Boston Scientific Corporation

Good morning and welcome to the Boston Scientific fourth quarter 2021 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. After today's 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 Lauren Tangler, Vice President, Investor Relations. Please go ahead.

Thank you, Andrew. Hello, everyone, and thanks for joining us. With me on today's call are Mike Mahoney, Chairman and Chief Executive Officer, and Dan Brennan, Executive Vice President and Chief Financial Officer. We issued a press release earlier this morning announcing our Q4 2021 results, which included reconciliations of the non-GAAP measures used in the release. We have posted a copy of that release as well as reconciliations on the non-GAAP measures used in today's call to the investor relations section of our website under the heading financials and filings. The duration of this morning's call will be approximately one hour. Mike will focus his comments on Q4 performance as well as future catalysts and the outlook for our business including Q1 22 and full year 22 guidance. Dan will review the financials for the quarter, provide more details regarding our Q1 and full year guidance, and then we'll take your questions. During today's Q&A session, Mike and Dan will be joined by our chief medical officers, Dr. Ian Meredith and Dr. Ken Stein. Before we begin, I'd like to remind everyone that on the call, operational revenue growth excludes the impact of foreign currency fluctuation, and organic revenue growth further excludes acquisitions and divestitures for which there are less than a full period of comparable net sales. Relevant acquisitions for organic growth versus 2020 and 2019 include Preventus, Fariposa, Luminous, which closed in March, August, and September of 2021, respectively, as well as VertiFlex and BTG Interventional Medicines, which closed in May and mid-August of 2019, respectively. Divestitures include BTG Spec Pharma, which closed March 1, 2021, and the Global Embolic Microspheres Portfolio and Intrauterine Health Franchise, which were divested in August 2019 and second quarter of 2020, respectively. Throughout the call today, we will refer to 2021 growth rates versus 2019 and 2020, Utilizing the comparison to 2019 as the last full year baseline prior to COVID. Going forward, 2022 guidance and corresponding results will be compared to 2021 only. 2022 guidance excludes Bayless medical acquisition, which is expected to close in Q1 22. For more information, please refer to slide 10 of our financial and operating highlights deck, which may be found on our investor relations website. On this call, all references to sales and revenue, unless otherwise specified, are organic. This call contains forward-looking statements within the meaning of the federal securities laws, which may be identified by words like anticipate, expect, may, believe, estimate, and other similar words. They include, among other things, the impact of COVID-19 pandemic upon the company's operations and financial results, statements about our growth in market share, new product approvals and launches, acquisitions, clinical trials, cost savings, and growth opportunities, our cash flow and expected use, our financial performance, including sales, margins, and earnings, as well as our tax rates, R&D spend, and other expenses. Factors that may cause such differences include those described in the risk factor section of our most recent 10K and subsequent 10Qs filed with the SEC. These statements speak only as of today's date, and we disclaim any intention or obligation to update them. At this point, I'll turn it over to Mike for his comments.

Thanks, Lauren, and thank you, everyone, for joining us today. I'm very proud of the agility and winning spirit of our employees and continue to be impressed with the resiliency of hospital systems and their ability to provide patients with the care they need during the pandemic. We're very pleased with the strength of our fourth quarter performance and anticipate that all of our business units either maintained or gained share in the quarter, despite the challenges COVID presented. On a full year basis, the global strength of our product diversification and category leadership strategy resulted in all businesses, with the exception of CRM and USEP, gaining share. We look forward to the year ahead and remain bullish on both the near-term and the longer-term opportunities we laid out at our investor day. In fourth quarter 21, total company operational sales grew 17% versus 2020, while organic sales grew 15, achieving the high end of our guidance range of 12 to 16. Fourth quarter 21, organic sales grew 7% versus 19. Full year 2021, operational sales grew 19% versus 2020, while organic sales grew 19%, again, achieving the high end of our guidance range of 18 to 19. Full year 21 organic sales grew 6% versus 2019. G4 adjusted EPS of 45 cents grew 94% versus 2020. It was flat to 2019, achieving the high end of the guidance range of 43 to 45 cents. Full year adjusted EPS of $1.63 grew 69% versus 2020 and 3% versus 2019, again, exceeding the high end of the full year guidance range of $1.60 to $1.62. Fourth quarter adjusted operating margin was 26.2%, resulting in the second half 2021 run rate of 25.9. The full year 21 adjusted operating margin was 25.3. Overall, we're very pleased with the cash flow with full year 2021 free cash flow generation of 1.3 billion and adjusted free cash flow of 2.2 billion, which grew 11% versus 2020. So turning to 2022, while we anticipate less of a COVID impact on underlying procedures for the full year 2022 versus 2021, yet we're providing a wider range to account for uncertainty related to COVID waves and staffing