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spk13: If you are using speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed, then you would like to withdraw your question, please press star then 2. At this time we will pause momentarily to assemble our roster. And the first question comes from the line of Robin Marcus with JP Morgan. Please go ahead.
spk07: Hi, good morning, and congrats on a great quarter. And since many of us are at TCT, I'll add the nice agent DCP trial as well. I had two questions. I had two questions, so I'll just go with one here. As we go back to the analyst day, you pointed to 8% to 10% growth and 150 basis points of operating margin expansion over the three-year time frame. And I believe one of the comments was at the beginning of the range, it'll be towards the lower end and accelerate as you have some of your big new product launches coming. So I'm looking at 2024 here, and I see the street at 8% to 9% organic sales growth and about 50 basis points margin expansion. I just want to make sure we're interpreting the comments you made at the end correctly and any thoughts you have on directionality for next year. Thanks a lot.
spk03: Yeah, sure, Robbie. I think relative to the analyst day commentary, let me just reiterate just to make sure we're all on the same page. So as you said, 8% to 10% organic revenue growth over the period 24 to 26, 150 basis points of margin expansion over that three-year period, which would put us, assuming we're at that 26.4 at the end of this year, kind of near that 28, which is a nice jumping off point for that 30% long-term goal. And then we said that the 2025 revenue growth rate would likely be higher than our 2024 revenue growth rate due to the launches that are coming in 2024. So that's really the commentary that we had relative to Investor Day. And obviously, 2023 shaping up to be a great year, good jumping off point heading into 24. But relative to specifics around 24, we're working through our 24 annual planning process here in the fourth quarter. And as you would expect, we'll use that as the basis to give you the guidance when we get to our Q4 earnings call in January.
spk07: All right, I appreciate it. Thank you.
spk13: The next question is from the line of Joanne Wunsch with Citibank. Please go ahead.
spk08: Good morning, and thank you for taking the question. Since many are sitting here at TCT, I think I'm going to focus on that, including I'd love some feedback on the data that's been presented here, particularly on the agent trial. And then I found the WATCH TAVR trial also interesting. So anything you can comment on, that would be wonderful. Thank you.
spk02: Dr. Stein, you want to comment?
spk16: Yeah, thanks, Mike. Let me start again. Hey, Joanne. We're really pleased by all of the data that we saw at TCT. I'll begin with agent and literally could not be happier with the ultimate results of that randomized trial. which, again, as I hope everyone recognizes, right, is intended to get approval of the first drug-coated balloon indicated for use in the coronaries in the United States for instant restenosis, right? Instant restenosis accounts for approximately 10% of U.S. coronary interventions today. Having a drug-coated balloon will allow interventionalists to address these stent failures while leaving nothing behind. We've seen how well it's performing where we do have it approved in Japan. And just to reiterate, really, the incredible results from the trial met endpoint of target lesion failure at 12 months, which really marked statistical and clinical superiority to planol balloon angioplasty. And importantly, you know, both clinically important reductions in target SLMI and reductions in the need for target lesion revascularization. And then, yeah, so that was yesterday. The day before yesterday, we saw the results of WATCH TAVR. And so WATCH TAVR, I think it was an important investigator-initiated trial looking at the combined use of the legacy WATCHMAN 2.5 device at the same time of TAVR in high-risk patients with atrial fibrillation undergoing TAVR. And I think on the one hand, We sort of acknowledge that combined use of Washington with TAVR does face a challenge in reimbursement environment, but also important, the trial validates the safety and the efficacy of the legacy Washington 2.5 device as compared to control therapy, including the use of NOACs in this population.
spk08: Thank you.
spk13: The next question is from the line of Rick Wise with Stifel. Please go ahead.
spk15: Good morning. Thank you for the question, and it's wonderful to see such an excellent quarter. I guess if I focus on one, maybe you could expand on your, Mike, on your, if you want to do it, your Neuromod comments, just your latest thinking Just broadly, what's going to help re-accelerate the business or what's next from here? But more specifically, the PDN indication approval, how does that affect the business? When does it start contributing? How would you have us think about the beneficial contribution there? Thanks a lot.
