Boston Scientific Corporation

Good morning and welcome to the Boston Scientific second quarter 2024 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to John Monson, Senior Vice President, Investor Relations. Please go ahead.

Thank you, Drew, and 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 results, which included reconciliations of the non-GAAP measures used in this release. We have posted a link to 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 Q2 performance as well as the outlook for our business, including Q3 and full year 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 the call, operational revenue excludes the impact of foreign currency fluctuations, and organic revenue further excludes acquisitions and divestitures for which there are less than a full period of comparable net sales. Relevant acquisitions and divestitures excluded, organic growth are the majority stake investment in Aquatech Scientific Holdings Limited, and the acquisitions of Apollo Endosurgery and Relievant Med Systems, which closed in February, April, and November 2023, respectively, as well as our acquisition of the Endoluminal Vacuum Therapy Portfolio from BBRON, which closed in March 2024. Divestitures include the Endoscopy Pathology Business, which closed in April 2023. Guidance excludes the previously announced agreements to acquire Axonix and Silk Road Medical, both of which are expected to close in the second half of 2024, subject to customary closing conditions. For more information, please refer to the Q2 Financial and Operational Highlights Deck, which may be found on the Investor Relations section of our 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 may be identified by words like anticipate, expect, may, believe, estimate, and other similar words. They include, among other things, statements about our growth and market share, new and anticipated product approvals and launches, acquisitions, clinical trials, cost savings and growth opportunities, our cash flow and expected use of cash, our financial performance, including sales, margin, 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 factor section of our most recent 10-K and subsequent 10-Qs filed with the SEC. This statement speaks only as of today's date, and we disclaim any intention or obligation to update them, except as required by law. At this point, I'll turn it over to Mike.

