Boston Scientific Corporation

Good morning and welcome to the Boston Scientific Fourth Quarter 2023 Earnings Call. All participants will be in listen-only mode. Should you need assistance, please signal a comfort 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 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 Q4 and full year performance as well as the outlook for the business, including 2024 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 this 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 14, 2022, the majority stake investment in Aquatech Scientific Holding Limited, Apollo Endosurgery, and Relievant Medical, which closed in February, April, November 2023, respectively. The vestiges include the Endoscopy Pathology Business, which closed in April 2023. Guidance excludes the previously announced agreement to acquire Exxonix, Inc., which is expected to close in the first half of 2024, subject to customary closing conditions. For more information, please refer to our Financial and Operating Highlights Deck, which may be found on our Investor Relations websites. On this call, all references to sales and revenue, unless otherwise specified, are organic. This call contains forward-looking statements within the meanings of 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 in 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 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, and thank you to everyone for joining us today. 2023 results were excellent, and our global performance represented one of the strongest years in company history, exceeding our financial goals that we set for the year. This performance is fueled by innovation and clinical evidence generation, commercial execution, and the winning spirit of our global teams. In fourth quarter 23, total company operational sales grew 15%, and organic sales grew 14% versus fourth quarter 22, exceeding the high end of our guidance range of 8 to 10. Full year 23 operational sales growth of 13% versus 2022, while organic sales grew 12%, exceeding our guidance of approximately 11% for the full year. Importantly, six of our eight business units grew sales double digit in the fourth quarter and double digits for the full year 2023. And all of our regions also grew double digits in the fourth quarter and double digits full year 2023. This performance is a testament to our category leadership strategy and our focus on innovation bolstered by commercial excellence. Fourth quarter adjusted EPS at 55 cents grew 24% versus 2022, exceeding the high end of our guidance range of 49 to 52 cents. Full year adjusted EPS of $2.05 grew 20% versus 2022, also exceeding the high end of our guidance range of $1.99 to $2.02. Q4 adjusted operating margin was 26.6% and full year 23 was 26.3, which is exciting because it exceeds pre-pandemic levels. We generated a full year cash flow of $1.8 billion and adjusted free cash flow of $2.5 billion in line with our expectations. Now for our 2024 outlook. We expect healthy procedure volumes to continue in our guide into organic growth of 7 to 9 for first quarter 24 and 8 to 9 for the full year 2024. Our Q1 24 adjusted EPS estimate is $0.50 to $0.52 We expect our full year adjusted EPS to be 223 to 227, representing growth of 9 to 11%. This guidance excludes the acquisition of Exxonix, which is expected to close in the first half of 24. Despite pressures on margins in 24 from FX headwinds, as well as investments in manufacturing capacity and selling expenses to fuel our exciting launches, we remain committed to improving operating income margins in 2024 and to our goal of improving the adjusted operating margin by 150 basis points in 24 to 26. Now, Dan will provide more details on those financials for both 2023 and 2024. I'll now provide additional highlights on 23's results, along with comments on our outlook. Regionally, on an operational basis, the U.S. grew 11% versus fourth quarter 22. Full year 2023 grew 10%. with particular strength in our Watchman, EP, Endo, and Euro business units. Europe, Middle East, and Africa grew 12% on the operational basis versus Q4 22, and 13% on a full-year basis. This above-market growth is supported by new and ongoing product launches across the portfolio, price 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 in our growth and emerging markets within the EMEA region. Asia Pacific grew 17% operationally versus Q4 in 19 versus the full year 2022, with all major markets growing strong double digits. Japan had a strong year, growing double digits for 22, with ongoing momentum from new products, most notably Agent, DCB, Resume, PolarFit, and Watchman Flex. And on a full year basis, China grew approximately 