Boston Scientific Corporation

Good morning and welcome to the Boston Scientific fourth quarter 2022 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 Tengler, Vice President, Investor Relations. Please go ahead.

Thank you, Drew. Welcome, everyone, and thanks for joining us today. 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 and full year 22 results, which include reconciliations of the non-GAAP measures used in the release. We have posted a copy of that release as well as reconciliations of 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 and Dan will provide comments on Q4 and full year performance as well as the outlook for our business, including 2023 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 Steins. Before we begin, I'd like to remind everyone that on the call, operational revenue growth excludes the impact of foreign currency fluctuations, and organic revenue growth further excludes acquisitions and divestitures for which there are less than a full period of comparable net sales. Relevant acquisitions excluded for organic growth are Preventus, Faripulse, and Luminous Surgical, which closed in March, August, and September of 2021, respectively, as well as Bayless Medical, which closed on February 14, 2022. Divestitures include the BTG specialty pharmaceutical business, which closed on March 1st, 2021. Guidance excludes the previously announced agreements to purchase a majority stake in MITech and Aquatech, as well as the acquisition of Apollo Endosurgery, which are all expected to close in the first half of 2023. For more information, please refer to 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 meanings 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, statements about our growth and market share, new and anticipated 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. If our underlying assumptions turn out to be incorrect, or if certain risks or uncertainties materialize, actual results could vary materially from the expectations and projections expressed or implied by our forward-looking statements. Factors that may cause such differences include those described in the risk factors section of our most recent 10-K and subsequent 10-Qs filed with the FCC. 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.

Thanks, Lauren. And thank you for everyone for joining us today. 2022 represented a return to more durable and consistent procedural growth within the markets we serve, which provided a stronger base for our innovative portfolio. I'm very proud of the resiliency and winning spirit of our global team delivering on our sales and EPS goals, despite the ongoing macroeconomic and supply chain challenges. Importantly, we deliver strong performance across all geographic regions and believe that most all of our business units gained or maintained market share throughout the year. In fourth quarter 22, total company operational sales grew 9% and organic sales grew 7% versus fourth quarter 21, which was the low end of the guidance range. However, it's very important to note that these results include an unplanned sales reserve of $60 million established for an Italian government payback provision, which resulted in the headwind of approximately 200 basis points for the quarter. The underlying fourth quarter performance was strong of both sales, operating margin increases, and earnings per share. And without the impact of the Italian sales reserve, we would have achieved a high end of our organic sales guidance range of seven to nine. Full year 22 operational sales grew 11% versus 21, while organic sales grew 9% in line with our guidance of approximately nine. Fourth quarter adjusted EPS of 45 cents declined minus 2% versus 21, and full-year adjusted EPS of $1.71 grew 5% versus 21, both achieving a low end of the guidance range. Once again, without the impact of the Italian sales reserve, we would achieve the high end of the guidance range for both fourth quarter and full year of $1.71 to $1.74. We generated a full-year precash flow of $950 million and adjusted precash flow of $2.1 billion in line with our expectations. Now for outlook for 2023. We are guiding to organic growth of 6 to 8 for both first quarter 23 and full year 23, which excludes the acquisition of Apollo into surgery and the majority stake investments in MITech and ACOTech, all of which are expected to close in the first half of 2023. Our first quarter 23 adjusted EPS estimate is 42 to 44 cents. and we expect our full-year adjusted EPS to be $1.86 to $1.93. And despite the ongoing macroeconomic pressures and supply chain headwinds, we remain committed to our goal of plus 50 basis points of operating margin expansion and double-digit adjusted EPS growth in 2023. Dan will provide more details on our 22 performance, the Italian sales reserve, and our 23 outlook. I'll now provide some additional highlights on 22 results, along with comments on our 