spk02: Thanks, Rick. In the third quarter, as I mentioned, we're proud that most all of our businesses grew, at least at, most likely, most of them grew above market, likely with the exception of the one that you asked about, Neuromod. In the Neuromod business, we grew roughly 3% in the quarter. I'll just start off before I jump to SCS. The brain business, our DBS business, continues to do well, continues to grow share. And in third quarter, it grew double digits again with the neural navigators. That business continues to become a larger part of the overall mix. Global SCS still is the largest piece. That's been under pressure, as you pointed out. The pressure points really come from additional, probably a couple new competitors to the marketplace, some competitive launches. And our DPN approval, which we're very excited about, which you highlighted, we received in October. But we don't expect to launch our DPN platform until likely first quarter, near the mid first quarter of 2024. So this will certainly help us with our core SCS business with that additional indication. And also with the Reliviant company that we've signed but not yet closed, we expect to close that in 2024. So we need the combination of the DPN to our existing SCS base. Combined with Relieviant and also our RF platform gives us a really nice category leadership position to treat pain with a variety of options, which will be differentiated. So we do expect likely some softness to continue in the fourth quarter. And we obviously aim to improve on those results in 2024 based on what I just highlighted.
spk15: Appreciate the color. Thank you. Perfect.
spk13: The next question is from the line of BJ Kumar with Evercore ISI. Please go ahead.
spk14: Hey, guys. Congrats on the print and the data being present at TCT. If I may, I want to stick to it on the financial side. Dan, just to clarify the 24 commentary, if the acceleration is all being driven by new products and these new products are being launched, I think it's the back half of next year. should we be perhaps thinking about the lower end of that eight to ten percent and i think you mentioned gross margins uh fx impact here so it looks like q4 is going to look similar to tq how to think about any fx impact on gross margins as we look at the outlook uh sure so i hit the gross margin one uh first uh
spk03: The gross margin in the third quarter was a little bit lower than we expected, and it was predominantly driven by FX at that 70.2%. So we had been targeting kind of to be approaching 71% for the full year this year. We were 70.5% last year. Just tempering that commentary to say, you know what, we might not hit the approaching 71%. We might be, you know, we'll be north of 70.5%, but maybe not as high as approaching 71%. So a bit of a nuance there, but driven by FX. And we had mentioned for 20, the long-range plan at investor day for 24, 5, and 6, that there'd be a bit of an FX headwind in gross margin in 24 that should get better over that timeframe of 24, 5, 6. Relative to 24 organic revenue growth, no, there's really not much to assume other than we'll let you know on January 31st when we have our call. We have 8% to 10% as the CAGR for the three years. As I mentioned, we'll work through our annual planning process here over the the back half of this quarter, and we'll let you know. We do have some nice launches, obviously, in 24, as you mentioned, many in the back half, but we'll let you know on January 31st what we think the range will be for 24.
spk14: Understood. Thanks, guys.
spk13: The next question is from the line of Larry Bigleton with Wells Fargo. Please go ahead.
spk05: Good morning. Congrats on the print. Mike, we made it this far without a GLP-1 question, but I'm going to ask it anyway. Obviously, diabetes and obesity are risk factors for many diseases, such as cardiovascular disease. So how are you thinking about the potential long-term impact of GLP-1s on your businesses? And any high-level thoughts, Mike, on how investors have reacted to GLP-1s in general? Thank you.
spk16: Dr. Stein, you want to give our comment on GLP-1? Yeah, thanks. Thanks, Mike. And hey, good morning, Larry. I'm going to begin, right? I mean, as a doc, I think you have to acknowledge these are promising agents. On the other hand, as a doc and a realist who's lived through the launch of other promising agents in the past, and I think statins are a really good example, I think you've got to acknowledge, and particularly these drugs, given issues of cost, issues of convenience, and issues of tolerability, we expect it will take at least a decade to reach peak penetration of these drugs in the indicated population. And even after a decade, we expect that only a minority of American patients with obesity will be taking these drugs. But if you think about these barriers to usage, I begin by saying we see very limited short-term impact on cardiovascular disease. And even in the long term, right, Our analysis, taking into account, again, penetration ramp of these drugs, as I said, and taking into account what we know thus far about a reported 20% reduction in cardiovascular event rates, suggests to us that the impact on U.S. coronary and peripheral procedure volumes will be minor, even at peak. And I think it's important to state, so we, even with these drugs, continue to expect both of these procedures to to continue to grow in volume over the next decade. Furthermore, I think it's also really important to point out that cardiovascular disease is a global issue, that there is less attribution to obesity in other regions, particularly Asia, making it less amenable to prevention with these drugs, which are frankly also very likely to be less accessible outside of the U.S. Also, any decrease in cardiovascular mortality in events will necessarily be accompanied by a corresponding increase in the prevalence of other diseases that are associated with aging. Diseases in areas that are really very well served by our products, including things like cardiac pacing, interventional oncology for many forms of cancer, deep brain stimulation. And finally, the assumptions that I'm talking through in terms of our modeling don't consider other procedural growth factors like an aging population over this period and certainly doesn't consider the long track record that we have of focusing and executing on innovation.
