Q3 2021 Boston Scientific Corp Earnings Call
As well as bird of flex and BTG interventional medicines, which closed in May in mid August of 2019, respectively. Divestitures include BTG spec pharma, which closed on March one 2021, and the global Embolic microspheres portfolio in intrauterine health franchise, which were divested in August 2019, and second quarter of 2020, respectively guidance excludes the <unk>.
Recently announced the borrow medical and Baylis medical acquisitions, which are expected to close in Q4 'twenty. One in Q1 'twenty two respectively for more information. Please refer to slide nine of our financial and operating highlights deck, which may be found on our Investor Relations website on this call all references to sales and revenue unless otherwise specified organic finally growth goals are.
6% to 8% ex COVID-19 represent comparisons between time periods in which results are not materially impacted by the COVID-19 pandemic I'm note. This call contains forward looking statements within the meaning of the federal Securities laws, which may be identified by words like anticipate expect may believe estimate and other similar words. They include among other things the impact of COVID-19 pandemic.
Upon the company's operations and financial results statements about our growth and market share new product approvals and launches acquisitions clinical trials cost savings and growth opportunities, our cash flow and expected use our financial performance, including sales margins and earnings as well as our tax rates R&D spend and other expenses factors that may cause such differences.
Include those described in the risk factors section of our most recent 10-K and subsequent 10 Qs filed with the SEC. These statements speak only as of today's date, and we disclaim any intention or obligation to update them.
At this point I'll turn it over to Mike for common Thanks, Lauren and thank you everyone for joining us today.
Out of our global team's execution. Despite the various challenges presented by the Covid surge in third quarter the.
The third quarter was impacted by Covid more than we anticipated as the Delta Varian surged globally and some electric procedures were deferred while we arent satisfied with this quarter's sales results, we delivered on our third quarter EPS and margin targets and we're confident that as global vaccination rates continue to increase and Covid wanes, we are well positioned to achieve our.
Long term sales goals, we continue to be excited and confident about the opportunities we laid out at our recent investor day.
Further enabled by our strategy of category leadership entry into higher adjacent growth markets and tuck in M&A.
Total company third quarter operational sales grew 10% versus 2020, while organic sales grew 11% versus 24% versus 2019.
Just below our guidance of 12% to 14% versus 2020.
Delta impacted procedure volume globally.
Despite the temporary impact of procedure volumes, we saw strength of new product launches generated robust clinical evidence and executed broadly across the portfolio.
Q3, adjusted EPS of 41 cents grew 10, 5% versus 2020, and 4% versus 2019, reaching the high end of our third quarter guidance range of 39 to 41 cents.
Adjusted operating margin of 25, 6% continues to improve and was in line with our third quarter expectations.
<unk> been pleased with our cash flow with third quarter free cash flow generation of $360 million.
And adjusted free cash flow of $525 million.
We're updating our fourth quarter and our full year guidance ranges for both sales and EPS, which assumes some level of impact of procedures from COVID-19 and staffing shortages.
Compared to 2020, we target in the fourth quarter 'twenty, one organic revenue growth of 12% to 16% in full year growth of 18% to 19%.
Compared to 2019, we target fourth quarter 'twenty, one organic revenue growth of 48% and for full year organic revenue growth of 5% to 6% versus 2019.
Our fourth quarter adjusted EPS estimate is 43 to 45 cents and we're updating our full year adjusted EPS to a revised range of $1 60 to $2 62.
Dan will provide more details on both sales and EPS performance and outlook, including the revenue contribution from our acquisitions this year.
I'll now provide additional highlights in Q3 'twenty one results along with comments on our fourth quarter and 'twenty one outlook.
Within the regions on an operational basis Q3, 2020, the U S grew 15% Europe mid East Africa grew 8% Asia Pac or 8% in the emerging market sales grew 18%.
Operationally, despite the impact from Delta EMEA delivered solid growth in third quarter across the majority of businesses and countries with notable strength in P. I E P and endo fueled.
Fueled by new and ongoing product launches like their sphere polar Rex and X yes.
We could.
When you go to performance with strong utilization driving double digit growth for both versus about 20 and 2019.
Asia Pac was impacted by pandemic related lockdowns in parts of the region the growth in China remained very strong.
We're encouraged heading into fourth quarter in 2022 as countries within Asia Pac are reopening as vaccination rates increase in Covid cases decline.
Although the Japan was in a state of emergency throughout third quarter, we were able to advance new product launches achieving number one share position with our ranger drug coated balloon as well as launching polo Rex in October.
China continues to deliver excellent results with sales grew 14% versus 2020.
We continue to see momentum across the portfolio driven by complex PCI and imaging as well as new product launches like ILUVIEN and actually yes.
Digital tools are also playing a role, enabling virtual physician training and allowing us to expand our reach with differentiated products like ibis.
We continue to expect double digit full year 2021 growth from China versus both 2020 and 2019.
I'll now provide some additional commentary on the business units.
Urology and pelvic health sales grew 7% organically versus 'twenty 'twenty and.
And the luminous acquisition closed in September, which expands that urology portfolio and stone offering to include the Moses laser which is complementary to the list of your single use flexible ureteroscope and our broad portfolio of disposables that support kidney stone removal.
