Q4 2024 Boston Scientific Corp Earnings Call
Speaker Change: After today's presentation, there will be an opportunity to ask questions.
Speaker Change: To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2.
Please note this event is being recorded.
Speaker Change: I would now like to turn the conference over to John Monson, Senior Vice President, Investor Relations. Please go ahead.
Speaker Change: Thank you Drew, 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.
Speaker Change: We issued a press release earlier this morning announcing our Q4 and full year 2024 results, which included reconciliations of the non-GAAP measures used in this release.
Speaker Change: The 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.
Speaker Change: Please note that on the call, operational revenue excludes the impact of foreign currency fluctuations.
Speaker Change: And organic revenue further excludes acquisitions and divestitures, for which there are less than a full period of comparable net sales.
Speaker Change: Guidance excludes the previously announced agreements to acquire Bolt Medical and Entera Oncology which are expected to close in the first half of 2025 subject to customary closing conditions.
Speaker Change: For more information, please refer to the Q4 Financial and Operational Highlights deck, which may be found on the Investor Relations section of our website. On this call, all references to sales and revenue are organic, and relative growth is compared to the same quarter of the prior year, unless otherwise specified.
Speaker Change: This call contains forward-looking statements regarding, among other things, our financial performance, business plans, and product performance and development.
Speaker Change: 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.
Speaker Change: Our underlying assumptions turn out to be incorrect or certain risks or uncertainties materialize Actual results could vary materially 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
Speaker Change: including the risk factor section of our most recent annual report on Form 10-K.
Speaker Change: Lawson Scientific disclaims any intention or obligation to update these forward-looking statements except as required by law.
Mike Mahoney: At this point, I'll turn the call over to Mike. Great. Well done, John. Thank you, everyone, for joining us today.
Mike Mahoney: In 2024, we had an excellent performance across the board, surpassing our financial goals that we set for the year.
Mike Mahoney: This outstanding and differentiated performance is fueled by innovation and great execution across our global business units and the earlier than expected approval and adoption of Ferropulse in the U.S.
Mike Mahoney: In the fourth quarter of twenty-four, company operational sales grew twenty-three percent.
Mike Mahoney: And organic sales grew 20% exceeding the high end of our guidance range of 14 to 16
Mike Mahoney: Full year 24 operational sales grew 18.5%, while organic sales grew 16% for the year, exceeding our guidance of approximately 15%.
Mike Mahoney: We believe that most of our global business units grew in line or faster than their respective markets in 2024, which is a testament to our broad, diversified product portfolio and the winning spirit of our global teams.
Fourth quarter adjusted EPS of 70 cents grew 26%.
Mike Mahoney: We've exceeded the high-end of guidance range of 64 to 66 cents.
Mike Mahoney: Full year adjusted DPS of $2.51 grew 22%, also exceeding the high-end range of our guidance 245 to 247.
Mike Mahoney: For the year, we drove 70 basis points of adjusted operating margin to 27%, representing a balance of margin drop-through on the revenue upside we saw throughout the year, along with a reinvestment back into the business to drive long-term differentiated growth.
Mike Mahoney: For our 25 Outlook, we expect our differentiated financial performance to continue.
Mike Mahoney: fueled by our innovative portfolio and strong global execution, and we're guiding to organic growth of 14% to 16% for the first quarter of 2025.
and 10-12% for the full year.
Mike Mahoney: Our First Quarter 25 Adjusted EPS Guide is $0.66 to $0.68.
Mike Mahoney: And we expect our full year adjusted EPS to be $2.80 to $2.87.
representing growth of 12 to 14 percent.
Speaker Change: Dan will provide more details on the financials and I'll provide some additional highlights in 24.
Speaker Change: So regionally, on an operational basis, the U.S. grew 31% in the fourth quarter. Full year 2024 was 21%.
with Double-Digit Growth and six of our eight business units.
Speaker Change: On an operational basis, Europe, Middle East, and Africa grew 12% in the fourth quarter and 14% on the full year.
Speaker Change: In 24, we saw above market growth from all business units ordered by strong commercial execution, talking about Europe here, and key franchises across the portfolio as well as price discipline.
Speaker Change: We expect to outpace the market again at 25 with further momentum in EP following the recent approval of Fairwave Nav and increasing contribution from our growth emerging markets.
Speaker Change: In Asia-Pac, we grew 12% operationally in the fourth quarter and 16% for the full year, led by excellent performance and double-digit growth across Japan, China, Australia, and New Zealand.
Speaker Change: Japan really had a nice year, growing double digits for the second year in a row, driven by Agent DCB, Resume Watchful Flex Pro, and very early contribution from Parapulse.
Speaker Change: On a four-year basis, China grew strong double digits and crossed $1 million in revenue.
Speaker Change: This differentiated growth in China was fueled by a broad portfolio, focus on innovation, and excellent commercial execution.
Speaker Change: Looking ahead, we expect China to grow mid-teens with increasing contributions from Parapals in our diverse portfolio despite the ongoing VVP pricing pressures in the region.
I'll now provide some additional commentary on our businesses.
Speaker Change: starting with urology which grew 8% in fourth quarter and 9% for the full year and an operational basis grew 20% in fourth quarter and 13 for the full year following the November close of exotics
Speaker Change: All your organic growth is fueled by prosthetic urology and stone management where we had key launches with the Tenacio pump for the AMS 700 and continued success with our expanding LithaView portfolio.
