Q4 2021 Boston Scientific Corp Earnings Call
Speaker 1: and then we'll take your questions. During today's Q&A session, Mike and Dan will be joined by our Chief Medical Officers, Dr. Ian Meredith and Dr. Ken Stein.
We will take your questions during today's Q&A session, Mike and Dan will be joined by our Chief Medical officers, Dr. Ian Meredith and Dr. Ken Stein.
Before we begin I'd like to remind everyone that on the call operational revenue growth excludes the impact of foreign currency fluctuation and organic revenue growth further excludes acquisitions and divestitures for which there are less than a full period of comparable net sales.
Speaker 1: Before we begin, I'd like to remind everyone that on the call, Operation of Revenue Growth excludes the impact of foreign currency fluctuation and organic revenue growth further excludes acquisitions and investors for which there are less than a full period of comparable net sales.
Speaker 1: Relevant acquisitions for organic growth versus 2020 and 2019 include preventive pharipus luminous which closed in March, August and September of 2021 respectively, as well as vertiflex and BTG interventional medicines which closed in May and mid-August of 2019 respectively. Divestitures include BTG spectr pharma which closed March 1, 2021 and the Global Embolish Microfuel Spheres portfolio and Intruder in Health franchise which were divested in Augustática saturatedfunded by the colitis region on special charges and vehement notifications.
Relevant acquisitions for organic growth versus 2020 in 2019 include prevent us fair pulse luminous, which closed in March August and September of 2021, respectively, as well as <unk> and BTG interventional medicines, which closed in May in mid August of 2019, respectively. Divestitures include BTG spec pharma, which closed 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. Throughout the call today, we will refer to 2021 growth rates versus 2019, and 2020 utilizing the comparison to 2019 is the last full year baseline prior to Covid going forward 2020.
Speaker 1: Throughout the call today, we will refer to 2021 growth rates versus 2019 and 2020, utilizing the comparison to 2019 as the last full year baseline prior to COVID. Going forward, 2022 guidance and corresponding results will be compared to 2021 only. 2022 guidance excludes Bayless medical acquisition, which is expected to close in Q122.
Two guidance and corresponding results will be compared to 2021, only 2022 guidance excludes baylis medical acquisition, which is expected to close in Q1 'twenty two for more information. Please refer to slide 10 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 are organic.
Speaker 1: For more information, please refer to slide 10 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, are organic.
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 Companys operations and financial results statements about our growth and market share new product approvals and launches acquisitions Clint.
Speaker 1: 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.
Speaker 1: statements about our growth in 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.
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.
Speaker 1: Factors that may cause such differences include those described in the risk factor section of our most recent 10-K and subsequent 10-Q files of 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 his comments.
Disclaim any intention or obligation to update them at this point I'll turn it over to Mike for his comments. Thanks, Lauren and thank you everyone for joining us today I'm very proud of the agility and winning spirit of our employees and continue to be impressed with the resiliency of hospital systems and their ability to provide patients with the care they need during the pandemic. We're very pleased with the strength of our fourth quarter performance in it.
Speaker 2: Thanks Lauren, and thank you everyone for joining us today. I'm very proud of the agility and winning spirit of our employees and continue to be impressed with the resiliency of hospital systems and their ability to provide patients with the care they need during the pandemic. We're very pleased with the strength of our fourth quarter performance and it's just spate that all of our business units either maintained or gained share on the quarter despite the challenges COVID presented.
Despite that all of our business units either maintained or gained share in the quarter. Despite the challenges COVID-19 presented on a full year basis, the global strength of our product diversification and category leadership strategy resulted in all businesses with the exception of CRM and U S E P gaining share.
Speaker 2: On a full year basis, the global strength of our product diversification and category leadership strategy resulted in all businesses with the exception of CRM and USEP gaining share.
Speaker 2: We look forward to the year ahead and remain bullish in both a near term and a longer term opportunity we lead out at our investor day.
We look forward to the year ahead and remain bullish on both the near term and the longer term opportunity as we laid out at our Investor day.
Speaker 2: In fourth quarter of 21, total company operational sales grew 17% versus 2020 while organic sales grew 15, achieving the high end of our guidance range of 12 to 16. Fourth quarter of 21 organic sales grew 7% versus 19. Full year of 2021, operational sales grew 19% versus 2020 while organic sales grew 19%, again achieving the high end of our guidance range of 18 to 19.
In the fourth quarter of 'twenty, One total company operated operational sales grew 17% versus 2020, while organic sales grew 15, achieving the high end of our guidance range of 12 to 16 fourth quarter 'twenty, one organic sales grew 7% versus 19.
Full year 2021 operational sales grew 19% versus 2020, while organic sales grew 19% again, achieving the high end of our guidance range of 18 to 19.
Full year 'twenty, one organic sales grew 6% versus 2019.
Speaker 2: Volume 21 organic sales grew 6% for the 2019.
Q4, adjusted EPS of <unk> 45 grew 94% versus 2020, it was flat to 2019, achieving the high end of the guidance range of 43 to 45.
Speaker 2: G4 adjusted EPS of $0.45 through 94% versus 2020. It was flat to 2019, achieving the high end of the guidance range of $0.43 to $0.45.
Full year adjusted EPS of $1 63 grew 69% versus 2023.
Speaker 2: Folier adjusted EPS of $1.63, it grew 69% versus 2020 and 3% versus 2019. Again, exceeding the high end of the Folier guidance range of $1.60 to $1.62.
<unk>, 3% versus 2019 again exceeding the high end of the full year guidance range of $1 60 to $1 62.
Speaker 2: Fourth quarter adjusted operative margin was 26.2%, resulting in the second half 2021 run rate of 25.9.
Fourth quarter adjusted operating margin was 26, 2%, resulting in the second half 2021 run rate of 25 nine.
Speaker 2: The full year 21 adjusted operating margin was 25.7.
The full year 'twenty, one adjusted operating margin was $25 three.
Speaker 2: Overall, we're very pleased to be with the cash flow with full year 2021 free cash flow generation of 1.3 billion, and adjust to free cash flow of 2.2 billion, which grew 11% versus 2020.
Overall, we're very pleased where the cash flow with full year 2021 free cash flow generation of $1 3 billion and adjusted free cash flow of $2 2 billion, which grew 11% versus 2020.
Speaker 2: So turning to 2022, while we anticipate less of a COVID impact on underlying procedures for the full year 2022 versus 2021, we're providing a wider range to account for uncertainty related to COVID waves and staffing shortage.
So turning to 2022, while we anticipate less of a COVID-19 impact on underlying procedures for the full year 2000 to 2022 versus 2021, we're providing a wider range to account for uncertainty related to COVID-19 waves and staffing shortages.
Speaker 2: For first quarter of 22, organic revenue were guidance growth of 5 to 8% and for a full year of 6 to 8%, excluding the bailiff acquisition in which is expected to close in first quarter of 2022.
