Q3 2024 Boston Scientific Corp Earnings Call
Good morning, and welcome to the Boston Scientific third quarter 'twenty 'twenty four earnings call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero on your telephone keypad.
Speaker Change: After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to John Monson, Senior Vice President Investor release.
Speaker Change: Please go ahead.
John Monson: Thanks, Jerry and thanks, everyone for joining US with me today are Mike Mahoney, Chairman and Chief Executive Officer, and Dan Brennan Executive Vice President and Chief Financial Officer during the Q&A session, Mike and Dan will be joined by our Chief Medical Officer, Dr. Ken Stein and art Butcher President of our med surge in Asia.
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John Monson: We issued a press release earlier this morning announcing our Q3 results, which included reconciliations of the non-GAAP measures used in this release that release as well as reconciliations of the non-GAAP measures used in today's call can be found on the Investor Relations section of our website.
John Monson: Please note on the call operational revenue excludes the impact of foreign currency fluctuations and organic revenue further excludes acquisitions and divestitures for which there are less than a full period of comparable net sales guy.
John Monson: Guidance excludes the previously announced agreement to acquire Exxon X, which is expected to close in the fourth quarter of 2024 subject to customary closing conditions for more information. Please refer to the Q3 financial and operational highlights deck, which may be found on the Investor Relations section of our website.
John Monson: On this call all references to sales and revenue are organic and relative growth as compared to the same quarter of the prior year unless otherwise specified.
John Monson: This call contains forward looking statements regarding among other things our financial performance business plans and product performance and development. These statements are based on our current beliefs using information available to us as of today's date and are not intended to be guarantees of future events or performance.
John Monson: If our underlying assumptions turned out to be incorrect or certain risks or uncertainties materialize actual results could vary from those projected by the forward looking statements factors that may cause such differences are discussed in our periodic reports and other filings with the SEC, including the risk factors section of our most recent annual report on Form 10-K, Boston scientific disclaims.
John Monson: Any intention or obligation to update these forward looking statements, except as required by law at this point I'll turn it over to Mike Mike. Thanks, John. Thank you everyone for joining US today, our Q3 results exceeded our expectations and we continue to invest in our portfolio and capabilities to deliver differentiated performance over the long term.
Mike: In Q3, 24 total company operational sales grew 19% and organic sales grew 18% exceeding the high end of our guidance range of 13 to 15.
Mike: Our excellent growth is and will continue to be focused on our category leadership strategy fueled by innovation clinical evidence generation and their winning spirit of our global team.
Mike: Q3, adjusted EPS of <unk> 63 cents grew 27% exceeding the high end of our guidance range of 57 to 59.
Mike: In Q3, adjusted operating margin was 27, 2%.
Mike: Turning to our fourth quarter and the full year 'twenty four outlook, we're guiding to organic growth of 14% to 16% for fourth quarter and are raising our full year guidance to approximately 15%, reflecting momentum across our broad portfolio and particularly in AF solutions.
Mike: Our fourth quarter adjusted EPS guidance is now 64 to 66 cents.
Mike: We expect our full year adjusted EPS to be $2 45 to $2 47.
Mike: Representing growth of 20% to 21%.
Speaker Change: Dan will provide more details on our financials in a few minutes now provide additional highlights our third quarter results along with our comments on our outlook.
Speaker Change: Regionally on an operational basis, the U S grew 24% with double digit growth or higher in six of eight business units. Our EP business continues to deliver impressive performance fueled by fair Appulse, new account openings and very strong reorder rates.
Speaker Change: Europe Middle East and Africa grew 14% on an operational basis. This performance was driven by continued above market performance in E. P.
Speaker Change: Where we continue to expand our PSA leadership.
Speaker Change: Complex PCI and structural heart.
Speaker Change: And tabby, we received CE, Mark and recently launched our next generation accurate prime valve.
Speaker Change: I also want to announce that following in nearly 30 year career, Boston scientific our president of EMEA, Eric to Pope will retire in December and Zavvi. Bertrand currently the vice president of peripheral interventions and EMEA will be appointed the new president of a math.
Speaker Change: Thank Eric for his many significant contributions to the organization and congratulate <unk> on his new role.
Speaker Change: Asia Pac grew 12% operationally with excellent performance in China, Australia, New Zealand grew mid teens. Despite recent V. B P implementations.
Speaker Change: In Japan, we received P. M D approval of the favorite pulse PFA system, and anticipate reimbursement and commercial launch in the coming weeks.
Speaker Change: I'll now provide some additional commentary on our business units urology sales grew 10% with double digit growth in stone management, and prostate health, including double digit growth in both resume and space or.
Speaker Change: Within the quarter, we continued to see momentum from the launches of Lithia view elite and the tenacity of pump whether a M. S 700 device.
Speaker Change: And looking forward, we expect to close the previously announced acquisition of Exxon ex in the fourth quarter and we're excited to add this excellent business into Boston scientific and our urology business.
Speaker Change: Endoscopy sales grew 7% organically and 8% op really operationally with strong growth, particularly in the U S. Our anchor products continue to drive above market growth with axis and exalt D. Both joined double digits in the quarter. We also continue to see strong double digit growth in our Endo luminal surgery franchise, we're pleased.
Speaker Change: Recently received a category one CPT code for the ESG weight loss procedure, which is expected to further momentum within this business.
Speaker Change: Neuromodulation sales grew 3% organically and 17% operationally, including relieve yet which will turn organic in November.
Speaker Change: Our branch franchise returned to low double digit growth in the quarter in the U S supported by the de Novo implants and competitive replacements.
Speaker Change: Our pain franchise grew low single digits organically in double digits operationally, our global SCS performance was below our expectations and a market that continues to be challenged offset by growth in the rest of the pain portfolio, which reflects the value of our category leadership strategy.
Speaker Change: Peripheral interventions sales grew 10% organically and 12% operationally.
Within our vascular business, we saw mid single digit growth in arterial with continued double digit growth in drug eluting therapies, and low double digit growth in venous.
Speaker Change: We're also pleased to have closed our acquisition of Silk Road medical in mid September.
Speaker Change: Adding the innovative T car system to our vascular portfolio.
Speaker Change: Our interventional oncology and nimble embolization franchise grew double digits again, driven by continued momentum from recent launches and embolization and sustained double digit growth in thera sphere.