Mike? Thanks, Sean, and thank you, everyone, for joining us today. Our second quarter results exceeded our expectations, led by the strength of our differentiated global cardiovascular portfolio, particularly the execution in AF solutions and the winning spirit of our global team. In second quarter, total company operational sales grew 16, organic sales grew 15, exceeding the high end of our guidance range of 10 to 12. Our top-tier growth continues to be fueled by innovation, clinical evidence generation, and our strategy of category leadership. Consistent with prior quarters, most of our businesses and regions grew well above market. Second quarter adjusted EPS of 62 cents grew 15 percent versus 2023, exceeding the high end of our guidance range of 57 to 59 cents. Second quarter adjusted operating margin was 27.2 percent, and as a result of our first half margin performance and revenue upside versus previous expectations, we now expect to expand adjusted operating margin 50 to 70 basis points for the full year. Turning to third quarter and full year 24 outlook, we're guiding to organic growth of 13 to 15 percent for third quarter and raising our full year guidance from 10 to 12 to 13 to 14 percent, reflecting momentum across our broad portfolio, particularly in our EP business unit. Our third quarter adjusted EPS guidance is 57 to 59 cents, and we expect our full-year adjusted EPS to be 238 to 242, representing growth of 16 to 18%. Dan will provide more details on our financials, and I'll provide some additional color on the quarter and the outlook for the second half of 24. Regionally and on an operational basis, the U.S. grew 17 in the second quarter, with exceptional growth in EP fueled by the continued success of the Ferropulse launch, as well as Watchman, coronary imaging, and strengthened our med-surg businesses. Europe grew 16 percent on an operational basis versus second quarter 23. This impressive performance was driven by double-digit growth in seven of our eight business units, led by robust growth in EP and strength across our growth and emerging markets. Second quarter was also a record quarter in the region for our structural heart business, following positive data presented on AccurateNeo2 at the recent EuroPCR conference. We expect this momentum to continue, supported by the launch of the larger size accurate prime valve in late 24. ASIAPAC grew 13% operationally versus a difficult comp in second quarter 23, with excellent performance in China growing high teens and Japan growing double digits. We also recently received approval in China for Ferripulse and Agent drug-coated balloon, and continue to expect approval for Ferripulse in Japan in the second half of this year. We expect the contribution from these launches will ramp over 2025. Within the quarter, pricing actions and key geographies went into effect, with the China VBP on coronary imaging and Japan reimbursement cuts in June. We do expect Asia-Pac to grow low double digits in the second half of the year, including the full impact of these pricing actions. Some additional commentary on the business units. Our urology business grew 9 percent organically in the quarter, with double-digit growth in stone management and prosthetic urology, supported by our direct-to-patient efforts driving patient awareness and early contribution from the limited market release of the Tenasio pump. International growth of 14% was driven by laser therapies and Resume. We look forward to closing this previously announced acquisition of Axonix, which we continue to expect in the second half of this year. Endoscopy sales grew 8%, both operationally and and organically in second quarter. Second quarter results were driven by above-market growth in our biliary franchise, led by high teens growth in Axios, and the high teens growth in our endoluminal surgery franchise. We continue to expect endo sales to go faster than the market throughout 24, enabled by our innovative portfolio. Neuromodulation sales grew 16 percent operationally and 4 percent organically in the quarter. our brain franchise grew low single digits with some impact from competitive product launches. We expect this business to strengthen in the second half of the year, driven by our portfolio of differentiated technologies. In second quarter, our pain franchise grew strong double digits operationally and mid-single digits on an organic basis. Our spinal cord stem business saw improved U.S. trialing cadence in the quarter, and we expect that our U.S. SCS franchise will improve in the second half of the year. The relief in business continues to perform extremely well, with more than 30,000 patients treated with the Intrasept system to date. Peripheral intervention sales grew 12% operationally and 9% organically versus second quarter. High single-digit growth in arterial was driven by continued momentum in our drug-eluting portfolio, with double-digit growth in the quarter. Mid-single-digit growth in venous was driven by momentum of ECOs supported by the real PE data set. and continued double-digit growth in Varathena. Our interventional oncology franchise grew double digits in the second quarter, driven by our broad offering across embolization and cancer therapies. Looking forward, we continue to expect to close the previously announced acquisition of Silk Road Medical in the second half of this year. Cardiology. Cardiology delivered another excellent quarter, with organic sales growing 22% versus second quarter 23%. Within cardiology, interventional cardiology therapy sales grew 9%. Growth in coronary therapies was driven by continued strength in our global imaging franchise and APAC calcium franchise. Within the quarter, we initiated a limited launch of Agent DCV in the U.S., which has received positive initial physician feedback. Our structural heart valves franchise grew strong double digits in the second quarter, led by AccurateNeo2, which continues to see growth from both new and existing accounts in Europe and Latin America. At the end of the quarter, we also completed follow-up of the full 1,500-patient cohort and the U.S. accurate IDE trial. We now expect to present this data in the first half of 2025, likely at the annual ACC meeting. Watchmen had another excellent quarter, growing 20 percent organically, with strong contribution from the ongoing launch of Watchmen FlexPro in the U.S. and Japan. The U.S. grew 20% led by further penetration into the existing indicated patient population, enabled by our innovation, clinical evidence, and patient awareness efforts. Cardiac rhythm management sales grew 3% organically in the quarter. In the second quarter, our diagnostics franchise grew double digits. This above-market growth is driven by our broad cardiac diagnostics portfolio. In Cora CRM, our high and low voltage business grew low single digits, with strong international growth partially offset by slightly below-market growth in the U.S. At the recent HRS meeting, data was presented from the modular ATP trial of the modular CRM system, which is comprised of the empowered leadless pacemaker and emblem SICD, which met all pre-specified six-month endpoints and a high rate of ATP success with no patient requests for deactivation of pacing due to pain or discomfort. Turning to EP, EP sales grew an impressive 125% organically versus second quarter 23, driven by the rapid and sustained adoption of the transformative FerroPulse PFA system. Second quarter sales were driven by outstanding commercial execution, robust supply, and positive real-world outcomes, as well as increased AF ablation volumes supported by the efficiency of the FerroPulse workflow. Our Bayless Access Solutions business also continues to see strong double-digit growth in the US with utilization in approximately 80% of PFA procedures and approximately 85% of Watchman procedures. Internationally, we saw continued FerriPulse account openings and robust utilization in Europe and launched APAC markets. Importantly, evidence on more than 20,000 patients treated with FerriPulse has been published or presented at medical conferences demonstrating the safety, efficacy, and reproducibility of the system. And within the quarter, we completed an enrollment in the NAVIGATE PF study of the Fairview software module and Fairwave NAV-enabled catheter, both of which are expected to launch in the U.S. during the second half of the year. At the recent HRS meeting, outcomes from a subanalysis of the ADVENT trial were presented. This is the very first randomized data for a PFA system demonstrating superior efficacy versus thermal modalities, with significantly more patients having achieved an arterial arrhythmic burden of less than 0.1% with FerriPulse compared to RF and cryo. We plan to continue a steady cadence of clinical evidence generation to maintain our PFA leadership, including Rematch AF, a planned trial designed to study the FerriPoint and FerriWave catheter in patients who need a redo ablation, which we expect to begin enrolling early in 2025. In closing, I'm very grateful to our global team for their commitment and winning spirit, enabling us to deliver life-changing technologies to millions of patients. We're in the most exciting chapters as a company with a track record of executing or exceeding our financial goals while delivering meaningful innovation. With that, I'll hand it over to Dan.