Speaker Change: Prostate Health also performed well on 24 with double-digit growth and resume, as well as strong performance in spacer. We're pleased to have enrolled our first patient in the HydroSpace trial, evaluating the safety net efficacy of our spacer hydrogel.
Speaker Change: In 2025, we expect to see continuous strong above-market growth for urology and look forward to further integrating the highly complementary Axonix technologies into our portfolio.
Speaker Change: Thank you for tuning in. I'm Michael Monson. We'll see you next time.
Speaker Change: Endoscopy sales grew 8% operationally and 7% in fourth quarter organically on a full-year basis, grew 9% operationally and 8% organically.
Speaker Change: Foliar growth was led by double-digit growth in our end-illuminal surgery and single-use imaging franchises, along with sustained growth of our Axios platform.
Speaker Change: We're reinvesting to drive expanded indications and most recently receiving approval in Japan for Axios for gallbladder drainage
Speaker Change: Within endoluminal surgery, we continue to see positive reimbursement wins for our ESG weight loss procedure, with a recent Category 1 CPT code announced, and now IFSO, an international bariatric committee, endorsing ESG with guideline updates.
Speaker Change: Neuromodulation sales grew 12% operationally and 5% organic in Q4, and the full-year basis grew 14% operationally and 3% organically.
Speaker Change: Our Brain Franchise grew mid-single digits in both a quarter and on a full-year basis, and our Pain Franchise grew mid-single digits in the quarter and low-single digits for the year.
Speaker Change: Within Deep Brain Stimulation, we expect improving growth in 2025 with the recent FDA and CE Mark approvals of our unique Cartesia X and HX leads.
Speaker Change: the first and only 16 contact directional leads that deliver precise personalized therapy.
Speaker Change: We also expect higher growth in our pain franchise in 2025, driven by continuous strong momentum and intercepts in the recently released data supporting safety, effectiveness, and durability through five years now.
Speaker Change: Cardiology delivered an exceptional quarter and year, with sales growing 32% in the fourth quarter and 25% for the full year.
Speaker Change: Within cardiology, interventional cardiology therapies sales grew 10% in fourth quarter and 11% for the full year.
Speaker Change: In a full year basis, the Coronary Therapies franchise growth was driven by strong global performance in our imaging and complex PCI franchises, and earlier momentum with the U.S. launch of Agent DCB, which now has additional reimbursement in the outpatient setting.
Speaker Change: In addition, we recently announced our agreement to acquire Bolt Medical, an intravascular lithotripsy platform for treatment of coronary and peripheral artery disease.
Speaker Change: BOLT's IVL technology is highly synergistic with our existing suite of devices in complex PCI imaging and drug looting portfolios in both ICTX and PI and we're excited to close the BOLT acquisition which we expect to do so in the first half of this year.
Speaker Change: Our Structural Hard Valves franchise grew double digits for the full year and low single digits in fourth quarter. During fourth quarter, we launched our next generation Acura Prime Valve in Europe, which features frame enhancements, a simplified deployment mechanism, and includes a larger valve size.
Speaker Change: Watchman sales grew 20% in fourth quarter and 19% on a full year basis.
Speaker Change: U.S. fourth quarter growth of 20% was bolstered by an increase in concomitant procedures.
enabled by the new DRG, which became effective in October.
Speaker Change: and positive data from our option trial demonstrating a similar stroke risk reduction with superior bleed risk reduction versus OACs and high-risk patients following AF ablation.
Speaker Change: These positive outcomes from option were reaffirmed by data in a common subset of patients, which was recently presented at the AF Symposium.
Speaker Change: We're pleased with the performance of our watchman business in 2024 and expect this market to continue to grow approximately 20% driven by concomitant procedures, ongoing clinical evidence, and our initiatives to drive patient awareness and physician training.
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Speaker Change: Our Diagnostics Franchise grew double digits on a full-year base in outpatient market growth, driven by our implantable cardiac monitors for the early contribution from our LUX DX2 launch in Europe.
Speaker Change: In Cora CRM, in both fourth quarter and in a four-year basis, both our high-end and low-voltage business grew low single digits. And as we look ahead, we're excited to bring our Empowered Weebles pacemaker and modular CM system to market in 2025, likely in the second half of the year.
Speaker Change: Electrophysiology sales grew 172% fourth quarter and 139% on a full year basis.
Speaker Change: Veripulse has continued to lead the transformation of the A-fib market.
surpassing $1 billion in revenue in 2024 globally.
Speaker Change: with over 200,000 patients treated and we expect the AF market to continue to rapidly convert to PFA in 25 and beyond driven by Ferripulse.
Speaker Change: Exceptional fourth quarter sales performance was driven by air pulse uptake in the U.S. and Europe as a result of a very strong safety profile, ease of use, and procedural efficiency.
as well as our launches in both Japan and China.
Speaker Change: Initial feedback on our integrated system of fair wave nav on our OPAL mapping system.
Speaker Change: which we launched during the fourth quarter in the U.S. has been very positive.
Speaker Change: We expect to continue to enhance our capabilities in this segment of the market, including with a recently closed acquisition of Cortex, an advanced AF mapping solution.
Speaker Change: We continue to build the best-in-class compendium of clinical evidence including the recent results of phase one of the ADDvantage AF trial.
Speaker Change: with data demonstrating positive outcomes using Ferropulsin for Cystinase patients, meeting the primary endpoint for efficacy and safety.
Speaker Change: with zero instances of stroke, pulmonary vein stenosis, esophageal injury, or major access complications.