Speaker Change: Cardiology delivered another exceptional quarter with sales growing 29%.
Speaker Change: Within cardiology, interventional cardiology therapies grew 14%.
Speaker Change: Mid teens growth in coronary therapies was supported by the launch of U S agent performance.
Speaker Change: The continued global adoption of coronary imaging with our vehicle plus platform and our calcium portfolio.
Speaker Change: The U S Asia launch continues to exceed our expectations with both new account openings and strong reorder rates were.
Speaker Change: We also recently commenced enrollment in the agent I D E long lesions sub study.
Speaker Change: And completed enrollment in our Vitalist early feasibility study in high risk PCI patients congratulations team on that milestone.
Speaker Change: Our structural heart valves franchise grew double digits in third quarter led by another quarter of above market growth of accurate Neo two in Europe.
Speaker Change: In the U S. We continue to collaborate with the FDA and our regulatory strategy and data from the U S. Accurate I D will be presented at TCT on October 30th.
Speaker Change: Watchman grew 18% with continued conversion to watchman flex pro in the U S and Japan.
Speaker Change: And globally, we surpassed 500000 patients treated with the watchman device driven by our innovation clinical evidence and patient awareness efforts.
Speaker Change: Key near term catalysts for watchman drive our confidence in delivering high growth in this business.
Speaker Change: The recently implemented DRG for concomitant L. A C and AF ablation and.
Speaker Change: And if positive the data readout from the option trial, which would which will be presented as a late breaking clinical trial at the American Heart Association Conference on November 16th.
Speaker Change: We also recently commenced enrollment of our simplified trial, which studied in a less intensive post procedure drug regimen enabled by our latest generation watchman flex probe and continue to expect data from the champion trial in the first half of 'twenty six.
Speaker Change: Cardiac rhythm management sales grew 2% in the quarter and third quarter. Our diagnostics franchise grew high single digits, driven by our implantable cardiac monitors Lux Dx, which both receive CE mark within the quarter.
Speaker Change: And of course, CRM strong international growth was offset by below market growth in the U S. We're excited about new and upcoming product launches in this business, including the expanded indication our branch zebedee lead for conduction system pacing, which received FDA approval in the quarter and our empower legals pacemaker, which we now have submitted to the FDA.
Speaker Change: Electrophysiology sales grew an exceptional 177% in the quarter driven by continued commercial execution pull through in our access solutions business and increased procedure volumes driven by excellent outcomes as well as efficiencies gained with variables.
Speaker Change: We have now treated over 125000 patients with fair pulse driving rapid and transformative conversion from RF and cryo to PFA, specifically using fair pulse.
As a result of this accelerated conversion of the market. We now expect PFA to likely exceed our previously communicated range of 40% to 60% of global AF ablation and <unk> by 2026.
Speaker Change: We are excited about the recent fair pulse approvals in both Japan, and China and expect these launches to have a meaningful impact on our global EP business in 2025.
Speaker Change: Recently, we received USDA approval of the fairway of NAV catheter, which combined with a fairway of software at the visualized cardiac ablation procedures exclusively with our Opal HD X mapping system.
We are pleased to have completed the follow up phase one of the advantage after clinical trial, which is evaluating a fair a pulse in the treatment of patients with drug refractory persistent AF and we expect to submit the results of the trial to the FDA later this quarter and anticipating presenting the results early twenty-five with label expansion expected in the second half.
Speaker Change: 25.
Speaker Change: We're also studying it very new patient population of drug naive persistent AF patients in Amman Guard.
Speaker Change: As we near the end of this enrollment we have elected to temporarily pause the trial to assess a few unanticipated observations.
Speaker Change: It is our intention to resume enrollment in the near term and based on the totality of clinical evidence of commercial real world experience, we remain extremely confident in the unique performance apparel pulse.
Speaker Change: In closing, we're very proud of the performance of our global teams and are confident in the sustainability of our top tier financial performance with that I'll hand over to Dan and provide more details on the financials. Thanks, Mike.
Dan: Third quarter 2024, consolidated revenue of $4 billion and $209 million represents 19, 4% reported growth versus third quarter 2023, and includes a 10 basis point headwind from foreign exchange, which was favorable versus our expectations. Excluding this $4 million foreign exchange headwind opera.
Dan: <unk> revenue growth was 19, 5% in the quarter sales impact from closed acquisitions contributed 130 basis points, resulting an 18, 2% organic revenue growth exceeding our third quarter guidance range of 13% to 15%.
Dan: Q3, 2024 adjusted earnings per share of <unk> 63 cents.
Dan: Grew 27% versus 2023 exceeding the high end of our guidance range of 57 to 59.
Dan: Primarily driven by our strong sales performance.
Dan: Adjusted gross margin for the third quarter was 74% slightly lower than anticipated driven primarily by foreign exchange. We continue to expect second half adjusted gross margin to be higher than the first half and full year adjusted gross margin to be slightly below our 2023 right.
Dan: Third quarter adjusted operating margin was 27, 2%.
Dan: Which expanded 110 basis points versus the prior year period, given our strong year to date performance. We now expect full year adjusted operating margin to be approximately 27%.
Dan: We believe the strikes a nice balance of delivering incremental margin from our sales upside and continuing to invest appropriately to drive strong top line performance.
Dan: On a GAAP basis third quarter operating margin was 17, 4% moving.
Dan: Moving to below the line third quarter adjusted interest and other expenses totaled $65 million, which was favorable to our expectations, primarily due to higher interest income.
Dan: On an adjusted basis, our tax rate for the third quarter was 13, 2%, which includes favorable discrete tax items, our operational tax rate for the quarter was 13, 5% full.
Dan: Fully diluted weighted average shares outstanding ended at $1 $487 million in the third quarter.
Dan: Free cash flow for the third quarter was $822 million with $1 $2 million from operating activities less $180 million and net capital expenditures, which includes payments of $208 million related to acquisitions restructuring litigation and other special items.
Dan: Yeah.
Dan: In 2024, we continue to expect full year free cash flow to exceed $2 billion, which.
Dan: Which includes approximately $900 million of expected payments related to special items.
Dan: As of September 32024, we had cash on hand of $2 $5 billion and our gross debt leverage ratio was two four times.