spk02: Thanks, Dr. Stein.
spk13: The next question is from the land of Travis Steed with Bank of America. Please go ahead.
spk06: Hey, thanks for taking the question. I did want to ask about Farapult. It sounded like the update was expected approval in second half of 2014. Just curious when that was filed with the FDA. And then maybe talk a little bit about, you know, scaling that up in the U.S. and the potential to see, you know, pull through on the ancillary products like mapping.
spk12: Maybe you take the timing of launch and you can speak to the value to the full portfolio.
spk16: Yeah, sure, Lauren. So, yeah, on timing, again, as we've said, I think everyone knows, right, our foundational pivotal scale data submit to the fda was advent uh presented those results as mike said at esc the end of august with simultaneous publication of new england journal of medicine hit all of our endpoints uh very clean data set uh and so again as as we've said we've now completed our regulatory submission to the fda and things things are in regulators hands so continue to expect approval second half of uh of next And I think all of the EPs that I've spoken to in the U.S. can't wait to get their hands on it.
spk02: Yeah, you saw the results in the third quarter, which are quite strong with both Polar and Ferripulse. I think what's important is our supply chain team has done a terrific job over the past 18 months in building supply of both catheters and the capital equipment needed. So we expect to see a more significant install cadence to the back half of this quarter and into first quarter. So we feel like we've really significantly improved our supply capabilities, and you'll see that in 24 in Europe, and we'll be ready for the U.S. launch.
spk06: Great. Thanks a lot for the question. You're asking a good quarter. Thanks, Travis.
spk13: The next question is from the line of Daniel Antalfa with UBS. Please go ahead.
spk01: Hey, good morning, everyone. Thanks so much for taking the question. And congrats on a great quarter and the data here at TCT. Just a quick question on 2.4 top line guide. I imagine there's some conservatism baked in here, but if I'm looking at it correctly, it is implying a little bit of a deceleration and not to be nitpicky here, but just want to make sure we're understanding of what the tailwinds versus headwinds are as we go into Q4 and heading into 2024. Thanks so much.
spk03: Sure, Danielle. Yeah, I think of note, if you think back to our July guidance, obviously we didn't give specific Q4 guidance, but implied in that guidance would have been 7% to 9%. So the 8% to 10% that we have for the fourth quarter It's a bit of acceleration from where that would have been. As always, we think the 8 to 10 is a prudent number for the quarter and believe it's the right number for the quarter to close out the year. It'll put us at 11%, approximately 11% organic revenue growth for the year. So I think that's a great year for the company. And you combine that with the other metrics that we have, not just revenue, but the 11% organic revenue growth. You'd see 80 basis points of margin expansion at that 26.4%. percent adjusted op margin, and then you get to 17% to 18% full year EPS at that $199 to kind of that milestone over $2 to get to that $202, that's a good year.
spk01: Thank you.
spk13: The next question is from the line of Matt Taylor with Jefferies. Please go ahead.
spk10: Hi, thanks for taking the question. I actually wanted to ask one on neuromodulation. You talked about results below expectations in light of competitive dynamics. So I was hoping you could comment on that and whether you expect any improvement in growth now that you have the PDN indication.