Speaker Change: We expect an updated label for persistent AF in the second half of the year. In the coming weeks, we expect to complete the enrollment of Avant Garde, evaluating the safety and efficacy of Ferripuls as a first-line treatment.
for persistent AF compared to antiarrhythmic drug therapy.
Speaker Change: Additionally, we anticipate data to be presented in the first half of this year from Phase 2 of the ADDvantage AF trial, evaluating Ferro Point, which is our point-by-point PFA ablation catheter.
Speaker Change: which is expected to support U.S. FDA approval by year-end 25.
Speaker Change: Turning to purple interventions, fourth quarter sales grew 22% operationally and 12% organically on a full-year basis, grew 15% operationally and 11% organic.
Speaker Change: Our interventional oncology and embolization franchise excelled again in Q4, with double-digit growth across the entire product portfolio and growing mid-teens for the full year.
Speaker Change: Expanding clinical evidence for new indications continues to be a focus area. We're pleased to have completed enrollment in the first phase of the Frontier trial, which is an early feasibility study for the use of Therasphere to treat recurrent glioblastoma.
Speaker Change: Additionally, we look forward to closing our acquisition of Entera, expecting the first half of 2025, which will broaden our interventional oncology offerings to patients with liver cancer.
Speaker Change: Within our vascular franchise on a full year basis we saw high single-digit arterial performance led by double-digit growth in our drug looming portfolio and mid single-digit venous growth led by giratina in our clot management portfolio.
Speaker Change: On a standalone basis, the Silk Road business grew double digits for the full year, and we're pleased to recently share the 30-day results from the Roadster 3 study, which demonstrated the safety and effectiveness of TCAR for patients with standard surgical risk.
Speaker Change: So in closing, I'm very proud of our global team and what we were able to accomplish in 2024, resulting in four-year organic growth of 16, adjusted EPS growth of 22.
Speaker Change: We're very excited about the future of Boston Scientific and remain focused on our talents while enhancing our culture that is relentless in driving differentiated results
Speaker Change: With that I'll pass it off to Dan to provide more details on the financials. Thanks Mike.
Dan Brennan: Fourth quarter 2024 consolidated revenue of $4,561,000,000 represents 22.4% reported growth versus fourth quarter 2023 and includes a 70 basis point headwind from foreign exchange which was unfavorable versus our expectations.
Dan Brennan: Excluding this 26 million dollar foreign exchange headwind, operational revenue growth was 23.1 percent in the quarter.
Sales impact from closed acquisitions contributed 360 basis points.
Dan Brennan: resulting in 19 and a half percent organic revenue growth exceeding our fourth quarter guidance range of 14.
Thank you. Thank you.
Q4 2024 Adjusted Earnings Per Share of $0.70.
Dan Brennan: grew 26% versus 2023, exceeding the high end of our guidance range of $0.64 to $0.66, primarily driven by our strong sales performance and favorable DAX results in the quarter.
Dan Brennan: Excluding this 127 million dollar headwind from foreign exchange, operational revenue growth for the year was 18.5 percent.
Dan Brennan: Sales from closed acquisitions contributed 210 basis points, resulting in 16.4% organic revenue growth, exceeding our guidance range of approximately 15%.
Dan Brennan: Full year 2024 adjusted earnings per share of $2.51 grew 22% versus 2023, exceeding the high end of our guidance range of $2.45 to $2.47.
These results include a 5 cent headwind from FX.
which was slightly unfavorable to our expectations.
Dan Brennan: Adjusted gross margin for the fourth quarter was 70.6% which represents a 20 basis point sequential improvement.
Dan Brennan: versus the third quarter and results in full year 2024 adjusted gross margin of 70.3 percent.
Dan Brennan: In 2025, we anticipate our full-year Adjusted Gross Margin will improve versus the full-year 2024 and contribute to our Adjusted Operating Margin expansion goals.
Dan Brennan: Fourth quarter adjusted operating margin was 27.4%, resulting in a full year 2024 adjusted operating margin of 27.0%.
Improving 70 basis points versus the full year 2023.
Dan Brennan: We expect to expand adjusted operating margin in 2025 by another 50 to 75 basis points.
Dan Brennan: balancing differentiated operating margin expansion while making targeted investments to fuel
I wish you all long-term, top-line growth.
Dan Brennan: On a gap basis, fourth quarter operating margin was 14.8%, resulting in a full year reported operating margin of 15.5%.
Dan Brennan: Moving to below the line, fourth quarter adjusted interest and other expenses totaled 87 million dollars, resulting in full year adjusted interest and other expenses of 301 million dollars, in line with our expectations.
Dan Brennan: On an adjusted basis, our tax rate for the fourth quarter was 10.5% and 11.9% for the full year 2024, including favorable discrete tax items and the benefit from stock compensation accounting.
Dan Brennan: Our operational tax rate was 12.3% for the fourth quarter, and 13.2% for the full year. Again, in line with expectations.
Dan Brennan: Fully diluted weighted average shares outstanding ended at 1,490,000,000 shares in Q4 and 1,486,000,000 shares for the full year 2024.
Pre-cash flow for the quarter was $1,181,000,000.
Dan Brennan: with $1,456,000,000 from operating activities, less $275,000,000 in net capital expenditures which include payments of $177,000,000 related to acquisitions, restructuring, litigation and other special items.
Dan Brennan: For 2025, we expect full-year free cash flow to be in excess of $3 billion.
Dan Brennan: As of December 31st, 2024, we had cash on hand of $414 million and our gross debt leverage ratio was 2.2 times.