Dan: Our top capital allocation priority remains strategic tuck in M&A, followed by annual share repurchases to offset dilution from employee stock grants are legal reserve was $250 million as of September 30th roughly flat versus Q2 2024.
Dan: $53 million of this reserve is already funded through our qualified settlement funds.
Dan: I'll now walk through guidance for Q4 and full year 2024.
Dan: We expect full year 2020 for reported revenue growth to be approximately 16, 5% versus 2023, excluding an approximate 50 basis point headwind from foreign exchange based on current rates, we expect full year 2020 for operational revenue growth to be approximately 70.
Dan: Per cent.
Dan: Excluding a 200 basis point contribution from closed acquisitions, we expect full year 2020 for organic revenue growth to be approximately 15% versus 2023.
Dan: We expect fourth quarter 2024 reported revenue growth to be in a range of 16, and a half to 18, 5% versus fourth quarter 2023, excluding an approximate 50 basis point tailwind from foreign exchange based on current rates, we expect fourth quarter 2020 for operational revenue growth.
Dan: <unk> to be 16% to 18% and excluding a 200 basis point contribution from closed acquisitions, we expect fourth quarter 2020 for organic revenue growth to be in a range of 14% to 16% versus 2023.
Dan: We continue to expect full year 2024, adjusted below the line expenses to be approximately $300 million.
Dan: We also continue to expect a full year 2024 operational tax rate of approximately 13, 5% and an adjusted tax rate of approximately 12, 5%, which contemplates current legislation, including enacted laws and issued guidance under OECD pillar two rules.
Dan: We expect full year adjusted earnings per share to be in the range of $2 45 to $2 47 reps.
Dan: Representing growth of 20% to 21% versus 2023, including.
Dan: An approximate <unk> <unk> headwind from foreign exchange, which is unchanged from our previous expectations. We expect fourth quarter adjusted earnings per share to be in a range of 64 to 66 cents.
Dan: We move to Q&A I want to provide a few housekeeping items related to 2025 that may be helpful. With your modeling there will be one less business day in 2025, which comes in Q1.
Dan: Note that in 2024, we have two extra business days versus 2023, one here in Q3 and one upcoming in Q4.
Dan: Below the line, we expect a meaningful increase versus 2024 related to higher adjusted net interest expense in 2024, we will earn approximately $100 million of.
Dan: Of nonrecurring interest income on the cash raised earlier this year to fund the <unk> acquisition, we expect which we expect to close here in the fourth quarter and 2025. We also have approximately $1 6 billion of bonds coming due which we expect to look to refinance likely at higher rates than the existing bonds, while maintaining our strong balance sheet.
The good news is this incremental expense should largely be offset by the operating income dollars associated with the deals we have closed in 2024 and the expected close of Exxon X.
Dan: Based on current global tax legislation, we expect our tax rate to be in line with our historical rate of approximately 14% operational and 13% adjusted.
Dan: In 2025, we will aim to outperform our markets deliver meaningful margin improvement and grow adjusted earnings per share double digits and faster than sales towards our goal of being the highest performing large cap Med Tech company as we said at last year's Investor Day for.
Speaker Change: For more information check our Investor Relations website for Q3, 2024 financial and operational highlights, which outlines more details on Q3 results and 2020 for guidance and with that I'll turn it back to John who will moderate the Q&A.
John Monson: Thanks, Dan drew let's open it up for questions for the next 40 minutes or so in order for us to take as many questions as possible. Please limit yourself to one question drew please go ahead.
Speaker Change: 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.
Speaker Change: Any time Youre question has been addressed and you'd like to withdraw. Your question. Please press Star then two again, please limit yourself to one question.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: The first question comes from Robbie Marcus with Jpmorgan.
Speaker Change: Go ahead.
Robbie Marcus: Oh, great good morning, and congrats on another fantastic quarter here.
Speaker Change: My wife Robyn.
Robbie Marcus: My one question there is so much to ask about here.
They've got a good one Ravi.
Robbie Marcus: Yeah.
Speaker Change: In our checks we hear consistently that the upcoming.
Speaker Change: Coming option trial that we will see at H a combined.
Speaker Change: With the.
Speaker Change: Recently started on October 1st reimbursement for concomitant watchman, and PFS and ablation has already started to kick into gear and option could meaningfully alter the usage patterns that had champion in first half of 'twenty six so wanted to get your thoughts on the importance of both concomitant and should.
Speaker Change: Option be positive what that can mean for both of those franchises both in the short and long term. Thanks.
Speaker Change: Sure.
Speaker Change: And Dr Stein can.
Speaker Change: Probably more helpful color.
Speaker Change: Clearly independently both platforms are doing incredibly well watchman omnicell with all the clinical evidence and you saw the amazing results of a terrible today.
Speaker Change: And doctors are so comfortable with both procedures is very safe procedure that concomitant reimbursement, we view as quite positive.
Speaker Change: It's also very positive economic for the hospitals benefits for the patient.
Speaker Change: The proceeds will be.
Speaker Change: Safely. So we're really pleased with that concomitant and so it was clearly a ongoing long term tailwind for watchman and also further helps fair pulse both both platforms as you know of a number of different clinical trials to continue to expand indications and Dr. Stein any other comments you'd like to make kind of yeah.
Dr. Stein: Oh sure sure Mike. Thanks, Ravi I, just again reiterate what Mike said at the outset right I mean, the ability to do concomitant procedures and get reimbursed with them under the new CMS DRG, it's one of those things.
Dr. Stein: It's positive for patients it's positive for the health care system.
And hospitals and it's certainly a positive for us given the unique advantages in doing concomitant procedures. When you think of the safety and efficiency.
Dr. Stein: Pulse and you think of the safety and efficiency.
Dr. Stein: And frankly excellent outcomes with <unk> and with our watchman flex and watchman Flex pro.
Dr. Stein: Again just to.
Dr. Stein: Give some sense of the importance of this right. There are approximately 350000 ablation performed in the U S. Every year for atrial fibrillation and roughly half of those patients are at high risk of stroke. According to things like the chance to ask scoring system.
Dr. Stein: We are all anxiously looking forward to see the option data when it gets read out.
Dr. Stein: The impact that will have I think you know, stating the obvious will depend on what those data show and if they do show a compelling benefit.