20% versus 2022. This consistent growth is fueled by the diverse portfolio, focus and innovation, and strong commercial execution. Looking ahead, we expect China to be an accretive mid-teens grower over our 24 to 26 LRP and to achieve over $1 billion in sales in 24, supported by new product launches, supply chain agility, and sustained investments in our talent and capabilities. The team Latin America grew 17% operationally versus both Q4 and full year 22. with seven of eight business units growing double digits on a full year basis. I'll now provide some additional commentary on our BUs. Urology had an excellent quarter, 10% organic growth versus Q4 22, and on a full year basis grew 11% organically. Full year growth was led by our stone management and prosthetic urology globally. And in 2023, we launched our direct to patient campaign, driving therapy awareness for erectile dysfunction, and supporting double-digit growth within our prosthetic urology franchise. We're excited about the opportunities ahead in urology, including our recently announced agreement to acquire Axonix, a medical technology company that offers innovative devices to treat urinary and bowel dysfunction. We look forward to bringing these complementary portfolios together and expanding access to differentiated technologies for physicians and patients. Endoscopy sales were also excellent in the quarter. growing 12% operationally and 11% organically versus fourth quarter, 22, and the full year basis growing 12% operationally and 11% organically. Within the quarter, strong results were led by Axios and SignalU Scopes, both growing double digits. On a full year basis, all regions grew double digits, supported by the broad and deep portfolio, new product innovation, and focus on commercial excellence. Neuromodulation sales grew 7% operationally and 3% organically versus fourth quarter 22. On a full year basis, 7% operationally and 5% organically versus 22. Our brain franchise grew double digits both in the quarter and on a full year basis driven by the precise genus portfolio and our innovative image guided programming, which is designed to improve the precision and efficiency of the deep brain stimulation procedure. In fourth quarter on an organic basis, our pain franchise was flat year over year, which was in line with our expectations. We expect our performance to improve in 2024 with the recent launch of our U.S. Waverider Alpha DPN indication and the strong real-world data on FAST recently presented at NANS. Furthermore, with the completion of our Relievant MedSystems acquisition in fourth quarter, we're excited about our ability to offer an expanded pain portfolio that supports a comprehensive treatment algorithm. Now, including the novel intra-step system for the treatment of chronic low back pain. Peripheral intervention cells were excellent, also growing 12% operationally and 10% organically versus Q4, and a full year basis growing 13% operationally and 11% organically versus 22. Arterial growth was led by the performance of our drug-eluting portfolio, both in Q4 and in a full year. This market remains under-penetrated, with more than half the procedures still being used with bare metal devices, underscoring the importance of our ongoing commitment to innovation and clinical evidence. In Venus, Q4 experience growth was led by Verithena, our market-leading varicose vein technology. Additionally, in fourth quarter, ECOS growth was supported by RealPE, the largest real-world and near real-time data set evaluating advanced therapies for pulmonary embolism patients. Our interventional oncology franchise performed extremely well in fourth quarter and in 2023, growing low double digits with strength across our portfolio of robust embolization technologies and cancer therapies. We continue to look to expand our clinical evidence and are pleased to have commenced enrollment in the Rowan trial, which will assess the safety and efficacy of using TheraSphere in combination with immunotherapy to treat HCC, the most common type of primary liver cancer. Cardiology delivered a tremendous fourth quarter and year, with both operational and organic sales growing 14% versus fourth quarter and for the full year 2022. Within cardiology, interventional cardiology therapy sales grew 10% for the quarter and its full year. On a full year basis, the coronary therapy's franchise growth was driven by strong performance in our international regions and our imaging franchise globally. Agent drug-coated balloon continues to form very well in Japan, and we now expect approval of agent in the U.S. in the first half of 2024. Agent DCB will be the first coronary drug-eluting balloon in the U.S., indicated