David. Thanks for the question. It's really difficult to call that at this point in time. You might expect we have a number of different scenarios that we've laid out and we've looked at various triggers that we would pull to reduce cost or or for fuel investment faster, but our base-case assumptions really what we laid out here, which is the most significant decline in Georgia.
Quarter encouraging that we have seen an improvement recently in April which gives us some optimism based on new centers opening up and that sequential Improvement obviously in third-quarter month and a goal to get back to growth and fourth quarter, but at this stage, I think it's probably premature to to estimate whether it'll be a kind of a surge, you know beyond that. So we'll keep you posted off but it's difficult for us at this point to project kind of the the starting point for twenty twenty-one.
Okay, and just to kind of related follow-up might just easy to think about pipeline procedures, you know coming out of covid-19 hostels resume procedures when I think about you know key drivers this year like criox Thursday or even Lotus that was still sort of in a phased rollout. What do you sort of assumed in terms of how hospitals are Physicians approach sort of new procedures do they focus on court procedures first? And how are how do you think that the the procedures will be prioritized by physicians and in the sales team as we come out of it so much sure. That's we spent quite a bit of time trying to create that this chart for you in the in the office website on emergence on my emergent any elective and clearly you've seen the results in April many of our businesses are have more highly emergent procedures particular particular Interventional oncology and many an investor Cardiology as well as some and endow. So I think you know those emergent that we've laid out in this chart will birth
Most quickly and then the semi emergence in the elective categories would likely Trail those but I think importantly that we laid out in our in our charts two-thirds of our business has done an outpatient setting whether it be a Outpatient Center obl or surgery center. So that two-thirds is helpful for us because we believe those procedures will come back more quickly. So thankfully we have our life that's more heavily weighted towards outpatients and also, you know many of our procedures are also which is helpful. And that's you profitable for hospitals. You've seen significant Improvement a reimbursement of the procedures like Watchmen and others. So I think the focus really Beyond these emergent procedures and then the followed by the semi urgent or elective, but we're helped by the mix of the outpatient facility mix that we have
Okay. Next we have Bob Hopkins of Bank of America, please. Go ahead.
A big picture questions first one is on your comments on cost-cutting and I realize we haven't heard from the whole medical-device universe in the first quarter off, but it does seem like the actions that you're taking or perhaps a little more aggressive on the cost-cutting front than some of your peers and I guess that could create at least some concern that it might you know for the next whatever wage 12 months set you back a little bit competitively versus those that are willing to just spend right through it. And so Mike has ordained was wondering if you could just kind of maybe address that concern and talk a little bit more about you know, exactly where the where the cuts are and and where they are not. Yeah. Absolutely. Yeah, we're not concerned at all about the cost-cutting and its ability to impact our competitiveness. We actually they get smart. It's it's their rationale cuts and our employees support it. So we've had reduced down some of the inventory builds. Yep.
Because we don't want to Stack Up Too Much inventory, which makes sense from a cash flow perspective, but we're very mindful of the need for surge capacity. So we ensure that we have ample Supply which we're very flexible with based on the tracking that we do and the agility of our operations team. So we're doing this with a mindset that we're going to have a stronger recovery as the months move on here in second quarter and Thursday and we're highly confident with ample Supply which is the most important one secondly many of the actions that we've taken and actually we we we let in this area has been to suggest are very important sales team. So, you know, we don't give the the details there. We've we've ensured certain levels of compensation for our sales teams, despite the significant sales. Mrs. That are occurring. So we feel like we've built strong loyalty and support from our sales team by taking those actions earlier than most and also we have moved
A four-day work week and the goal for that would be for it to be a second quarter impact only but we'll see how that progresses as the as the recovery returns and quite frankly that's been met, you know pretty well with our employee base their highly engaged or working very effectively from home or building new capabilities and digital and it's a team approach and also with the support of the cares act, you know, some of those employees are also benefiting from some of the financial relief and certain States in that area. So actually we think all the actions are what sparked companies would do. And if anything I think it's built, you know, potentially greater loyalty amongst our employee base with an changes we've made
Okay. Yeah, thanks for that. One other big picture question for you. Is it you know the Boston Scientific, you know, Scott prices down as much as companies with much less defensive mixes of businesses within Medtech and just curious as to your kind of the message to you or from you to invest money on that front. It's you know, again, it's just it's notable for the relative under performance this year so far and just you know curious that you're you're kind of messages to to investors on the ability to kind of come back.
yeah, well, that's why we
We want to lay this out in detail. We want to give you as much transparency as possible that we gave you the April results. We've seen the some recent improvements and we're quite confident in the wage recovery plan that we outlined with the Improvement in third-quarter and fourth quarter. And I think that's the also the the what I mentioned with David's comment on the prestige is that we have heavily weighted towards outpatient procedures is very helpful for us and I think most importantly when as procedure volumes get back. It's really about the portfolio that week and we have a impressive Cadence of launches that we outlined many of those across all of our businesses and we have a very, you know, robust pipeline. We're keeping the key R&D projects alive back on this and so you'll continue to see if we believe happened one of the most differentiated Medtech portfolios in the business a highly engaged Workforce and the financial flexibility to weather Thursday.
oh, thank you and good morning, and thank you for
Or so I would consider it a very good buying opportunity and I think the other thing bought from my perspective is I think of the conversations I've had with investors over the last 90 days, you know leverage and liquidity crept into that conversation where it hadn't been before so we're a little bit more highly leveraged than some of the peers. So I think we took a little bit more of a decline based on that. I'm still I'm super proud of what the team did on the bank financing last week. I think we've answered that question have ample liquidity have things where we need on that front. So I think that's hopefully been asked and answered and that was a little bit of a concern that folks had over the last the language as well.
