Boston Scientific Corporation

Good morning, everyone, and welcome to the Boston Scientific first quarter 2023 earnings call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key, 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 and then one on your telephone keypad. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Lauren Tengler, Vice President, Investor Relations. Please go ahead.

Thank you, Jamie. 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 Q1 2023 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 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 Q1 performance, as well as the outlook for our business, including Q2 and full year 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 Officer, 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 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 Bayless Medical, which closed on February 14, 2022, the majority stake investment in Architect Scientific Holding Limited, and Apollo Endosurgery, which closed in February and April of this year, respectively. Please note that we have elected to consolidate ACOTEC results of operations on a one-quarter lag, thus having no impact to our Q1 reported or adjusted results. Guidance excludes the previously announced agreement to purchase a majority stake in MITEC, which has not closed. 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 meaning of the federal security clause, 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 in market share, new and anticipated product approvals and launches, acquisitions, clinical trials, cost savings and growth opportunities, our cash loan 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 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 factor section of our most recent 10-K and subsequent 10-Qs 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.

Thanks, Lauren. Thank you to everyone for joining us today. Our first quarter performance exceeded our expectations across all business units and regions, which is a testament to the winning spirit of our global team and the relentless focus on innovation and execution. We also launched more than 70 new products globally in 2022. In the first quarter of 2023, total company operational sales grew 15%, versus 2022, while organic sales grew 14%, exceeding the high end of our guidance range of six to eight. We believe that all business units grew faster than the respective markets with differentiated portfolios and a strong commercial execution supported by healthy procedural demand. First quarter adjusted EPS of 47 cents grew 19% versus 2022, exceeding the high end of the guidance range of 42 to 44 cents. First quarter adjusted operating margin was 25.5%, which is in line with expectations. Now for our 2023 guidance. For second quarter 23, organic revenue, we're guiding to growth of 7% to 9%, and full-year organic growth of 8% to 10%. Our second quarter 23 adjusted EPS estimate is 48 to 50 cents, and we're guiding to a full-year adjusted EPS range of $1.90 to $1.96. I'll now provide additional highlights on first quarter, along with comments on our 2023 outlook, and Dan will provide more details on the financials. Regionally, on an operational basis, the U.S. grew 13% versus first quarter 22, inclusive of 140 basis point tailwind from the Bayless acquisition, with notable organic strength across all our business units. Europe, Middle East, and Africa grew 20% on an operational basis versus first quarter 22, with nearly every market growing double digits in the quarter. This strong above-market growth is driven by our diverse portfolio, new launches, and commercial execution with healthy underlying market demand. We remain excited about the year ahead and expect to continue to outpace our peers within the EMEA market. Asia-Pac grew 15% operationally versus Q1 2022, with broad-based strength across all major markets and business units. Within the quarter, we're pleased to have received Health Sciences Authority approval for FerriPulse in Singapore, expanding access of this innovative new technology to more patients. In Japan, first quarter growth is fueled by the launch of Agent drug-coated balloon, a differentiated coronary drug-coated balloon for instant re-stenosis in small vessels, with physicians pleased with ease of use and balloon deliverability. China also grew double digits in first quarter ahead of our expectations with solid procedural demand as hospitals work through COVID-delayed procedures. Our diverse portfolio in China, commercial execution, and supply chain management within the country supported the strong performance in the quarter. In February, we also closed our majority stake investment in Accotech, further expanding our presence in the market, and we continue to expect double-digit growth in China for the full year. I'll now provide some comments on our business units. Urology sales grew 16% organically. All four franchises grew double digits in the quarter, with strength in key products including Lithivue and Rezum. In the US, we received FDA clearance and initiated a limited market release for Lithivue Elite, which is a single-use flexible ureteroscope, which incorporates an innovative pressure sensing capability that will enable physicians to monitor intrarenal pressure during stone removal procedures. Endoscopy sales for the quarter grew 11% organically versus first quarter, 22, with broad-based strength across all regions and franchises. Our single-use imaging franchise grew double digits, and we're pleased to have recently launched our third-generation Exalt D with improved ergonomic design updates to improve the physician experience. In April, we closed the Apollo Endosurgery Acquisition, which furthers furthers our category leadership strategy within the important area of endoluminal