for instant restenosis, providing physicians and their patients a solution for this unmet clinical need. Our structural hard valves franchise grew double digits in both fourth quarter and in a full year basis, led by the performance of Accurate Neo2 in Europe, and we now have treated more than 70,000 patients to date with our Accurate technology globally. As we look ahead, we anticipate approval of Accurate Prime in Europe in 2025. However, after reviewing a planned interim analysis of the U.S. Accurate IDE data, we will now wait for the full one-year data from the RCT cohort of 1,500 patients to determine our regulatory strategy. Therefore, we no longer anticipate the approval of ACR-Prime in the U.S. in 2024. Additionally, in alignment with the FDA, we are suspending enrollment in the single-arm continued access study while continuing to enroll in the randomized extended durability cohort. We expect to have more information in the second half of 2024 following the full data review. Watchman sales grew 23% organically versus fourth quarter 22 and 25% on a full year basis. Q4 finished with record sales and strong utilization in all major markets. We have now treated over 400,000 patients globally with the Watchman technology. US Q4 growth of 23% was supported by the breadth of the portfolio and the initial launch of Watchman Flex Pro, which we expect to move into full launch in the first quarter. We continue to expand the breadth of clinical evidence supporting this technology and are pleased with the pace of enrollment within our post-market HEAL LAA trial, including our newly added cohort, which is studying Watchman FlexPro in underrepresented patient populations. We also look forward to initiating our monotherapy trial, simplified trial, later this year, which will study Watchman FlexPro with a simplified post-implant drug regimen. Cardiac rhythm management sales grew 5% organically versus Q4 22, and on a full year basis grew 6% organically versus 22. On a full year basis, our diagnostics franchise grew double digits, outpacing market growth, driven by broad portfolio and ongoing investments in innovation. In core CRM in both fourth quarter and a full year basis, our high voltage business grew low single digits, and our low voltage business grew mid single digits. 2023 performance was driven by our differentiated high voltage portfolio and shock polarity options. As we look ahead, we expect our core CRM growth to be in line with the market performance in 24. Turning to electrophysiology, sales grew 43% both operationally and organically versus fourth quarter 22. And the full year basis grew 37% operationally and 33% organically versus 22. U.S. fourth quarter sales grew 40% organically, driven by our PolarX launch and ongoing momentum with our Access Solutions portfolio. Our international EP growth accelerated into fourth quarter, growing 46% organically, fueled by improved FerriPulse console supply, and we now have treated over 40,000 patients globally with the FerriPulse technology to date. And with the news this morning that we received FDA approval for FerriPulse, we are thrilled to enter the U.S. market immediately. We continue to invest in clinical evidence to study new indications and support access to our FerroPulse technology. Late last year, we initiated the Avant-Garde trial to evaluate the safety and efficacy of the system as a first-line treatment for PISCIS and AF compared to antiarrhythmic drug therapy. Additionally, real-world data was presented to AHA from more than 17,000 patients treated with FerroPulse, from the Manifest 17K registry, which reinforced the real-world safety profile of the FerriPulse platform with no reports of permanent phrenic nerve palsy or pulmonary vein stenosis or esophageal injury and an overall major adverse event rate of less than 1%. We're excited to bring this innovative technology to more markets and expect approval of FerriPulse in Japan, China and Japan, likely in the second half of this year. In closing, I'm very proud of our global team, what we are able to accomplish in 23, resulting in fully organic sales growth of 12% and adjusted EPS growth of 20%. We're excited about the year ahead and remain focused on our talent and sustaining a culture that's motivated to drive differentiated performance and achieve our long-range plan goals. Those goals, as a reminder, are sales on average of 8% to 10% over the three-year period, while expanding adjusted operating margin by 150 basis points, including double-digit adjusted EPS growth and improvement of our free cash flow conversion to approximately 70% in 2026. With all of that, I'll pass over to Dan to provide more details on the financials.