Speaker Change: To watchman, how big is that benefit.
Speaker Change: And then again to reiterate what Mike said beyond option. We also have the champion trial.
Speaker Change: In that trial to read out in early 2006, which would look at watchman versus the new oral anticoagulants in all comers.
Speaker Change: Great. Thanks, a lot.
Speaker Change: The next question comes from Joanne Wuensch with Citi. Please go ahead.
Joanne Wuensch: Good morning, and thank you for the question I want to talk about the amazing results with Arab Gulf.
Joanne Wuensch: We just.
Joanne Wuensch: And specifically how youre thinking about.
Joanne Wuensch: Moving on I was really interested in one quote that you said to exceed 40% to 60% of global ASP procedures by 2026.
Joanne Wuensch: Thank you.
Speaker Change: Sure. So this is just been a tremendous launch.
Speaker Change: Just a quick shot out to our operations supply chain team for staying ahead of the manufacturing extremely high demand.
Speaker Change: This product and the excellence that we're seeing in the field by the commercial and clinical teams. So.
Speaker Change: Doctors are moving surprisingly quickly too.
Towards fair pulse surprisingly to what we thought it would be a year ago.
Speaker Change: So when we had the Investor day, we.
Speaker Change: We weren't quite sure because we have had up.
Speaker Change: It didn't have approval in the U S. We saw excellent momentum in Europe.
Speaker Change: And now our operations team is scaled to meet the demand and the same excellent clinical outcomes and procedural efficiencies and safety benefits.
Speaker Change: Patients received in Europe are being felt throughout the throughout the world now.
Speaker Change: We've been planting over 120000 of them. So that was our point estimate you know about a year ago or so and based on the rapid uptake we're confident in stating that we do expect it to be at the high end and likely exceed that 40 to 60 based on how quickly physicians are.
Speaker Change: Transferring especially for PPI from traditional RF and cryo too.
Speaker Change: Two favorable since also been supported by the sub studies within advent that show the benefits of fair pulse versus traditional RF.
Speaker Change: So it's a it's a great time in the market for the physicians and the patients and we've also proven based on our competitive launches in Europe, who have been out for a while that we clearly are the market leader and PFA and we have lots of plans in place to continue to extend that leadership with clinical.
Speaker Change: Asian and product enhancements.
Speaker Change: Thank you.
Speaker Change: The next question comes from Larry <unk> Olsen with Wells Fargo. Please go ahead.
Speaker Change: Good morning, Thanks for taking the question and I'll Echo my congratulations on a really phenomenal quarter here.
Speaker Change: The Doctor side, given the importance of <unk> can you provide more color on the argon guard trial and the observations you saw and related to that we're going to be more PFA ablation choices soon.
Speaker Change: <unk> from the market leader once these new PSA catheters or launch what are the factors that will lead existing power pulse customers to stay with power pulse or choose Faro post if they haven't adopted it yet thank you.
Yes, sure Larry Let me, let me take those successively so so first on <unk>.
Speaker Change: Vanguard again, as Mike said due to a few unanticipated observations in the trial, which is studying a completely new population, which is drug nave patients with persistent AF, which <unk> is not currently indicated to treat we did elect to temporarily pause enrollment until we develop better under.
Stan I think of the observations.
Speaker Change: While none of the observations were life threatening.
Did make a decision to temporarily pause, but it is our intention to resume enrollments in the near term and this in no way at all affects our confidence in the overall performance of the <unk> system as it's being used today commercially or in other clinical trials again as Mike said in his opening comments.
Speaker Change: We remain confident that we're going to obtain expanded indication for drug refractory persistent AF patients and thats the data from our advantage phase one trial.
Again, as Mike said, we expect to submit that data to FDA. Later this quarter, we expect to present that data in early 2025 with indication expansion expected to come in the second half of 2025 and.
Speaker Change: Again, I just want to close by emphasizing that this patient population that we're studying in a vanguard, which is drug naive persistent AF patients has not previously been studied population thats not indicated for pop for ablation today under guidelines and it's not the population that's being treated today with <unk>.
Speaker Change: Our pulse system.
Speaker Change: I also want to emphasize that we remain highly confident in the global performance of Sarah Pulse, which has now been used to treat more than 125000 patients across more than 65 different countries and is supported by extensive clinical data demonstrating positive outcomes for the device and I think.
Speaker Change: That also leads into your second question right, which is why as Sarah pulse going to maintain category leadership in pulsed field ablation.
Speaker Change: What's going to prompt new users to two to continue to newly adopt the system and it's several things I think first of all it's just the compelling.
Speaker Change: Ease of use and straightforward nature of doing the ablation with Farah pulse.
Speaker Change: It's just the tremendous clinical experience.
Speaker Change: That people have when they start using the system I am not aware of anyone who has started using this and then has stopped and gone back to thermal ablation.
Speaker Change: It's also the extensive clinical trial data that we've got supporting it as Mike mentioned right.
Speaker Change: <unk> had a sub analysis the hasnt data, which is the first data that anyone has had to actually show superiority in efficacy outcomes.
Speaker Change: When we look at AF burden.
Speaker Change: As a secondary analysis of the advent data.
Speaker Change: It is supported by published clinical data now in approximately 20000 patients globally.
Speaker Change: And again is as Mike said right in Europe, where we've seen commercial systems launch alright, we really have not seen that meaningfully detract from the position of fair pulse has as the leading PFA system.
Speaker Change: In those markets and then last just to make sure it doesn't get get get lost in all the other stuff here right the approval and the launch now of a thorough if NAV catheter and thorough view mapping system, which really becomes the first mapping system, that's really designed around Psa.
Speaker Change: I think provides just you know maybe it's the cherry on top of that Sunday and in terms of answering your question.
Thank you so much.
Speaker Change: Yeah.
Speaker Change: The next question comes from Rick Wise with Stifel.
Speaker Change: Please go ahead.
Rick Wise: Thank you and good morning, everybody.
Rick Wise: I'm, hoping Mike.
Rick Wise: You or Dr. Stein will expand on the Nat cat comments.
Rick Wise: From a couple of aspects.
Speaker Change: Are you ready to fully launch.
Speaker Change: In Crane.
Speaker Change: Nat cats.
Speaker Change: A price premium given premier technology.