The prostate health franchise grew double digits with continued strength in our resume in space of our businesses and we're excited to initiate two trials in this space within the quarter.
The global Sable Sabre clinical trial, which will examine the effectiveness of spacer view and reducing late toxicity in patients receiving a stereotactic body radiotherapy treatment for prostate cancer and the vapor trial, which compares resume to dual drug therapy for BPH.
Our electric procedures within the pelvic health portfolio were impacted by the third quarter surge in delta, but historical growth trends have shown a quicker recovery as COVID-19 searches Wayne.
And endoscopy sales grew 11% organically versus 'twenty 'twenty, our market, leading global endoscopy portfolio continues to benefit from differentiated innovative technology launches, including <unk> resolution Ultra hemostasis clip and single use scopes.
During the quarter Exalt D received FDA clearance and is now available in both U S and Europe with physicians I'm pleased with this image quality and selection capabilities.
We continue to make progress with exalt D and are launching a 1.5 enhanced exalt D design, which features improved physician ergonomics.
Additionally, we're pleased to now have approximately 40% of ERC P procedures qualify for additional reimbursement with N type approval as of October one.
In cardiac rhythm management organic sales were flat versus 2020 S. I D. C. S. ICD sales grew mid single digits versus Q3 19 supported by the launch of the enhanced electrode.
Well of course here [noise] core CRM third quarter trends improved over first half 'twenty, one cross both deferred been pacer, we believe that growth likely lag the market.
Looking ahead, we anticipate stabilization of course CRM growth exiting 2021 and into early 2022 supported by S ICD and our differentiated heart logic offering.
Within our diagnostics franchise or Lux Dx implantable cardiac monitor continues to gain share as physicians are pleased with the implant experience technology and remote programming capability.
Our preventive business remains on track to deliver at plus 20% growth for the full year versus 2020 on a pro forma basis fueled by the broad and differentiated ambulatory ECG portfolio.
Electrophysiology organic sales were up 10% versus 2022, driven by strong international sales in both Europe and Japan.
International growth is well above market driven by the innovative portfolio, including polar X and stable point.
Colorectal was recently approved in Japan, where the first cases occurring in October.
In addition, the frozen AF trial completed enrollment, which represents an important step in bringing <unk> to the U S with an expected launch in 2023.
We also closed our favorite pulse acquisition in third quarter, which is the only commercially available PFA technology. We're seeing strong early usage in a limited number of lost accounts in Europe.
Finally, we announced our acquisition of valence medical further, enabling our strategy of category leadership with a novel approach to left heart access.
Within the U S. The balas platform is used in close to 40% of EP ablation procedures on the left side of the heart.
Furthermore, it is used in left atrial appendage closure and mitral valve intervention.
We expect to close this acquisition in first quarter 2022.
In Neuromodulation organic revenue grew 2% versus 2020 as underlying procedure volumes was impacted by the delta surge throughout much of the quarter.
Within our pain management franchise, we continue to see excitement for our wave rider Alpha SCS system, and differentiated fast algorithm as well as our cagny to digital solution.
With deep brain stimulation. The majority of our accounts have transitioned to precise genus and we continue to drive new account openings as physicians are pleased with the integrated platform and personalized therapy.
And last week, we received approval for our essential tremor indication and are excited to begin a limited launch in fourth quarter of 2021, which will expand our addressable market by $2 billion.
In interventional cardiology organic sales grew 26% versus 2020, which includes a 1200 basis point tailwind related to the watchman consignment sales return reserve taken in third quarter 'twenty.
Our watchman franchise had another strong quarter of double digit growth as physicians continue to be pleased with the next generation of flex performance and differentiated clinical data.
This positive sentiment has been further supported by ongoing real world clinical evidence presented at HRS, demonstrating the high rates of effective L. A closure and low rates of complications post procedure, we can.
Continue to innovate and are launching our fixed curb sheath offering greater deployment control inability to reach an expanded range of anatomies.
We also anticipate enabling our U S label to include depth to support physician and patient choice and patient.
Implant care by year end.
And caviar accurate Neo two continues to do well with physicians pleased with its clinical performance and ease of use backed by strong real world clinical data, resulting in approximately 20% market share in open accounts.
Momentum continues with Sentinel cerebral embolic protection device wishes exceeding 20% share in the U S where it's utilized.
Coronary therapies grew 8% versus 'twenty 'twenty as the China D. S tender impact begins to annualize in our portfolio mix shift into higher growth markets continues to strengthen.
We continue to see excellent growth in complex PCI and imaging being driven by a Rota pro and Ibis. We also just received FDA clearance for V go to our next generation guidance platform.
Peripheral interventions consistently delivers with organic sales up 8% versus Q3 2020.
<unk> was a standout once again and grew double digits in the quarter with continued momentum for the positive epoch trial.
A first of its kind of worth their sphere was studied a second line therapy with a primary endpoint of progression free survival in patients with M. CRC was Matt.
Additionally, we've begun patient enrollment in the Mandarin trial, an important first step for bringing HCC treatment to China patients.
And arterial our drug ILUVIEN portfolio continues to perform well growing double digits for 2020 with positive late breaking clinical data presented at Viva earlier this month <unk>.