Dan Brennan: Our top capital allocation priority remains strategic tuck-in M&A followed by annual share purchasing
Dan Brennan: I will now walk through guidance for Q1 and the full year 2025. We expect full year 2025 reported revenue growth to be in a range of 12.5% to 14.5% versus 2024.
Dan Brennan: We expect full year 2025 operational growth to be in a range of 13.5% to 15.5%.
Dan Brennan: Excluding a 350 basis point contribution from closed acquisitions, we expect full year 2025 organic revenue growth to be in a range of 10% to 12% versus 2024.
Dan Brennan: We expect first quarter 2025 reported revenue growth to be in a range of 17-19% versus the first quarter of 2024.
Dan Brennan: excluding an approximate 100 basis point headwind from foreign exchange based on current rates. We expect first quarter 2025 operational revenue growth to be in a range of 18% to 20%
excluding a 400 basis point contribution from closed acquisitions.
We expect first quarter 2025 organic revenue growth.
Dan Brennan: to be in a range of 14% to 16% versus 2024.
Dan Brennan: As we indicated on our October call, we had one more business day in the fourth quarter of 2024, which was worth approximately 200 basis points.
Dan Brennan: In the first quarter of 2025, we have one less business day.
again, worth approximately 200 basis points.
Dan Brennan: When adjusting for the impact of business days, the high end of our first quarter 2025 guidance range is in line with fourth quarter 2024 organic revenue growth.
Dan Brennan: We expect full year 2025 adjusted below the line expense to be approximately...
$425,000,000
Dan Brennan: Under current legislation, including enacted laws and issued guidance, we forecast a full year 2025 operational tax rate of approximately 13.5% and an adjusted tax rate of approximately 12.5%.
Dan Brennan: This includes a benefit from the accounting for stock compensation, which we expect will be largely recognized in the first quarter, resulting in a forecasted Q1 2025 adjusted tax rate of approximately 11.5%.
Dan Brennan: We expect full year adjusted earnings per share to be in a range of $2.80.
Dan Brennan: to $2.87, representing growth of 12% to 14% versus 2024, including an approximate $0.05 to $0.06 headwind from foreign exchange, which is in line with what we saw in 2024.
Dan Brennan: We expect first quarter adjusted earnings per share to be in a range of $0.66 to $0.75.
with the U.S.
Thank you.
Dan Brennan: In closing, I am extremely proud of what our global team delivered for 2024 financial performance and look forward to executing on our full year 2025 guidance of 10% to 12% organic revenue growth, 50 to 75 basis points of adjusted operating margin expansion, and 12 to 14% adjusted EPS growth.
Dan Brennan: For more information, please check our investor relations website for Q4 2024 financial and operational highlights, which outlines more details on Q4 results and 2025 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 35 minutes or so. In order for us to take as many questions as possible, please limit yourself to one question. Drew, please go ahead.
John Monson: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad.
John Monson: If at any time your question has been addressed and you'd like to withdraw your question, please press star then 2. Again, please limit yourself to one question. At this time, we will pause momentarily to assemble our roster.
Speaker Change: The first question comes from Robbie Marcus with J.P. Morgan. Please go ahead.
Robbie Marcus: Oh, great. Good morning and congratulations on a really good fourth quarter.
Robbie Marcus: I wanted to ask on PFA and Watchmen. You had very good fourth quarters here, saw a slight tick up in U.S. growth in Watchmen.
Speaker Change: We'd love to get your thoughts on sort of what you saw during the quarter after concomitant reimbursement kicked in October 1st and the option trial and how you're thinking specifically about those products throughout 2025 given.
Speaker Change: There are two of your better margin products and the implications. Thanks a lot.
Speaker Change: Thanks Robbie. Yeah, we have excellent momentum in both Aeropulse and Watchmen, and increasing momentum I would say. With Watchmen, we did see a bit of a benefit at the end of the fourth quarter with the concomitant news, which reconfirmed
Speaker Change: based on the option trial data, safety and efficacy with the reimbursement. We saw a little bit of uptick. As we stated before, we think the concomitant reinforces the 20% market CAGR for 2025.
Speaker Change: We'll be excited about the option readout in the first half of 2026.
Speaker Change: So, we're well positioned with Watchman and we obviously continue to invest in our product portfolio, clinical evidence, our clinical teams around the world.
Speaker Change: fully maximized the concomitants opportunity and obviously with a momentum of fair pulse in our broader rhythm management portfolio ideally becoming the partner of choice for AFib and electrophysiologists
Speaker Change: I think the numbers pretty stand out. Tremendous growth is the biggest transformation that I've seen in MedTech. Over a billion dollars globally in one year. We launched less than a year ago in the U.S. so that the.
Speaker Change: The execution of our commercial teams has been strong. The execution of our supply chain operations manufacturing to stay at a demand has really been impressive.
Speaker Change: We don't anticipate supply challenges given the investments that we made throughout the year. And so we're excited about our competitive position with Ferropulse. In 2025, you've seen the clinical data.
Yeah.
Speaker Change: It's a bit unclear as to the competitive landscape in 2025.
Speaker Change: And we want to become the clear leader as we are now in PFA, as PFA is really transforming this market.
Appreciate it. Thanks a lot.
Larry Beagleson: The next question comes from Larry Beagleson with Wells Fargo. Please go ahead.
Larry Beagleson: Good morning, thanks for taking the question and I'll echo my congratulations, obviously a stellar quarter and a year.