For first quarter 'twenty, two organic revenue guidance growth of 5% to 8% for full year of 6% to 8%, excluding the <unk> acquisition, which is expected to close in first quarter of 2022.
Our Q1 adjusted EPS estimate is 38 to 40.
Speaker 2: Our Q1 adjusted EPS estimate is 38 to 40 cents, and we expect our full year adjusted EPS to be $1.73 to $1.79. Despite the near-term macroeconomic pressures in 2022, we continue to target operative margin expansion with a goal of double adjusted EPS row to the high end of the range. Dan will provide more details on both sales and EPS performers and outlook, including more insights on 2022.
And we expect our full year adjusted EPS to be $1 73 to $1 79.
Despite the near term macroeconomic pressures in 2022, we continue to target operating margin expansion with a goal of double digit adjusted EPS growth at the high end of the range.
Dan will provide more details on both sales and EPS performance and outlook, including more insights on 2022.
I will now provide more highlights in Q4 and full year 'twenty one results along with comments on 'twenty two outlook.
Speaker 2: I'll now provide more highlights in Q4 and full year 21 results along with comments on 22 outlooks.
Regionally on an operational basis. The U S grew 20% versus fourth quarter 2020, and full year 'twenty, 1% full year 2021 grew 25% inclusive of a 300 basis point tailwind from acquisitions and continued strength from new product launches across the portfolio.
Speaker 2: Regionally, on an operational basis, the US grew 20% versus fourth quarter 2020, and full year 21%, full year 2021 grew 25%, inclusive of a 300 basis point tailwind from acquisitions and continue to strengthen new product launches across the portfolio.
Speaker 2: Europe Middle East Africa grew 16% on an operational basis versus both fourth quarter 20 and full year 20.
Europe Middle East Africa grew 16% on an operational basis versus both fourth quarter, 'twenty and full year 'twenty.
We continue to see strong performance in Europe , Despite the pandemic impact with many of the western countries and excellent growth in the Middle East and Africa region.
Speaker 2: We continue to see strong performance in Europe despite the pandemic impact with many of the Western countries and excellent growth in the Middle East and Africa region.
Speaker 2: On a full-year basis, all business units in Europe grew double digits versus the prior year, with a majority of businesses gaining share. We continued into this face strong growth from our Europe region, given the innovative product pipeline, globalization efforts, and integration of the acquisition.
On a full year basis, all business units in Europe grew double digits versus the prior year with the majority of businesses gaining share. We continue to anticipate strong growth from our Europe region, given the innovative product pipeline globalization efforts and the integration of the acquisitions.
Speaker 2: Asia Packer is 17% operationally versus fourth quarter 20 and 14% for the full year.
Asia Pac grew 17% operationally versus fourth quarter, 'twenty and 14% for the full year.
Speaker 2: Within the quarter, the vast majority of Asia-Pac countries grew versus prior year with double digit growth in IC, PI, and EP supported by new and ongoing product loans.
Within the quarter the vast majority of the Asia Pac countries grew versus prior year with double digit growth in IC P. I N E P supported by new and ongoing product launches.
On a full year, Japan grew 7% fueled by new products like watchman flex pull erection ranger as well as innovative launches across the coronary therapies portfolio.
Speaker 2: On a full year, Japan grew 7% fueled by new products like Watch & Flex, Polarex, and Ranger, as well as innovative launches across the coronary therapies portfolio. I'll now provide some
I'll now provide some additional comments on our business units.
Urology and pelvic health sales grew 9% on an organic basis versus fourth quarter 'twenty and then a full year basis grew 19% versus 2020 and 11% versus 2019.
Speaker 2: Eurology and Pelvic Health sales grew 9% on an organic basis versus fourth quarter 20. And then a full year basis grew 19% versus 2020 and 11% versus 2019.
Speaker 2: Within the quarter space or in resume, both through double digits, and we're pleased with the 22 improved reimbursement for the ASC and hospital outpatient setting for resume.
Within the quarter space or and resume both grew double digits and we're pleased with the 22 improved reimbursement for the ASC and hospital outpatient setting for resume.
Speaker 2: On a full year basis, we saw strength across the business with double-digit growth on lift view, core stone, resume, space or anorectile restoration.
On a full year basis, we saw strength across the business with double digit growth unless view cornerstone resumed space or an erectile restoration.
Speaker 2: As we look forward towards 2022, we remain excited about our strong leadership position, further extended by the acquisition of Luminus and the market-leading Moser Lasers technology.
As we look forward towards 2022, we remain excited about our strategy our strong leadership position further extended by the acquisition of luminous and the market leading most of the laser technology.
Speaker 2: Turning to endoscopy sales through 10% organic lea versus fourth quarter 20 will fuel your growth of 19% versus 20 and 12% versus 2019.
Turning to endoscopy sales grew 10% organically versus fourth quarter, 'twenty will full year growth of 19% versus 20 and 12% versus 2019.
Over the duration of the year broad based strength across all regions and franchises resulted in das business, achieving $2 billion in 2021.
Speaker 2: Over the duration of the year, broad-based strength across all regions and franchises resulted in Daskaby Business achieving $2 billion in 2021.
Speaker 2: Within the quarter, we launched the Axio Stent in China, and on a full-year basis, grew this product line over 20% globally. We remain excited about the outlook of our innovative offerings within our single-use imaging portfolio, including Spyglass DS, Exalt Model D, Exalt Model B, and SpyDiscover.
Within the quarter, we launched the axial stent in China, and then a full year basis grew this product line over 20% globally. We remain excited about the outlook of our innovative offerings within our single use imaging portfolio, including Spyglass D. S. Exalt model D Exalt model B and spy discover.
Looking at 2022, we continued to dissipate above market growth as the endoscopy global commercial teams continue to execute at a high level by creating long term partnerships with hospitals, given the unique breadth and differentiation of our portfolio.
Speaker 2: Looking at 2022, we continue to anticipate above-market growth as the endoscopy global commercial teams continue to execute at a high level by creating long-term partnerships with hospitals, giving a unique breadth and differentiation of our portfolio.
Speaker 2: Turning to CRM, organic sales grew 4% versus fourth quarter 2020 and full year sales grew 8% versus 20 and declined 6% versus 19.
Turning to CRM organic sales grew 4% versus fourth quarter of 2020, and full year sales grew 8% versus 20 and declined 6% versus 19.
Speaker 2: In queue for a high voltage business through low single digits, which we expect with in line with the market, with improved sequential growth in our SICD franchise, enabled by our enhanced electrode launch in June .
In Q4, our high voltage business grew low single digits, which we expect was in line with the market with improved sequential growth in our S. ICD franchise enabled by our enhanced electrode launch in June .
Speaker 2: The Pacer business grew mid-single digits, which was likely in line with market.
The Pacer business grew mid single digits, which was likely in line with the market.