<unk>, our drug Eluting stent exhibited superiority in the imminent trial compared to bare metal stents in two year data from the range of two trial demonstrated continued high rates of primary patency and significant reduction in re interventions with our Ranger D C b.
And venous we continued to push forward with our first patient enrolled in a hype Heathrow trial. We also had late breaking clinical data from the knockout P registry.
Presented aviva, confirming the safety and efficacy of ethos.
Building on our strategy of category leadership, we announced our acquisition of <unk> medical and the Wolf Thrombectomy platform, which is an innovative technology designed to rapidly capture and extract blood clots in arterial and venous systems, while minimizing blood loss.
We look forward to closing this acquisition in the fourth quarter of 'twenty one.
More broadly, we're furthering our commitment to sustainability and I'm proud to report that Boston scientific is joining the United Nations race to zero campaign and.
And since 2017, and we've reduced the BSC carbon footprint by 50%.
We're on track to meet our goal to be carbon neutral and all manufacturing a key distribution sites by 2030.
We're building on this foundation to establish ambitious science based targets to <unk>.
Set us on a path to net zero emissions across our entire value chain.
We are bullish about the future outlook of Boston scientific at our recent Investor Day, we detailed our L. R. P plans for growth of 6% to 8% growth.
Operating margin expansion of 50 basis points or more each year and double digit adjusted EPS growth.
I'd like to extend a big thank you to our employees for their contributions and winning spirit, sorry, and I'll now turn things over to Dan.
Thanks, Mike.
Third quarter consolidated revenue of $2.932 billion represents 10, 3% reported revenue growth versus the third quarter of 2020 and reflects a $17 million tailwind from foreign exchange.
On an operational basis revenue growth was nine 7% in the quarter sales from the acquisitions of preventive Farah pulse and luminous contributed 220 basis points more than offset by the divestiture of specialty specialty pharmaceutical, resulting in 10, 6% organic revenue growth slightly below our guidance range of <unk>.
12% to 14% growth versus 2020.
Compared to the third quarter 2019 organic growth was four 1% below our guidance range of 5% to 7%. This four 1% growth excludes $35 million in 2019 sales of divested intrauterine health embolic beads, and BTG specialty pharmaceutical business.
<unk> as well as $117 million in 2021 sales of acquired businesses, which consists of half a quarter of BTG interventional medicine, a full quarter of preventive and post close revenue from Ferro pulse and luminous.
Spend controls and a favorable tax rate drove Q3 adjusted earnings per share of 41.
Representing 10, 5% growth versus 2024% growth versus 2019, and achieving the high end of our guidance range of 39 to 41.
Adjusted gross margin for the third quarter was 76% in line with our expectations.
We expect slight sequential improvements to continue in Q4 as some headwinds remain in particular, the transient cost of Brian plants with Covid specific measures increased freight costs and some price pressures on direct materials and wages.
Third quarter adjusted operating margin was 25, 6% again in line with our expectations driven by spend control and lower travel offsetting the revenue headwinds.
We're pleased with our trajectory and continue to target adjusted operating margin to average 26% for the second half of this year.
On a GAAP basis operating margin was 13, 2% and includes a $128 million of intangible asset impairment primarily related to the needy as we've made the decision to retire the V. G venous stent following our voluntary recall earlier this year moving.
Moving to below the line adjusted interest and other expense totaled $104 million again in line with expectations.
Our tax rate for the third quarter was seven 8% on an adjusted basis favorable to our expectations driven by the geographic mix of earnings. We ended Q3 with 1.436 billion fully diluted weighted average shares outstanding.
Adjusted free cash flow for the quarter was $525 million and free cash flow was $359 million with $465 million from operating activities less $106 million net capital expenditures.
Our goal remains to deliver adjusted free cash flow in line with 2020, approximately $2 billion as we continue to expect increased working capital investments in inventory and accounts receivable. During the remainder of 2021 as of September 32021, we had cash on hand of $1 $9 billion. We continue to expect to close the acquisition.
<unk> medical in Q4 of this year and Baylis Medical company in Q1 of 2022.
Our top priority for capital remains tuck in M&A, and we will continue to assess additional opportunities in conjunction with our financial goals.
I'll now walk through guidance for fourth quarter and full year 2021 for the full year, we expect 2021 operational revenue growth to be in a range of 18% to 19% versus 2020, which includes an approximate net 30 basis point headwind from the divestiture of our intrauterine health franchise and specialty pharmaceuticals.
Partially offset by the acquisitions of preventive Farah pulse and luminous <unk>.
Excluding the impact of closed acquisitions and divestitures, we expect full year organic revenue growth to be in a range of 18% to 19% versus 2020.
And 5% to 6% versus 2019 for.
For the organic comparison to 2019 full year 2019 sales exclude $50 million and sales of our embolic beads portfolio and intra uterine health franchise as well as $81 million in specialty pharmaceutical sales and at the midpoint of guidance 2021 sales exclude approximately 530 million.
And sales from recent acquisitions, including vertical.
BTG interventional medicines through mid August.
Ventas firewalls, and luminous as well as $13 million of specialty pharmaceutical sales prior to divestiture.