Speaker Change: Mike and Dan, I was hoping to ask one, you know, kind of long-term question. At J.P. Morgan, you know, you increased your weighted average market growth to 9% in 2026.
Robbie Marcus: I know you expect to grow faster than your end market. So does this imply you see Boston as at least a 9% grower in 2026? And can you grow EPS double digits next year with the tax rate increasing, Dan, two to 300 basis points? Thanks a lot.
Robbie Marcus: Sure, obviously we're not going to give any specific guidance relative to anything beyond 2025, but I think it's safe to assume, as we've done over the last decade, very well as a team.
and them back.
to get to that 9% by 2026.
Robbie Marcus: Relative to double-digit EPS, again, I point to the track record, an extremely strong record of double-digit adjusted EPS growth. That's always the goal. We'll see what happens to the tax rate. That could be obviously a fluid environment in Washington, so if there's even an increase in that tax rate, our goal will still be to get double-digit EPS growth.
Thank you for joining us. Thank you. Thank you.
All right. Thanks, Dan.
Speaker Change: The next question comes from Rick Wise with CFO. Please go ahead.
Speaker Change: Good morning, everybody, and thanks for the great quarter. Maybe it's a one in a quarter of a question. You typically start the year in what I like to call prudently conservative fashion in recent years.
Speaker Change: maybe you can help us better understand where the upsides and and where the risks are and and should we view this as another attempt to start the year in a thoughtfully prudently conservative
Speaker Change: fashion, and related to that, Debbie, how are you thinking about competition on the PFA side coming in? What's dialed into your guidance as of this point? Thank you.
Debbie: Hey Rick, you certainly want us to be thoughtful and prudent, which we always are.
Debbie: have a nice track record of delivering on our commitments. So I would say that's the same strategy as we provided the guide in 2025. You know, clearly the company has a lot of momentum. I would say we do have more tailwinds than headwinds.
You know we think about
Debbie: The tailwinds, there's a lot of momentum across every region. You obviously know about the parapalse momentum in the U.S.
We expect Neuromod to be above market in 2025.
Debbie: So, strong momentum there on the tailwind side. There could be stronger PFA competition in 2025. A lot of that is out of our hands, but we, as I said before, we're focused on
Debbie: driving forward relentlessly every day. China's GDP is more extensive this year in 2025 than it has been in the past, but despite that, we expect...
Debbie: to grow kind of mid-teens in China in 2025, but that'll be...
a little more difficult for us this year.
Debbie: and you know they're all they're all some continuing strengthening lower-cost competitors I would say for some of our mid-surge businesses in Asia and in Europe and the team you know focus on our portfolio and innovations to counteract that but that is a bit of a headwind for us and our end-to-end Europe business.
Debbie: But overall, we feel that we do have more tailwinds and headwinds, and we're looking forward to the year.
Thank you.
Speaker Change: The next question comes from Joanne Wench with Citibank. Please go ahead.
Joanne Wench: Good morning and nice end to the year. I'm going to spend just a little bit of time talking about margins. Interesting commentary on gross margins being additive to the operating margin expansion. I'm sort of curious how do you think about managing that? And I'm going to sneak in a cash flow question. You're kicking out a lot of cash. How do you think about investing it?
Thank you
Speaker Change: I can take that. I'll tell you what I really like about 2025 is the equation for the operating margin expansion. We've done it very well over the last decade each year with a variety of different scenarios, but I think one of the optimal scenarios is where gross margin goes north.
SG&A, you get leverage.
And then I think in 2025, you might actually see...
Speaker Change: see a little bit of an uptick in R&D spend as a percentage of sales.
Speaker Change: I think that's a winning hand for how to increase operating margin overall. And so in our 50 to 75 basis points, I'd look for gross margin to get better versus the 70.3 that we put up in 2024. I'd look for SG&A on the 10 to 12 percent sales growth to improve its leverage there and deliver margin expansion. And then again, on R&D, not a significant
Speaker Change: increase. But you know, maybe 20, 30 basis points of an uptick in R&D to continue to help to fuel the top line growth for the long term. I think that's a great, great equation for 25 for margin expansion.
Speaker Change: Cash flow, you saw and you heard in the commentary, we got to 71% free cash flow conversion. That wasn't by accident. That's a tremendous effort by the entire global team on reducing DIOH, reducing DSO, strong working capital management, and of course, obviously, significant growth in operating income.
Speaker Change: In terms of our capital allocation strategy, no change. It's worked well for us, again, over the last decade, too.
for the
Speaker Change: continue to do that strategy and execute that strategy in 25 and beyond.
Terrific, thank you.
Speaker Change: The next question comes from David Roman with Goldman Sachs. Please go ahead.
Speaker Change: Thank you. Good morning, everybody. I wanted just to dive into some of the different drivers here around the EP business. Clearly, on the Faribault side, you've seen huge conversion on that de novo paroxysmal segment of the market. But as you gain a persistent indication and then also launch Faribault exiting 2026,
Speaker Change: Can you maybe help us think about the segment of the market that you're not able to address today?
how much market becomes available to you.
Speaker Change: with Fair Point and the persistent indication, and then maybe as a corollary to that...
Speaker Change: help us think through kind of the mapping strategy given your installed base relative to the other two participants in the market.
Speaker Change: and how you're thinking about remaining an open platform versus potentially looking to become more closed as some of your peers are.
I'll turn it over to Dr. Stein here.
Dr. Stein: Thanks, David. I'm going to start with the mapping strategy first. As you point out, we intend to maintain an open platform.
Thank you.