shortages. For first quarter 22, organic revenue, we're guiding to growth of 5% to 8%, and for a full year of 6% to 8%, excluding the Bayless acquisition, which is expected to close in first quarter 2022. Our Q1 adjusted EPS estimate is 38 to 40 cents, And we expect our full year adjusted EPS to be $1.73 to $1.79. Despite the near-term macro economic pressures in 2022, we continue to target operating margin expansion with a goal of double adjusted EPS growth at the high end of the range. Dan will provide more details on both sales and EPS performance and outlook, including more insights on 2022. I'll now provide more highlights in Q4 and full year 21 results, along with comments on 22 outlook. Regionally, on an operational basis, the U.S. grew 20% versus fourth quarter 2020, and full year 2021 grew 25%, inclusive of a 300 basis point tailwind from acquisitions and continued strength from new product launches across the portfolio. Europe, Middle East, Africa grew 16% on an operational basis versus both fourth quarter 20 and full year 20. We continue to see strong performance in Europe despite the pandemic impact with many of the Western countries and excellent growth in the Middle East and Africa region. On a full year basis, all business units in Europe grew double digits versus the prior year, with the majority of businesses gaining share. We continue to anticipate strong growth from our Europe region given the innovative product pipeline, globalization efforts, and integration of the acquisitions. Asia-Pac grew 17% operationally versus fourth quarter 20, and 14% for the full year. Within the quarter, the vast majority of Asia-Pac countries grew versus prior year, with double-digit growth in IC, PI, and EP, supported by new and ongoing product launches. On a full year, Japan grew 7%, fueled by new products like Watch and Flex, Polarex, and Ranger, as well as innovative launches across the coronary therapies portfolio. I'll now provide some additional comments on our business units. Urology and public health sales grew 9% on an organic basis versus fourth quarter 20, and on a full year basis grew 19% versus 2020 and 11% versus 2019. Within the quarter, SpaceOar and Resume both grew double digits and were pleased with the 22 improved reimbursement for the ASC and hospital outpatient setting for Resume. On a full year basis, we saw strength across the business with double digit growth on Lithview, CoreStone, Resume, SpaceOar, and Erectile Restoration. As we look forward towards 2022, we remain excited about our strong leadership position, further extended by the acquisition of Luminous and the market-leading Moser lasers technology. Turning to endoscopy, sales grew 10% organically versus fourth quarter 20, with full-year growth of 19% versus 20, and 12% versus 2019. Over the duration of the year, broad-based strength across all regions and franchises resulted in endoscopy business achieving $2 billion in 2021. Within the quarter, we launched the Axio Stent in China, and on a full-year basis grew this product line over 20% globally. We remain excited about the outlook of our innovative offerings within our single-use imaging portfolio, including Spyglass DS, Exalt Model D, Exalt Model B, and Spy Discover. Looking at 2022, we continue to anticipate above-market growth as the Endoscopy global commercial teams continue to execute at a high level, by creating long-term partnerships with hospitals, giving a unique breadth and differentiation of our portfolio. Turning to CRM, organic sales grew 4% versus fourth quarter 2020, and full year sales grew 8% versus 20, and declined 6% versus 19. In Q4, our high voltage business grew low single digits, which we expect was in line with the market, with improved sequential growth in our SICD franchise, enabled by our enhanced electrode launch in June. The pacer business grew mid-single digits, which was likely in line with market. In December, we enrolled our first patients in the modular ATP trial, our dual-track clinical study for a standalone lumbos pacemaker, as well as to provide anti-tachycardia pacing to emblem SICD patients. Within the diagnostics franchise, our implantable cardiac monitor, LuxDX, continues to perform well and grow share. The preventive business grew 20% on a full year pro forma basis enabled by our differentiated portfolio and strong execution. Electrophysiology sales grew 16% versus fourth quarter 20 on an organic basis with full year growth of 23% versus 20 and 7% versus 19. Importantly, the international EP sales grew 38% versus prior on a full year operational basis fueled by our innovative portfolio, including Polarex, StablePoint, and Ferropulse. The early Ferropulse launch is going well in Europe with physicians enthusiastic about the safety and ease of use of this technology. We're very excited about the outlook of the EP business and look forward to further complementing it with the closing of Bayless in first quarter 22. In neuromodulation, fourth quarter organic revenue grew 6% versus prior year, and full year sales grew 19% versus 2020 and were flat to 2019. Despite the COVID wave impacting procedure volumes, we continue to gain share with strong demand for our Waverider Alpha systems and ongoing clinical evidence resulting in a full-year SCS growth rate of over 20% versus 2020. Just a few weeks ago, we presented various data sets at NANS, including the two-year combo RCT data, supporting the longevity of our SCS therapy. We continue to roll in the SOLUS trial, studying our Waverider SCS systems for the treatment of patients with chronic low back and or leg pain who have not undergone spinal surgery and anticipate initial clinical work on DPN in the coming months. In our brain