Thanks, Mike. Fourth quarter 2023 consolidated revenue of $3,725,000,000 represents 14.9% reported growth versus fourth quarter 2022 and includes a 40 basis point tailwind from foreign exchange in line with our expectations. Excluding this $12 million tailwind from foreign exchange, operational revenue growth was 14.5% in the quarter. Sales from closed acquisitions and divestitures contributed 90 basis points, resulting in 13.6% organic revenue growth, exceeding our guidance range of 8% to 10%. Q4 2023 adjusted earnings per share of 55 cents grew 24% versus 2022, exceeding the high end of our guidance range of 49 to 52 cents, primarily driven by our strong sales problems. Full year 2023 consolidated revenue of $14 billion and $240 billion represents 12.3% reported revenue growth versus full year 2022 and includes an 80 basis point headwind from foreign exchange. Again, in line with our expectations. Excluding this $104 million headwind from foreign exchange, operational revenue growth for the year was 13.1%. Sales from closed acquisitions and divestitures contributed 80 basis points, resulting in 12.3% organic revenue growth, exceeding our guidance range of approximately 11%. Full year 2023 adjusted earnings per share of $2.05 grew 20% versus 2022, exceeding the high end of our guidance range of $1.99 to $2.02. Adjusted gross margin for the fourth quarter was 70.4%, resulting in full year 2023 adjusted gross margin of 70.7%, in line with our expectations and representing a 20 basis point improvement versus full year 2022, inclusive of a 220 basis point headwind from foreign exchange. In 2024, We expect a mixed benefit from our new launches with offsetting headwinds from FX and the incremental investment in our manufacturing capacity. And as a result, we anticipate our full year 2024 adjusted gross margin will be at or slightly below our full year 2023 rate. Fourth quarter adjusted operating margin was 26.6%, resulting in a full year 2023 adjusted operating margin of 26.3%. improving 70 basis points versus 2022. We expect to expand adjusted operating margin in 2024 by another 30 to 50 basis points, balancing progress towards our long-range plan goal of 150 basis points over the three years 2024 to 2026, with flexibility for critical investments to support key launches. On a gap basis, the fourth quarter operating margin was 15.7%, resulting in a full year reported operating margin of 16.5%. Moving to below the line, fourth quarter adjusted interest and other expenses totaled $79 million, resulting in full year adjusted interest and other expense of $331 million in line with our expectations. On an adjusted basis, our tax rate for the fourth quarter was 10% and 11.2% of the full year 2023, including favorable discrete tax items and the benefit from stock compensation accounting. Our operational tax rate was 14.6% for the fourth quarter and 13.9% for the full year, again, in line with expectations. Fully diluted weighted average shares outstanding ended at 1,477,000,000 shares in Q4 and 1,464,000,000 shares for full year 2023. Free cash flow for the quarter was $718 million, with $984 million from operating activities, less $267 million of net capital expenditures. Excluding special items, adjusted free cash flow was $913 million. Full year 2023 cash flow was $1.8 billion, and adjusted free cash flow was $2.5 billion, both in line with expectations. For 2024, we expect full-year free cash flow to be in excess of $2 billion, which includes approximately $800 million of expected payments related to acquisitions, restructuring, litigation, and other special items. As of December 31, 2023, we had cash on hand of $865 million, and our gross debt leverage was 2.3 times. We expect to fund the Axonix acquisition through a mix of cash on hand and new debt, which will be determined prior to or at the time of close. Our top capital allocation priority remains strategic tuck-in M&A followed by annual share repurchases to offset dilution from employee stock grants. Our legal reserve was $377 million as of December 31st, a decrease of $30 million versus the prior quarter. $108 million of this reserve is already funded through our qualified settlement funds. Now I'll walk through guidance for the first quarter and the full year 2024. We expect full year 2024 reported revenue growth to be in a range of 8.5% to 9.5% versus 2023. Excluding an approximate 50 basis point headwind from foreign exchange based on current rates, we expect full year 2024 operational revenue growth to be 9% to 10% Excluding a 100 basis point contribution from closed acquisitions, we expect full year 2024 organic revenue growth to be in a range of 8% to 9% versus 2023. We expect first quarter 2024 reported revenue growth to be in a range of 7.5% to 9.5% versus first quarter 2023. Excluding an approximate 100 basis point headwind from foreign exchange based on current rates, We expect first quarter 2024 operational growth to be 8.5% to 10.5%. Excluding a 150 basis point contribution from closed acquisitions, we expect first quarter 2024 organic revenue growth to be in a range of 7% to 9% versus Q1 2023. We expect our full year 2024 adjusted below the line expenses to be approximately $330 million. Under current legislation, including enacted laws and issued guidance under OECD Pillar 2 rules, we forecast a full-year 2024 operational tax rate of approximately 14% and an adjusted tax rate of approximately 13%. We continue to monitor tax legislation globally, including the currently drafted law to partially repeal U.S. R&D capitalization. If the law were to be passed as currently proposed, we would expect a tailwind of approximately 100 basis points to our operational tax rate in 2024. We expect full year adjusted earnings per share to be in a range of $2.23 to $2.27, representing 9% to 11% growth versus 2023, including an approximate $0.04 headwind from foreign exchange at current rates and existing hedging contracts, which will be recognized ratably through the year. we expect first quarter adjusted earnings per share to be in a range of 50 to 52 cents. For more information, please check our investor relations website for Q4 2023 financial and operational highlights, which outlines more details on Q4 and full year results and 2024 guidance. In closing, I'm very proud of our 2023 performance and look forward to executing on our 2024 guidance of 8% to 9% organic revenue growth, 30 to 50 basis points of adjusted operating margin expansion, and adjusted EPS growth of 9 to 11%. Before I turn it back over to Lauren for the Q&A, I wanted to provide a quick update. A key part of our talent strategy is moving high potential individuals throughout the company to give them a broad set of experiences. As part of this, effective March 1st, Lauren Tangler will become the global controller for our urology business unit, providing financial leadership to the global business, and importantly, playing a key role in the integration of the Axonics business. Lauren previously spent many years within our urology business, making her uniquely qualified for this opportunity. Following Lauren's transition, John Monson, currently our chief accounting officer, will move to our investor relations function, leading Allie DeVoe and the rest of the team. I know the investment community will join me in thanking Lauren for her leadership and contributions and in welcoming John to the role. With that, I'll turn it back to Lauren, who will moderate the Q&A.