For the fourth quarter 2021, we expect operational revenue growth to be in a range of 14% to 18% versus 2020, which includes an approximate net 180 basis point tailwind from the acquisitions of preventive Ferro pulse and luminous partially offset by the divestiture of specialty pharmaceutical.
Excluding the impact of acquisitions and divestitures, we expect Q4 organic revenue growth to be in a range of 12% to 16% versus 2020, and 4% to 8% growth versus 2019.
For the Q4 organic comparison to 2019, 2019 sales exclude $67 million and sales of our divested intrauterine health and specialty pharmaceuticals businesses and at the midpoint of guidance 2021 sales exclude 90 million approximately $90 million in sales from the acquisition of preventive.
Farrah pulse and luminous we.
We continue to expect adjusted below the line expenses, which include interest payments dilution from our VC portfolio and costs associated with our hedging program to be approximately $400 million to $425 million for the year.
On year to date favorability, we now forecast our full year 2021 operational tax rate to be approximately 10% and our adjusted tax rate to be approximately 9%. We expect fully diluted weighted average share count of approximately 1.439 billion shares for Q4, 2021 and 1 billion.
434 million shares for the full year 2021.
We are narrowing the range for full year 2021, adjusted earnings per share guidance to $1 60 to $1 62.
Which includes our update to sales guidance and considers Q3 performing at the high end of our guidance range for the fourth quarter adjusted earnings per share is expected to be in a range of 43.
It's a 45 cents.
Please check our Investor Relations website for Q3, 2021 financial and operational highlights, which outlines more detailed Q3 results with that I'll turn it back to Lauren who will moderate the Q&A.
Thanks, Dan Andrew Let's open it up to questions for the next 35 minutes yourself in order to enable us to take as many questions as possible. Please limit yourself to one question and one related follow up Andrew. Please go ahead.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys.
At any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
Again, please limit yourself to one question and one related follow up.
At this time, we will pause momentarily to assemble our roster.
Our first question comes from Bob Hopkins of Bank of America. Please go ahead.
Alright, Thank you and can you hear me okay.
Hey, good morning, Bob maybe find Bob Great. Good morning. Thank you.
So first question is pretty straightforward I'm just curious how your thoughts on Q4 have evolved since the analyst day, and just what you're seeing today in terms of procedure volumes, especially in the U S.
Sure Good morning, Bob.
Morning, as you saw it with some other some other peers our third.
Third quarter July was pretty pretty good and then we saw a slowdown but it's.
Largest slowdown the anticipated August and September and I would say the last few weeks of September are you know certainly improved versus that August early September trend.
And we provided our fourth quarter.
Our sales guidance here.
You know overall clearly when you travel outside of the U S. The vaccination rates are improving and the and the western countries, Japan, South Korea, Australia.
The extension rates are improving in Europe.
And you know what the vaccination status. This year. So overall, we are more optimistic about.
The improved growth in fourth quarter versus third quarter based on the improved vaccination rates, although we do expect COVID-19.
<unk> is still to be a bit spotty, but we also we also highlighted some of the staffing challenges so overall.
Based on the guidance, we do anticipate improved fourth quarter versus third quarter, but we're still you know guarded given the staffing challenges to some locations and Covid. Yeah makes sense and then just one quick follow up on that I guess.
Taking a step back one of the things that's giving you know a lot of med Tech investors pause right. Now is just the sheer number of macro issues to kind of think through from staffing to COVID-19 waves to supply chain to inflation and that's before we even start to look at company fundamentals. So I guess, one big picture question I would ask you. Mike is as you know all of that is making it hard for investors.
As to know how to think about modeling for the next 12 months and so it just would love your kind of top down thoughts on the ability of Boston to deliver over the next 12 months you know given all of these headwinds you know not asking for specific quantification of things, but just your ability to manage through all of these headwinds.
Yeah. So I can think about that it would take a step back and look at third quarter and that's why I started that my script.
That I'm really proud of the team's global execution, because you think about it we went through a you know a delta serves in the third quarter, which was bigger than most anybody anticipated and we grew a 11% for 'twenty and 4% versus 19, 4% is not a great number, but it's not a bad number going forward.
Percent given the the delta surge and during that time, we had nice improvement in operating income margin.
Despite some of the supply chain headwinds that everyone's familiar with and we delivered EPS growth so in a quarter, where delta surged we grew topline.
Fairly well clearly not where we want it to be a normal situations, but we improve margins hit a P. S.
And in the third quarter, we have all those macro issues you've talked about.
But we do anticipate moving forward that you know the impact on Covid and the company has when it searches has decreased upon each search. So every time theres been a delta surge the performance, although not where we want it to be has been better each time and so that shows the hospital's ability to man.
<unk> Covid.
One great thing about our portfolio, which were primarily.
Interventional Medicine company and I was at a couple of slides just yesterday and they're doing 80% of their watchman volume outpatient now so you've seen a dramatic shift in watchman for example to outpatient procedure. So I think our portfolio has tailwind that support productivity for hospitals hospitals have shown the ability.
<unk> to execute despite surges and in a quarter, where about every macro issue was thrown on top of the company I think the performance is quite good.
Great I appreciate the thoughts thank you.
The next question comes from Robbie Marcus with Jpmorgan.
Please go ahead.