Speaker Change: Of course tomorrow with something like this integrated.
Speaker Change: We assume that you guys selling at a higher price and just last one sort of related to what Dr. Stan was talking about as well.
If <unk> is approved.
Speaker Change: Approved.
Who only afib, obviously, a huge portion of the market.
How how does that.
Speaker Change: How are you going to manage.
Speaker Change: The argument that other other imaging mapping systems, obviously are approved for all imaging.
Speaker Change: Where will farrow nab fit in and the broader the larger scheme. Thank you.
Speaker Change: Sure.
Speaker Change: Yeah.
Speaker Change: Yes, Rick let me take the second part of that question first.
Speaker Change: And then get on to what some of the advantages are that we see.
Speaker Change: Need to Farrah view, right, which is on our refreshed Opel HD X platform and so to begin the open platform is approved for.
<unk> mapping and navigation across the whole spectrum of cardiac arrhythmia is now when we look at the US specifically as it integrates with fairways and fairway of NAV at Fairway is an AF ablation catheter and I think part of the reason that we've seen the.
Speaker Change: <unk> that we'd had part of the reason I was able to give any answer than I did to Larry right.
Speaker Change: Is that it's just exquisitely beautifully designed for our blading atrial fibrillation.
Speaker Change: It's a fantastic tool for pulmonary vein isolation and again, we hope to share our data from our advantage clinical trial showing how it is also.
Speaker Change: Can be used to a tree.
Speaker Change: Persistent atrial fibrillation.
Speaker Change: But it is.
Speaker Change: Really explicitly not designed to be the catheter to tackle some other it resumes the next catheter in our pipeline is our ferrous point catheter.
Speaker Change: And that catheter was studied in phase two of our advantage clinical trial.
Speaker Change: And we have completed enrollment in that phase two of advantage and are continuing to follow those patients and to start we'd expect to qualify that catheter for use for treating arrhythmia atrial flutter.
As an adjunct to April.
Speaker Change: The relation ablation procedures, but beyond that right could see fair appoint used right for really any sort of or arrhythmia.
Speaker Change: Where you.
Speaker Change: I would prefer a point catheter form factor.
Speaker Change: Then next to follow after that right is our so called mapping of Blake catheter. It's a large focal lesion catheter called flex right, which again all of these will integrate with Fairview on Opal right and that would really give us a.
Speaker Change: Ability and the capability to be able to.
Speaker Change: Target the vast majority of arrhythmias that are seen in clinical practice.
Speaker Change: In terms of fair view.
Speaker Change: Specifically again I think it's really important to emphasize this is the first mapping and navigation software that's built around understanding cost field ablation.
Speaker Change: So it gives a lot of advantages to users who want to use it to navigate a catheter. It gives dynamic visualization of the fairway of catheter as it moves into its various configurations, whether it's a basket or a flower.
Speaker Change: Anything in between and it's also got a unique feature of Caulfield tagging, where physicians will be able to see where the post field will intersect with tissue and hopefully allow them to better strategize, where and when and how to put lesions in when theyre doing an ablation for.
Speaker Change: <unk>.
Speaker Change: That's an amazing answered just the price premium alright. Thank you.
Speaker Change: Yes.
Speaker Change: Im not going to comment on pricing on specific products Rick.
Thanks, so much everyone.
Speaker Change: Okay. The next question comes from David Roman with Goldman Sachs. Please go ahead.
David Roman: Thank you and good morning, everyone I was hoping to switch gears, a little bit from the E&P side of the business and maybe if you could spend a few minutes on the performance of the franchises kind of ex watchman and EP, which are still trending very well, although a slowdown from where you started the year how are you thinking.
David Roman: About resource allocation and just the focus on those businesses and maintaining.
David Roman: Ongoing support for those franchises in light of the success of PFA and how should we think about the growth drivers and some of those more established categories on a go forward basis.
Speaker Change: Sure I'll take that give Dr. Stein some oxygen here.
David Roman: <unk>.
David Roman: We're we run is a very decentralized business units and so we are the leaders of these divisions have that's all they do.
David Roman: Global teams thousands of employees they have.
David Roman: They wake up and think about peripheral interventions interventional oncology endoscopy, urology, neuromodulators long and ICT X, which grew what 15%.
David Roman: <unk> in the quarter, so theres tremendous focus by their teams on the global execution of these businesses.
David Roman: We just announced the closing of Silk road, we anticipate announcing the closing of <unk> in the fourth quarter here.
Speaker Change: Just as Ken said, we attempt to drive this category leadership.
Speaker Change: In terms of our breadth of portfolio and unique innovation across each division and we have different varying degrees of success in that but in general we're very strong in that area. So in terms of capital allocation. We've obviously invested significantly in the manufacturing ramp of.
Speaker Change: A P F F as well as our ongoing R&D in clinical studies as well as our commercial capabilities to continue to enhance our mapping salesforce, but that in no way has detracted from the investments that we're making across these other businesses, which are really the foundation of the company.
Speaker Change: Despite.
Speaker Change: Both those at the same time as we continue to improve our margin profile, which I think is shows the testament of the winning spirit of the team. So we have a rich pipeline of products organically within these business units.
Speaker Change: You've seen the performance for the quarter and the full year, we did see a bit of a slowdown in some procedure volume in the summer time in July August specifically in our Endo Euro business, but we saw a nice procedure bounce back in September and essentially grew kind of in line, where we have the.
Speaker Change: The past eight quarters in those businesses.
Speaker Change: So we have a lot of confidence in them and.
Speaker Change: We don't.
Dr Stein and I may spend a bit more time on PFA certainly Dr. Stein does but we.
Speaker Change: We don't take the gas pedal down all the other businesses at all of the company.
Speaker Change: Great. Thanks, I appreciate the perspective.
Speaker Change: The next question comes from Patrick Wood with Morgan Stanley. Please go ahead.
Patrick Wood: Perfect. Thank you very much taking my question.
Patrick Wood: I guess, just one on capacity in totality for the system, obviously, I get PSA, adding some efficiencies the system overall, but for.
Patrick Wood: The EPS between Washington, and everything is a tremendous call on People's time, we saw in structural heart, a little bit of noise in one of the players, saying that what capacity constraints. How are you viewing that going forward and how quickly do you think the system can adapt to enable you to keep growing these franchises still have capacity to actually get them done. Thanks.