Speaker 2: In December , we enrolled our first patients in the modular ATP trial, our dual-track clinical study for a standalone legal pacemaker, as well as to provide anti-tachycardia pacing to emblem SICD patients.
In December we enrolled our first patients in the modular ATP trial, our dual track clinical study for a standalone <unk> pacemaker as well as to provide anti tachycardia pacing to emblem S ICD patients.
Speaker 2: Within the Diagnostics franchise, our implantable cardiac monitor, LUX-DX, continues to perform well in gross share.
Within the diagnostics franchise, our implantable cardiac monitor Lux Dx continues to perform well and grow share.
The preventive business grew 20% on a full year pro forma basis enabled by our differentiated portfolio and strong execution.
Speaker 2: The Preventus business grew 20% on a full year pro forma basis enabled by our differentiated portfolio and strong execution.
Speaker 2: Electrophysiology sales grew 16% versus fourth quarter 20 on an organic basis with full year growth of 23% versus 20 and 7% versus 19.
Electrophysiology sales grew 16% versus fourth quarter 'twenty on an organic basis with full year growth of 23% versus 27% versus 19 <unk>.
Speaker 2: Importantly, the international EP sales grew 38% versus prior on a full-year operational basis, fueled by our innovative portfolio including Polarex, StablePoint, and Ferropol.
Importantly, the international <unk> sales grew 38% versus prior on a full year operational basis fueled by our innovative portfolio, including polar ex stable point and variables.
Speaker 2: The early Ferropulse launch is going well in Europe with physicians enthusiastic about the safety and ease of use of this technology.
The early Ferro pulse launch is going well in Europe with physicians are enthusiastic about the safety and ease of use of this technology.
Speaker 2: We're very excited about the outlook of the EP business and look forward to further complementing it with a closing of bailiffs in first quarter 22.
We're very excited about the outlook of the EP business and look forward to further complemented that with a closing the bailiffs in first quarter 'twenty two.
In Neuromodulation fourth quarter organic revenue grew 6% versus prior year and full year sales grew 19% versus 2020 and were flat to 2019.
Speaker 2: In neuromodulation, fourth quarter organic revenue grew 6% versus prior year and full year sales grew 19% versus 2020 and were flat to 2019.
Speaker 2: Despite the COVID wave impacting procedure volumes, we continue to gain share with strong demand for our WaveRider Alpha systems and ongoing clinical evidence resulting in a full year SCS growth rate of over 20% versus 2020.
Despite the Covid wave impacting procedure volumes, we continue to gain share with strong demand for our wave rider Alpha systems and ongoing clinical evidence, resulting in a full year SCS growth rate of over 20% versus 2020.
Speaker 2: Just a few weeks ago, we presented various data sets and NANDs, including the two-year combo RCT data, supporting the longevity of our SCS therapy.
Just a few weeks ago, we have presented various datasets a NAND is included in the two year combo RCT data supporting the longevity longevity of our SCS therapy, we continue to roll in the solace trial studying our wave rider SCS systems for the treatment of patients with chronic low back and leg pain, who have not undergone spinal surgery and anticipate initial.
Speaker 2: We continue to roll in the SOLAS trial, studying our WaveRider SCS systems for the treatment of patients with chronic low back and or leg pain who have not undergone spinal surgery and anticipate initial clinical work on DPN in the coming months.
Clinical work on VPN in the coming months.
Speaker 2: In our brain franchise, while COVID impacted procedure volumes, we continue to enhance our portfolio and capabilities with strong foliar growth in 21 versus 2020.
And our brain franchise, while Covid impacted procedure volumes, we continue to enhance our portfolio and capabilities with strong full year growth in 'twenty, one versus 'twenty 'twenty.
We look forward to expanding our U S precise genus offering in 'twenty, two and partnership with <unk> lab.
Speaker 2: We look forward to expanding our U.S. for SICE genus offering in 2022 in partnership with BrainLab.
And in interventional cardiology organic sales grew 40% versus fourth quarter of 2020, and 31% versus full year 'twenty, which includes a tailwind of approximately 1000 basis points related to sales return reserves for the transition to consignment for watchman in 2020.
Speaker 2: In interventional cardiology, organic sales grew 40% versus fourth quarter 2020 and 31% versus full year 20, which includes a tailwind of approximately 1,000 basis points related to sales return reserves for the transition to consignment for Watchman in 2020.
Speaker 2: Full year interventional cardiology sales grew 7% versus 2019.
Full year interventional cardiology sales grew 7% versus 2019.
Speaker 2: In coronary therapies, our complex PCI franchise has strong growth in 21 with strength across every region, further enabled by the recent launch of our Avigo II guidance system in the US.
In coronary therapies, our complex PCI franchise had strong growth in 'twenty, one with strength across every region. Further enabled by the recent launch of our V go to guidance system in the U S.
Within drug Eluting stents, we continued to differentiate our portfolio to the global launches of synergy 48 millimeter and Megatron.
Speaker 2: Within Drug Loony Scents, we continue to differentiate our portfolio through the global launches of Synergy 48mm and Megatron.
We continue to anticipate being first to U S market in 2024, where their agent drug coated balloon and expect to complete enrollment in the U S. IDE trial in the first half of 2022.
Speaker 2: We continue to anticipate being first in the U.S. market in 2024 with our agent drug-coated balloon and expect to complete an enrollment in the U.S. IDE trial in the first half of 2022.
We're extremely pleased with the performance of watchman franchise in the fourth quarter as sales surpassed our expectations and.
Speaker 2: We're extremely pleased with the performance of Watchmen franchise in the fourth quarter as sales surpassed our expectations.
Speaker 2: Importantly, the 2021 global performance of Watchmen was consistent each quarter with strong double-digit growth, resulting in full-year sales of $830 million, growing 68% versus 2019.
Importantly, the 2021 global performance of Watchman was consistent each quarter with strong double digit growth, resulting in full year sales of 830 million growing 68% versus 2019.
Speaker 2: We continue to be pleased with our ability to deliver the safest and most efficient therapy, increased physician utilization, and global expansion, while driving greater awareness to this fast-growing LAC market.
We continue to be pleased with our ability to deliver the safest and most efficient therapy increased physician utilization and global expansion, while driving greater awareness to this fast growing <unk> market.
Clinical evidence generation remains an important focus and we expect the first readout from the ongoing surpass analysis of the N C. D. R. L. A O registry at CRT later this month.
Speaker 2: Clinical evidence generation remains an important focus, and we expect the first readout from the ongoing SURPASS analysis of the NCDR LAO registry at CRT later this month.
This analysis will include over 16000 patients and is the largest data set in and watchman flex patients presented to date.
Speaker 2: This analysis will include over 16,000 patients and is the largest data set in a Watchman and FLEX patients presented to date. We continue to expect Watchman to be a significant growth driver for Boston Scientific in 2022 and beyond.
We continue to expect watchman to be a significant growth driver for Boston scientific in 'twenty, two and beyond.