What about your line of Robbie Marcus JPMorgan, please go ahead. Thanks and want to say thank you for giving us such great color both on the table and down the p&l. I think it'll be helpful for all of us for the rest of our earnings. Um, maybe turning to my question, you know, a big part of the Boston Scientific story has always been a pipe long and that's obviously hit a bump here is running trials is pretty difficult. You pulled the the future product launch page. Hopefully, it'll come back once you get them restarted. But how are you thinking internally about the delays to new product launches and and something that was in the pipeline that had a trial involved with it?
Yeah, so the the this impact isn't exclusive to Boston Scientific any company that's in the midst of ongoing clinical trials is going to see a similar type of time delay time frame DeLay So I think you know that's unfortunate but getting patients to enroll in new clinical trials during the pandemic obviously has hasn't been effective. So that's why you see the delay and that'll be consistent with any company whose enrolling any clinical trial. So I think in the in the near-term, that's why we have in the materials the launches that we have in 2020. So we have some very large churches in 2020 with a Watchman Flex with the DC balloon with the polar X product in EP. We've got a number of product launches in in coronary and wage like eight of them in p i, so there's a significant number of launches that will occur in 2020 and then we've got a rich pipeline of other things, but it's called Dead.
3 to 6 month delay likely
Based on the look of timing so I don't think that'll be unique to Boston the near-term pipeline strong. You know, we talked about pre covid-19.
Great, and maybe it's a follow-up maybe a little bit of a moot point here. But I just wanted to check what were the trends like up through the middle of March and some of the businesses that face the shortfall in fourth-quarter believe I see The Replacements were one was in another. You know, how did those businesses Trend before covid-19 hit divorce markets around the world. Thanks. Yeah, I think this is Dan Robbie before before covid-19 Dove, you know pre mid-march things were were kind of going pretty nicely on on the rails Thursday. We saw in in Asia particularly in China. We had the impact that started in January, but for for the demia and unaffected areas in asia-pac things were going pretty nice. So the impact that you saw in the results that you see in q1 is is a China and asia-pac impact across the the full quarter but really those last two weeks of March birth.
Right hit the brakes hard and and and an email. And so those those Trends have kind of continued into April as Mike said we're seeing some signs of encouragement here recently in April and he gave you all the phone numbers of what each business is down in April, but the the q1 results are really defined by the last two weeks of March in the US and Europe.
And next week or two line of Vijay Kumar evercore, please. Go ahead.
Hey guys. Thanks for taking my question. And again if she had all the color, this is probably the most detailed we've gotten from any company Mike. Maybe you know, how long on on the second-half recovery. I guess one of the questions were struggling with this you'll have all these, you know, social distancing measures. You know, when you think about yourself for free engaging with physicians weight. How does that Dynamic, you know play does it have any impact at all or you know, I'm just curious and how you know, what the you know, how how that impacts your life a product that you know that you mentioned roll out. You know, how does it get it back there?
Yeah, so I would say the clearly the positions have had the managing a pandemic on their mind every day, but without a doubt Physicians are very anxious to bring back their procedure volume. They know patients are waiting for your encouraging them to come back to the hospital and your seat and some hospitals open up. So I think the fact there's a great alignment in terms of hospitals desire appropriately the right time to bring back elective procedures and there's very high alignment by physicians wanting to do that and some positions and we're talking about working 6 7 days a week multiple shifts to make up for that backlog. So I think there's a lot of Industry alignment with the motivations of the hospital and the physician Community to bring that back in terms of our our sales reps. We've had excellent retention obviously during this this. They want to support wage.
Their inherent nature is to support their customers and they do it in.
Safeway we give them obviously the proper PPE the local testing will really be a local event in terms of what the requirements that our sales reps will go through Thursday work with their physicians in terms of what testing protocols I think that'll vary by city by state likely and we obviously have our own internal programs, but I don't see the social distancing a as a as a deterrent in terms of our sales reps collaboration will go through the right testing protocols will have and importantly our ability to work for those who need more remote support. We have excellent capabilities here across the across our businesses to support our sales reps remotely with remote proctoring remote training and remote support Remote device checks. So we have excellent capabilities there, but I don't think the social distancing will be a big impact on the recovery.
That's helpful, and then one follow-up maybe on maybe, you know pricing environment in a post-cold war, you know, maybe General some comments on, you know, as you see your customers demon dog. Sure. Does it change behavior and in you know, maybe thoughts and how the industry is set up to respond to it. Thank you.
yeah, I think you know we're we'll do everything we can to support, you know, our customers like we always do with clinical support with excellent product Supply and and great Innovation many of our procedures, you know, help support hospitals financially based on the reimbursement that they receive they send the clinical value and you know pricing is always a topic in medavakkam since I've been in the industry forever and will continue to to manage that with our VIP cost improvements and bring a new innovation and partnering and in many ways with customers Beyond just price off
We'll go to next to the line of Joanne winch of Citibank, please go ahead good morning. And thank you very much for all the information you provided. I have two questions. I'll put them right up front. I'm curious how you're doing with some of the integration of the Acquisitions. You've made over the last 18 months particularly btg in this current environment and what you're really seeing there. And then my question is I'm looking generally in life right now for Silver Linings. So during this period of time what are you learning either about your business or employees that help you on the other side? Maybe it's telemedicine May expenses. Maybe it's something else. Thank you. Sure and the immigration funded the largest one month. If you want to build a pandemic portfolio you want you want to have therasphere. So therasphere is doing extremely well grew I think mid-teens in the in the quarter dead.
Taking share and it's really not a procedure that can be deferred. So the Interventional oncology.
Business broadly is doing well really driven by therasphere. So I'd say in and the sales piece of it and they also saw aspect Pharma do quite well. So from a sales standpoint wage portfolio has been more robust than Legacy, which is great news and the integration.