Well, we're still relatively early in our launch.
In the U S. We got approved in February we started launching in late February March.
Speaker Change: So we still have a number of new accounts that have not used spare pulse in the U S and we have yet to launch in Japan.
And we've let a launch in a meaningful way in China and many other countries. So we're still quite early in the launch and very major markets and we're seeing currently.
Speaker Change: Currently launched accounts, we're seeing many accounts move from one system originally to two three sometimes four systems, so they're increasing their utilization of ferro pulse across their multiple labs. So we have a lot to do to continue to increase share within existing accounts and then thirdly because of the efficiencies of the <unk>.
Speaker Change: System, the hospitals are improving their workflow and most accounts are doing I don't know 10, 25%, 30% more procedure volume in a day.
Speaker Change: So theres a lot of efficiencies in the hospitals when economically in the patients benefit as to the physicians.
Speaker Change: And then to your term on capacity that's why this concomitant procedures also a big win.
For the workflow of the hospital and the patient. So now an extra 10 to 15 minutes for the appropriate patients you can do a.
Speaker Change: Fair pulse plot for pulse.
Speaker Change: Our system as well as the L. A C with watchman. So it also drives procedural efficiency, which is very unique to Boston scientific versus our competitors. So when we design. These platforms, we look at operational efficiency.
Speaker Change: And also the economics of the hospital, and we think fair pulse and watchman and concomitant are all very helpful to hospitals sufficiency and we're still early early in the launch of fair pulse.
Speaker Change: Alright, thanks for the color.
Speaker Change: The next question comes from Travis Steed with Bank of America. Please go ahead.
Travis Steed: Hey, Thanks for taking the question I wanted to follow up on the other guard trial pausing I guess a lot of questions on that this morning. So it seems like the observations you saw didn't change your your thoughts drastic like you're restarting the trial soon.
Travis Steed: Making sure that you know.
Travis Steed: Maybe help us understand why this doesn't really change your view on on safety of airports overall or mitigate the real world data you have or and maybe just help us understand the patient population. That's in this trial today, how they are getting treated today it would be great. Thanks a lot.
Speaker Change: Yes, sure Travis again begin at least the patient population.
Speaker Change: So right today standard of care for patients with newly diagnosed persistent atrial fibrillation is to get a trial of antiarrhythmic drug therapy first.
Speaker Change: And then guy.
Speaker Change: <unk> would say only to be referred for ablation, if they actually fail anti arrhythmic drug therapy.
Speaker Change: You know, obviously, because even though we've paused enrollment for the moment.
Speaker Change: Still in ongoing clinical trials, so I really can't get into any detail on the observations again, just reassure everyone. You know nothing that we saw.
Speaker Change: Certainly was was.
Speaker Change: Life threatening.
Speaker Change: And.
Speaker Change: I think we are very highly confident in the overall safety profile overall efficacy.
And again overall efficiency of Sarah pulse system and again, that's just based on the extensive experience that we've got with it.
Speaker Change: Which is both commercial experience as we said.
Over 125000 patients now have been treated with this system globally as well as extensive.
Clinical data, that's been published and approximately 20000 patients and data that we see from all of our ongoing clinical trials.
Speaker Change: Great. Thanks, a lot.
Speaker Change: Okay.
Speaker Change: The next question comes from Daniel <unk> with UBS. Please go ahead.
Speaker Change: Hey, good morning, everyone. Thanks, so much for taking the question congrats on quarter.
Speaker Change: Kind of thing but.
Speaker Change: Just wanted to ask I appreciate there's not going to be a lot you can say Dan appreciate the comments that you did give on 2025, but specifically as we think about sales you noted above market sales growth I mean market can be a moving target a little bit here about how you think about the market growing next year. So I was hoping maybe you could.
Speaker Change: Give a little bit more color if possible, even if its just highlighting tailwind and headwinds from a sales growth perspective, as you think about as we look ahead to 2020.
Speaker Change: How much.
I'll start and then Dan you could clean up my mess [laughter].
Speaker Change: We're excited obviously about a 24 growing estimated 15 over a comp of 12 or 2023 and as we head into 2025, obviously it will have a nice comp at approximately 15, but there's so many good things going on at the company.
Speaker Change: Thank you for the Nonferrous pulse question that was asked earlier about the other businesses like pie in ICT X.
Speaker Change: In urology, commonly growing double digits and the strength of Endo and we want to strengthen neuro modern and you assume a bit more.
Speaker Change: And so but as you look at 2025.
Speaker Change: The big headlines obviously are fair pulse on watchman.
Speaker Change: We do think the Japan launch in China launch will drive meaningful growth for the franchise and as I mentioned just prior Theres a number of new accounts to open in the U S and there's a lot of penetration in current accounts to add additional volume to both fair pulse you've heard all about the concomitant reimbursement for watchman. So those are all a nice.
Speaker Change: <unk>.
Speaker Change: Tailwind for the company.
Speaker Change: The procedure volumes, we see is relatively consistent we did see a bit of a slowdown July August but strength in September.
Speaker Change: And so we think that procedure volumes will maintain a strong.
Speaker Change: They are now.
Speaker Change: And we see strong global performance. So obviously, we'll have some more challenging comps there'll be some more competition in PSA, but we're doing very well against that competition in Europe.
Speaker Change: No Dan.
Speaker Change: Also we have the agents, which throw one out the cardiology team, which has performed quite well so far.
Speaker Change: Find out about reimbursement on that product in the next coming weeks that should add some additional momentum to that franchise I think that summarizes it well and just to give you a sense of the process. It's no different than it is any year.
Speaker Change: We have our annual operating plan process, that's alive and well here through the fourth quarter. We will review that as we go through the end of the quarter and into early next year and we'll let you know what we think for 2025 at our Q4 earnings call.
Speaker Change: Thanks, guys.
Speaker Change: The next question comes from Anthony Petrone with Mizuho group.
Speaker Change: Please go ahead.
Anthony Petrone: Alright, thanks, and congrats on a strong quarter here I think the question will be on the go to market next year 2025, you go back to the October 18th press release, and you have far away of NAV catheter out there but.
Anthony Petrone: But it indicates that it's exclusive to Opel on the mapping side. So in other words the company is coming with a closed loop offering here next year.