Speaker 2: Across the structural heart franchises, we had the highest quarterly sales results to date for Acurate Neo2, Sentinel, and the Safari Guidewire. Acurate Neo2 continues to perform well with positive physician feedback on the clinical performance and ease of use of the valve. We're excited for the year with over 10% share across full European market, and are approaching 20% share in open accounts.
Across the structural heart franchise as we had the highest quarterly sales results to date for accurate Neo two sentinel in the Safari Guidewire.
Accurate Neo two continues to perform well with positive physician feedback on the clinical performance and ease of use of the valve and we're excited for the year with over 10% share across full European market and are approaching 20% share in open accounts.
We've been pleased with the early clinical progress of the millipede technology, we have decided to discontinue work on a multi program due to the time and financial investment required to commercialize this platform as compared to other near and long term portfolio opportunities across the company. We've made this decision now so that we can focus on the execution of the existing.
Speaker 2: While we've been pleased with the early clinical progress of the MillP technology, we have decided to discontinue work in the MillP program due to the time and financial investment required to commercialize this platform as compared to other near and long-term portfolio opportunities across the company.
Speaker 2: We've made this decision now so that we can focus on the execution of the existing and future technologies within the structural arts space and elsewhere within our portfolio.
And future technologies within the structural heart space and elsewhere within our portfolio.
In peripheral interventions organic sales grew 9% versus fourth quarter of 2020 with full year sales growth of 14% versus 29% versus 2019.
Speaker 2: In peripheral interventions, organic sales grew 9% vs. Q4 2020 with full year sales growth of 14% vs. 2020 and 9% vs. 2019.
Speaker 2: Within the drug eluting portfolio, we've been pleased with the globalization and ongoing clinical evidence supporting Luvia and Ranger, resulting in exceeding our sales goal of $150 million for 2021.
Within the drug Eluting portfolio, we've been pleased with the globalization and ongoing clinical evidence supporting <unk> and Ranger, resulting in exceeding our sales goal of $150 million for 2021.
And Venus, our market, leading verrucose vein offering <unk> grew over 40% in 2021.
Speaker 2: In Venus, our market leading in Verico's Vain offering, Veracina, grew over 40% in 2021. And we see continued runway with this underserved market. In Q4, we closed the Devoro acquisition, and look forward to launching our arterial and Venus offerings in the second half of 2022, complementing the broader portfolio and further extending our category leadership.
We see continued runway with this underserved market in.
In Q4, we closed the <unk> acquisition and look forward to launching our arterial and venous offerings in the second half of 2022, complementing the broader portfolio and further extending our category leadership.
Speaker 2: In interventional cardiology, therasphere grew over 20% on a full year basis, supported by ongoing clinical evidence, including the EPOC trial, which is the first positive phase 3 SIRT trial, studying therasphere as a second-line therapy in patients with liver-dominant MCRC that have failed first-line chemotherapy.
In interventional cardiology, if there are severe grew over 20% on a full year basis supported by ongoing clinical evidence, including the <unk> trial, which is the first positive phase III.
Our T trial studying <unk> their sphere as a second line therapy in patients with liver dominant M. CRC that have failed first line chemotherapy.
Our focus on improving patient health comes with a responsibility to have a positive impact in the world we share.
Our environmental social and governance practices guide us as we make long term measurable progress and I'm proud to announce that Boston scientific received the 2022 catalyst award their premier recognition for organizations initiatives advanced women in the workplace.
Boston Scientific also ranked among the top 50 of American most just companies for our contributions to creating jobs, providing benefits and work life balance cultivating a diverse and inclusive workplace and produce sustainable products and building stronger communities.
I am grateful for the passion and commitment of our global team as we continue to live our values and do our part to create a better future both as a global business and as a global corporate citizen.
While we have faced challenges over the last few years with Covid, we are stronger for it we're building new capabilities that will enable us to better serve our patients and customers both today in the future.
We are well positioned in 2022 with category, leading innovative product positions continued focus and investment in clinical evidence, while continuing to enter high growth adjacent markets. We acquired several companies in the past year with innovative products that are accretive markets and we continued to evolve our leadership in commercial structures to best enable these exciting new tech.
Allergies.
We remain committed to our long term financial goals of 6% to 8% organic revenue growth operating margin expansion double digit adjusted EPS growth with strong cash flow generation I'm very grateful to our employees for their winning spirit and I will now turn things over to Dan to review, our financial performance and forward looking expectations. Thanks, Mike.
Fourth quarter consolidated revenue of $3 billion $127 million represents 15, 4% reported revenue growth versus fourth quarter of 2020 and reflects a $38 million headwind from foreign exchange on an operational basis revenue growth was 16, 9% in the quarter.
Sales from the acquisitions of prevent us Farah pulse and luminous contributed 330 basis points, partially offset by the divestiture of the BTG specialty pharmaceuticals business, resulting in 15, 1% organic revenue growth towards the high end of our guidance range of 12% to 16% growth versus 2020.
This 15, 1% growth includes a 440 basis point tailwind from the Watchman sales return reserve recognized in Q4, 2020, which was contemplated in our guidance.
Compared to fourth quarter 2019, organic revenue growth was six 7% nicely above the midpoint of our guidance range of 4% to 8%.
This six 7% growth excludes $67 million in 2019 sales of the divested intrauterine health and BTG specialty pharmaceuticals businesses as well as $89 million in 2021 sales of acquired businesses, including preventive Farah pulse and luminous.
Q4, adjusted earnings per share of <unk> 45.
It represents 94% growth versus 2020 flat versus 2019 and achieved the high end of our guidance range of 43 to 45 drew.
Driven by revenue performance at the higher end of our guidance range and a slightly favorable adjusted tax rate.
Full year 2021, consolidated revenue of $11 $888 million representing.
<unk> represents 19, 9% reported revenue growth versus the full year 2020, and reflects a $126 million tailwind from foreign exchange.
On an operational basis revenue growth was 18, 7% in the quarter versus 2020.
Sales from the acquisitions of preventive Ferro pulse and luminous contributed 210 basis points more than offset by sales of the divested intrauterine health and BTG specialty pharmaceuticals businesses, resulting in 18, 9% organic revenue growth within our guidance range of 18% to 19%.
Compared to full year 2019 organic growth was five 7% again above the midpoint of our guidance range of 5% to 6%. This five 7% growth excludes $131 million in 2019 sales of divested businesses as well as $531 million in 2021 sales.
Of acquired businesses, including vertical ex BTG, interventional medicines, preventive Farah pulse and luminous.
And $13 million of specialty pharmaceutical sales prior to divestiture.
Full year 2021, adjusted earnings per share of $1 63.
Represents 69% growth versus 2023% growth versus 2019 and exceeded the high end of our guidance range of $1 60 to $1 62.
Adjusted gross margin for the fourth quarter was 79% in line with our expectations of a slight sequential improvement from the 76% recorded in Q3, we continue to face macro environment headwinds on gross margin, which included the cost of running plants with COVID-19 specific measures increased freight costs and price.