Dr. Stein: We don't need to force people to use our opal mapping system.
Dr. Stein: And I think it's actually really important as we look both at how the business evolves.
Globally.
Dr. Stein: as well as we look at potential future moves into an ASC-type environment.
Dr. Stein: to be able to support doing cases without mapping, to be able to support doing cases with competitive mapping systems.
Dr. Stein: but also to provide differentiated features within Opal and our Fairview software package.
Dr. Stein: that I think really provide the best possible solution for people who want to map their cases. And even though it's early into the launch of Farrow Wave Nav and Farrow View in the US, we've really been very pleased with the feedback that we've gotten thus far.
Dr. Stein: In terms of drivers, I think it's important to acknowledge, right, that
That's it.
Dr. Stein: The persistent atrial fibrillation population, just in prevalence terms, is at least as large and probably larger than the population with paroxysmal atrial fibrillation. I'd also acknowledge that we are already seeing off-label use of Faropulse.
in treating patients with persistent atrial fibrillation.
Dr. Stein: It's why it was important for us to run trials like ADDvantage and Avant Garde.
Dr. Stein: I think everyone's seen the data from the ADDvantage trial. It met all of our endpoints in terms of safety and efficacy in treating persistent atrial fibrillation.
Dr. Stein: And so we do anticipate getting that label by the end of this year. Beyond that, right, then the next drivers, in terms of at least expanding our labeling,
Speaker Change: As you say, getting TheraPoint to be used as an adjunct for treating atrial flutter in patients who are undergoing ablation for atrial fibrillation.
use in patients who are undergoing repeat affiliation procedures.
Very helpful. Thanks so much.
Speaker Change: The next question comes from Travis Steed with Bank of America. Please go ahead.
Speaker Change: That it's going to take a larger deal to kind of move the needle on such a larger revenue base But also, you know finding growth accretive deals that you know now that your your baseline growth is so much faster already Just kind of thinking about like how your M&A strategy changes now that you're you're a bigger company and growing so much faster
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Speaker Change: It doesn't change that much. We're always investing for the long term at Boston Scientific.
Speaker Change: We obviously gave 25 guide, but as we've said before at another conference in January You know we're investing for products that won't be launched until 2930
through.
Speaker Change: internal organic M&A through our VC portfolio, which is very extensive. We did nine new investments in our VC portfolio in 2025, and you're aware of the tuck-in acquisitions that we've done in 2025. I have four or five of those.
Speaker Change: And so the formula remains. We really are focused on increasing our WAMGR, which was Dan talked about earlier, which we anticipate 9% in 2026, growing faster than that WAMGR.
Speaker Change: consistently quarter by quarter, year over year, doing everything we can to enhance that WAN growth through those tools of internal R&D, our VC portfolio, and tech and M&A. So as the company gets larger...
Speaker Change: It's become larger every year and we continue to find ways to improve our WAMGR and exceed the growth of our WAMGR.
Speaker Change: So, we place a lot of focus and time internally on ensuring that we'll be a differentiated company in 2030 beyond 2025.
Great. Thank you.
Patrick Wood: The next question comes from Patrick Wood with Morgan Stanley. Please go ahead.
Speaker Change: Beautiful. I'd love to just broaden it out a little bit. I appreciate the endoscopy business is kind of singles and doubles, but you know, obviously you guys have been flagging Apollo ESG.
Speaker Change: quite a unique approach and illuminal. I'm super curious, even though they're down a bit, there's a chunk of sleeves that are still done in the U.S. and it seems like a way better approach. I'm super curious how you think midterm, you know, how big that business could be, how you're feeling about the initial launch there, just anything you've got to give us on ESG, I'd love to hear it. Thanks.
Speaker Change: and the clinical science behind it. We have some recent momentum with CPT codes. So it's gonna be a nice driver over the long-term for endo business.
Speaker Change: It's not going to reshape Boston Scientific Errando in 2025, but we definitely see positive support by the physicians, by the industry groups, by the reimbursement.
Speaker Change: We're unique and we're likely the only one who can offer the Apollo procedure wrapped around with our other Endo tools, so we think this will be a significant growth driver for Endo as you look towards the kind of longer term of the Strat plan.
Love it. Thanks for the question.
Speaker Change: The next question comes from Danielle Antalfi with UBS. Please go ahead.
Danielle Antalfi: Hey, good morning, everyone. Thanks so much for taking the question. Congrats on a really strong year. Just a quick question at a high level.
Speaker Change: You know, we talk, we focus so much on the major growth drivers like Farrah Pulse and Watchman. I'm just curious, Mike or Dan, where you think Boston Scientific's either underperforming or under-indexed but see an opportunity or line of sight into improving performance?
Danielle Antalfi: Over the next year or two that may be the streets under modeling or not appreciating. Thanks so much
Danielle Antalfi: Yeah, so most of our businesses did well against the peer group in the market and growing faster than the canker. Even if you take out Watchmen at Farrah Paul's results, the rest of the businesses grew faster than our WAMGR.
Danielle Antalfi: A couple areas that we want to improve on in 2025, one is the overall NIRMOD performance, which we anticipate will have a nice improvement in 2025.
Danielle Antalfi: With the launch in our DBS platform, we expect that to gain momentum in 2025.
and the combination of our refocused commercial team in Payne.
Danielle Antalfi: and the benefit of relievance. We do anticipate a better year for Neuromod. We want to strengthen U.S. CRM. We continue to maintain share, I would say, in terms of the unit volume perspective and high voltage.