franchise, while COVID impacted procedure volumes, we continue to enhance our portfolio and capabilities with strong foliar growth in 21 versus 2020. We look forward to expanding our U.S. Versace genus offering in 22 in partnership with Brain Lab. In interventional cardiology, organic sales grew 40% versus fourth quarter 2020. and 31% versus full-year 20, which includes a tailwind of approximately 1,000 basis points related to sales return reserves for the transition to consignment for Watchman in 2020. Full-year interventional cardiology sales grew 7% versus 2019. In coronary therapies, our complex PCI franchise had strong growth in 21, with strength across every region, further enabled by the recent launch of our Avigo 2 guidance system in the U.S., Within Drug Looney Sense, we continue to differentiate our portfolio through the global launches of Synergy 48mm and Megatron. We continue to anticipate being first to U.S. market in 2024 with our agent drug-coated balloon and expect to complete enrollment in the U.S. IDE trial in the first half of 2022. We're extremely pleased with the performance of Watchman franchise in the fourth quarter as sales surpassed our expectations. Importantly, the 2021 global performance of Watchman was consistent each quarter with strong double-digit growth, resulting in full-year sales of $830 million, growing 68% versus 2019. We continue to be pleased with our ability to deliver the safest and most efficient therapy, increased physician utilization, and global expansion, while driving greater awareness to this fast-growing LAAC market. Clinical evidence generation remains an important focus, and we expect the first readout from the ongoing SURPASS analysis of the NCDR-LAO registry at CRT later this month. This analysis will include over 16,000 patients, and it's the largest data set in Watchman and Flex patients presented to date. We continue to expect Watchman to be a significant growth driver for Boston Scientific in 22 and beyond. Across the structural heart franchises, we had the highest quarterly sales results to date for Accurate Neo2, Sentinel, and the Separi Guidewire. AccurateNeo 2 continues to perform well with positive physician feedback on the clinical performance and ease of use of the valve. We're excited for the year with over 10% share across full European market and are approaching 20% share in open accounts. While we've been pleased with the early clinical progress of the Millipede technology, we have decided to discontinue work in the Millipede program due to the time and financial investment required to commercialize this platform as compared to other near and long-term portfolio opportunities across the company. We've made this decision now so that we can focus on the execution of the existing and future technologies within the structural art space and elsewhere within our portfolio. In peripheral interventions, organic sales grew 9% versus fourth quarter 2020 with full year sales growth of 14% versus 20 and 9% versus 2019. Within the drug alluding portfolio, we've been pleased with the globalization and ongoing clinical evidence supporting Luvia and Ranger. resulting in exceeding our sales goal of $150 million for 2021. In Venus, our market leading varicose vein offering, Varathena, grew over 40% in 2021, and we see continued runway with this underserved market. In Q4, we closed the Devoro acquisition and look forward to launching our arterial and Venus offerings in the second half of 2022, complementing the broader portfolio and further extending our category leadership. In interventional cardiology, TheraSphere grew over 20% on a full-year basis, supported by ongoing clinical evidence, including the EPOC trial, which is the first positive Phase III SIRT trial, studying TheraSphere as a second-line therapy in patients with liver-dominant MCRC that have failed first-line chemotherapy. Our focus on improving patient health comes with the responsibility to have a positive impact in the world we share. Our environmental, social, and governance practices guide us as we make long-term, measurable progress. And I'm proud to announce that Boston Scientific received the 2022 Catalyst Award, their premier recognition for organizations' initiatives that advance women in the workplace. Boston Scientific also ranked them in the top 50 of American Most Just Companies for our contributions to creating jobs, providing benefits and work-life balance, cultivating a diverse and inclusive workplace, and producing sustainable products and building stronger communities. I'm grateful for the passion and commitment of our global team as we continue to live our values and do our part to create a better future, both as a global business and as a global corporate citizen. While we have faced challenges over the last few years of COVID, we are stronger for it. We're building new capabilities that will enable us to better serve our patients and customers both today and the future. We are well positioned in 2022 with category leading innovative product positions, continued focus and investment in clinical evidence, while continuing to enter high growth adjacent markets. We acquired several companies in the past year with innovative products that are creative markets, and we continue to evolve our leadership and commercial structures to best enable these exciting new technologies. We remain committed to our long-term financial goals of 6% to 8% organic revenue growth, operating margin expansion, double-digit adjusted EPS growth with strong cash flow generation. I'm very grateful to our employees for their winning spirit and will now turn things over to Dan to review our financial performance and forward-looking expectations.