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    Boston Scientific Corp (BSX)

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    Business Description

    Boston Scientific Corporation is a global company that develops, manufactures, and markets medical devices for various interventional medical specialties . The company operates through two main segments: MedSurg and Cardiovascular, offering a diverse range of products . Boston Scientific's product portfolio includes devices for gastrointestinal, pulmonary, urological, neurological, and cardiovascular conditions, driven by strategic growth and expansion into emerging markets .

    1. Cardiology - Develops and markets medical devices for heart-related conditions, contributing significantly to the company's overall sales.
    2. Peripheral Interventions - Provides devices for treating peripheral vascular diseases, enhancing the company's cardiovascular offerings.
    3. Endoscopy - Focuses on devices for gastrointestinal and pulmonary conditions, supporting minimally invasive procedures.
    4. Urology - Offers medical devices for urological conditions, addressing a wide range of patient needs.
    5. Neuromodulation - Addresses neurological movement disorders and chronic pain through innovative device solutions.

    Q3 2024 Summary

    Initial Price$77.30July 1, 2024
    Final Price$84.14October 1, 2024
    Price Change$6.84
    % Change+8.85%

    What went well

    • FARAPULSE is exceeding expectations, with Boston Scientific now expecting PFA to likely exceed their previously communicated range of 40% to 60% of global AF ablations by 2026 due to rapid adoption and strong clinical outcomes.
    • The new reimbursement for concomitant WATCHMAN and PFA ablation is anticipated to provide a long-term tailwind for the WATCHMAN franchise. If the upcoming OPTION trial shows compelling benefits, it could meaningfully alter usage patterns ahead of the CHAMPION trial results expected in the first half of 2026.
    • Boston Scientific expects to maintain category leadership in pulse field ablation despite upcoming competition, owing to the compelling ease of use and extensive clinical trial data supporting their FARAPULSE system, which has treated over 125,000 patients globally.

    What went wrong

    • The AVANT GUARD clinical trial evaluating FARAPULSE in drug-naive persistent atrial fibrillation patients has been temporarily paused to assess "a few unanticipated observations," raising concerns about potential safety or efficacy issues.
    • The core Cardiac Rhythm Management (CRM) business experienced "below market growth in the U.S.," despite strong international growth, indicating challenges in the domestic market.
    • The global Spinal Cord Stimulation (SCS) performance was "below our expectations in a market that continues to be challenged," suggesting ongoing difficulties in this segment.

    Q&A Summary

    1. AVANT GUARD Trial Pause
      Q: Is there any safety concern with FARAPULSE after pausing the AVANT GUARD trial?
      A: Management reassured that they are highly confident in the safety of the FARAPULSE system . The AVANT GUARD trial was temporarily paused due to unanticipated observations in a new patient population—drug-naïve patients with persistent atrial fibrillation—not previously studied . These observations were not life-threatening, and they intend to resume enrollment in the near term . The pause does not affect their overall confidence in FARAPULSE's performance, which has been used to treat over 125,000 patients globally .

    2. 2025 Growth Outlook
      Q: What are the key growth drivers and expectations for 2025 sales?
      A: Management is excited about growth prospects for 2025, anticipating continued above-market sales growth. Key drivers include the strong performance of FARAPULSE and WATCHMAN, with upcoming launches in Japan and China expected to fuel further growth. They also highlighted robust contributions from other divisions like PI, ICTX, and Neurology, which are commonly growing in double digits.

    3. Maintaining Leadership Amidst Competition
      Q: How will FARAPULSE retain its market leadership with new competitors entering PFA ablation?
      A: FARAPULSE's leadership is expected to continue due to its ease of use, extensive clinical data, and superior safety and efficacy outcomes. Physicians prefer FARAPULSE for its straightforward nature and have not switched back to thermal ablation after using it. The FARAVIEW mapping system, designed around PFA, further enhances its unique advantages.

    4. Manufacturing Capacity and System Constraints
      Q: Are there any capacity or supply constraints for FARAPULSE given its high demand?
      A: Management confirmed there are no supply issues and praised the operations team for meeting the high demand . Despite the rapid adoption, they do not anticipate any manufacturing capacity shortages next year. Hospitals are also improving workflow efficiency, performing 25–30% more procedures per day with FARAPULSE.

