BOSTON SCIENTIFIC CORP Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Q3 Results: Total company operational sales grew 19%, organic sales grew 18%, exceeding guidance; adjusted EPS $0.63 grew 27%, adjusted operating margin 27.2%.
• Guidance: Guiding to 14%-16% organic growth in Q4, raising full-year organic growth to ~15%; Q4 adjusted EPS $0.64-$0.66, full-year $2.45-$2.47 (20%-21% growth).
• Regional Performance: US grew 24% (six of eight business units double-digit), Europe, Middle East, Africa grew 14%, Asia Pac grew 12% (strong in China, Australia, New Zealand).
• Business Units: Urology grew 10%, Endoscopy 7% organic/8% operational, Neuromodulation 3% organic/17% operational, etc.; closed acquisitions of Silk Road Medical and expected Axonics in Q4.
• Clinical Trials: OPTION trial at AHA, SIMPLIFY trial, CHAMPION trial in 2026, ADVANTAGE AF trial results expected, AVANT GUARD trial paused temporarily.
• Leadership: Eric Thepaut to retire in Dec, Xavier Bertrand appointed EMEA President.

Segment Performance

• Urology: Sales grew 10%, with double-digit growth in Stone Management and Prostate Health, including Rezum and SpaceOAR.
• Endoscopy: Grew 7% organically and 8% operationally, with strong growth in the US, AXIOS and Exalt D growing double-digits, and the ESG weight loss procedure receiving a Category 1 CPT code.
• Neuromodulation: Grew 3% organically and 17% operationally, Relievant turning organic in November, brains franchise in low double-digit growth, pain franchise low-single-digit organic but high-double-digit operational.
• Peripheral Intervention: Grew 10% organically and 12% operationally, Vascular with mid-single-digit arterial, double-digit Drug-Eluting, low double-digit Venous; closed acquisition of Silk Road Medical.
• Interventional Oncology and Embolization: Grew double-digits, driven by embolization launches and TheraSphere.
• Cardiology: Sales grew 29%, Interventional Cardiology Therapies 14%, Coronary Therapies mid-teens with US AGENT launch, structural heart valves double-digits, WATCHMAN grew 18% (surpassed 500,000 patients), OPTION trial at AHA, SIMPLIFY trial, CHAMPION trial in 2026.
• Cardiac Rhythm Management: Grew 2% in quarter, Diagnostics franchise high-single-digits, Core CRM strong international growth, new product launches like INGEVITY lead and EMPOWUR leadless pacemaker.
• Electrophysiology: Grew 177%, driven by FARAPULSE, treated over 125,000 patients, FARAPULSE expected to exceed 40%-60% of global AF ablations by 2026, FARAWAVE NAV Catheter approved, ADVANTAGE AF trial results expected, AVANT GUARD trial paused temporarily.

Guidance

• Full year 2024 organic growth raised to ~15%, Q4 organic growth 14%-16%.
• Q4 adjusted EPS guidance $0.64-$0.66, full-year $2.45-$2.47 (20%-21% growth).
• Axonics acquisition expected to close in Q4 2024. 2025 expectations include bond refinancing, margin improvement, and double-digit adjusted EPS growth.

Risks

• Potential differences between forward-looking statements and actual results due to incorrect assumptions or unforeseen risks.
• Uncertainties in clinical trial outcomes, including the AVANT GUARD trial pause.
• Foreign exchange impact on gross margin.
• Regulatory risks related to product approvals and market competition.

Question and Answer

Q: Robbie Marcus on OPTION trial and concomitant reimbursement for WATCHMAN and PFA ablation.

A: Michael Mahoney and Dr. Ken Stein discussed the positive impact of concomitant reimbursement, confidence in WATCHMAN and FARAPULSE, and upcoming OPTION trial results at AHA.

Q: Joanne Wuensch on FARAPULSE growth expectations.

A: Michael Mahoney stated FARAPULSE is seeing rapid uptake, operations scaled to meet demand, and expected to exceed 40%-60% of global AF ablations by 2026.

Q: Lawrence Biegelsen on AVANT GUARD trial and FARAPULSE competitiveness.

A: Dr. Ken Stein explained AVANT GUARD trial paused temporarily due to unanticipated observations, but confidence in FARAPULSE's safety and efficacy remains, and highlighted FARAPULSE's clinical data and mapping system advantages.

Q: Frederick Wise on FARAWAVE NAV Catheter and pricing.

A: Dr. Ken Stein discussed FARAVIEW mapping system's advantages for PFA, but declined to comment on pricing, emphasizing the system's design for AF ablation.

Q: David Roman on resource allocation and established categories.

A: Michael Mahoney stated strong focus on all business units, no reduction in investment in established categories despite PFA investments, and confidence in their organic growth.

Q: Patrick Wood on capacity and mapping segment.

A: Michael Mahoney and Dr. Ken Stein assured no supply issues with FARAPULSE, and discussed FARAWAVE NAV Catheter's integration with OPAL mapping system, not closing out competitive systems.

Q: Travis Steed on AVANT GUARD trial observations and safety.

A: Dr. Ken Stein reassured no life-threatening observations, confidence in FARAPULSE's safety, and explained the trial's patient population as drug-naive persistent AF.

Q: Danielle Antalffy on 2025 sales growth outlook.

A: Michael Mahoney and Daniel Brennan discussed tailwinds like Japan/China launches, concomitant reimbursement, and procedural volume recovery, with 2025 plans outlined in annual operating plan.

Q: Anthony Petrone on go-to-market in 2025 for FARAPULSE.

A: Michael Mahoney and Dr. Ken Stein stated FARAPULSE can be used with competitive mapping systems, but OPAL integration offers differentiated user experience.

Q: Vijay Kumar on TAVR strategy and FDA filing.

A: Michael Mahoney discussed TCT presentation of ACURATE Neo2 trial data, with more info at investor call, and focus on growing the TAVR business.

Q: Matt Miksic on gross margin and leverage.

A: Daniel Brennan explained Q3 gross margin impacted by FX, but full-year adjusted gross margin expected below 2023, with margin expansion expected from sales upside and investments.

Q: Josh Jennings on supply and mapping portfolio.

A: Michael Mahoney stated no supply issues, and Dr. Ken Stein discussed FARAWAVE NAV Catheter as single-use, and diagnostic mapping portfolio buildout with ORION catheter and future catheters.

Q: Matthew O'Brien on AVANT GUARD trial safety signal.

A: Dr. Ken Stein reaffirmed confidence in FARAPULSE's safety, extensive clinical data, and intention to resume AVANT GUARD trial soon.