Danielle Antalfi: We don't have the portfolio yet in Legal Spacemaker, which has a struck higher ASP.
Danielle Antalfi: which is driving, you know, on a dollar basis share loss in Pacer. So we'd like to see improvement in the overall U.S. CRM business.
Danielle Antalfi: We're launching SICD with a leadless pacemaker in the tail half of 2025.
Danielle Antalfi: and we'll have increased focus on that business in 2025. So we'd like to see some improvements there. And as I mentioned before, we do see some, you know, increasing competition in some of our businesses from the lower cost competitors. So we're challenging our team to...
Danielle Antalfi: continue to drive a lower cost portfolio so we can serve our global customers more efficiently.
Thank you for that.
Danielle Antalfi: The next question comes from Michael Pollark with Wolf Research. Please go ahead.
Michael Pollark: Good morning. Thank you. I want to ask on the TAVR or the structural heart
Michael Pollark: update in the deck. Low single-digit growth in the fourth quarter. Can you just comment on kind of post-accurate IDE? Is that the influence that's driving the decel there or are there other things you'd call out? And then maybe Pester for an update on the path in the US for your TAVR franchise. Thank you.
Michael Pollark: Sure, in the U.S. we haven't provided any updates. We're still in discussions internally and with the appropriate authorities there.
Michael Pollark: Again, similar to other calls, you'll receive an update once we can give you clear direction on that.
Michael Pollark: In Europe, we did see some impact in the EU based on the U.S. trial. But nonetheless, the team did have a strong year in TAVR in Europe.
Speaker Change: The next question comes from Vijay Kumar with Evercore ISI. Please go ahead.
Speaker Change: Hey guys, thanks for taking my question and congrats on the nice one here. Maybe my one question is around mapping. What percentage of PFA procedures do you think are associated with mapping? And once you launch,
Speaker Change: your mapping technology, when you look at the medium term, what percentage of those mapping procedures do you think will be using a Boston solution versus competition?
Speaker Change: Yeah, so I would just reinforce, and Ken can comment further, Ken's overall strategy is an open platform. We do see
EU, you see more centers using without mapping.
Speaker Change: We do see some very high volume centers in the U.S. for PVI, also non-mapping, but predominantly it's a heavy mapping
Speaker Change: region in the US, a little bit less so, but still quite a bit in Europe, and heavy mapping in Japan and China. So as Ken said, we do believe that the OPAL platform
Speaker Change: is the best platform to optimize the use of air pulse.
Speaker Change: and we'll continue to enhance the OPAL platform as we continue to enhance the varipulse catheter category and widen that out more. So we think that's the most cost-effective.
Speaker Change: competitive mapping systems. So, excellent. We'll continue to ensure that they can use competitive mapping systems. On the share percent, we wouldn't speculate there.
It's a big investment area for us in terms of...
Speaker Change: technology and physical clinical mappers around the world to continue to enhance that group, put a lot of investment behind that.
Speaker Change: and hopefully we'll make good progress in that area in 2025.
Mike Mahoney: Thank you. I don't have too much to add to what Mike just said, I'll just reiterate that Europe predominant cases are done without mapping today, the U.S. a vast majority of cases are done without mapping.
are done with mapping today.
Mike Mahoney: We intend to support all different workflows. The goal is to make things easier for physicians, not harder. And I think what you're going to see over the long run is, the simpler the case is, the easier it is to do, and the more efficient it is to do.
Mike Mahoney: without any mapping, the more complex the case is, the greater the need for mapping.
Mike Mahoney: We believe that we've got some really important differentiated advantages with Farrerview on Opal. That's also behind our acquisition of Cortex, which is an AF mapping technology.
specifically a mapping platform for
Mike Mahoney: very complex types of atrial fibrillation and I mean our goal overall not just with mapping as we look at just EP strategy overall
Mike Mahoney: is to provide physicians with the widest possible toolbox so that they have exactly what they need to treat the particular patient who's in front of them.
All right. Thank you, guys.
Speaker Change: The next question comes from Peto Chickering with Deutsche Bank. Please go ahead.
Peto Chickering: Hey, good morning. To comp out the China VVP and Japanese reimbursement cuts in the back half of the year, how should those markets be growing in the back half of this year without those cuts? And can you refresh us on the key drivers in both those markets? Thanks.
Peto Chickering: Those cuts are happening, so we bake that into our guide.
China, you know, really impressive performance given the DPP.
which really is a...
Peto Chickering: like taking a daily vitamin. It happens every year, but the team continues to grow nicely above market and in line or faster than Boston Scientific in China.
So, we'll have more VBP.
Peto Chickering: tailwinds or headwinds, I guess, this year, but they're overcome by our product launches, FairPulse, diversification of our portfolio, and greater access to more customers. And it really speaks to the category leadership portfolio strategy we have across the company.
So the team there continues to do well
Japan, again there's
Peto Chickering: Typically, every other year price cuts in Japan, we know about them, they're built into our guidance. Japan's going to have a really nice year this year with the launch of AeroPulse.
to go to them.
Speaker Change: The next question comes from Josh Jennings with TD Cowen. Please go ahead.
Hi, good morning. Thanks for taking the question.
Speaker Change: and congrats on the year. I wanted to just, Mike, get your views, it may be way too early, but the new administration issuing some policy decisions, getting some nominees through the congressional process.
Speaker Change: Can you just talk about, from a high level, any risk you see to the medical devices sector in general, or to Boston Scientific specifically, with this new leadership in place? Thanks. Thanks for taking the question.