spk02: Sure, Matt. Yeah, there's been a couple new entrants into the field over the last 12 months. And so they've taken a little bit of market share. Overall, the market's likely, I don't know, 5% to 6%-ish. And this year, we're likely to, in SCS US, likely be below the market. I mentioned earlier, a big driver there is not having the support of DPN, which we just recently received in October. And we expect to be able to offer that capability in line with some of our competitors in first quarter 2024. So we do expect to have a softer fourth quarter. And then we expect acceleration improvement in 24 versus 23 for our SCS business. In our brain business, DBS continues to take share and grow double digits. And, again, mentioned it's likely the only division that's grown below the market.
spk10: Great. Thanks, Mike.
spk13: The next question is from the line of Josh Jennings with TD Cowen. Please go ahead.
spk09: Hi, good morning. Congratulations on the strong results. I wanted to follow up on Travis's question on FerriPulse. I was hoping to just better understand where your US EP sales force stands today and how you're building that out or plan to build that out for the FerriPulse launch. And then just on top of that, just thinking about the full integration of FerroPulse into arrhythmia and developing these Fairview capabilities, is there anything of note that we should be thinking about that would provide clinical advantages that could catalyze stronger demand for arrhythmia once that integration is complete, I believe, at the year end of 24? Thanks for taking the questions.
spk02: Sure. Yeah, I won't go into too many specifics on our commercial strategy. We do have a scaled and trained EP sales force. As you imagine, given the capabilities we have with our Watchman division and our EP business and our CRM business. So we have a scaled EP force that's been trained up now. And what's great to see is they're successfully selling cryo today. So having approval of that, And we had a really nice initial, I don't know, 30 days or so of Cryo openings. So we expect to see Cryo to be a nice revenue driver for us in 2024 as we wait for the Ferropulse approval. So we do have a scaled, highly capable EP commercial team. And Ken, if you want to comment on the Rhythmia offerings.
spk16: Yeah, thanks, Josh. And again, we're very excited about Ferropulse as it stands today. So we have disclosed we do have a next generation of FeraWave catheter, right, which is the ablation catheter part of the FeraPulse system that will include an embedded nav sensor that will work with a novel iteration to the Rhythmia software that we're calling FeraView that we do have targeted for year end of 24. And our goal here really, Josh, is, you know, like I said, we're never going to compel people to use Rhythmia if they want to use FeraPulse, but we're going to make the FeraWave and FeraView system compelling for physicians to use. And there are really some very novel things that we're able to do with that system combination that we believe is going to improve physician workflow and hopefully lead to even better patient outcomes with the combined system even on top of the great outcomes that we saw in ADVENT.
spk09: Great. Thanks a lot.
spk13: The next question is from the line of Chris Pascal with Nefron Research. Please go ahead.
spk17: Thanks. And a follow-up for Dr. Stein on agents. The results were certainly impressive versus PTA, but it was noted from the podium that about 85% of ISR cases in the U.S. today are being treated with drug-eluting stents. So do you have plans to follow up the IDE study with a randomized trial versus DES, and maybe just some thoughts on how you see agents fitting into the treatment paradigm versus that standard of care?
spk16: Yeah, Chris. You know, I'm not going to get into what our post-approval research strategy is going to look like, I think there's a lot to be learned when you see how drug-coated balloons are used in Japan and how they're used in Europe today. Patients with instant restenosis have failed the stent. Fool me once, shame on you. Fool me twice, shame on me. I don't think that there are a lot of physicians who want to be putting additional foreign objects into someone who's already had an instant restenosis. So we really believe the results that we saw with AGENT are compelling and compelling enough to move the vast majority of interventionalists to use AGENT in place of either planobolone angioplasty or in place of, again, yet another stent in the instant restenosis area. I think the only other thing I'll say is clearly there are a lot of potential indications for the use of the agent product beyond instant restenosis, and we'll certainly be looking at research into all of those as we get beyond approval and use for the first indication.
spk17: That's helpful. Thanks.
spk13: The next question is from the line of Michael Pollark with Wolf Research. Please go ahead.
spk11: Good morning. Thank you for taking the question. I have a question on price cost. On price, the message has been, you know, historically, we were kind of a little negative. We've moved it at the portfolio level to neutral. As we jump into 24, what's a good base case? Neutral, again, a little up, a little down. On the cost side, kind of where are you seeing opportunities, raw materials, freight labor? Where are you seeing tensions? And then the last piece of this is one of your large competitors did announce inventory obsolescence charge this quarter. I think we all can see that inventories for the sector overall are quite higher than they used to be because of the COVID stresses and strains. Can I get an update on Boston's status on inventory? Thank you.