<unk> and higher direct labor wages.
As the Omicron variant searched we saw increased headwinds, particularly in December with higher levels of Covid related absenteeism in our plants as well as price pressure on direct material cost driving unfavorable manufacturing variances.
As a reminder, manufacturing variances are capitalized on the balance sheet and realized over an approximate six months period. As a result, we expect full year 2022 gross margin to improve slightly versus the second half of 2021.
Gross margins in the first half of 2022 are expected to be below the second half of 2021, driven by the lagging impact of unfavorable manufacturing grants has capitalized on the balance sheet and typical standard costs revaluation in line with our historical trends, we anticipate that the second half of 2022 gross margins will be improved versus the first half.
Half driven by lower Covid related headwinds and recognition of full 2022 standard cost improvements our longer term goal remains to return to pre COVID-19 gross margin levels of 72% plus as global supply chain disruptions and inflation lessen over time.
Fourth quarter adjusted operating margin was 26, 2%, resulting in a second half average of 25, 9%.
Full year adjusted operating margin was 25, 3% in.
In light of increased gross margin pressures, we felt it was prudent to provide a range for 2022 adjusted operating margin and expect the full year to be within a range of 26% to 26, 4% representing a 70 to 110 basis point improvement over the full year of 2021 with the high end, representing our long range plan.
<unk> goal of 50 basis points annual improvement versus second half average 2021.
On a GAAP basis fourth quarter operating margins were five 8% and includes a $197 million intangible asset impairment related to the discontinuation of the millipede program as Mike outlined and a $128 million in litigation related expenses, which I will provide further details on in a moment.
Moving below the line adjusted interest and other expense totaled $115 million in Q4 and $423 million for the full year 2021 in line with expectations, our fourth quarter tax rate was five 3% on an adjusted basis, our full year adjusted tax rate of seven 6% includes discrete.
Tax items and the benefit from stock compensation accounting.
Excluding these items our operational tax rate was eight 8% favorable to our expectations driven by our geographic mix of earnings fully.
Fully diluted weighted average shares outstanding ended at one 1.436 billion shares in Q4, and 1.434 billion shares for full year 2021.
Adjusted free cash flow for the quarter was $425 million and free cash flow was $217 million with $478 million from operating activities less $261 million of net capital expenditures for full year 2021, we delivered adjusted free cash flow of $2 2 billion and free.
Cash flow of $1 3 billion with $1 9 billion from operating activities less $540 million of net capital expenditures.
We exceeded our expectations for full year adjusted free cash flow with growth of 11% versus 2020, driven by lower working capital as we balance increasing our inventory position with sales recovery and finished the year with a favorable DSO.
For 2022, adjusted free cash flow, we aimed to be at or above 2021, while we continue to invest in inventory with less COVID-19 related impact on our manufacturing labor and direct material availability.
As of December 31, 2021, we had cash on hand of $1 9 billion.
We continue to expect to close the acquisition of Baylis medical in Q1 funded with cash on hand, our top priority for capital remains high quality tuck in M&A, and we will continue to assess opportunities in conjunction with our financial goals.
With respect to our legal reserves, we booked $128 million in Q4, which includes $60 million related to ongoing litigation in the Neuromodulation space and $68 million related to mesh product liability claims in Australia.
Theres been no material change to the outlook for the U S. Mesh claims over the last three years materially all U S claims remained settled and we continue to seek prompt resolution of active cases and claims our total legal reserve was $548 million as of December 31, 2021.
I'll now walk through guidance for Q1, and the full year 2022 as a reminder, our guidance does not include the acquisition of Baylis medical since it has not yet closed.
We expect full year 2022 operational revenue growth to be in a range of 7% to 9% versus 2021, which excludes an approximate 100 basis point headwind from foreign exchange based on current rates and includes 110 basis point contribution from the acquisitions of preventive power pulse and luminous and 13 million.
A pre divestiture specialty pharmaceutical sales in 2021.
Excluding the impact of closed acquisitions and divestitures, we expect full year 2022 organic revenue growth to be in a range of 6% to 8% versus 2021, we.
We expect first quarter 2022 operational revenue growth to be in a range of 7% to 10% versus 2021, which excludes an approximate 200 basis point headwind from foreign exchange based on current rates and includes 210 basis point contribution from the acquisitions of preventive Farah pulse and luminous and 30.
Million of pre divestiture of specialty pharmaceutical sales in 2021.
Excluding the impact of closed acquisitions and divestitures, we expect first quarter 2022 organic revenue growth to be in a range of 5% to 8% versus 2021.
We forecast our full year 2022 operational tax rate to be approximately 13% with an adjusted tax rate of 12%, including the benefit from the accounting standard for stock compensation of note. Our forecasted tax rate includes a headwind from delayed provisions in the 2017 Tc JA <unk>.
Effect in 2022 related to the treatment of R&D expenditures. We believe there is bipartisan support to reverse these provisions and if such legislation were to be enacted we would expect our tax rate to revert to its historic range of approximately 11% operational and 10% adjusted.
We expect adjusted earnings per share for the full year to be in a range of $1 73.
To $1 79 and.
And for the first quarter to be in a range of 38 to 40.
A few other items to keep in mind as you look to model 2022, we expect 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 for the year preferred stock dividends will be approximately $55 million for the year.
And we expect a fully diluted weighted average share count of approximately $1 443 million shares for Q1, 2022, and $1 447 million shares for the full year of 2022. Please check our Investor Relations website for Q4, 2021 financial and operational highlights which outlines more detailed.
Q4 results with that I'll turn it back to Lauren who will moderate the Q&A. Thanks.
Thanks, Dan Andrew Let's open it up for questions for the next 30 minutes or so in order for us to take as many questions as possible. Please limit yourself to one question 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 to withdraw its anytime you question has been addressed and you'd like to withdraw your question. Please press <unk>.
Star then two again, please limit yourself to one question.
At this time, we will pause momentarily to assemble our roster.
First question comes from Robbie Marcus with Jpmorgan. Please go ahead.
Hi, good morning, Thanks for taking the question.
Maybe we can start on operating margins for 2022.
Dan just a few weeks ago, you you reiterated the comment that Youre planning on 50 bps margin expansion off of the second half run rate from 2021, we ended up with a margin guidance lower than that.
Implies just very minimal margin expansion, so maybe walk us through what happened in the past few weeks and are you returning to that 50 bps expansion target for 2023 and beyond.
Sure Robbie yeah to be clear the 50 basis points is the goal has always been the goal and is the high end of our guidance range. So our guidance range is 26 to 26, 4% the.
Second half average in 2021 was 25, 9%. So the goal is absolutely still to deliver that 50 basis points, just given the macro environment and the headwinds from inflation and and the omicron surge and the global supply chain disruption, which have really intensified over the December January timeframe, we just thought.
To provide a range.