Thanks, Mike. Second quarter 2024 consolidated revenue of $4,120,000,000 represents 14.5% reported growth versus second quarter 2023 and includes a 160 basis point headwind from foreign exchange, which was slightly unfavorable versus our expectations. Excluding this $57 million foreign exchange headwind, operational revenue growth was 16.1% in the quarter. The sales impact from closed acquisitions was 140 basis points, resulting in 14.7% organic revenue growth, exceeding our second quarter guidance range of 10 to 12%. Q2 2024 adjusted earnings per share of 62 cents grew 15.4 percent versus 2023, exceeding the high end of our guidance range of 57 to 59 cents, primarily driven by our strong sales performance. Adjusted gross margin for the second quarter was 70.4 percent, contracting 160 basis points versus the prior year period, driven by higher than expected inventory charges related to the Polar X cryoablation system given the strong commercial adoption of FerroPulse in the U.S., as well as increased levels of capital placements in the quarter. We continue to expect second half adjusted gross margin to be higher than the first half, driven by the mixed benefit from key product launches and full recognition of our annual standard cost improvements. We expect full-year adjusted gross margin to be slightly below our 2023 rate. Second quarter adjusted operating margin was 27.2%, which expanded 40 basis points versus the prior year period. Given our strong first half operating margin and our expectations for the second half, we are raising our full year 2024 adjusted operating margin expansion goal to 50 to 70 basis points from 30 to 50 basis points compared to 2023. We believe this strikes a nice balance of delivering incremental margin from our sales upside and continuing to invest appropriately to drive strong top line performance. On a GAAP basis, second quarter operating margin was 12.6%, which included intangible asset impairment charges related to the acquisitions of Criterion Medical and Devoro Medical. The Criterion impairment charges were related to the high conversion rates of cryoablation to Farapulse for ablation procedures in the U.S. The Devoro impairment charges were related to the decision to discontinue work advancing the Wolf thrombectomy platform. Moving to below the line, Second quarter adjusted interest and other expenses totaled $68 million, which was favorable to our expectations. On an adjusted basis, our tax rate for the second quarter was 13.1%, which includes favorable discrete tax items. Our operational tax rate for the quarter was 13.6%. Fully diluted weighted average shares outstanding ended at 1,484,000,000 shares in the second quarter. Free cash flow for the second quarter was $660 million, with $814 million from operating activities, less $155 million in net capital expenditures, which includes payments of $200 million related to acquisitions, restructuring, litigation, and other special items. In 2024, we continue to expect full-year free cash flow to exceed $2 billion, which includes approximately $700 million of expected payments related to special items. As of June 30, 2024, we had cash on hand of $2.9 billion, and our gross debt leverage ratio was 2.4 times. Our top capital allocation priority remains strategic tuck-in M&A, followed by annual share repurchases to offset dilution from employee stock grants. In alignment with our acquisition strategy, in Q2, we announced our agreement to acquire Silk Road Medical, and close the acquisition of SoundCat, a free revenue privately held medical technology company developing an intracardiac echocardiography product complementing our existing electrophysiology portfolio. Our legal reserve was $251 million as of June 30th, a decrease of $32 million versus Q1 2024. $54 million of this reserve is already funded through our qualified settlement funds. I will now walk through guidance for Q3 and full year 2024. We expect full year 2024 reported revenue growth to be in a range of 13.5 to 14.5 percent versus 2023. Excluding an approximate 100 basis point headwind from foreign exchange based on current rates, we expect full year 2024 operational revenue growth to be 14.5 to 15.5 percent. Excluding a 150 basis point contribution from closed acquisitions, we expect full year 2024 organic revenue growth to be in a range of 13 percent to 14 percent versus 2023. We expect third quarter 2024 reported revenue growth to be in a range of 13 percent to 15 percent versus third quarter 2023, excluding an approximate 100 basis point headwind from foreign exchange based on current rates. we expect third quarter 2024 operational revenue growth to be 14% to 16%. Excluding a 100 basis point contribution from closed acquisitions, we expect third quarter 2024 organic revenue growth to be in a range of 13% to 15% versus 2023. We now expect full year 2024 adjusted below the line expenses to be approximately $300 million. Given discrete items recognized in the first half of 2024, we now expect a full-year 2024 operational tax rate of approximately 13.5 percent and an adjusted tax rate of approximately 12.5 percent, which contemplates current legislation, including enacted laws and issued guidance under OECD Pillar 2 rules. We expect full-year adjusted earnings per share to be in a range of $2.38 to $2.42 representing growth of 16% to 18% versus 2023, including an approximate $0.04 headwind from foreign exchange, which is unchanged from our previous expectations. We expect third quarter adjusted earnings per share to be in a range of $0.57 to $0.59. For more information, please check our investor relations website for Q2 2024 financial and operational highlights, which outlines more details on Q2 results and 2024 guidance. And with that, I'll turn it back to John, who will moderate the Q&A.

Thanks, Dan. Drew, let's open it up for questions for the next 40 minutes or so. In order for us to take as many questions as possible, please limit yourself to one question. Drew, please go ahead.

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're using a speakerphone, please pick up your handset before pressing the key If at any time your question has been addressed and you would like to withdraw your question, please press star then two. Again, please limit yourself to one question. At this time, we will pause momentarily to assemble our roster. The first question comes from Robbie Marcus with J.P. Morgan. Please go ahead.

Oh, thank you, and congratulations on another fantastic quarter here. Thanks, Robbie.

Thanks, Robbie.

With my one question, I want to ask about guidance and the sustainability. It was a big quarter. You had a big first quarter. PFA is clearly outperforming. Watchman had a great quarter. A lot of the rest of the business continues to fire on all cylinders. So I'm seeing about 14% organic for the back half of the year, which is a really healthy rate. And I guess really the question is, How do you feel about continuing through 24 and really into 25? Is this a pull forward of the revenues expected in the long-range plan, or do you think there's better demand, better market adoption, better volumes underlying pricing that could keep maybe not 14 percent, but something elevated for the foreseeable future? Thanks.

