Boston Scientific Corporation

Dave, and welcome to the Boston Scientific Q2 2023 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press Start and Choose. Please note, this event is being recorded. I would now like to turn the conference over to Lauren Candler, Vice President and Investor Relations. Please go ahead.

Lauren Candler Thank you, Kyle. 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 Q2-23 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 and Dan will provide comments on Q2 performance, as well as the outlook for our business, including Q3 and full year 23 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 and divestitures excluded for organic growth are Bayless Medical, which closed on February 14th, 2022, the majority stake investment in ACOTEC Scientific Holding Limited and Apollo Endosurgery, which closed in February and April of this year, respectively. Divestitures include the endoscopy pathology business, which closed in April of this year. Please note that we have elected to consolidate ACOTEC results on a one-quarter lag, which had an immaterial impact on our Q2 reported and adjusted results. On June 15, 2022, we announced our entry into a definitive agreement to purchase a majority stake in MITEC. The agreement required global regulatory approvals that we were unable to obtain in some countries. As a result, the original agreement was terminated, and in June of this year, we purchased a minority stake in MITech. 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 federal securities laws, which might 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 used or 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. Mike?

Thanks, Lauren, and thank you to everyone for joining us today. We're very proud of our second quarter results, which exceeded our expectations and demonstrated the strength of our category leadership strategy, commitment to clinical evidence, and the winning spirit of our global team. In second quarter 23, total company sales grew 12% both operationally and organically versus second quarter 22, exceeding the high end of our organic guidance range of 7 to 9. We anticipate that most of our business units grew in line or faster than their respective markets, fueled by our innovative portfolio and commercial execution, also supported by healthy procedure demand. Second quarter adjusted EPS at 53 cents grew 21% versus second quarter 22, exceeding the high end of the guidance range of 48 to 50 cents. And second quarter adjusted operating margin was 26.8%, also slightly higher than anticipated. Through the first half of the year, we have grown their business organic sales rate at 13%, with broad-based durable growth across all of our business units and regions. Importantly, we have also grown our adjusted EPS growth 20% during the first half, while balancing our investments to ensure we achieve our short-term and long-term goals. Now for our 2023 guidance, we're guiding this third quarter 23 organic revenue growth of 7% to 9%. and we expect momentum to continue and are raising our full year organic guidance to 10 to 11%. Our third quarter adjusted EPS estimate is 46 to 48 cents, and we're increasing our full year adjusted EPS range to $1.96 to $2. I'll now provide some additional highlights in the second quarter, along with comments on our 23 outlook, and Dan will provide more details on the financials. Regionally, in an operational basis, the U.S. grew 9% in second quarter, with notable strength in our watchman, PI, and endoscopy businesses. Europe, Middle East, Africa also grew 9% on an operational basis versus second quarter, with strong performance in the region was broad-based, with double-digit growth in four out of our five major markets in Europe. Across the portfolio, we saw strength in new and ongoing product launches, including Ferropulse, PolarX, AccurateNeo2, and LuxDX. Asia Pacific grew 24% operationally versus second quarter, led by strength in China and Japan. Japan growth is fueled by new products, including Agent, our drug-coated balloon for the coronary arteries, and Resume, our minimally invasive BPH technology with device performance and procedures that leave nothing behind, is resonating in the market. China delivered excellent growth in the second quarter, led by our innovative portfolio and commercial execution against the COVID impact second quarter 22. We also saw particular strength in our interventional cardiology therapies, Watchman, CRM, and PI business units, and we continue to expect double-digit growth in China for the full year. I'll now provide some additional commentary on our businesses. Starting with urology, urology sales grew 8% organically in the second quarter, The stone management franchise grew double digits, driven by lithovue and ongoing globalization efforts. ReZoom continues to do well globally, growing strong double digits in the quarter and most recently launching in Brazil. We continue to see ongoing momentum within our prosthetic urology franchise, fueled by patient activation efforts designed to bring awareness to our erectile restoration and male incontinence interventions. Endoscopy sales were excellent, growing 12% organically and 14% operationally in the second quarter, with notable strength in the U.S., Latin America, and Asia Pac, with new product momentum and healthy procedure demand. Our Apollo integration is progressing well, and earlier this month we received FDA clearance for OverStitch NXT, a suturing system that enables suture placement during advanced endoscopic procedures. This next-generation device brings ease-of-use benefits and improved accessibility when using a single-channel endoscope. Neuromodulation cells grew 3% organically in the second quarter. Spinal cord stimulation cells were flat versus prior year, and we expect SCS cells growth to improve in the second half of the year, with strong trialing in the second quarter in support of clinical evidence, which was presented this month at Aspen. Notably, six-month outcome data were reported from the SOLUS trial, which is a randomized controlled trial for non-surgical back pain, which demonstrated superior outcomes for SCS