Thanks so much, Dan. Drew, let's open it up to questions for the next 30 minutes or so. In order for us to take as many questions as possible, please limit yourself to one question. Drew, please go ahead.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Robbie Marcus with JP Morgan. Please go ahead.

Oh, great. Congrats on a really good quarter and congratulations, Lauren, on the promotion. I wanted to ask on two of the biggest product drivers in 2024, Watchman and Farapulse. Farapulse got approval today. I wanted to see what's included in guidance for this year and how to think about phasing over the year, how long will it take to get into hospitals and approved on formularies. And then second on Watchman, it still had a very good quarter and fourth quarter, but growth slowed a little bit. How should we be thinking about the potential for Watchmen and 20% plus growth in 2024? Thanks a lot.

Sure. Thanks, Rob, for the comments. I'll start with the Watchmen. It's just an excellent platform. We had growth of 23% for the quarter, 25% for the full year. Terrific work. And as you know, that product gets larger and larger for us. I had to cut the script back because the clinical investments we're making with Watchman go on for a while. And we can touch on those if interested. But as you know, we continue to exceed likely 90% share in the U.S. We'll be rolling out Watchman Flex Pro more as a percent of our total mix in the U.S. in the first quarter and throughout the year. So you'll continue to see that, which is a differentiated platform. So with the clinical work that we're doing and the Watchman FlexPro and the steerable sheath likely to be in the market in 2024 as well, we continue to expect to gain share and we aim to significantly widen the market opportunity through these clinical trials. So full steam ahead with Watchman. On FerroPulse, maybe the most exciting day I've had in my career at Boston Scientific with this platform that we have based on the results that we've seen in Europe and the enthusiasm globally for our PFA platform, and to receive approval today was really exciting. We did anticipate a first quarter approval for Ferripulse, and as you might expect, we expect the impact of Ferripulse to be somewhat in first quarter and much more significant as the year goes on as we work with contracting with hospitals, getting on contract, and getting the capital approved and rolling it out. But we have a lot of experience in doing that through our European success that we've enjoyed. Our team is trained. We have an installation team. We continue to invest in it. So we're really excited about aiming to disrupt the EP market with what we think is the premier PFA platform. Great. Thanks a lot.

The next question comes from Joanne Lynch with Citi. Please go ahead.

Thank you, and good morning. I don't want to leave Faripul's quite yet, and I suspect there will be a lot of questions on it this call. But if you're looking for China and Japan approval in the second half of 24, could you sort of outline what you think those opportunities may be? And then can you just give a quick highlight on some of the other sort of higher profile cardiology companies such as Polar and Agent? Thank you.

Yeah, so Kent can help me out, but obviously China and Japan represent significant opportunities in the EP market. They're the largest markets that we compete in in those countries, and we currently are underscaled, particularly in China. In Japan, we've built a lot of momentum over the last, call it 18 months, with our PolarX launch. So in Japan, that grew, I don't know, I think over 40% our EP business. And so we have a more scaled commercial team, capabilities in Japan, and the eventual approval in the second half of this year in Japan with Ferrapulse will really be the next leg of the growth stool in Japan for us. So a lot of confidence there. The market in China may be even bigger. We're a bit more underscaled in China, so we'll be making a lot of investments there. We have a brand-new leader we're excited about in China to run our EP business under Jun Chang. So we'll be making additional commercial investments, clinical investments, and hope to have approval in the second half of the year in China. So those will be nice growth drivers for us in 2024, more significant in 2025. And, Agent, Ken, do you want to comment a bit more on Faripal's? Dr. Stein?

I'd love to comment on Faripal's. Again, it is a very exciting day. Joanne, in terms of questions specifically about Japan and China, right, I think we've got to realize AFib is a global disease. I hate to use the word pandemic, but it is pandemic. And we're really pleased about the strength of the clinical trial data that we have, as well as the commercial experience in Europe with, as Mike said, greater than 40,000 patients already infected. treated to date. And it's that strength of the clinical data, right, that led us to the really, I think, rapid approval that we got from the FDA and that has led us to update our anticipated approval times both in Japan and China. Again, I think having said that, you know, we looked to those approvals in the second half, so I don't think we're going to expect to really see too much material out of that until we get into 2025. But they are both large and important markets and large and important patient populations that are currently really very much underserved in terms of access to ablation technology. Agent.

Oh, agent. Agent.

Thanks, Joanne. Thank you. The next question comes from Larry Beagleson with Wells Fargo. Please go ahead.

Good morning. Thanks for taking the questions. Congrats on a strong finish here and the approval of Farrah Pulse in the U.S. On Farrah Pulse, can you talk about the manufacturing capacity for the Catherine console upon launch and expectations for the EP business this year? You grew 43% in Q4 of 23. Any reason why growth would be lower in 24? And I have to ask you to please clarify your comments around AccurateNEO2. It sounds like something happened with Prime, which is the larger size. What are the implications for the other sizes of NEO2 in Europe and the U.S.? Thank you.

Thanks, Larry. Starting with Ferripulse, really very proud of the global supply chain team and what they've done over the past 18 months in the Ferripulse group that we originally acquired a while ago. But they've done a tremendous job in building capabilities to supply this for the U.S. launch. and to expand in Europe and eventually Asia, as we just highlighted. So we are now significantly improved our catheter and council supply. We opened numerous centers in Europe in the fourth quarter, and we're ready to go. So we at this point don't anticipate supply being an issue to continue to support Europe or to facilitate the U.S. launch. given the capabilities and investments that we've made and approvals to manufacture in multiple locations. So great work by the supply chain team, and we're ready to launch this in the U.S. On AccurateNEO2, as I mentioned in the earnings script, maybe just two overall points. We continue to do very well with AccurateNEO2 in Europe, implanting I think the number 70,000 and continuing to grow faster than the market in Europe. And we are on track for what we have is called Prime in Europe in 2025. So that continues to move forward as planned. With respect to the trial, as I mentioned in the script, based on the interim analysis, we now need to wait for the full one-year follow-up of the 1,500 patients. And as a result of that, we will not be receiving approval for AccurateNeo in 2024. And we will wait until likely near the end of 2024 for the full readout of the accurate IDE study to determine our path forward.