Sure, Rob, I'll take a shot at it. We're not going to give 25 guidance here, but at our investor day, we set our goal was to be the highest performing med tech company in terms of sales and EPS growth, which we believe we did in 23. Our aim is to do that in 24, and our aim is to do that for many years to come. And I think one is that the primary drivers, if you've seen the decade-long portfolio shift into faster growth markets for the company, where our weighted average market growth rate is probably closer to 7% to 8% versus what it used to be kind of flat. So, one, we enjoy, because of our portfolio choices, faster-growing markets. Secondly, we have strong growth across the world. You're seeing Europe double digits, Asia-Pac double digits, where FairPulse has not yet launched, and obviously the U.S. doing quite well as well. And then I think you just have to look at the durability of other businesses. You know, we'll likely talk about Fair Pulse and Watchman a lot on the call, but you see continued strong growth, you know, 8% to 9% through the first half within our med-surg businesses. So that kind of gets diminished because of the strength of some other areas, but that's pretty good. And then the cardiovascular portfolio is just getting stronger and stronger. with our EP franchise, Bayless, what we're doing with Coronary with drug-coated balloon. You saw the results with Accurate in Europe. And also potentially some benefits with concomitant reimbursement in the future. And who knows, maybe these procedures may move over time to an ASC center in EP, which also we think would benefit Boston Scientific given our solution. So we had a tough comp in 23 with a 12%. Our guidance for the full year is now 13 to 14. We won't give 25 guidance, but our goal is to really distinguish ourselves from the peer group in terms of revenue growth and EPS, and we have the portfolio and the team to do it. Appreciate the thoughts. Thanks.

The next question comes from Joanne Wunsch with Citibank. Please go ahead.

Thank you so much for taking the question, and I echo. A very nice quarter. Can we unpack just a little bit, and you may not like this question, but I get it a lot. What's next? And how do we think about, to your point, we're going to talk about therapist and launchment a lot, but people are now sort of looking forward at how does this continue to roll out to deliver this kind of growth? And thank you.

Yeah, I think it's, thanks, Joanne. I think it's similar to some of the themes I just highlighted. We have, we're in higher way of the average market growth rate markets to start. We see consistent procedure volume around the world. We are in a pricing environment where we used to be a price giver pretty significantly. Now it's getting closer to negative one to zero. We also expect in the margin front, you know, we took our margin goals up for the year. We expect gross margin to improve over time. Right now, we're getting more margin benefit from SG&A primarily, which is good leverage. We expect to get more gross margin upside over the LRP period. And we just have a very strong product cadence in very fast-growing markets. You know, the two of the best markets in all of MedTech, obviously, are EP and Watchman. And we have strong leadership position in PFA. And that market's only growing. and we haven't launched yet in Asia. And we have a lot of clinical work going on with Watchman, as you know, to significantly increase the TAM of that market, where it will rival the TAVI market, you know, three to five years from now. So, the clinical evidence that we have in fast-growing markets differentiate a portfolio, and we continue to make and play strong M&A bets with Axonix and Silk, and our venture portfolio, which we'll continue to leverage. The playbook hasn't changed, but it's the execution of the team of continually putting this in better markets and out-executing the competition.

Thank you very much.

The next question comes from Larry Beagleson with Wells Fargo. Please go ahead.

Good morning. Thanks for taking the question, and congrats on a really nice quarter here. Mike, maybe just to drill down on EP and Farrah Pulse. I guess it's a similar question, but just the sustainability here of the growth and the share. By our math, it looks like you've captured about 15% of the US EP market in the second quarter, excluding Bayless. Help us understand how durable your EP share and growth is. Can EP continue to be a growth driver for Boston Scientific for years to come And what's driving your confidence you can compete effectively with, you know, Athera and Varipulse when they launch? Thank you.

So I'll start, and then Dr. Stein can maybe talk about how we're really leading the field in our clinical evidence and some other physician comment. You know, we're competing with those companies today in Europe, with J&J, with all the companies that have PFA platforms. And you've heard us talk on many calls now on the differentiation of FerriPulse in terms of its safety profile, the clinical data, and really the usage of physicians who never considered using Boston Scientific EP prior. Many of them have completely converted to using FerriPulse for their AFib ablation procedures. But we're still relatively early in our launch in the U.S. It's less than six months of launching in the U.S., and we have yet to launch in China, and we have yet to launch in Japan. And we have a lot more to do in Europe. And we have additional indications coming and additional portfolio coming. So we think the short story is, you know, the FerroPulse platform combined with Bayless, combined with our clinical, will be a differentiated growth driver for Boston for many years to come. Now, will it grow, you know, as it continues to scale up over 100% a quarter? Unlikely. But we expect this to be maybe the biggest business of Boston Scientific in the years to come here.