It's really a dynamic environment. We think our guide
as best we can.
encompasses macro challenges around the world including
Speaker Change: and I'm going to be talking about the the the the the the the the the the the the the the
Speaker Change: Dan talked about the tariffs. FX is really not a policy thing, but tariffs is probably the biggest one which we think is very manageable. We do aim, hope that the FTC environment
Speaker Change: is appropriate and so maybe that could be positive for the industry. We'll see on tax reform where that goes. Dan made comments on that.
Speaker Change: But other than that, you know, MedTech typically hasn't been the tip of the spear for major policy changes over many, many different types of presidents that we've had. So we feel overall very comfortable with our guidance.
and how we can manage through that.
Thank you.
Speaker Change: The next question comes from Chris Pesquale with Zephron Research. Please go ahead.
Speaker Change: Our own conversations with high-volume centers suggest many of them are expecting a meaningful uptick in their own procedures.
Speaker Change: as a result of that change. So is there something else that you think really offsets that tailwind? And then maybe for Dr. Stein, can you just remind us how you think about the portion of the AF population that is really appropriate for both of these procedures?
Speaker Change: Yeah, on the volume side we'll see over time. Right now we're kind of calling a 20% market kicker as the market gets a bit larger and larger.
Speaker Change: That along with EP is the best market you can be in a medtech. We have a unique position in both of them So I think we're comfortable with a 20% CAGR now and we'll see as the year progresses
Speaker Change: if that upticks or not. We want to continue to work with customers on productivity and workflow. They have tremendous demands that they have on their cath labs. There's other technologies and structural heart coming out and so forth.
Speaker Change: but they're very very comfortable with with Watchman, TheraPulse, and the concomitant procedures so we want to continue to work to make sure we can drive operational effectiveness and productivity for our customers who are still have a
Speaker Change: strong backlog and demand of patients and other technologies coming out. So besides safety effectiveness, we want to make sure Watchmen and Veripulse
Speaker Change: really is the solution in terms of ease of use and procedural efficiency for hospitals.
Speaker Change: And Chris, just in terms of, you know, who are appropriate candidates for...
these procedures.
We're very pleased with the results of OPTION.
Speaker Change: really incontrovertibly that the Watchman device is at least as effective as oral anticoagulants in treating high-risk patients after AF ablation, that it is certainly safer in terms of long-term bleeding risk. We also showed that you can do a concomitant procedure
Speaker Change: and in a randomized trial that there was no added risk of adding Watchman.
and as you say, we've certainly seen an uptick.
Speaker Change: To allow for use as first-time therapy and people who don't
otherwise already have a reason to avoid the long-term use.
of Orlandi Coagulants.
Speaker Change: We will be presenting the champion data in the first half of next year and as a
Speaker Change: first-line, even in patients who aren't candidates for AF ablation. Today in the United States...
Thank you. Bye-bye.
you have time.
Speaker Change: who may get their Watchman, you know, may get a count of Watchman that they might not have otherwise gotten. There were also patients who were referred in for a Watchman procedure.
Speaker Change: who are now being considered for ablation, who might have never been considered previously for ablation, again, just given the safety and efficacy of adages of the TheraPulse system.
Speaker Change: So I just to close again excited about the concomitant procedure opportunity
Again, we look at our product portfolio as
Speaker Change: being the best suited to support that. It's a procedure that's great for patients.
and for practitioners.
That's helpful. Thanks.
Speaker Change: And I understand there's time for one last question that comes from Marie. Sure that comes from Marie Thibault with BTIG. Please go ahead.
Marie Thibault: Thanks so much for squeezing me in. I wanted to ask a question about a recent acquisition. I saw that interventional oncology and embolization, you know, killed it again this quarter. I wanted to understand what's going on in that product segment and understand how the Interra Oncology acquisition fits into that product segment, how it can help accelerate growth. Thanks so much for taking the questions.
Yeah, so that division, uh...
Marie Thibault: Interventional psychology doesn't get talked about enough through mid-teens for the full year. Again, it's in line with our category leadership strategy that we have across most of our business units.
Marie Thibault: The team had a really excellent launch of our organic R&D program in our Embolics portfolio, which has really been a big growth driver for us.
Marie Thibault: obviously Y90 does extremely well for us. So the combination of those two products and the rest of the remaining portfolio that we have gives us the
Marie Thibault: the widest portfolio and unique differentiation within there with ourabolic portfolio Y90.
Marie Thibault: to capture high share and to partner with customers, much like we do with other businesses. And the acquisition, again, is just another extension.
Marie Thibault: for us to widen out to other adjacencies in interventional oncology with a pump.
Marie Thibault: portfolio. It gets us closer to the oncologist and we also have additional software enhancements coming to improve the efficiency and workflow of our Y90 coming in 2025. So we want to continue much like we do other business units too.
Marie Thibault: expand into smart adjacency to accelerate our growth and enable us to partner more closely with the interventional radiologists and the ecologist team.
Speaker Change: Great, well thanks everyone for joining us today. We appreciate your interest in Boston Scientific. If we are unable to get to your question or if you have any follow-ups, please don't hesitate to reach out to the Investor Relations team.
Marie Thibault: Before you disconnect, Drew will give you all the pertinent details for the replay. Thanks, everyone.
344-7529 or 1-888-344-7529.
Marie Thibault: 412-317-0088 using replay code 397-6753 until February 12, 2025 at 1159 p.m. Eastern Time.
Marie Thibault: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.