But rest assured our goal is still delivered to deliver that 50 basis points, but as we have always done and being thoughtful and providing ranges we thought.
Prudent to provide that range of outcomes.
And for 2023, it's still the.
Should we be thinking of this as the midpoint of ranges going forward or is it somewhere in the range I think it's just a bit of semantics and how we think about it.
Yeah I would just.
Good morning, Robert I would say as Dan said, our goal is to deliver that in 2022, but we provided the range given the macro economic headwinds we do.
We do believe that the second half of 'twenty, two should ease some of the supply chain and some of the macroeconomic headwinds that we see as Covid continues to wane and supply chain gets more in order. So our goal for 'twenty. Two just reiterate is to deliver that but we provided that range as you look into 'twenty three and beyond is it's tough to call that but we do think.
Assuming that theres less COVID-19 impact in 'twenty, three and as most people predict the supply chain continues to get more in line with norms that the margin improvement opportunities potentially could be enhanced more than 23 versus 22, given the macroeconomic environment. So our overall investor day goal of improving 50 basis points.
Over the three year period per year 150 basis points over three years continues to stay the same and stuck in unchanged there and we do think the macro environment will get better in the second half of the year and our goal is to still deliver that number in 2022, despite the challenges.
Great. Thanks, a lot.
Yep.
The next question comes from Larry <unk> Olsen with Wells Fargo. Please go ahead.
Good morning, Thanks for taking the question and congrats on a nice finish to the year just on watchman Yep.
Yeah of course, just on watchman, just what you've seen so far with amulet, Boston I mean, I'm, sorry habit claims.
About 10% share of the U S. In December what are you assuming in the guidance for watchman growth in 2022.
How confident are you you will get the DAP label in the first half of this year. Thanks for taking the question.
Sure. Good morning, Larry Watchman, we had a fabulous year in our fab this quarter and quite frankly, the results in Q4 exceeded our expectations and I think the big thing Youre seeing that maybe difficult.
For the competition to.
To see is the size of the market growth.
It continues to perform very well.
With increased utilization by current doctors opening new accounts.
Referring physicians confidence and the watchman flex product and also helped by the international market. So I think.
We're very confident.
Going into 2022, we think the share position that the competitor talked about is quite a bit elevated and I think it's quite frankly, a result of I'm not understanding the size of the market and the market growth that we're seeing because fourth quarter 2021 results in terms of growth rate.
Really in line with what we saw in previous quarters. So we didn't see a.
Any hiccups in fourth quarter growth rate due to the size of the market. So in 2022, we're going to lose some share.
But we are very confident in the performance of the watchman flex platform. The momentum that we have the infrastructure that we have we've got a super exciting clinical dataset coming at CRT.
Ian or Eric can can comment on so.
We're very bullish on watchman going forward here and maybe talk about the DAP label.
Thanks.
We're very confident Larry that we'll get that tough global in the first half of the year, we won't see capability of irritation.
Patients the choice of Jeff Dorr.
No actual therapy. So we've re submission we feel pretty confident we've put that position as you know we already have.
That approval in Europe , and great results in patients in Europe are on depth liable. So we didn't push out any further.
The problems are choosing that label.
Thanks, so much.
The next question comes from Joanne Wuensch with Citibank. Please go ahead.
Good morning, and thank you for the question.
Briefly I'm curious about two things. The first one is that your view towards M&A for this year.
I'll just sort of talk around out there did I hear correctly that the MLP program has been stopped and if so what does that mean for a mitral program. Thank you.
Sure I'll take on the millipede, one we've made that decision.
With the context of looking at across our portfolio of Boston scientific.
In areas, we can invest in whether it be in structural heart watchman in complex coronary as well as understanding the venture portfolio that we have in the near term opportunities that we see coming over the next <unk>.
12 months to 18 months and quite frankly, when we look at the composite of opportunities across the company.
On pipeline products and our venture portfolio as you know we think about half the deals that we've done the last two years came from a retro portfolio, we feel that that's a richer opportunity set to invest our money in versus the millipede program Importantly, the millipede program was making progress we've had some clinical success is a safe product, but when.
We look at the overall financial investment versus the market opportunity, we see better choices across our portfolio that really was the basis of it in terms of our structural heart portfolio. Overall, clearly watchman or are you know our biggest platform, where we have multi generational enhancements coming to that.
<unk>, starting even in 2023.
Initial indications are the.
The accurate Neo two trial is enrolling extremely well in the U S and we're anxious to get that.
Fully enrolled hopefully by the year end here and we're seeing really nice success in growing share and growth in Europe in terms of other mitral opportunities we do have multiple.
Venture investments in that area.
But importantly, we have a lot of investments that we're not going to detail through here in the heart and the emerging heart failure space that we like a lot and circulatory support some organic programs and also in litho plasty. So within the cardiology segment alone. There is a number of new opportunities that we see that we like.
And obviously across our full business, we have others as well so that that was the decision we made and we think it was the best.
Financial return on investment looking at the portfolio broadly and then with respect to the first question on M&A Joanne suffice.
Suffice to say that the.
Landscape and the pipeline is rich across the entire business you heard me talk about it we've been very very consistent that our number one priority in capital allocation is high quality tuck in M&A and the list is long and we have a lot of.
Interest in our various properties across basically all seven of our of our business units, so likely not to see the level of activity that you saw in <unk> in.
In 2021, but you should certainly look for a handful of tuck in deals for us in 2022.
Terrific. Thank you so much.
The next question comes from Vijay Kumar with Evercore ISI. Please go ahead.
Hey, guys. Thanks for taking my question, Dan I just had one on the.
On the guidance here if I just look at the EPS guide at the high end, it's about eight tenths below number.
Right.
If I correctly understand.
The moving parts here.
The guide does not have BLS and at the Street numbers had bell, that's probably that some of the delta with your comments on supply chain.
I mean these were things that were known back in John Crane late December early Jan It doesn't feel incremental given your comments about gross margins being up.
And it looks like a lot of this seems to be below the line and the tax and share count. So maybe if you could just walk walk us through that and Doug towards the screen on EPS.
Is that the right way to think about.
The EPS does that this is all below the line versus the operating margins are a top line issue.
Sure Vijay I think I can probably be helpful. In this regard so.
From what I see Theres, probably three key areas that that would cause that that difference and I think you hit on a couple of them.
First is the all in tax rate.
Which we've guided to 12% with that T. C. J, a provision that that I outlined that's versus our historical 10%, so with each 100 basis points and tax being worth a couple of pennies.
<unk> difference to what folks might have expected.
And you mentioned that when I look at some street models I think theres, just some housekeeping and some modeling updates that need to happen with respect to those below the line expenses.
We're very clearly today said those should be $400 million for 2022.
That from what I see that that's that's worth some pennies as well depending on what folks have model and frankly, the rest of the Delta is that street revenue and operating margins at the high end of our guidance range.