Yeah, and Larry, maybe just to add on what Mike said. First, just, I mean, AF is the most common sustained arrhythmia in the world. Ablation therapy for AF today is still dramatically under-penetrated, right? I mean, ablation, high single-digits penetration for persistent AFib, low double-digits penetration for paroxysmal AFib. And the safety advantages, the efficacy advantages, the efficiency advantages, and just the overall simplicity of the Faripal system, I think, are just going to continue to drive the size of that market and penetration into that market. And then in terms of the competition, right, again, you know, we do expect to see competitors bring out their first-generation products late this year, early next year. They're already approved in Europe, and frankly, as Mike said earlier, right, we have not seen that materially impact the rapid, sustained adoption of FerroPulse in Europe. FerroPulse is a transformative technology with really important differentiated advantages against these competitors. As Mike said, Mike treated over 70,000 patients to date, published clinical trial data on over 20,000 patients to date, which really testifies to the safety, to the simplicity, to the efficiency. And, again, Mike referred to the data we presented at Heart Rhythm Society. It is the only system right now with any data testifying to actually superiority in an efficacy measure against traditional ablation.

Thank you. The next question comes from Rick Wise with CIFL. Please go ahead.

Hey, Rick, can you hear us?

Hi there.

Can you hear me? Yes, please.

Go ahead. We can hear you now. We can hear you now.

Great. Sorry about that. I was hoping also to talk about PFA from another perspective. In my recent doc checks, I've heard a great deal of encouraging interest in arrhythmia, and obviously many cases are being mapped now with other companies' systems. Just maybe give us some more color on when you launch your mapping integrated catheter in the second half. I assume that's still the target. How do we think about the implications for arrhythmia adoption for the percentage of cases that could be mapped on the Rhythmia system and the impact on your growth outlook as a result. Thank you.

Yeah, thanks, Rick. I appreciate the question. Again, we still are projecting approval of both our NAV-enabled Farrow Wave catheter and a completely new software suite on Rhythmia that we're calling FarrowView to help support that. And we certainly do expect that to help drive more adoption of the use of Rhythmia and FaroView to accompany FaroWave. Now, I want to begin, though, by saying, look, FaroPlus will remain an open system. We want to support workflows that don't involve any use of mapping or navigation, support workflows that involve these competitive systems, but also we'll expect with FaroView and FaroWave Nav to provide some major advantages in terms of workflow. I think important for me to I think emphasize that existing mapping and navigation systems don't understand PSA at all. They were built around an RF ablation paradigm. And so, FarrahView is going to be the first software in a mapping system that fundamentally understands what we do with PSA and with FarrahPulse. There are some important features, dynamic visualization of the catheter as it changes shape and basket flower configuration. field tagging specific to PFA energy. And I think when you put all of that together, it has the potential to minimize the use of fluoroscopy during these procedures, minimize catheter exchanges, and really continue what we've tried to do and I think have accomplished with TheraPulse to begin, right, which is to create a procedure that is safer, that is at least as effective, and that is far more simple and efficient compared to what people have been doing with legacy systems.

Now on the financial side, as you know, you've seen some of the competitive reports. Mapping is a sizable chunk of the overall EP procedure. And when FerroPulse is being used, you're seeing increased procedure volume based on the efficiency. So some competitors are benefiting from that productivity gain of FerroPulse. So in addition to strong utilization rates and opening new centers, more broadly impacted in 2025, We do expect a number of physicians to adopt this Fairview platform that Ken said, which is additional revenue that you're not seeing today in the FairPulse EP procedure.

That's great. Thank you so much.

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

Hi, guys. Thanks for taking my question, and my congratulations on my experience here. I had one question on USPFA, the 220% growth. Can you parse out what was the capital contribution versus, you know, capital contribution in the U.S. number? And I think you mentioned a TPT, you know, in the U.S., in the allocation setting. Any update on has Boston submitted its TPT? Thank you.

Yeah, so thanks for the question. Unfortunately, we're not going to break out for you the capital and disposable. Disposable is obviously more sizable than the capital, but that's probably the color we'll provide on that. And on the overall pricing, as you do know, the pricing is a bit of a premium, but based on the clinical benefits and efficacy and efficiency that physicians and customers are enjoying, that seems to be the proper price point. And on TPT, Kenneth, do you have any comments on that?

Yeah, Vijay, so we have submitted for TPT. Again, I think important to recognize there are some very strict criteria for eligibility for TPT. And I think just to reiterate what Mike said, which is, you know, right now we are not seeing pricing as a barrier to the rapid and sustained adoption of Farrapulse.

Next question comes from David Roman with Goldman Sachs. Please go ahead.

Thank you, and good morning. I want to keep going a little bit on the EP side, but also could you talk a little bit more about both the technology and commercial strategy? And if you think about the technology side, right now the bulk of your business right now sits in the ablation side. You talked a little bit about the importance of mapping and access, but how should we think about the portfolio evolving and how that unlocks new opportunities for you, whether that's in the non-AF side of the ablation market, be it with FerroPoint or some of the other products. And then on the commercial side, where are the opportunities for pull-through here? So, for example, are you training your mappers on generator replacements and ICDs? And how should we think about the overall benefit to the portfolio?