against conventional medical management, also consistent with primary endpoint results. Our brain franchise grew double digits in the quarter with continued momentum from new product launches in the U.S. and procedure recovery in Europe. Earlier this month, we received FDA approval for the Precise Neural Navigator 5 software, which, when used with our deep brain stimulation system, can help provide clinicians with data for efficient programming in the treatment of Parkinson's disease. Peripheral intervention cells were very strong, growing 13% organically versus second quarter 22. Our arterial franchise grew double digits, led by our drug-eluting portfolio. And earlier this month, after reviewing all available data and analysis, The FDA provided updated information associated with pacotaxel-coated devices used to treat PAD, recognizing the safety of these devices and eliminating the requirement for specific warning language within device-related labeling. We're pleased that the FDA determined that the available data do not support an excess mortality risk, and we remain dedicated to helping physicians provide the best care possible for their patients. In Venus, U.S. growth was led by ongoing strength in Varathena, a non-thermal treatment for varicose veins, with international growth driven by our clot management technologies. Our interventional oncology franchise grew double digits with strength across the entire portfolio. And last month, we received clearance for the embold soft and packing coils, which along with the embold fibered coil, complete our detachable coil system. We also began our limited market release for Obsidio, which is the only conformable gel embolic material that's indicated for the peripheral vasculature, adding to our robust embolization portfolio. Cardiology delivered another excellent quarter with organic sales growth of 13% versus second quarter. Within cardiology, the interventional cardiology therapies business, sales grew 12% organically versus second quarter. Our coronary therapies franchise growth is driven by our innovative imaging technologies as well as the recent launch of our agent drug-coated balloon in Japan, offsetting ongoing price pressure in drug-looting stents. Our structural heart valves franchise grew strong double digits with another quarter of performance from our accurate NEO2 in Europe. Market reception remains very high, backed by clinical evidence, ease-of-use benefits, and a focus on lifetime patient management. We continue to expect to bring accurate NEO2 to the U.S. in the second half of 2024. Watchman sales grew 27% organically versus second quarter, also outpacing the market. U.S. demand remained strong, and international growth was led by China and Japan. We were pleased to have completed an enrollment in the Watchman FlexPro CT pilot study, which is a single-study design using multiple imaging modalities to assess post-procedural healing in the next generation of Watchman FlexPro. We expect continued momentum within the Watchman franchise, further supported by the anticipated approval of our both Watchman Flex Pro and our steerable sheath called TrueSteer by the end of 2023. Cardiac rhythm management sales grew 5% organically in the quarter. In core CRM, our high-voltage business grew low single digits, and our low-voltage business grew mid-single digits. And we believe that performance was in line or slightly below market growth as our replacement tailwinds neutralized. Our diagnostic franchise grew double digits in the quarter on the strength of our broad cardiac diagnostic portfolio, and we anticipate momentum will continue, supported by the approval of our next generation ICM called LUX2, expected later this year. Electrophysiology sales grew 28% organically in the second quarter. International growth continues to be fueled by strong performance in both FerriPulse and Polarex across Europe and HPEC. We continue to make progress toward bringing these innovative technologies to the U.S., and we expect Polarex approval in the third quarter. In addition, we are looking forward to the data presentation of the ADVENT trial, our US IDE, at the ESC conference on August 27th. Recall the ADVENT trial is a first-of-its-kind randomized clinical trial designed for noninferior 12-month primary safety and efficacy endpoints. compared to commercially available RF and cryoablation systems. It is notable for its design and rigor as it seeks to demonstrate the single procedure effectiveness of an intervention without the use of antiarrhythmic drugs and re-ablations. We continue to anticipate the approval of FerriPulse in the U.S. in 2024. The Access Solutions franchise grew strong double digits in the second quarter with continued momentum in the U.S. and Japan with a differentiated VersaCross transeptal platform. We're also proud of the performance of our global teams and are confident in our future. We remain committed to sustainable innovation and our financial goals, consistently growing sales faster than our underlying markets, expanding operating margins, and delivering strong double-digit adjusted EPS growth with strong adjusted free cash flow generations. We're looking forward to our September 20th Investor Day, where our leadership team will provide more insight into our innovative pipeline today, the opportunities ahead, and our long-term financial goals. So before I pass along to Dan, I want to announce that we also have some movement within our business unit leadership team. And after nearly 20 years at Boston Scientific, Malik Nanavati has announced his plan to retire in August. Jim Cassidy will now lead the neuromodulation business, where he previously spent eight years prior. before moving over to lead the Watchman franchise five years ago. Lastly, Angelo DeRosa will now lead our Watchman business. Angelo has spent the last 10 years with Boston Scientific in Europe, most recently leading the European CRM and EP business. Congratulations to Jim and Angelo, and we appreciate Malek for his many contributions to neuromodulation in Boston Scientific throughout his career. With that, I'll pass over to Dan to provide more details on the financials.