Yeah, great. Thanks for taking the questions.
Maybe shifting over to some of the.
The businesses, we'd love to get a sense of what you're seeing.
Out in the field I know, it's early but you have some competition coming from watchman would love to hear what you're seeing there and just how you feel about your positioning and how.
Now, how we should be thinking about trialing of competitive products in the near term.
Hey, Robby good morning.
You know clearly the competition, we have some trialing benefit.
But I would say I've been in the field extensively in Europe last week, and as well as U S. This week and probably never been more enthusiastic about the future of watchman.
Basically I made a comment earlier about the procedural trends of how efficient that procedures being done with the watchman flex.
You know every doctor that we speak with that I've spoken with which is quite a few in our field.
Doctors that have transition, which.
99, 9% a path from amulet to dot from from two five to watchman flex have increased utilization significantly and they've done that because of the safety profile of the device and the outcomes that they're getting and then you see right now we have some additional product enhancements being.
Launch with the.
With the delivery catheter and we have a cadence of additional platforms being developed in the next two years as well as expanding clinical outcomes. So the growth in watchman was excellent in the third quarter and we think it'll be a critical growth driver moving forward and we have a lot of confidence in our ability to maintain it.
Our leadership position here.
Great and and maybe just on the other side of the house you yourself have several new disposable scopes launching I know it was a tough environment over the past 12, plus months to get into hospitals and set up accounts, but maybe just the latest update on on where you were in third quarter and where are you you think.
You'll be in fourth quarter with those launches in the environment and the receptivity so far thanks.
Yeah, I would say on.
And exalt D. It's commentary similar to previous calls, where we continue to which continue to chip away at it I would say you know, we're making progress primarily in the U S with capital placements utilization.
Utilization continues to improve and importantly, we had a additional launched this quarter. The one dot five exalt D.
Which will address some some ease of use enhancements and the AR and the and the platform, which doctors are anxious for it so I think that'll help.
And it'll be a a a nice growth driver for Endo in 2022, I would say coming out of the quarter were more bullish on exalt D. I would say the performance of that platform is quite good in terms of its.
Suction capability.
And our team is ramping up our supply chain manufacturing capabilities.
To enhance supply for <unk> B in 2022, so the combination will continue to along with <unk> and a lot of other products in Endo continue to drive endo to be nicely accretive to the company.
Going forward here.
Great. Thanks for taking the questions.
The next question comes from to win wins.
Citi. Please go ahead.
Good morning, and thank you for taking the question.
In the fourth quarter, there's a somewhat larger range than usual of 12% to 16% I'm a little curious what takes you to the bottom end versus the top end and I'd like to confirm that that box exceeded $1 62 for the year are skewed a higher end of the full year guidance.
Just that second question.
The EPS range of $1 60 to $1 62, whats the question on that one Joanna.
Does that assume the higher or the end of the guidance. The mid range of the guidance I thought I had heard higher.
I don't think it assumes it assumes that that were within the 4% to 8% range versus 2019 in the 12% to 16% range versus 2020 in the fourth quarter for sales.
He would like clarity I'm kind of fourth quarter.
Well take to you the top end of our system.
And so as.
As we saw in our in the third quarter I mean, it's a little bit larger range than where than we're used to but just as Mike detailed the uncertainties around COVID-19 and staff insurances and where we are I think just a provides for a larger range in the quarter again four to eight we think at any point in that range is a good is good growth.
Versus 2019, and 12 to 16 versus 2020, but just given the uncertainty you feel it's appropriate to have a little bit larger range for the fourth quarter.
Okay. Thanks, and then my follow up question on products.
Just give us an idea of what you're seeing in neuro Mod I'm, probably competitive landscape point of view.
Kim.
Yeah, it's it's a it's a market where there's a lot of innovation and there's a number of competitors that you know I think we are having all the we haven't had all the competitors report, but based on what we've seen so far we think we gained share so far based on the competition that's reported.
Based on the really the platform that we recently launched with a fast algorithm.
And that Cagny to our practice management software application that that we also use as part of our system. So I think it's a it's a dynamic market, where there's a lot of new product enhancements, but I think our team.
And Valencia neuroma businesses.
We think best in breed in terms of minute innovation almost all of their innovations come internally, whether it be DBS or SCS and they always have.
You know pretty strong impressive cadence of new launches every 18 months.
So you.
I put our team against anybody in STS and at least so far in the third quarter. We gained share in this fast algorithm. That's just in its early days of launching there really the business as you know Joanne it's been impacted by Covid.
Urology and Neuromodulation as are the two businesses that are the most sensitive.
Searches and the most responsive when Covid wanes.
So hopefully that.
The Covid trends will continue globally, and you'll see improvement in both urology and neuromodulation in the fourth quarter as Cook as Covid continues to stabilize so that's been a business that's been challenged during COVID-19.
As have our competitors, but we expect that business to improve quite a bit as COVID-19 improves.
Excellent. Thank you so much.
The next question.
It comes from Rick Wise with Stifel. Please go ahead.
Hi, Good morning, Hi, Dan.
Yeah, I think I was hoping to get just a big picture question.
Thinking about that.
The pressures of Covid.
On the other hand, I continue to read reports about.