Again, I guess Ken and I will try to tag-team this. Thank you for the question. It's maybe the best market in MedTech, about $10 billion market. The chunk that we're doing well on now is the $6 billion AFib market that we continue to strengthen, and we'll get approval, as you know, in Asia Impact in 2025. There are a number of other areas that we're trying to move into. The mapping segment, based on the previous commentary, is one. We do have an organic ice program, which is a 510K product. Hopefully we'll be competitive with a new ice platform during this LRP period, which is another large slice of it. And Ken can probably detail out a bit more the clinical studies that we're doing to widen the indication for FerriPulse beyond what is used today.

Yeah, thanks, Mike. So, David, let me start with it. the clinical strategy and maybe say a little more about where we're going from a technology standpoint as well, because I think it's important that all the other stuff we're doing doesn't just get lost in the excitement around FerriPulse, as exciting as FerriPulse is. From a clinical trial standpoint, to begin with, our Advantage clinical trial, which is aimed to get labeling for FerriPulse in persistent AFib, has completed enrollment We expect to present those results late this year, early next year. We are well underway in a trial called Avant-Garde, which is aimed to prove that theropulse should be used as first-line therapy for patients with persistent atrial fibrillation. We've announced an intent to run a trial called Rematch, which will look at theropulse for redo ablations. From a technology standpoint, we've already talked about the Farrow-Wave NAV catheter. In addition to that, we have a point catheter, FarraPoint, that's through its clinical trial. And then down the road, I think more sophisticated catheters for both mapping and ablation, a catheter called FarraFlex. And I think, as you can imagine, we are interested in the use of this for many arrhythmias beyond atrial fibrillation, atrial tachycardias and trichotachycardia. that pretty much you name it. But I don't want some of the other technology innovations to get lost. And so, right, the EP performance was not only a Farrah Pulse story. It's fantastic performance from our access solutions portfolio. And in terms of pull-through, right, see very good synergy between Farrah Pulse and the access solution products. Likewise, in really good synergy between the Watchman and the access solution Again, I think, you know, in terms of the pull-through question, the most obvious opportunity, as Mike mentioned, is the opportunity now to have reimbursement in the U.S. for concomitant theropulse ablation and launchment procedures, which we expect will be a growth driver and hope to see that finalized before the end of this year by CMS. Again, Dan mentioned our acquisition of SoundCath, so an ice product. to support EP procedures and potentially also Watchman procedures. Probably just a very long winded way of saying we love Ferripulse, but it is far from the only story.

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

Fabulous, thank you. And on that note, I might flip the script if that's right with everybody and maybe focus on something a little different. You know, obviously you guys announced Silk and appreciate that hasn't closed yet, but I'd love if you could unpack, you know, what was so exciting for you guys in TCAR and that asset overall and the ability to flip Wallstent into the package and how meaningful that is relative to just the capacity to plug it into Boston overall and drive sales. Anything around there would be great.

Sure. Silk is a really terrific asset we've looked at for a long time. Hopefully, we aim to close that second half this year. You know, as a standalone business, they were really kind of leading the rejuvenation of that field through their clinical evidence and their performance over many years in the U.S. And it came to a point where we felt it was mature enough in terms of its sales ramp and for us to acquire it at the right price. So I guess, first of all, it always starts with clinical indications. We're really pleased with the data and the long-term durability of this procedure. So as a standalone company, they're growing certainly accretive to Boston Scientific faster, but clearly not there on the margin front. So now in Boston Scientific's hands, we feel like we can grow the company faster in the U.S. given the category leadership portfolio we have and a common call point with a vascular surgeon. We also have the ability to take it outside the US to appropriate countries. And we also aim to improve the margin profile of the business by integrating the company as appropriately within our operations supply chain team like we've done for many other acquisitions in the past. So it's an accretive asset that we think will be stronger and more profitable in the hands of Boston and make us more important for the vascular surgeon which is an area that needs improvement for us, I would say, within that business unit. So now we have the leverage, not the leverage, but the capabilities to present to vascular surgeons our broader PI portfolio, given the relationships that the Silk Road team has with the vascular surgeon.

Brilliant.

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

Hey, thanks for taking the question. I wanted to ask, you know, given the strong margin guide raise and, you know, EPS guide raise here, where you're at kind of on the Farrah Pulse, getting those to full margins in the scale there. Are you halfway there, kind of more or less, and your willingness to kind of continue to let that flow through? And I also wanted to ask about TAVR. It felt like a little bit of a time change and tone change on TAVR, so I just wanted to make sure we didn't miss anything on the TAVR update.