spk03: Sure, Mike. Happy to. A lot in that question. So on the Pricing, historically we've been in that kind of very low single-digit decline for many years. We're starting to envision a world where we could be flat, so that's a goal of ours as we go forward over the LRP to get to flat pricing, which obviously helps revenue and helps all the way down through the rest of the P&L. On the cost side, as you look at the traditional areas that we've talked about that have been impacted over the past couple of years, When you take freight, I'd say that's gotten better, but it's certainly not back to where it was. So I'd say improving but still elevated. And obviously the conflict in the Middle East has us focused on fuel and oil as that runs the risk of increasing off of that. The inflation impact on our direct material costs, again, I would say we're seeing signs of that stabilizing over time, but it's absolutely elevated from where it was. So we still do see impact there. And then the consistency of supply, it's not fully back to normal again, but it has improved. So we're optimistic about the future that we see a – a better macro environment for cost of goods in that category. But we're not there yet is what I would say. And then relative to inventory, yeah, I mean, I would say we've been building inventory over the last two or three years, right? Our back order has been elevated higher than we have liked. The team's done a great job over the last 12 months of getting that more in line with where you've been historically. So I would not point to, you know, charges from our perspective as a big driver because we're still a bit in catch-up mode and making sure that we have the right amount of inventory to supply. So I think we're focused on having the right inventory, but we're not at the point where we have too much inventory.
spk13: Mr. Pollack, have you finished with your questions?
spk11: Yes, thank you.
spk13: Thank you.
spk12: Can we take the last question?
spk13: Thanks, Mike. Our last question comes from the line of Matthew O'Brien with Piper Sandler. Please go ahead.
spk04: Morning, thanks for squeezing me in here. I know you guys are a domestic company, but the performance in EMEA and APAC specifically were notable, and specifically APAC was really, really strong this quarter. Can you just give us a little more sense for, because I think those two collectively were roughly after growth this quarter. The durability of the performance in those geographies, is it a function of just more and more products into those areas? And so, you know, that's pretty straightforward. Or is it share taking that's required or what's really required to continue to deliver? Maybe not this level of growth, which is really strong again, but a very strong growth going forward where that's, you know, a significant contributor to the top line for 24, 25 and beyond. Thanks.
spk02: Sure. Starting with Europe is really not, thankfully, it's not a new phenomenon for our team in Europe, which we also referenced in Middle East Africa. Last year they grew 12% and they're on track to grow another double digits again in 2023. So the European team, it's really a combination clearly of share taking, given the markets aren't growing double digits in Europe. And our European team has benefited from the portfolio of having many of the product launches that were talked about for second half of 24 in the U.S. already in that marketplace. So they're doing an excellent job of launching our innovative products, taking share in the more developed Western European markets, and also building a pretty significant capability in the appropriate emerging markets in Europe that also goes double digits. So the team's just done a really nice job of executing and driving our innovation with launches. Asia-Pac had another strong quarter this year. That region also will grow through double digits last year and double digits again this year. And I would say the new news here is really just the strength of Japan is excellent in the quarter, and we expect another strong quarter for them in the fourth quarter. Again, it's all back to our people and our portfolio. And the team in Japan launching PolarX agent Avigo will be the next platform to launch in Japan. So that team's done a really nice job. And China, I was just there for about a week, and that team continues to grow nicely, strong double digits, despite all the challenges that are well-known in the marketplace. Again, based on the strength of our portfolio, some of the alliances that we're doing, and our team in China is quite strong. So they continue to... So it's not a... new event for us this quarter. Those regions have been delivering that for quite some time.
spk12: Thanks, Mike, and thank you for joining us today. We appreciate your interest in Boston Scientific. If we were unable to get to your question or if you have any follow-ups, please don't hesitate to reach out to the investor relations team. Before you disconnect, Cossus will give you the pertinent deals for the replay. Thank you.
spk13: Ladies and gentlemen, please note that our recording will be available in one hour by dialing either 1-877-344-7529 or 1-412-317-0088 using replay code 760-7776. until November the 2nd, 2023, at 11.59 p.m. ET. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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