surgery with differentiated technologies like OverStitch and X-TAC along with an entry into the adjacent endobariatric market. Neuromodulation sales grew 14% organically versus first quarter 22. Our pain business grew high single digits in the quarter with strong SCS performance driven by our innovative alpha portfolio with fast therapy, and our Cognita suite of digital tools supporting patient activation. Our Brain franchise grew double digits in the quarter, driven by new product launches including GuideXT, which was developed in collaboration with BrainLab. This revolutionary software provides implanting and managing clinicians the ability to model the effect of a patient's stimulation ahead of actual programming, which will improve procedural efficiency. In the quarter, peripheral interventions also grew 12% organically versus first quarter 22. Our arterial franchise grew double digits, led by a drug-eluting portfolio, establishing clear leadership in SFA drug elution, further supported by our differentiated Lubia long-length DES. Our venous franchise growth was driven by ongoing above-market performance in Varathena, And within the quarter, we launched ECOS Plus in the U.S., which provides more ultrasound power to resolve clot burden more quickly and completely. Our interventional oncology franchise grew double digits with strength across the entire portfolio. We look forward to initiating our limited market release in the second quarter for Obsidio, the first conformable embolic indication for the peripheral vasculature. Cardiology delivered another excellent quarter, with operational sales growing 17%, when organic sales growing 15 versus first quarter 22. Within cardiology, interventional cardiology therapies, sales grew 13%. Our coronary therapies franchise grew low double digits in first quarter, led by strong performance within our imaging portfolio, with particular strength in the U.S. with the ongoing launch of the Vigo2 guidance system. Our structural heart valves franchise continues to grow strong double digits, and we're pleased to have completed enrollment on our accurate IDE trial and continue to expect to launch accurate NEO2 within the U.S. in the second half of 2024. Watchman sales grew 29% organically versus first quarter 22. Demand remains very strong for Watchman Flex, and we now have treated more than 300,000 patients globally since launch. We are proud of our performance to date, and we continue to invest for the future through product innovation, solutions, and clinical evidence. Last week, the Population Health Research Institute announced the IDE approval of LAOS-4, which is a collaborative research study with Boston Scientific that will continue to expand our LAAC clinical evidence. This trial is expected to start in mid-2023. It will complement the existing Champion AF and option trials. Cardiac rhythm management sales grew 8% organically versus first quarter 22. Our diagnostics franchise grew strong double digits in the quarter with continued momentum across the portfolio. In core CRM, both our high voltage and low voltage businesses grew mid-single digits, and we believe that all major markets were in line or slightly above market growth. We do expect our core CRM growth to taper closer to market growth for the remainder of 23 as replacement tailwinds neutralize. Electrophysiology sales grew 54% operationally and 31% organically versus first quarter 22. Our international EP business grew 40%, and importantly, the EMEA region grew our EP business 57%, driven by strong adoption of FerroPulse and PolarX. We continue to invest in the expansion of our portfolio and received approval in Japan, Canada, and Europe for PolarFit, which is an expandable balloon catheter capable of creating 28 and 31-millimeter sizes, providing procedural adaptability and efficiency. And just last week, one-year outcomes data from the Manifest PF Registry were presented as a late breaker at EHRA. This is the first large, real-world data set on a novel ablation technology, which demonstrated real-world safety, efficacy, and efficiency of the FerroPulse PFA system. The data also reinforced the minimal learning curve and reproducibility of the FerriPulse workflow in everyday commercial use. We continue to advance our clinical evidence within this space and initiate enrollment in our Advantage AF trial, which is studying the use of FerriPulse for patients with persistent atrial fibrillation. We also look forward to the readout of our ADVENT-USID randomized control trial in the second half of this year and continue to expect their approval in the U.S. in 2024. We're also very pleased with the performance of our Access Solutions franchise, which grew strong double digits in first quarter, driven by further penetration into transeptal crossing procedures. Last week, we released our 22 performance report, outlining our environmental, social, and governance results. We are pleased with the progress our global teams have made to advance sustainable innovation while contributing to a healthier planet, addressing inequities and supporting communities around the world. We have much more to do, and our values-based culture will serve us well as we continue to transform lives and hold ourselves accountable to our commitments. We are confident the year ahead will bring many more exciting milestones across each of our business units, and we remain committed to our financial goals of consistently growing faster than our underlying markets and our peer group, expanding operating margins, and delivering double-digit adjusted EPS growth with strong free cash flow generation. We also look forward to hosting our Hybrid Investor Day event on September 20th. With that, I'll pass it off to Dan to provide more details on the financials. Thanks, Mike.