Patient backlogs I read a report yesterday, a large hospital center in Maine has a backlog of 1500 procedure just waiting.
To be addressed.
How are you all.
Seeing the backlog situation for your broad array of procedures. How are you dialing that in not just in the fourth quarter, but how do we think about it impacting.
How are you thinking about it impacting next year that idea and it is growing backlogs everywhere in the world probably.
Yeah, So good morning, Rick.
So we're obviously, we haven't we can't I'm not going to give our guidance for 2022 yet.
I'll hold off a few more months, but you know our L. R. P goals are 6% to 8% organic.
We will likely have an organic comp of one five to six.
Going into it which is you know versus 19, and a bigger comp versus a 2020, but anyway. So.
I mean overall you'd like to be optimistic because you think COVID-19 impact will be less in 'twenty two than it is in 'twenty, one based on the vaccination rates and the improvement in Asia, Europe, and hopefully the U S as well so you'd like to see in 2022 and better Covid environment.
The staffing shortages are a bit of a challenge, but the hospitals do hustle and they figure out ways to get things done, but it does it does create a bit of a headwind, but as COVID-19 should be better in the backlog you do see a backlog to some of our procedures you see a watchman backlog and in other areas. So.
Overall, I I hope I think the macro trends should point to better in 'twenty two versus what we've seen in 'twenty, one given the vaccination rates broadly.
Gotcha.
And just maybe one product question you highlighted.
On the DBS side, you're opening new accounts.
And obviously as essential tremor indication opens up a new opportunity can you give us a little more color on both of those just.
Where do you think you are in terms of.
Opening new accounts, what do we expect is that when they accelerated.
And how are you going to get after maybe you can give us a little more color on how you're going to get after that essential tremor indication.
Sure. It's a nice new indication for us as you know DBS is a nice growing market, it's still very underpenetrated. Its a market that does well when COVID-19 wanes in the market that does not do well when COVID-19 searches so hopefully you'll see a improved.
And fourth quarter across the board in the market and particularly with us and the 'twenty two as COVID-19 improves, but it doesn't do well when COVID-19 surges because of the duration of the procedure time.
And the fact that it typically can be deferred a few months back to your backlog question.
On the on the business itself, they've done an amazing job, where we weren't a player at all six seven years ago.
We're the number one de novo market share leader in Europe, I would say, we're probably likely tied for number one on de novo market share in the U S and they can the business. The team continues to add <unk>.
Sales in commercial resources, and the new indication, obviously will help that business.
In 2022.
Now that we have now that Ron label. So it's a similar call point similar physician the same commercial team that we have so it's almost like a adjacency for us with the same physician in the same sales rep. So it should help the business in 2022 and again my hope.
I don't think I'm too optimistic, but I am assuming COVID-19 is broadly better in 'twenty two versus 21, so that'll help the neuroma DBS business.
Thanks, Mike.
The next question comes from Larry Nicholson with Wells Fargo. Please go ahead.
Oh good morning, Thanks for taking the question one on watchman, one for Dan on on the P&L. So on Watchman, you know I'd love to hear from Dr. Steiner, Dr. Meredith kind of what the counter strategy encounter messages are for amulet you know if there's a doctor who is considering using it you know.
What data are you pointing to you know we have her doctors are very satisfied with flex, but I'm just curious you know.
Kind of what are what you would say to a doctor who is considering using.
Using amulet and I had one follow up.
Well, perhaps I can start and then Ken can follow it but first of all as Mike alluded to earlier one of the important features of watchman flex is the ease of use the rounded bowl design the proven safety of the of the devices. So our of course.
Physicians will trial, new devices, but the support we have in terms of education and training.
The ease of use of the of the device the safety profile and the excellent.
Outcomes were saving is what we're seeing is really driving the continued use and <unk>.
<unk> T to watchman Flex I think it's also important Larry as you know at two highlights that are what we like about the amulet I D trial is it's just the novel large trials Thats provided evidence for left atrial appendage closure in the context of Sop.
Of increased ischemic risk patients in the setting of atrial fibrillation. So that's going to grow the entire market. This is a big piece of evidence that basically says if you are at an increased risk of stroke in the setting of atrial fibrillation. We've got two devices that were equally efficacious. So of course it was very very.
The focus on the the first generation device 10, yeah, no. Thanks, Ian Yes.
Again reiterate what Ian said first off right. The antibody I'd E shows everyone again more data that just as a therapy left atrial appendage occlusion as safe and effective and it is a fantastic alternative for patients who need that kind of therapy, and then you know that trial well against our last generation device generation that's new.
Longer sold in the U S and show non inferiority for safety and efficacy, but a higher rate of procedural complications.
If it were me I know, which device I'd want to add.
That's very helpful. And then Dan you know looking at 'twenty 'twenty. Two you know the street's at about 16% EPS growth anything you'd call out that the street missing and how should we think about the tax rate next year, excluding a potential increase.
In corporate tax rate.
For taking the question.
Sure and I think as as per our usual I think youre going to have to wait for our guidance until our Q4 call. So wouldn't necessarily point to anything in 2022, you are hurt our long term goals at our Investor day.
But we'll hold off on guidance until we have our Q, our Q4 call in February.