23 outlook. Regionally, on an operational basis, the U.S. grew 10% versus fourth quarter 21. Full year 22 grew 11%, inclusive of 300 basis point tailwind from acquisitions, with particular strength in our watchman, endo, and urology business units. Europe, Middle East, and Africa grew 11% on an operational basis versus fourth quarter 21, and 12% on a full year basis. This above-market growth is supported by ongoing investments in emerging markets, new and ongoing product launches across the portfolio, pricing discipline, and strong commercial execution. We're excited about the year ahead with ongoing momentum across the region, particularly with our innovative EP portfolio and further opportunity with Bayless and the Access Solutions franchise. Asia Pacific grew 10% operationally versus fourth quarter 21 and 12% for the full year. On a full-year basis, six out of eight business units grew double digits, supported by ongoing innovation across the region. Full-year Japan growth is driven by new products, including PolarX, which has approximately 50% share in open accounts. We look forward to 2023 with ongoing momentum for both new products and are excited about a recent approval and reimbursement received for Agent DCB, which is a coronary drug-coated balloon for instant re-stenosis in small vessels. On a full-year basis, China grew more than 20%, fueled by 13 new product launches, ongoing portfolio diversification, and the team's resiliency and execution. We continue to expand our presence in the China market with a recently announced acquisition of a majority stake in AccoTech. We believe this investment can create strategic value for both companies without opportunities to collaborate in R&D, manufacturing, and commercial strategies. We also continue to expect China to be a double-digit grower in 23 despite ongoing VBP pressure and potential impact to procedure volumes in Q1 from COVID. In Latin America, the momentum continued with operational sales growth of 16% versus fourth quarter 21 and full-year growth of 28% with all business units growing double digits versus 21. On the business units starting with urology, Urology sales grew 12%, both operationally and organically, versus fourth quarter, 21, and on a full-year basis. They grew 15% operationally and 10% organically versus 21. Within the quarter, all franchises grew double digits, fueled by new and ongoing product launches and continued global expansion. On a full-year basis, global growth was driven by key products such as Lift-A-View, Resume, and SpaceOar, as well as the acquisition of the luminous Moser laser technology, further complementing the urology portfolio. Endoscopy sales grew 7% organically in the quarter, and on a full year basis grew 8% organically versus 21. In 22, we had global success with innovative products such as Axios and single-use imaging, both growing over 20% and supporting strong growth across the globe. In the fourth quarter, we announced our intent to acquire Apollo Endosurgery, which will add a complementary and innovative endoluminal surgery portfolio. We look forward to closing this acquisition as well as our previously announced majority stake in MITech, which includes the innovative, wow, Henaro stent in the first half of 23. Neuromodulation sales grew 5% organically versus fourth quarter 21, and on a full year basis grew 3% organically versus 21. Globally, our spinal cord stimulation business grew 4% in fourth quarter with continued physician enthusiasm for Waverider Alpha and FAST. We continue to invest in clinical evidence to expand indications and presented three-month data from our non-surgical back study SOLUS at NANS earlier this year. The study comparing SCS to conventional medical management met its primary endpoints and we anticipate FDA approval for non-surgical back indication by the end of 23. Our brain franchise grew double digits in the quarter and low double digits on a full year basis. This strong performance is aided by continued momentum from new product launches in 22 as well as the recent launch of the Versace 2-in-1 lead extension. Peripheral intervention sales grew 9% organically versus both fourth quarter 21 and full year 21. Within arterial, we are pleased with the performance of our drug looting portfolio, growing strong global digits for the full year and achieving the number one global position, I'm sorry, the number one position within the SFA in the U.S. On a full year basis, our Venus franchise was flat versus prior year, with Varathena, our market-leading varicose vein offering, growing over 20% in 2022. Our interventional oncology franchise performed well in 22, growing low double digits, led by our portfolio of innovative cancer therapies and suite of embolization tools. We continued to invest in expanding the potential applications of TheraSphere and enrolled our first patient in our early feasibility study, Frontier, evaluating