Thank you.

Congrats, Lauren.

Thanks, Larry.

The next question comes from Vijay Kumar with Evercore ISI. Please go ahead.

Hey, guys. Thanks for taking my question, and congrats on a really strong finish here. Maybe just one on that. the guidance here perhaps for Dan. Dan, the 8% to 9%, it looks like Farrah Paul's, the prior guided assumed back half launch, it's coming in a little bit ahead. Can you just walk us through that 8% to 9%? Is that right that Farrah Paul's perhaps assumptions have changed? Any impact from VBP or base impact that we should be aware of? And what are you assuming for pricing in fiscal year 24? Thank you.

Sure. So the VVP assumptions are the same as they've always been, really no change there. As you saw in December when we issued the press release on Avant-Garde, we moved up the timing of expected Farrow Pulse launch to Q1. So we've been anticipating a Q1 launch, and that 8% to 9% full year and the 7% to 9% for the first quarter in terms of revenue growth contemplated a Q1 launch. Q1 approval of TheraPulse. As Mike said, you know, there's probably some contribution in Q1, but more of that contribution comes in Q2 to Q4. So the 8 to 9 has that contemplated in the overall guide. And then pricing. So I would say on pricing is we were basically flat in 2023, and the goal is to be flat again in 2024. So likely no impact would be the goal in 2024 versus 2023. Fantastic.

Sorry, on days, Dan, any days impact here?

No, all the days, there's a lot of, obviously, a lot of noise and days around the world through the year. It's all contemplated in guidance, all in the eight to nine for the full year.

Fantastic. Thank you, guys.

Sure, BJ. Thanks.

The next question comes from Danielle Antelfi with EBS. Yes. Please go ahead.

Hey, good morning, everyone. Thanks so much for taking the question. Just a follow-up question on Accurate Neo2, Mike, if I could. So, appreciate the comments that you did provide. Just curious, I mean, obviously, you're giving pretty strong guidance here for 2024. I mean, is the right read here that regardless of what happens with Accurate Neo2 and timing there, You're sticking to your long-term sales growth guidance that you provided back in September. And sort of how do we think about this as a long-term growth contributor now given this little wrinkle here? And, Lauren, we will miss you very much. Thanks so much.

Lauren's not leaving the company. She'll be around. We're still going to see her.

Yeah, but we won't get to see her.

Oh, okay.

I'll work my way in.

We'll work our way in once in a while. We're excited for John to come in and Lauren to move out. No, we're excited for Lauren to go to urology. Yes, so to answer your question, we are fully committed to the 8% to 10% organic growth CAGR over the 24 to 26 period that we provided in Investor Day. Absolutely no change in that outlook. and pleased with the 23 performances, you know, where we grew 12. So, absolutely no change to those financial goals. You know, Accurate continues to do well in Europe. It's a product that's used every day by many European physicians, and we're excited about getting the larger size approved there. We are disappointed that we didn't get Accurate over the goal line for approval in 2024. So, at this point, we need to wait until the full data sets have been followed up for a year. and read out likely before the end of this year in 2024, and we'll take it from there in terms of the U.S. launch. But we are disappointed we're not going to launch that really very end of this year and into the next, but absolute no change to our financial guidance that we gave at Investor Day.

Okay, great. And also, welcome, John. Sorry, I didn't mean to leave you out. Thanks so much, guys.

Thanks, Danielle.

The next question comes from Travis Steed with Bank of America. Please go ahead.

Hey, thanks for taking the question. Maybe one more follow-up on TAVR. Do you remind us what the interim look was? Was that just like a six-month look at the data, and now you need to wait for a one-year data for the line to separate? And I'm curious if you think what you saw in the interim look, are you still pretty confident that at one year we could have a U.S. TAVR launch, or does this put the whole U.S. TAVR launch at risk?

Gennar, are you able to hear us okay?

Yeah, I can hear you loud and clear.

Great. Dr. Osantanathan is our chief medical officer, as you know, for ICTX and Structural Heart. Maybe he could comment a bit.

Yeah, I'll take the comment just about the data. So essentially what happened in the trial was that as part of a planned interim analysis, we made the decision to await the full one-year data. It is important just to note that the accurate IDE study is still an active clinical study with active clinical follow-up, and so as a result, we cannot disclose any data related to the trial at this time. We will expect, as Mike said, a readout of the study in the second half of 2024 following a full data review.

Great. Thank you.

The next question comes from Josh Jennings with TD Cowan. Please go ahead.