Fair enough. Thanks.
The next question.
Comes from Vijay Kumar.
With Evercore ISI. Please go ahead.
Hey, guys. Thanks for taking my questions.
I had two one on watchman and one on the tax rate and I'll ask them both upfront.
Mike on watchman.
It is you.
We understand the market is underpenetrated for them, it's been massively given the amount of clinical data.
In the context of staffing challenges.
You know code and my understanding that there are limited number of centers, who can do these kinds of structural heart procedures.
How should we think about market expansion versus <unk> is that going to accelerate in this current environment given the challenges and you have a second up there coming in would love your thoughts on on market expansion horses.
Competition.
On tax or Dan.
Is that the corporate tax reform, what kind of impact should we assume thank you.
Hey, Vijay yeah to be honest.
Extremely confident about watchman going into fourth quarter and full year 'twenty two.
A few comments before that.
First of all watchman.
The clinical results for watchman flex are extraordinarily good and doctors have tremendous confidence in the platform and they've been using it for about a year and your average doctor is increasing their utilization of watchman every quarter.
Because of the confidence that they have in the referring physician community has seen their patients recover and get off Oh blood centers and reduce the risk of stroke. So it's expanding the awareness when they were referring physician community. The Gi community. The neuro community. So there's a lot of momentum there and the other.
[noise] thing on I mentioned that productivity, even in Covid, you have hospitals dramatically moving watchman limiting.
Anesthesia.
Using ice imaging.
And doing procedures that are very very efficient in many cases less than an hour and the economics of watchman now are quite good across the U S. So there's.
It's there's always headwinds intelligence across a diversified portfolio, but the tailwind from reimbursement procedural efficiency clinical outcomes, new clinical data product cadence are very very positive with watchman.
And then on the tax rate Vijay as you would expect we're following the development of the legislation closely.
I would say all of it is still a work in progress as you see there's a lot of negotiating of outcomes still going on.
And as usual, we'll provide guidance on our Q4 call in February.
Thanks, guys.
The next question comes from Danielle and hopefully.
SBB Leerink. Please go ahead.
Hi, good morning, everyone and thank you so much for taking the question Mike.
Mike I appreciate all the commentary on Covid and improving and we're all in the same boat, we hope it's better it heading into next year, but they never dynamic here is the hospital labor shortage and I'm, just curious sort of how you as a company are helping hospitals manage through that why youre seeing hospitals do you.
Adapt to be able to continue to get patients through the system and treated eye given the labor shortages, which you know that to me seems like that tougher nut to crack as far as like when that we'll resolve it feels like that's not something that can sort of fix itself over overnight. So would just love some.
Some commentary there.
Sure So I've been in the field a lot recently and.
It is an issue for hospital Ceos, there's no doubt about it they've had to increase their.
Their wages and labor force expenses to accommodate increasing wages for nurses and staff and so forth. So they're doing are there they're working through that process, but you know, it's not going to be a short term.
Issue, but hospitals are pretty resilient.
And as you know a couple of things I would say that point specific to BSC and how that's changing is just the use of telehealth.
Telehealth and.
Telemedicine and pre screening for patients.
It has become.
Very widespread and very efficient so that'll that reduces down significantly the number of.
Patient visits to the hospital drives more efficiency and staff productivity. So I think youre going to continue to see that trend continue to increase and the other one more specific to Boston is what I mentioned before as you know we're not a surgery companies. So we're not driving multi day length of stays in a hospital.
The portfolio shift this.
The shift to interventional medicine is helpful for hospitals and it gets patients in and out of the clinic or.
Ah patient setting typically in the same day and you'll see more of our complex procedures because of the capabilities and the technology we have.
Augmented by imaging moved to more outpatient settings and.
I made the comment on watchman, how that mix shift has moved more and more of the same day procedure. So I think a combination of telehealth combination of outpatient.
Shunt orientation and same day procedures.
Very helpful for our product mix and hospitals, just like anybody else they innovate and they find a way. So it's it is a headwind, but it's you know in the quarter here, where we had staffing shortages and its Serge we grew okay and I think the searches will calm and the staffing charters will likely linger a bit.
But hospitals are pretty resilient and figuring out ways to drive.
Drive volume.
That's it for me that was very helpful. Thank you.
The next question comes from Matthew O'brien with Piper Sandler. Please go ahead.
Good morning, Thanks for taking the questions.
As I look across the portfolio I think a lot of things held up better than I might have expected going into Q3 with all these COVID-19 headwinds.
With their sphere doing better and peripheral and.
Preventing assuming to hold up you know CRM and watchman, obviously doing well, even when netting out the the reserve tailwind. So what I'm curious about is what youre seeing in non COVID-19 geographies as far as the momentum in those businesses are you taking share with some of these new products are you seeing accelerating momentum with some of these new categories.
Why wouldn't that accelerate coming out of Covid, just given you know some of the underlying strength that I think is there.
Yeah, I think it should accelerate.
In a less COVID-19 impacted year for sure.
You you hit a number of the highlights in our <unk> business has been very resilient drives consistent high performance were the number one D. C. B player now in Japan. The team has done a great job of that launch.
And that their sphere platform continues to do extremely well and you saw that clinical data so.