the safety of image-guided intra-arterial delivery of TheraSphere GBM in patients with the reoccurring glioblastoma. Cardiology delivered another excellent quarter with operational sales growing 13% or an organic sales growing 10 versus fourth quarter 21. On a full year basis, sales grew up 14% operationally and 10% organically. A newly aligned cardiology group delivered strong growth across its four businesses, as we continue to invest in higher growth segments and differentiated offerings for our customers that address the areas of greatest cardiac need for patients. Within cardiology, interventional cardiology therapy sales grew 5% organically in fourth quarter, and on a full year basis grew 8% organically in first 21. On a full year basis, the coronary therapies franchise, which includes both drug-loving stents and complex PCI, grew 7%, driven by strong performance in our international regions and our imaging franchise. Our structural hard valves franchise grew double digits in both fourth quarter and the full year basis, outpacing the market in Europe with our AccurateNeo2 aortic valve. Ongoing clinical evidence has supported growth throughout 22 and into fourth quarter. Data from the AccurateNeo2 PMCF study was presented as a late breaker at PCR London valves, demonstrating positive safety and 30-day outcomes with low PVL rates and best-in-class pacemaker implantation rates. Additionally, we enrolled our first patient in the AccuratePrime XL nested registry, assessing the safety and efficacy of the AccuratePrime aortic valve XL to treat patients with severe aortic stenosis who need a larger valve size for the TAVR procedure. Watchman sales grew 22% organically versus fourth quarter 21, and on a full year basis grew 24% organically versus 21. Q4 finished with record sales, strong utilization in the U.S., supported by the DAPT label expansion. Importantly, we completed the enrollment of our champion AF trial way ahead of schedule. This head-to-head trial versus novel oral anticoagulation has the potential to more than triple the number of patients indicated for WatchmanFlex in 2027 and beyond. We remain excited about this outlook for this business and expect double-digit growth in fueled by innovation, ongoing clinical evidence, and strong commercial execution. CRM sales grew 6% both operationally and organically versus fourth quarter 21, and on a full year basis grew 8% operationally and 7% organically. Our diagnostics franchise had a strong year, growing double digits versus 21. In core CRM, on a full year basis, our high voltage business grew low single digits, and our low voltage business grew mid single digits. We expect that all major markets were in line or slightly above the market. Electric physiology sales grew 76% operationally and 25% organically versus fourth quarter 21, and on a full year basis grew 69% operationally and 18% organically versus 21. Importantly, our international EEP business continues to outpace the market, growing over 40% organically versus fourth quarter 21. PolarX continues to perform well in both Europe and Japan, has now been treated to treat over 25,000 patients since launch. Momentum and FerroPulse continues with another strong quarter of growth in Europe, and we continue to invest in clinical evidence and look forward to the readout of the randomized ADVENT USID trial in the second half of 23, and are planning to initiate our Advantage AF trial studying the use of FerroPulse for patients with persistent AFib imminently. We've been very pleased with the performance of our Bayless acquisition and the innovative VersaCross platform, which grew two times faster than the market in 22. We launched our VersaCross Connect in 22, improving efficiencies in our Watchman procedure. Earlier this year, we shared our strategy consistent with years past. We continue to position ourselves to win in the markets we play through meaningful innovation by balancing our financial commitments. And in 22, we announced four acquisitions, invested 10% of our sales in internal R&D to fund sustainable growth and advance patient care. We're extremely excited about the year ahead and remain focused on our people and sustaining a culture that is motivated to drive differentiated performance and achieve our long-term goals, continuing to grow sales faster than markets, continuing to expand operating margins, and delivering double-digit adjusted EPS growth and strong adjusted pre-cash flow generation. So before I turn it over to Dan, I want to share that with the retirement of Dr. Ian Meredith, Dr. Ken Stein will assume some of the global responsibilities that previously fell under Ian, including total company investor engagement, in addition to his CRM, EP, and watchman roles. Please join me in congratulating Ken and thanking Ian for his many contributions. With that, I'll pass it off to Dan to provide more details on the financials. Thanks, Mike.