Sure, I can start on the gross margin and then Mike can take the TAVR one. So where are we on the journey? As Mike said, we're early in the journey in the United States relative to the FerroPulse launch. That corresponds pretty well with the gross margin story. So if you think of where we are, the standard margin for FerroPulse is absolutely accretive relative to the catheter. So that's a great accretive gross margin growth driver. The things that in the initial stages are a little bit dilutive. Obviously, you heard me talk about the inventory charges with respect to PolarX. So, you know, we don't want to take inventory charges, but when you're taking them as a result of the success of FerroPulse, you know, that should be temporary and should not be something that continues. So those should get better over time. The manufacturing variances. So we have built our manufacturing capacity and our operations and supply chain team to be the leaders in this space. So we have significant capacity. So as we're making the product today, it's a little under-absorbed relative to that. So that'll get better, obviously, as we make more, and that's obviously our plan. And then the capital placements are dilutive. Again, it's not a huge number relative to the overall gross margin for the company, but it does you know, at the edges, kind of take that down a bit. So overall, I would say Ferropulse, every quarter, Ferropulse will be a better contributor to margin. And I think as you get into 25 and 26, it'll be a significantly accretive growth driver for gross margin for the company.

Now, Tavi, the European team has done really an outstanding quarter and outstanding quarters back-to-back with AccurateNeo 2, over 20% growth. Importantly, we expect to launch in fourth quarter or maybe first quarter 2025 prime, which is our next generation AccurateNeo2 that has all risk indications and the full-size matrix, which has been the challenge for us to date with the optimized delivery and the valve frame. Just to reiterate, on the U.S. timing, we did complete enrollment of the 1,500-patient cohort And we do expect to present the data in the first half of 25, likely at the ACC meeting. I think it's important to note that this is the largest randomized trial that's been done in TAVI. And really based on the timing of the last patient follow-up and the size of the trial and the multiple risk and mixed control groups that we have in it, it's an extensive trial. And we believe that the first half, 25, and likely at ACC is the appropriate timing.

And then just as a quick follow-up to the gross margin question, Travis, none of that's a surprise relative to gross margin. So we've been saying all along the gross margin is not likely to help the margin improvement story in 2024, but lo and behold, we're able to increase the overall operating margin from 30 to 50 to 50 to 70. So I think all's well on the margin expansion front. Really proud of that 50 to 70 relative to the guidance for this year. And as you look to 2025 and beyond, I think gross margin, I think all lines of the P&L can contribute to the margin expansion journey, and gross margin will be one of those.

Great. Very helpful. Thanks a lot. The next question comes from Josh Jennings with TD Cowan. Please go ahead.

Good morning. Thanks a lot for taking the questions and congrats on the stellar results. I wanted to just follow up on Travis's two questions. I guess first on TAVR, could we see top line data before the ACC presentation next year and could Boston file before that presentation? And then just the other follow-up is just on the profitability. You guys are seeing, letting a lot of profitability flow through on the outperformance on the top line. Wanted to just get a sense of of taking some of that profitability and reinvesting that, you know, where could we see, where's some of those dollars going, and just some high-level commentary on that reinvestment driving, supporting this sustainability of top-tier revenue growth in the medtech space. Thanks for taking the questions.

Josh, maybe I'll take the TAVR question first, and then Dan and Mike take the others. Just really what Mike said, right? Last patient follow-up in the trial was just in this quarter. It's a very large, very complex trial. And just honestly, based on the timing of getting the data cleaned and getting the readouts from all of the various core labs that are engaged in getting us the analyses for the trial, we are going to miss the abstract deadlines for all of the major fall meetings. Those deadlines literally come up within a couple of weeks. And, again, these data are so important and pivotal, right? We want to present this at a major meeting. And so, right, the first major cardiology meeting where we'll be able to meet an abstract deadline is going to be the ACC. Would not expect you to see any data released ahead of that.

And the second part of your question, relative to the balance between reinvesting the sales upside and dropping some through. I think you're seeing the evidence of that here in our guidance raise for the 50 to 70. So I think we've struck a really good balance on that. So we've had sales upside during the year and the realization that we closed the first half a little bit ahead of expectations, so we're giving some of that back. So we're taking the 30 to 50 to the 50 to 70. So that's great. At the same time, we are reinvesting in the business, primarily in the commercial-facing functions. We're leveraging the back office and the administrative areas, which makes sense. We don't need to grow those. when you're growing the revenue at the rate that we're at. So we got significant leverage opportunities there. And then, as Mike said, this isn't just reinvesting in Ferropulse. This is reinvesting across the whole portfolio, the broad portfolio that we have. So we picked the right spots to reinvest to be able to continue to deliver that top-line performance for the long term. I think we're striking a nice balance there.

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

Hey, good morning, everyone. Thanks so much for taking the question, and I'll be a broken record here. Congrats on the really awesome quarter. Mike, I wanted to go in a different direction here, away from PFA for a second, and talk about how we should think, just on this theme of sustainability of growth into 2025, appreciating we won't give guidance here, but if we think about Asian DCB launching back half of this year and modular development, in the back half, or I guess is that launching this year as well. So how do we think about those contributing and maybe elevating CRM growth above the market in next year as well as the interventional cardiology portfolio? Thanks so much.