That that division continues to do very well Endo I would put them.
Despite COVID-19 grew 8% versus <unk> 19 in the quarter and a number of new product launches euro has been impacted by COVID-19, but that typically bounces back when COVID-19 improves.
And we have a lot of commentary on watchman today.
Hmm.
We saw strong E T growth in Europe, we continue to lag in the U S. But the E. P momentum, we see in Europe, and Japan is very encouraging based on the.
On the on our on our cryo capabilities as well as the early early insights into Faro pulse.
I don't know if I answered your question, but.
I'm actually I as I said in the call I'm really pleased with the quarter given the macro headwinds that the company faced.
Okay. That's helpful and as a follow up on the on the acquisition side. You know can you just talk a little bit about the plans for tomorrow, maybe over the next couple of years and then Balas I think you said, 40% of all your cases with interventional cardiologist.
Of those cases R.
E T crossing is what can you do from a atrial appendage closure or mitral valve.
You know perspective, as we look out over the next couple of years. Thanks.
Hey, Matt maybe a this is Ken I'll start first with the with the balas.
So yeah Youre right, we do see the bailiffs technologies in the U S used.
Around 40% as EP ablation procedures on the left side of the heart.
And at least that.
In structural heart.
Left atrial procedures like watchman or mitral valve intervention, it's one of the great things to us of that.
Uh huh.
Potential acquisition.
Because of the synergies it provides across our entire portfolio.
Left atrial procedures and just getting back to maybe some of the earlier questions. I mean, one of the advantages of it right. If anything that makes our procedures safer more predictable and more efficient is just increasingly important in this.
The pandemic and.
Hopefully eventually a post pandemic environment.
Yeah, and just real quick on tomorrow.
So the Devorah hasnt closed yet it'll close.
Hopefully fourth quarter I guess right.
Pretty soon here.
So we're we think it's a perfect fit for the portfolio, we have a lot of strength in our arterial business with our ILUVIEN in D. C. B, our interventional oncology business has been a.
Very strong grower for many quarters in a row and you saw the data coming out of our there is for our business and we're doing a lot of.
Our work in the venous area with East coast with clinical trial, but there are a few product segments, where we have gaps in Navarro does fill those and so that we made an early investment in Navarro, a number of years ago, because we like their technology, we like their leadership team.
And I'm sure enough they've delivered quite well and so we acquired them, but so it's still early stage.
It's still early stage company, so we aimed to have.
I'm not exactly sure what we've communicated in 'twenty two in terms of product timing launch second half launch. Okay. So you see it you'll see second half 'twenty to impact with a product approvals and product launched and we're excited about bringing that in.
Got it thank you.
The next question comes from Anthony Petrone with Jefferies. Please go ahead.
Thanks, Todd a two part question one is high level on ones on on Watchman high level I guess can you recap and the company did a good job and in the midst of the pandemic what what percent of the overall portfolio is linked to non urgent elective procedures versus critical and so maybe another way of that.
Asking when we look into 'twenty, two what percentage of the business could potentially see a tailwind what potentially can face a headwind and then on watchman, maybe just high level on how we see shares trending over time is this potentially a.
70% Boston market, 30% Abbott.
And that takes into consideration the different designs out of the gate just curious to hear your comments on the differences in targeting different size anatomies and potentially the limitation from competition and having a complete our left atrial appendage closure immediately post surgery is that.
Limiting.
For any follow ups surgeries. Thanks.
Sure Anthony I can take the one on the relative level of acuity of the procedures and the short answer is it varies by business right. So if you look at cardiology and you look at peripheral you look at cardiac rhythm management those have held on and we're actually getting pretty good at this now a number of waves, we've had relative to COVID-19.
Those are much more emergent and and hold up better Mike mentioned this earlier that businesses like Neuromodulation and urology they come down very quickly in a COVID-19 wave. The good news is they come back very quickly. So it's a it's kind of a V shaped curve for those businesses. So they obviously don't perform as well in a COVID-19 setting, but they come back very nicely on the others.
So it really there's not really one number you can point to for the whole company and pinpointed it varies by by business, but I think we've proven and have a good track record in a non COVID-19 environment that are the business performs very well and as a as Mike's comments preclude that's what we're looking forward to in 'twenty two and beyond.
And Anthony on Watchman again, I think you just have to come back to the.
The amulet I D trial, compared that device to our last generation watchman device and the watchman flex device, which is now the device that we commercialize in the United States is really set the standard for safety and for efficacy.
Just to remind everyone our clinical flex trial results with watchman flex show less than 1% procedural safety events, no pericardial effusions and that trial through seven days, no device embolization and 100%.
<unk> left atrial appendage closure and I, just don't think there's anything else out there that approaches those.
Those those numbers so as Mike said as Ian said, we remain high.
Highly bullish and are highly confident in the continued success of watchman.
Thank you and with that we'd like to connect Paul Thanks for joining US today. We appreciate your interest in Boston scientific before you disconnect Andrew will give you the pertinent details for the replay.
Thank you again. This concludes today's conference call. The replay for this call may be accessed one hour until November three 2021 by dialing 187734475 to nine or 141 to 317.
0088, and use access code 101, 60 row 203 again 10160203.
You may disconnect your lines.
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