Good morning. Thanks for taking the questions and congratulations for a strong end of the year. Wanted to ask about the international cardiac ablation market. Boston's incredible fourth quarter 40 plus percent growth. Some of your competitors delivered really strong international growth in their electrophysiology businesses as well. Um, what's going on in the international market. I mean, are we seeing the promise of PFA driving market expansion this early? Um, or is there any pricing dynamics going on? But the, the, I think it's 20% almost market growth in internationally for credit completion this year. Just want to get some details there and whether that could translate to PFA launches in the United States driving market expansion, which I think you guys detailed in your investor day. Thanks for taking the question.

Dr. Stein, you want to take a shot at it? Yeah, Josh. Thanks, Mike. I think it's a couple of factors here. And I don't think it's, I don't know that I can parse out for you, you know, how much is getting contributed from each. But again, I think we just begin with the fact, right, that atrial fibrillation is an incredibly common arrhythmia. Again, as I said earlier, it is literally pandemic worldwide. I know, for instance, in the U.S., right, a quarter of adults over the age of 40 will experience AFib at some point in our lives. And ablation, even with legacy thermal technologies, things for us like StablePoint or PolarX, is incredibly effective. It's more effective than drugs, but on a global scale. it is still really incredibly under-penetrated as a market. And much of the growth that you see really just reflects, I think, you know, increasing realization in the cardiology community, the referring physician community about, you know, the relative efficacy and safety of all ablation technologies. And then you layer on top of that the promise and the data with Farrapulse, right? And Farrapulse, again, takes a procedure that's already effective. It is at least as effective. It is clearly safer. And it's also much more efficient than thermal ablation. And so that, right, enables docs and medical centers to scale this out much better, right, and start to get into this underpenetrated population and So maybe a long-winded answer, but the short answer is, right, it's both a dramatically under-penetrated population to begin with, and then on top of that, you have the accelerated impact of Faripov.

Appreciate that. Thank you.

The next question comes from Richard Newitter with Truist Securities. Please go ahead.

Hi. Thanks for taking the questions, and congrats on a really strong finish to the year. Thanks. My first question is just going back to TAVR. You know, at your analyst day, you had talked to, you know, an expectation and a level of confidence that you could disrupt that market in the U.S. relatively quickly out of the gate. I'm just curious with, you know, I get something approaching 20% share of the market over time, which is what you've done you know, in other markets with your disruption capabilities. I'm just curious, does anything change there with the indeterminate kind of view of what the next steps are for the U.S.? I'm just trying to focus on that commentary a bit. You know, does your outlook for the franchise in the U.S. change in TAVR? And then I have a follow-up.

Yeah, just a few clarifying points. Again, in Europe where we set 70,000 valves and Physicians use it routinely on an everyday basis. We continue to grow faster than the market there and have continued to have done that for, I don't know, 10 quarters in a row. So we make nice progress, and we're excited about getting the large valve size approved in Europe. I believe in 2025 is the time period. In the US, honestly, first of all, I would state that we've never quoted a market share goal for TAVR in the US. So we never set 20. I'm not sure if that's what you put in your models or not. But based on the results that we've seen in Europe, we've always been confident in our ability to have Acura be a meaningful growth driver in the US, as we stated in Investor Day. As a result of this, we are disappointed that we're not gonna have this launched in 2024. As we talked about, based on the data that we just highlighted in the script, And as Jannar mentioned, we now need to wait for the full year data, the full one-year follow-up on the 1,500 patients, and then working with the FDA and submitting that and having a data readout by year end 2024. And we'll take it from there. So as Jannar said, the trial is still active. So we do not expect any of this news to alter our 8% to 10% organic growth over the three-year period. We're coming off of 12%. We continue to grow faster than most all of our peers and drop EPS faster than our peer group. And we're still very committed to those financial targets. And we're hopeful that Accurate will continue to be a big growth driver for us, but a lot of it depends on that data readout in fourth quarter 24.

Okay, thanks for that. And then maybe just on M&A, you know, you've been active in 2023, and congrats on Relievant and more recently Axonix early this year. I'm just curious on kind of how we should think about, you know, how aggressive and opportunistic you'll be over the next 12 months. You mentioned, obviously, your first priority remains deploying capital for Tuckins. But do we kind of think of you guys in a little bit of a digestion period or kind of steady she goes, just as aggressive and opportunistic as you have been in the past?

Sure, I can take that one. So as you mentioned, Exonix, the most recent deal we did, super pleased with that. I think that is a classic tuck-in for Boston Scientific. It's one I think, as you look back, these types of deals we really do well with and we're super excited to have that close and welcome the Axonics team into the BSE family. As you said, we've been remarkably consistent over a long period of time. Tucking M&A is still the number one capital allocation priority for us and will continue to be active. In terms of how active over the near to medium term, this is not a major event, like a major delevering event that we need to do. This is take on a little bit of additional debt over a period of time and then over a very reasonable period of time we'll be right back to where we are today relative to our leverage goals. So I'd look for us to continue to be active in the tuck-in M&A space in 24 and beyond.