Well, thank you for pointing that out because I was getting hammered by text from our agent team and our CRM team for not mentioning those in their prior questions. So I think if you're to continue to add on that discussion, which is how do we maintain and sustain high performance that's highly differentiated from the peer group for many years to come, it's all the things we talked about before with PFA and Watchman indication expansion. And as you said with agent, kudos to that team. They're really transforming that portfolio. You know, drug-related stents next year will probably be 2% of overall Boston Scientific. And you're seeing tremendous growth in our imaging business with our IBIS imaging platform. And now we're the first one to have approval for agent. And that TPT decision will be made soon and apply hopefully in January. And that is a market that we plan to drive where we have a multi-year advantage, where we have superiority data for what is at least 10% of the market with restenosis. in an appropriate price point. So that's going to accelerate the growth of that division and significantly improve the margin profile over time while we continue to invest in clinical science and our structural heart portfolio. And also, we have a very vast VC portfolio. And oftentimes, those VC investments come with dilution, which our team is able to manage consistently while investing for the future while improving margins at the same time. So I think that's a big part of it. As you do know, the CRM business is a bit of a lag for us. The international business did quite well. The U.S. lagged a little bit. And the modular ATP, proud of the team for that. That was a long study, a very difficult project. But you saw the results of that, the SICD with the modular platform. And we're excited to launch that in 2025. So there are two other areas that I didn't mention before that you pointed out. And also, you know, what's not being mentioned here today is just the tremendous growth in our endo and euro businesses. Our Euro business is near double digits for the first half. Our end of business is near double digit for the first half. Those are all accretive margin companies for us. We're very excited about the Axonics acquisition, which will have an operational benefit in 2025 and organic in 2026 primarily. But it just makes those divisions even stronger. So there's many things to be excited about for the future of the company to continue on with our goal of differentiated performance.

Thank you.

The next question comes from Matthew O'Brien with Piper Scientific. Please go ahead.

Great. Thanks so much, Piper Sandler. Just maybe on just sticking with kind of where Danielle was going outside of PFA, but just on the Watchman business, you know, 20% growth is a little bit of a tick-up versus Q1. You know, your competitor said they grew 45% in the quarter. So are you losing a little bit of share to those guys, or is the market starting to accelerate for some reason? I don't know if it's in front of this concomitant reimbursement. Just, you know, maybe talk a little bit about that. And then maybe for Dr. Stein specifically, if you get this concomitant reimbursement, can you just talk about the workflow for the clinician in terms of doing a PFA case plus a Watchman reimbursement? case at the same time. I mean, how much more challenging is that? Do you have to bring in an IC sometimes and other times not bring an IC in to do the watchman part of the case? Just maybe talk a little bit about that opportunity going forward. Thank you.

Yeah, I'll just touch on the growth. You know, 20% is excellent. We're in the midst of launching our Watchman Flex Pro, and maybe as importantly, this new steerable sheath, which is early in its launch. And so I think the clinical data and the extremely high market share of Watchman speaks for itself, and the ongoing R&D platforms that we're driving for Watchman and clinical science. So we are extremely comfortable that we're nearly 90% a share in the U.S., and there may be some extremely price sensitive accounts that we'll occasionally lose business to, but it's very, very small margin, very, very small numbers And if you look at the size of this Watchman business and our share and our technology lead, we're very comfortable with the position we're in.

Yeah, and in terms of just workflow and concomitant, this is one of the areas where I think in between, right, the safety and efficiency advantages of Watchman Flex and Flex Pro combined with the efficiency and safety advantages of Veripulse create a real advantage for us as a a unified ecosystem. You know, the beauty of doing these two procedures together, right, is they both involve transeptal access into the left atrium. They both involve catheter manipulation inside the left atrium. So there's a huge benefit to patients to be able to have it all done at one sitting as opposed to having to have one procedure and then go through many of the same risks of the first procedure, go and have it done as a second procedure. And just to reiterate, when you think of doing it as a concomitant procedure, what you want are technologies that enable you to do it safely, enable you to do it reproducibly, and enable you to do it efficiently, so you're spending as little time as possible, right, mucking about inside someone's left atrium. And Farrapulse and Watchman FlexPro together are unmatched in giving you those advantages.

And I understand there's time for one last question. Yes, please. Okay. That last question will come from Matt Taylor with Jefferies. Please go ahead.

Hi. Good morning, guys. Thank you for taking the question. Congrats on the great quarter. I did want to ask a follow-up question on Farrakhal just to help with thinking about the modeling and the opportunity there. Could you give us any kind of update or parameters on on how many centers you're in, how many boxes you've placed, and maybe talk about whether the early experience has changed your views on how the market could evolve like you laid out at the analyst day several months ago.

Yeah, I think the only piece of that we'll provide color on is the last part of it. We don't want to break out catheter usage, capital usage. How many sites? I would say the utilization rates of sites once they use FerriPulse is very quick and sustainable. So we're not seeing hospitals turn it on and turn it off and go in and out of it like you see in many MedTech products. So the sustainability and usage of FerriPulse is very high once customers start using it. And obviously we have a chance to sell more councils to larger centers. in the existing accounts besides opening new accounts. And the second part was what? I just seen your moment. You got a good conversion.

You got it.

I got it.

Okay.

Great. Thanks, Matt. I ended it with a dud. Sorry, Matt.

All right.

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