Anthony Petrone: And presumably will have competitors that are coming with a bundled approach. So maybe the question here is just when we enter 25. It seems that three competitors will be out there with a bundled approach to PSA with Mappers. So maybe just walk through that dynamic a little bit congratulations again on the quarter.
Anthony Petrone: Yeah.
Speaker Change: I'll just comment that Ken again.
Speaker Change: Finishes so today for customers using ferro pulse with our legacy arrhythmia mapping system and Theyre also using it with our two primary competitors.
Speaker Change: Today, so the Opel platform will.
Speaker Change: We will not be closed out in such a way that if a physician wants to continue to use a competitive mapping system with fair pulse they still can't.
Speaker Change: We do think that with the Opal mapping system, specifically with Ferro pulse the user experience will be more meaningful and more streamlined and differentiate it. So we're not closing the system and that were shutting out.
Speaker Change: Competitive systems.
Speaker Change: Doing fair pulse cases, where we're quite confident in the user experience. The overall economics and the value of the Opel integration with fair pulse to be differentiated versus what they're using today.
Speaker Change: Yes, Anthony just to again build on what Mike said right.
Speaker Change: So we do not feel that we got a forced people to use our products and what would you say with Sarah.
Speaker Change: It is people want to use it.
Speaker Change: And people who have used it in a variety of different ways and we are going to continue to support their ability to use it in the way that they want to and that includes people who use no mapping and navigation at all which is really sort of the predominant use case that we see in Europe and throw out a lot of the world or to use it.
Speaker Change: With the mapping and navigation system.
Speaker Change: We're going to continue to keep the original right that the fairway of catheter without the NAV sensor on the market for people, who want to use it with a competitive mapping system fairway of NAV, because it's got a magnetic naff sensor and it does have to get tied into a particular mapping system.
Speaker Change: Which for US is the refreshed Opel HD X system with Fairview.
Speaker Change: But we're not going to force people to use it we think it's got enough compelling differentiated advantages compared to what else is out there that people are going to want to use it.
Speaker Change: Very helpful. Thank you.
The next question comes from Vijay Kumar with Evercore ISI.
Speaker Change: Please go ahead.
Vijay Kumar: Hi, guys congrats on a nice quarter here and thanks for taking my question, Mike maybe one for you on <unk>.
Vijay Kumar: Next week's accurate due to results here.
Speaker Change: What is the regulatory strategy do you.
Speaker Change: To file with the FDA and I think you.
Speaker Change: You mentioned.
Speaker Change: Do you expect to have a successful launch in the U S is that is that referencing njoku or some other.
Speaker Change: Generation of the well so maybe you can talk about.
Speaker Change: Your tower strategy in the U S.
Speaker Change: Sure. So as we've talked about before the accurate neo two trial on the AR 1500 patient will be TCT M Wednesday.
Speaker Change: Starting on October 30th so that that is an important milestone to to see that clinical.
Speaker Change: Clinical trial data that will be presented and we would actually be holding our investor meeting.
Speaker Change: That day.
Speaker Change: With Joe Fitzgerald, and Lance Bates and the team to talk about the broader cardiology portfolio and the plans for accurate post the data.
Speaker Change: As you do know we've continued to have excellent momentum in Europe, you saw the third quarter results, we continue to grow above market and kudos to the team on the launch of Prime the next generation accurate Neo two which they just recently started.
Speaker Change: Implementing in Europe.
Speaker Change: Sorry, and does it mean, you expect to file.
Speaker Change: The FTAA, Mike and what does a successful launch.
Speaker Change: Well a successful launch we've ever provided share attainment goals, just like we don't provide a share for ferro pulse. So we obviously want to grow the business, it's a very large market.
Speaker Change: Very mature market growing.
Speaker Change: I don't know, 879% and we continue to do quite well in the U S will provide more information at the TCT at the Investor call there.
Speaker Change: The next question comes from Matt mixing with Barclays. Please go ahead.
Matt Mixing: Hey, thanks, so much for fitting us in and congrats on really impressive quarter and all the great growth drivers you have running.
I had a question just on maybe for Dan on some of the dynamics in the gross margin line.
Matt Mixing: In the quarter, you mentioned FX being kind of one of the primary headwinds.
Matt Mixing: As you move into 25, maybe up a little bit about.
Matt Mixing: Where the leverage in the model as you know.
Matt Mixing: Gross margin levering some of the operating investments that youre, making but maybe just some color on on how that how you see that progressing at this point. Thanks.
Speaker Change: Sure Matt The Q3 story is actually pretty simple. So we were 74% gross margin in Q3.
Speaker Change: Slightly below what we would've expected and that's really driven by foreign exchange in the quarter. So simple simple story for Q3.
Speaker Change: We've said consistently that we believe our full year adjusted gross margin will be below last year last year, we were $70. Seven. So we've consistently said you know what we're probably not going to hit that 77% in 2024, that's okay. Because we're actually driving 70 basis points of adjusted operating margin expansion without that kind of a testament to the the hallmark.
Speaker Change: Of the DNA of the company of continuing to drive margin expansion through all lines of the P&L. So 2020 for gross margin not gonna contribute that's okay. Because we have the the SG&A in another horses.
Speaker Change: Horses to ride there as you go into 'twenty, five and beyond I think all lines of the P&L can contribute on a gross margin as part of that and how does that happen a big piece of that will be will be product mix, so called Faro pulse today.
Speaker Change: The single use catheter, that's a nice margin, but you have a lot of that capital placements that we have as Mike mentioned, we're still still launching this week.
It's only six or seven months into the launch so we're still launching a lot of capital, placing a lot of capital and next year, we'll have Japan and China. So we'll still be doing that will be effectively launching.
Speaker Change: There, but I think the story is as you go into 'twenty, five and and work through 'twenty five and beyond <unk> becomes accretive overall as the single use catheter kind of swamp. The overall margin within Ferro pulse and is accretive to overall Boston scientific Watchman is obviously helpful. You heard a lot of commentary on the call today about the the.
Speaker Change: Some of the tailwind that could be there for watchman, that's great news for the gross margin line. So I think the takeaway is gross margin 25.
Speaker Change: And beyond gross margin can be a contributor to the overall operating margin journey. That's been so successful for the company for the last decade.