    5. Mapping System Strategy
      Q: Will the FARAWAVE NAV Catheter be exclusive to Boston Scientific's mapping system?
      A: While the FARAWAVE NAV Catheter integrates with their refreshed OPL HDx mapping system, Boston Scientific will not force exclusivity. Physicians can continue using FARAPULSE with competitive mapping systems if they prefer. They believe the compelling advantages of their system will naturally attract users.

    6. TAVR Strategy and ACURATE neo2
      Q: What is the regulatory strategy for ACURATE neo2 in the U.S.?
      A: The ACURATE neo2 trial data will be presented at TCT on October 30, marking an important milestone. Management plans to discuss the broader cardiology portfolio and post-data plans at an investor meeting. They have seen excellent momentum with ACURATE neo2 in Europe and aim to grow the business in the U.S..

    7. Gross Margin Outlook
      Q: How does management view gross margin trends and leverage in the model for 2025?
      A: Gross margin in Q3 was slightly below expectations due to foreign exchange impacts. While full-year adjusted gross margin may be below the prior year, management continues to drive operating margin expansion through all P&L lines. Going into 2025, they expect product mix—including contributions from FARAPULSE and WATCHMAN—to improve gross margins and support overall profitability.

    8. Performance of Other Franchises
      Q: How are the other business units performing amid focus on FARAPULSE and WATCHMAN?
      A: Boston Scientific's decentralized structure ensures focused attention on all divisions. Leaders dedicate themselves to their specific areas, with teams that think about their markets all day. Despite resource allocation to FARAPULSE, they have maintained investments in other businesses, which are the company's foundation. They reported strong performance across divisions, with some growing in double digits.

    9. China Launch and VBP Impact
      Q: What is the outlook for FARAPULSE in China, and how are VBPs affecting the business?
      A: The China launch of FARAPULSE is expected to be slower due to approvals and launch cadence. However, they anticipate a strong launch in Japan. Despite significant VBP headwinds impacting certain franchises, the China team continues to grow at the company average, outperforming peers facing tougher results.

    10. Price Premium on NAV Catheter
      Q: Will the FARAWAVE NAV Catheter have a price premium due to its advanced technology?
      A: Management did not comment on specific pricing for the NAV Catheter. They emphasized the catheter's compelling ease of use and integrated features that provide unique advantages.

    Guidance Changes

    Quarterly guidance for Q4 2024:

    • Organic Growth: 14% to 16% (raised from 13% to 15% )
    • Adjusted EPS: $0.64 to $0.66 (raised from $0.57 to $0.59 )

    Annual guidance for FY 2024:

    • Organic Revenue Growth: ~15% (raised from 13% to 14% )
    • Operational Revenue Growth: ~17% (raised from 14.5% to 15.5% )
    • Reported Revenue Growth: ~16.5% (raised from 13.5% to 14.5% )
    • Adjusted EPS: $2.45 to $2.47 (raised from $2.38 to $2.42 )
    • Adjusted Tax Rate: ~12.5% (no change from prior guidance )
    • Operational Tax Rate: ~13.5% (no change from prior guidance )
    • Free Cash Flow: exceed $2B (no change from prior guidance )
    • Adjusted Operating Margin: ~27% (no prior guidance)
    • Adjusted Below-the-Line Expenses: ~$300 million (no prior guidance)