And relative to that we believe our guidance range is appropriate to start the year, giving given the lingering uncertainty on COVID-19 and the staffing fronts as well as the macro or macro environments long year. So we've got plenty of time left and as we start the year. We wanted to make sure that we had a prudent range as we as we head into 2022. So that's the rest of the difference.
If you look at that the the.
The streets just at the high end of our guidance range. So I think if you take those three factors.
That does a pretty good job of reconciling the difference.
That's helpful. Thank you guys.
Sure.
The next question comes from.
And Tom sorry.
Maybe comment on that as well.
Unveil as well.
When we put out the press release without announcing the deal. We said that was one penny accretive in 2022, and we were very clear that's not in our numbers today. So if that were to be in People's numbers.
Shouldn't be and when it closes will lag that penny back.
Yes, I think just on all of this margin EPS questions. We re <unk>. Our goal is to improve margins and our goal is to get to 50, but we wanted to provide a range given the environment and will stretch to and we'll push to do it.
The tax rates elevated given the what dan's comments the share count.
Balas piece you know it shouldnt be included there so.
Terms of operating the business the goal will be to continue to improve margins like we have done consistently.
And some of those below the lineup matters on tax and share count.
Then laid that out yes.
Sorry go ahead Andrew.
Oh not at all.
Thank you. The next question comes from Daniela and healthy with SBB Leerink. Please go ahead.
Hi, good morning, everyone. Thank you so much for taking our question not that not that I have one broad question I Wouldnt watchman specific question, but not to harp on the guidance issue, but it seems like you know people came away from your comment a few weeks ago, a little bit more bullish about how to think about 2022 and I just wanted to make sure.
Sure.
The messaging correct Lee that the wider range is really reflecting more conservatism than anything that's materially.
Birthdays, a few weeks ago. That's my first question I just have one quick one follow up.
Yeah.
Sure I think I mean, something has changed obviously the tax rate has changed as we've gotten into January . So that's we guide hadn't given tax guidance. We guide at the time of what the tax laws that are enacted at the time and that's the 200 basis points relative to the macro environment headwinds, we actually have seen some things get a little bit worse in January the Covid absentee.
In our in our manufacturing plants, we now have closed the books for Q4, we know what manufacturing variances are on the balance sheet as of the end of last year and you've seen some of the data recent data on inflation on the global supply chain disruption. So again I wouldn't call. It necessarily conservatism I would just say, we think it's an appropriate range and to state what Mike and I have said.
All through a 50 basis points is the goal the $26 four is what we're going to work hard to deliver as a team but given that the.
The macro environment, we just thought it was prudent to provide that range.
Got it yeah understand and then and then just a follow up on watchman.
The.
Hum.
Was just curious about what you guys are seeing from that we're expecting maybe is a better way to talk about it from a growth market growth perspective.
Historically cardiology market when they go from a monopoly to a duopoly expand pretty meaningfully.
Yes.
Any early days I appreciate that that's sort of how you're thinking about the market expansion potential with a second player now in the market. Thank you so much.
Yes, there are there are strong company and they're running good clinical trials, just like we are which are potentially could expand the market over time, and it's an exciting market.
We call that Investor day, a 30% growth market and we're clearly seeing that type of a market growth if not slightly more given what we saw in Q4. So the market is growing very well and I think the additional data.
That will continue to lay out with watchman flex will continue to differentiate our platform in terms of its safety profile and ease of use and we've got a very strong global infrastructure in place. So there's just a lot of momentum there and so we're quite confident we're going to lose some share.
Given the second player in our in our strong position here, but this will be a meaningful driver for us in 2022.
Just like it was in 'twenty one.
Thank you guys.
Thank you.
The next question comes from Matt.
Credit Suisse. Please go ahead.
Hi, good morning, Thanks for taking the question.
So I had one follow up on some of the portfolio and investment in.
Strategic comments that you made regarding millipede and so the other options that are out there. If you could talk maybe a little bit about one of the areas. I don't think you had mentioned was.
Tricuspid and other sort of structural heart opportunities.
And as well as digital and any understanding heart logic is a big part of your CRM strategy.
Maybe if you could comment on.
Further investments there or to what degree you view either one of those is strategically important and I had one follow up if I could.
Ken you want to start with a heart logic stuff and maybe Dr. Meredith on the structured yes, thanks, Matt again.
Re baseline everyone Reinhart logic is our proprietary diagnostic.
Diagnostic currently implanted in our ICD CRT D devices proven to provide and median a month of warning prior to an impending heart failure decompensation.
As we've discussed previously at investors day right. Our goal is to take that same technology and enable it on our Lux Dx implantable cardiac monitor platform broadening its applicability well beyond just the heart failure patients who are eligible for ICD CRT devices, but really to broaden it to the entire population.
<unk> of patients with heart failure, and we are currently engaged in a clinical trial or Lux Dx trend study.
That gets to exactly what the modifications are we need to make the algorithm in order to bring it onto that platform, but we do have a high degree of confidence that we will eventually be able to do that.
And we have been granted breakthrough designation by the FDA in that effort.
Yeah, and touch on the other areas and structural.
Mike Thanks, Ken with respect to tricuspid, we see this as a.
Very important fields, and a growing field, particularly with the aging population and the increasing burden of heart failure.
As Mike said the decision with respect to millipede a was it a decision to get out of my mitral and tricuspid. It was simply a decision to focus on.
On the execution of existing and future technologies, we have both in the structural heart space and across the portfolio.
Have.
Continued interest in in that tricuspid space that investment so that we wanted to outline here, but.
This shouldn't be taken as a decision too.
Our move away from the mitral and tricuspid space.
Okay, Great and then just one follow up.
Obviously, a lot of strong growth drivers contributing.
Currently in Q4.
Ordinarily throughout 2022, you have this cadence of new.
Of acquisitions that are kind of rolling in you mentioned, the 200 basis points contribution to reported not organic in Q1.
Can you maybe just.
Give us a thumbnail sketch of how the.
Quarter to quarter.
With those those additional acquisitions will will look like in terms of additive organic growth throughout the year.
That'd be super.
Matt I can take that offline with you and we do talk about as they phase in preventive. His first on March one and then the next one is it's really an Arab health in August and then luminescent in September but we can we can talk about that offline.
Great. Thanks, so much.
Yes.
Yeah. So I think the short story that there'll be obviously, some there'll be some benefit in 'twenty two right.
Primarily for prevent us and some from <unk> and a lot more benefit in 'twenty three as you anniversary the one year or again, our operational number so there'll be some nice impact in 'twenty, two but more limited and stronger in 'twenty three I think.
It was a question I think what I'm really proud of in terms of as we finished the year is the the share performance across the businesses I mentioned that in the script now beyond the acquisitions, which we're excited about that we did in 'twenty, one and will likely do a few more in 'twenty two just the overall strength of the portfolio and the strength regionally each reach.