That's great. Thanks, a lot.
Speaker Change: The next question comes from Josh Jennings with TD Cowen. Please go ahead.
Josh Jennings: Hi, good morning, Thanks for taking the questions and congratulations on the quarter wanted to just.
Josh Jennings: Check that box, Mike you called out call. It your ops.
Josh Jennings: Apply chain team for keeping up with the demand for thermal pulse.
Josh Jennings: And staying on top of I, just want to make sure that theres no manufacturing capacity issues next year if.
Josh Jennings: If that franchise continues to outperform internal expectations and then also just sorry to follow up on a two parter, but.
Josh Jennings: Wanted to just get your team's view on this mapping segment I mean, my understanding is that MAPI capital and diagnostic MAPI catheters.
Josh Jennings: The percentage of the overall population.
Josh Jennings: Higher than the ablation catheter segment and just I know you guys are now well positioned there, but just to review that and maybe just the revenue of the business model for Boston scientific whether this pulse is fair pulse NAV.
Josh Jennings: Catheter will be single use for <unk> and Oh, and then just how you're how you're building out your guidance.
Josh Jennings: Diagnostic mapping catheter portfolio, sorry for the multipart.
Josh Jennings: Multi part.
Josh Jennings: Yeah.
Speaker Change: Hey, Josh I'll take the second part first.
Speaker Change: And then we can get to the supply issue. So just for clarity I just jumped up and there is no supply issue.
Speaker Change: Sorry about that so kudos to the team.
Speaker Change: Let me take the first part we do not anticipate even despite the.
Speaker Change: High demand.
Speaker Change: Our team has done a great job on the catheter supply in the cab and the council suppliers. So we don't anticipate.
Speaker Change: Any supply shortages.
Speaker Change: That should not have to use that word.
Speaker Change: Yeah in terms of just the.
Speaker Change: Clarity fairway of Nab catheter it is a single use device.
It is again currently indicated for PV I for patients with paroxysmal atrial fibrillation.
Speaker Change: As.
Speaker Change: We said it.
Speaker Change: The advantage clinical trial as our clinical trial to get label expansion for the fairway of catheter family for use in patients with drug refractory persistent atrial fibrillation.
Speaker Change: And again I think.
Speaker Change: What we really want to emphasize here is that theres, some really significant differentiated advantages to fair view versus other systems that are currently on the market for.
Speaker Change: <unk> mapping and navigation of PSA catheters, right and that specifically ability to dynamic visualization of the catheter shape.
Speaker Change: As it changes the ability also to do field tagging.
Speaker Change: And so the ability to plan where to put lesions and when youre doing an ablation procedure.
Speaker Change: Just in terms of the.
Speaker Change: Asking about the catheter portfolio build out you guys do have a high density mapping catheter and the pipeline is my understanding but just wanted to get a better better look on that.
Speaker Change: Yes, Josh we already have a high density mapping catheter right, which is our Orion catheter.
Which can be used on the refreshed opal system.
Speaker Change: And then as we go down the road right. We've talked about additional catheter is going to be part of the <unk> pulse family, which includes Sharepoint and includes a fair flex catheter, which would have the capability to do both high density mapping and also do PFA ablation the same catheter.
Speaker Change: They're all just I'll just add on and we'll move on to the next one there are elements of the procedure that we do we don't compete in today that that pie like ice catheters and others. So we're doing extremely well in the.
Speaker Change: Ablation portion of it.
Speaker Change: We expect <unk> to do quite well in the mapping segment, which we've been.
Speaker Change: Under scaled in but there are still segments within the EP procedure mix that we don't plan today that we're shooting to fill out in the portfolio over time.
Speaker Change: Yeah.
Speaker Change: I'll just make one other comment on fair pulse relates to China for it wasn't a question, but we're excited about the approval in Japan and in China, We do expect the China launch to be a bit slower than what you typically see in the U S and Japan based on onshore.
Speaker Change: And that product or team, but it's more on <unk>.
Speaker Change: Getting our approvals and registries and launch cadence in terms of the volume of new accounts. So we've done some recent openings there that's gone quite well, but we don't anticipate the same.
Speaker Change: Aggressive launch in China that you've seen in U S.
Speaker Change: We do expect to have a very strong launch in Japan, and also just a shout out to the China team. Despite the significant V. B P headwinds that we've seen.
Speaker Change: Which have impacted our ibis franchise and there'll be more V. B piece in 2025, we continue to grow essentially at the company average in China. Despite those headwinds when many of our peers have faced a tougher results.
Speaker Change: Andrew Let's take one more question.
Andrew: Thank you.
Speaker Change: That question will come from Matthew O'brien with Piper Sandler. Please go ahead.
Matthew O'brien: Good morning, Thanks for taking the question and I'd much rather focus on all the positive things going on here, but I'm looking at the stock down now versus up prior to this army guard commentary so Dr. Stan Stein I'm not sure exactly what you can say, but.
Matthew O'brien: Is there any kind of safety signal that we should be aware of and then if you can't comment on that is there anything to think about in terms of this patient population really being the cause of the difference maybe extra lesions that need to be created.
Matthew O'brien: Higher risk benefit requirements, because it's drug naive patients just anything along those lines that you can share because I think folks are pretty nervous. This morning, just based on how important for pulses to the to the business. Thanks.
Speaker Change: Yeah, Matt again, because this is an ongoing trial I can't get into any details again, what I can say is we are highly confident in the safety of the system.
Speaker Change: Again, we've got extensive commercial use data in over 125000 patients treated we've got extensive published clinical trial data and other ongoing.
Clinical trials and are highly confident in the safety the efficiency and the efficacy.
Speaker Change: Sarah pulse system.
Speaker Change: We expect to relaunch this trial soon.
Speaker Change: Thanks, Ken Thanks, Mike and thanks, everyone for joining us today, we appreciate your interest in Boston scientific.
We weren't able to get to your question or if you have any follow ups. Please don't hesitate to reach out to the Investor Relations team before you disconnect drew will give you all the pertinent details for the replay thanks, everyone have a great day.
Speaker Change: Please note a recording will be available in one hour by dialing either 187734475 to nine or 141 to 3170088 using replay code 607711.
Speaker Change: Until October 30th 2024 at 11, 59 P M Eastern time.
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