    Key Metrics

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    Executive Team

    NamePositionStart DateShort Bio
    Wendy CarruthersExecutive Vice President, Human ResourcesFebruary 2022Wendy Carruthers oversees global human resources activities, including operations, total rewards, talent management, diversity and inclusion, and community engagement. She joined Boston Scientific in 2004 and has held various positions, including Senior Vice President, Human Resources .
    Joseph M. FitzgeraldExecutive Vice President and Group President, CardiologyMay 2022Joseph M. Fitzgerald is responsible for developing rhythm management technologies and solutions for coronary artery disease and structural heart disorders. He joined Boston Scientific in 1990 as a sales representative and has held various management positions .
    Daniel J. BrennanExecutive Vice President and Chief Financial OfficerJanuary 2014Daniel J. Brennan oversees Global Controllership, Global Internal Audit, Corporate Finance, Treasury, Corporate Tax, Investor Relations, and Corporate Business Development. He joined Boston Scientific in December 1996 and has held various roles with increasing responsibilities .
    Vance R. BrownSenior Vice President, General Counsel, Corporate SecretaryJune 2021Vance R. Brown provides global legal leadership and oversees the company's global compliance function. He joined Boston Scientific in 2010 and previously served as Vice President, Chief Corporate Counsel, and Assistant Secretary .
    Arthur C. ButcherExecutive Vice President and Group President, MedSurg and Asia PacificMay 2022Arthur C. Butcher oversees the Asia Pacific region and the Urology, Endoscopy, and Neuromodulation businesses. He joined Boston Scientific in 1997 and has held various management roles .
    Jeffrey B. MirvissExecutive Vice President and President, Peripheral InterventionsFebruary 2020Jeffrey B. Mirviss is responsible for solutions for treating arterial and venous system blockages and cancer. He joined Boston Scientific in 1997 and has held various roles, including Vice President, Group Global Marketing .
    John Bradley SorensonExecutive Vice President, Global OperationsMay 2022John Bradley Sorenson oversees Global Supply Chain, Quality and Regulatory Affairs, and other functions. He joined Boston Scientific in 2014 and has over 20 years of experience in medical device manufacturing .
    Eric ThépautExecutive Vice President and President, Europe, Middle East and AfricaFebruary 2020Eric Thépaut joined Boston Scientific Europe in 1996 and has held various roles in marketing and finance. He is responsible for the Europe, Middle East, and Africa regions .
    Michael F. MahoneyPresident and Chief Executive OfficerNovember 2012Michael F. Mahoney joined Boston Scientific as President in October 2011 and became CEO in November 2012. He was appointed Chairman of the Board in May 2016. Prior to Boston Scientific, he held leadership roles at Johnson & Johnson and Global Healthcare Exchange .
    David HabigerBoard of Directors MemberJuly 30, 2024David Habiger has over 30 years of business leadership experience and is the CEO of J.D. Power. He joined Boston Scientific's Board of Directors in 2024 and serves on several other boards .
    Dr. Cheryl PegusBoard of Directors MemberMay 8, 2024Dr. Cheryl Pegus has over 25 years of clinical and business leadership experience. She joined Boston Scientific's Board of Directors in 2024 and has held executive roles at Walmart, Cambia Health Solutions, and other organizations. She began her career as a cardiologist .

    Questions to Ask Management

    1. Can you provide more details on the unanticipated observations that led to the temporary pause of the AVANT GUARD trial for FARAPULSE in drug-naïve persistent AF patients, and how might this impact your timeline for resuming enrollment and obtaining label expansion?

    2. With new pulse field ablation (PFA) catheters entering the market, what specific strategies are you implementing to ensure that existing FARAPULSE customers remain loyal and to attract new users, especially given the competitive landscape?

    3. In the U.S., your core Cardiac Rhythm Management (CRM) growth was below market. What factors contributed to this underperformance, and what actions are you taking to improve your position in this segment?

    4. Regarding the upcoming presentation of the ACURATE neo2 trial data at TCT, if the results are not as positive as anticipated, how will this affect your TAVR strategy in the U.S., and what contingency plans do you have in place?

    5. Given your expectation that pulse field ablation adoption may exceed the previously communicated range of 40% to 60% of global AF ablations by 2026, do you foresee any potential supply constraints, and how are you ensuring your manufacturing capacity can meet this increased demand?

    Share Repurchase Program

    Program DetailsProgram 1
    Approval DateDecember 14, 2020
    End Date/DurationNot specified
    Total additional amount$1.000 billion
    Remaining authorization$1.000 billion
    DetailsNo shares have been repurchased under this program

    Past Guidance

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: Q4 2024 and FY 2024

    Guidance:

    1. Q4 2024 Guidance:

      • Organic Growth: 14% to 16% .
      • Adjusted EPS: $0.64 to $0.66 .

    2. FY 2024 Guidance:

      • Organic Growth: Approximately 15% .
      • Reported Revenue Growth: Approximately 16.5% versus 2023 .
      • Operational Revenue Growth: Approximately 17%, excluding a 50 basis point headwind from foreign exchange .
      • Organic Revenue Growth: Approximately 15%, excluding a 200 basis point contribution from closed acquisitions .
      • Adjusted EPS: $2.45 to $2.47, growth of 20% to 21% versus 2023 .
      • Adjusted Operating Margin: Approximately 27% .
      • Adjusted Below-the-Line Expenses: Approximately $300 million .
      • Operational Tax Rate: Approximately 13.5% .
      • Adjusted Tax Rate: Approximately 12.5% .
      • Free Cash Flow: Exceed $2 billion, including approximately $900 million of expected payments related to special items .