<unk> performed extremely well in the fourth quarter. It was probably our best quarter for the year in terms of our share position across the company, where we feel like we actually gained share or held share in every single business and for the full year, the only really soft spot with some CRM, but fourth quarter had a nice.
Quarter end CRM as well so the the.
The trend exiting the year was quite good we did provide appropriate guidance given the environment, but the momentum that the business has regionally and across each bu.
We're quite proud of as we enter 'twenty two here.
Yes.
The next question comes from Matt Taylor with UBS. Please go ahead.
Hi, guys. Thanks for taking the question.
I just wanted to ask you one about your assumptions for recovery I didn't hear a lot of color that you gave on recent trends, maybe you could give us an update there and talk about how quickly you think things could come back here in the second half of Q1 and whats imputed into your range. The high end and the low end for recovery through the year.
Yeah.
Yeah, Thanks, Matt so.
To be clear our assumption is that the macro environment factors.
Factors of an inflation in supply chain that there are present for all of 'twenty, two but they wane throughout the year right.
And you know as you look at the global supply chain disruption as supply has continued to get more normalized you would expect that that would have an impact on moderating prices and that we see that but I think I don't think we're the only ones we see that moderating as we go through 2022.
Well with Covid, we're obviously.
Omicron has had impact in December in the first part here of <unk>.
Q1, but as we look at the rest of the year. The goal is and the belief is that there'll be less impact in 'twenty two than there was in 'twenty. One so we see a brighter future, particularly as you get to that second half as the macro environment gets a little bit better COVID-19 .
Waned, even more than it had in in 'twenty, one and and that gives US reason for optimism as we as we go through the year and just frankly, just relative to the operating margin and gross margin.
That should.
Lead to higher gross margin and higher operating margin as we progress through the year. That's a historical trend that we've had in the past, but it also should be true in 2022 that it should get better as it goes through 'twenty, two and that's the underlying in the guidance that we gave.
We've become pretty good at seeing what happens with our business when there's COVID-19 peaks and Thats why you see a wider ranges and you see how strong the businesses when Covid wanes.
So I'm not the expert on this anymore, but that's for sure, but we do believe it'll be a better full year of COVID-19 impact in terms of less impact in 'twenty to 'twenty, one and youre starting to see some improving trends recently so.
It points to a.
Hopefully this kind of what we saw in December January February is the hopefully the toughest part in terms of Covid impact and staffing.
Staffing shortages and we expect that to get better as the year goes on.
That's really helpful can I just ask one quick follow up I mean, I guess in this <unk>.
Media period post Omicron do you expect more of a quick snapback or a more gradual recovery in terms of what youre seeing so far and informed by prior periods.
Well I just look at this time last year, Dan will have all the numbers, but we saw a slower first quarter 2021, and we saw a fantastic second quarter and then we saw a little slowdown in the third quarter as another wave came in we had improved fourth quarter. So the business snaps.
Business quite good anyway, so it's not like it needs to snap back but at the business is quite good.
And we see when Covid waned as the business responds quite well, especially divisions like urology, Neuromodulation and others, who are more greatly impacted so we've seen a couple of year trend now what happens during COVID-19 waves and we've learned how to manage through that well.
While improving margins by the way and we also know when it wanes the business.
It was quite strong.
Thanks, Mike Thanks, Dan.
Thanks, Matt.
The next question comes from Cecilia furlong with Morgan Stanley . Please go ahead.
Great. Thank you for taking the questions I wanted to ask just on your EP business. Specifically can you talk about what Youre seeing in Europe . Just in terms of early samples versus cryo versus are at 10, and then beyond that as well can you provide an update on your proposed U S trial.
Enrollment in there as well as what Youre seeing in Japan is typically around pull out. Thank you.
Dr. Stein you want to answer that one yes, thanks, Mike Thanks, Australia with avid a lot there to unpack, let me just start again.
With Europe as Mike laid out in the script, we're really extremely pleased with the growth of the business in Europe and that growth really has been broad based I mean, it's all three of the technologies that you mentioned right stable point, our unique catheter that combines <unk> with our proprietary <unk>.
Since technology polar X, our differentiated cryo balloon and then.
Really overwhelmingly positive reception to Sarah pulse as we started early commercialization of it.
In Europe , and really seen fantastic growth in accounts that we've been able to open with a technology, which continue opening new accounts.
In terms of.
Our progress with the advent trial in the United States again, we're very pleased with the pace of enrollment in the trial as.
As I think I've said in other settings, it's an adaptive trial design. So we can't tell you exactly how many patients we're going to need before we close it but we continue to be on pace with what our expectation was when we closed the deal and what we've said that.
Previously if things like investors day.
And are very anxious to get that trial fully enrolled and complete our one year follow up and submit to the FDA.
Okay and the next question will come from <unk> Chickering with Deutsche Bank. Please go ahead.
Good morning, guys. Thanks for squeezing me in here, if you're drilling too.
Neuromodulation for the fourth quarter, there were some COVID-19 impact, which makes sensitive due to the durability of their procedures, but can you give us any color on backlog is due to staffing and any color on geographic growth.
Growth within the division, specifically Europe versus the U S and on the product side any color on DBS growth as a COVID-19 headwinds fade and then finally, how should we think about Ses competition.
<unk> thousand two with D P on approvals for Medtronic and never.
Sure I'll do my best to try to answer some of that.
Similar to our urology business, the Neuromodulation business and.
And we've seen this kind of across the board with some electric procedures, you know kind of down.
Down quite a bit as COVID-19 waves with with cancellations.
The rescheduling and a bit of a frustrating process there but.
You can't control the market all the time and we've seen how quickly it snaps back if you look at second quarter 'twenty.
'twenty, one and what our results with neuroma, but I think encouragingly, despite the difficult market.
Full year, it grew 19% versus 20 in flat versus 19 fourth quarter and grew 6% versus 20 and minus seven so thats actually faster than what are some of our competitors have outlined for the fourth quarter. So we're pleased.
With the overall performance of the group you can ask them to do much more than gain share and continue to invest in capabilities for the future and the market will improve so I think that's a good signal for as you look at 2022 and beyond and a lot of Thats being driven by just the innovation, we have in that business and their commercial teams. This fast algorithm that we have.
With with SCS and the data that was presented at dance <unk>.
Supports the share gains that we're seeing.
And this clinical indication that there is certainly something that we're interested in.
We are.
Enrolling in our Virgin back trial in 2022, and we have plans for a VPN as well. So those will continue to expand the marketplace, but the the market primarily in 'twenty two will be all about spinal cord stimulation in the treatment of pain, which were doing quite well in DBS.
It's a great story for US we continue to invest in that business that has been impacted by Covid and that's another area that to kind of snaps back when COVID-19 wanes, but nonetheless has become a sizable business for us we have a significant share position in Europe and the U S.
And we expect that to be again, a nice growth driver for us in 'twenty two.
Great. Thanks, so much.
This concludes our question and answer from Stephens go ahead.
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[music].
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