Okay. Again, congrats on an outstanding 4Q. Thank you. Thank you.

The next question comes from Patrick Wood with Morgan Stanley. Please go ahead.

Amazing. Thank you for taking the question, and congrats, Lauren. I might stick with Axonix if that's all right. I appreciate it hasn't closed yet, but I'm just kind of curious, you know, urology in Boston has a very sizable distribution network across, I guess, primarily stone management, but a whole bunch of different areas. How are you thinking about, you know, the ability to drive adoption in OAB faster and, like, really push that asset? I'm guessing, you know, having just played with the numbers, and correct me if I'm wrong, but there's some assumption of slightly faster growth there. Once you've acquired Axonics and the street previously had in there, at least that's where I end up with the numbers. Feel free to correct me, but how are you thinking about the commercialization and really pushing that through the distribution network? Thanks.

Sure. Well, we haven't closed it yet. We hope to first half of this year. The team at Axonics has done an amazing job with this platform since starting the company years ago. and taking significant share in what is a strong double-digit growth market. The team at Actonics, we can't speak too much for them, it hasn't closed yet, has also done a remarkable job in a few areas. One is just the core technology, where they've leveraged that to gain share. The clinical data that they have, the commercial excellence that they possess. and also expanding the market through their direct-to-patient marketing and awareness. So this is a significant global opportunity, and the patient awareness of this treatment is still early days. And so that's one reason why we acquired the company, was the momentum they have, the technology, and the long-term market that we see based on the global opportunity. The market today is nearly all U.S. That's something we'll evaluate More in the future here as to would it make sense for us to bring this to select markets outside the U.S. given the data that we have. As you mentioned, we have a significant commercial channel in our urology business through all of our different business units within urology. So this is an ideal fit. It is an adjacency for us. We don't have any competitive product in this area. So it's a nice adjacency for us that will allow us to compete more comprehensively with urology customers. But we aim to take Axonix to the next level, but that team has done a terrific job to date. Amazing. Thanks for taking the question.

Sure.

And just to verify, do we have time for one more question?

Yes. One last question, please.

Okay, that question will come from Michael Pollark with Wolf Research. Please go ahead.

Hey, good morning. Thanks for sneaking me in. I'll ask a gross margin question. Dan, I heard in the script for 24 flat to maybe slightly down year on year in the guide. The world seems to be calmer on price-cost, but as we all know, the Middle East is flaring. And so I'm curious, one, have you built in any cushion for kind of cost push from those events? And two, in real time, are you seeing any impact in the field? And if so, what does that look like?

Yeah, I can give you the short answer and a little bit longer answer. So the short one is that we've contemplated all that. Our team is super close to everything relative to our global supply chain network. And so everything that we have in the guidance that we gave contemplates what we know today and the guidance that they're giving us on that, which the impact is minimal. Overall on gross margin, the little bit longer answer, if you look at 23, we came in pretty much right where we expected at that 70.7%. And then as we said at the investor day in September, we said it would be challenged to contribute to our margin expansion goals in 24, which that's probably going to prove out to be true because we're saying we'll be either at or slightly below But that's okay. There are many other areas of the P&L, and as you know, we have a pretty solid track record over time of managing all those lines of the P&L to drive margin expansion, most recently that 70 basis points last year. So for 24, I'd kind of point to two headwinds and two tailwinds that'll play out and, again, have us at that kind of at or slightly below the 70.7 we put up last year. And one is inflation. And that's probably a little bit of a tailwind, right? So the macro factors are improving in general relative to inflation and other things. But as a reminder, we enter into contracts for many elements of materials for 2024 already last year. So we don't see that full benefit. But in 2025 and 2026, I'd like to believe there's even more benefit there, not only from the macro side of inflation, but also for gross margin in total. And then our mix. So, you know, getting the Ferro Pulse approval today, that's exciting because that's a great mix thing for the company and many of our other launches are as well. And then on the headwind side, foreign exchange was a headwind in 23, continue in 24. And as I said at Invest Day, good problem to have, but we also need to make investments in manufacturing capacity to support the sales growth, you know, growing 12 last year and then eight to nine this year. But we're absolutely committed to the 150 basis points over three years. Gross margin probably won't pay a lot of bills for us in 2024, but I think it certainly will in 2025 and 2026. Recall, we used to be north of 72% back in 2019, and we are maniacally focused to get there and then to get the overall operating margin kind of on the doorstep of 2028 when we get to 2026. And that puts that 30% long-term goal that we've had kind of right in our line of sight as we're in 2026.

Thank you. Thank you.

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