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: Q3 2024 and FY 2024

    Guidance:

    1. Q3 2024 Guidance:

      • Organic Revenue Growth: 13% to 15% versus Q3 2023 .
      • Operational Revenue Growth: 14% to 16%, excluding a 100 basis point contribution from closed acquisitions .
      • Reported Revenue Growth: 13% to 15% versus Q3 2023 .
      • Adjusted EPS: $0.57 to $0.59 .

    2. FY 2024 Guidance:

      • Organic Revenue Growth: 13% to 14% versus 2023 .
      • Operational Revenue Growth: 14.5% to 15.5%, excluding a 100 basis point headwind from foreign exchange .
      • Reported Revenue Growth: 13.5% to 14.5% versus 2023 .
      • Adjusted Operating Margin Expansion: 50 to 70 basis points .
      • Adjusted EPS: $2.38 to $2.42, growth of 16% to 18% versus 2023 .
      • Adjusted Tax Rate: Approximately 12.5% .
      • Operational Tax Rate: Approximately 13.5% .
      • Free Cash Flow: Exceed $2 billion .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: Q2 2024 and FY 2024

    Guidance:

    1. Q2 2024 Guidance:

      • Organic Revenue Growth: 10% to 12% versus Q2 2023 .
      • Reported Revenue Growth: 10.5% to 12.5% versus Q2 2023 .
      • Operational Revenue Growth: 11.5% to 13.5% .
      • Adjusted EPS: $0.57 to $0.59 .

    2. FY 2024 Guidance:

      • Organic Revenue Growth: 10% to 12%, up from 8% to 9% .
      • Reported Revenue Growth: 11% to 13% versus 2023 .
      • Operational Revenue Growth: 11.5% to 13.5% .
      • Adjusted EPS: $2.29 to $2.34, growth of 12% to 14% .
      • Adjusted Operating Margin: Expand by 30 to 50 basis points .
      • Adjusted Below-the-Line Expense: Approximately $315 million .
      • Operational Tax Rate: Approximately 14% .
      • Adjusted Tax Rate: Approximately 13% .
      • Free Cash Flow: Exceed $2 billion, including approximately $800 million of expected payments related to special items .

    Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: Q1 2024 and FY 2024

    Guidance:

    1. Q1 2024 Guidance:

      • Reported Revenue Growth: 7.5% to 9.5% versus Q1 2023, excluding a 100 basis point headwind from foreign exchange .
      • Operational Growth: 8.5% to 10.5%, excluding a 150 basis point contribution from closed acquisitions .
      • Organic Revenue Growth: 7% to 9% versus Q1 2023 .
      • Adjusted EPS: $0.50 to $0.52 .

    2. FY 2024 Guidance:

      • Reported Revenue Growth: 8.5% to 9.5% versus 2023, excluding a 50 basis point headwind from foreign exchange .
      • Operational Revenue Growth: 9% to 10%, excluding a 100 basis point contribution from closed acquisitions .
      • Organic Revenue Growth: 8% to 9% versus 2023 .
      • Adjusted EPS: $2.23 to $2.27, growth of 9% to 11% versus 2023, including a $0.04 headwind from foreign exchange .
      • Adjusted Operating Margin: Expand by 30 to 50 basis points .
      • Adjusted Gross Margin: At or slightly below 70.7% .
      • Operational Tax Rate: Approximately 14% .
      • Adjusted Tax Rate: Approximately 13% .
      • Free Cash Flow: Exceed $2 billion, including approximately $800 million of expected payments related to special items .
      • Adjusted Below-the-Line Expenses: Approximately $330 million .

    Competitors

    Competitors mentioned in the company's latest 10K filing.

    • Abbott Laboratories - Primary competitor in the medical device markets .
    • Medtronic plc - Primary competitor in the medical device markets .
    • Domestic medical device companies in certain countries, particularly in China, which may benefit from their status as local suppliers .
    • Non-medical device companies offering alternative therapies or technologies that could augment or replace procedures using Boston Scientific's products .
    • Pharmaceutical companies, biotech companies, and providers of various diagnostic tests offering alternative therapies or diagnostics .