Boston Scientific Corporation

we've talked about in the past with some low-cost scope competitors in Asia and Europe, which our team has really done a nice job of addressing. So we anticipate some of that headwind being mitigated as we look to 2026. So despite that, really strong performance in endo, as you know, high-margin business for us as well. Also pleased to see the enhancement and improvement in neuromodulation. The team there grew strong double digits in DBS, and the relieving acquisition has been integrated extremely well and really providing strong accretive growth to the company and a wider solution for pain physicians. And we continue, I would say, to have improved momentum in spinal cord stimulation. The team made a number of commercial changes over the past year or so, and that team is starting to come together and strengthening. So we anticipate you know, continued momentum with that neuromodulation business over the horizon. And our urology business is a fantastic franchise. It's grown a little bit under what we typically expect them to deliver. And we signal that at the end of the first quarter call, given some supply chain constraints that we're working through, that will get better in the second half of the year. And also some low-cost competition, again, that the team is addressing very proactively. The Axonics integration is a super important integration for the franchise and for the company. In the first half of the year there, we really worked through some commercial model changes, some turnover, which we anticipated, and that team is now kind of re-strengthened. We also had quite a bit of stocking that we had to work through in the first half of the year. So we anticipate improvement in the Axonics growth in the second half of the year and a very strong 2026 for Axonics. So, overall, med-surgs performed well, and hopefully that color was helpful to you.

It is. Thank you.

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

Good morning, Mike. Hi, everybody. Maybe just start us off, if you would, by thinking about, the ASC setting and how it sets up growth for next year. And help us think through one thing. Obviously, in the hospital, you're seeing very strong concomitant attachment rates or uptake rates. If the PFA moves to the ASC, I don't think you know, that concomitant would be as prevalent. Help us think through those moving pieces and is this still, is ASC a net positive given maybe potentially lower Watchman implants? Just help us think through all that if you would.

Yeah, thanks. Thanks, Rick. And it's a really nuanced point that you're raising. So I'll give you our view on it. And let me just start maybe with the upshot. We still do see it as a positive. What you need to think about are really two things. One is the pace at which procedures are going to move out into the ASC. And again, this is a proposed rule. Assuming that it gets approved, there will be, if not a step change into the ASC. Today, there are approximately 20 states in the union where there are not CON, you know, certificate of need or other regulations that would limit docs from opening an ASC makes up approximately 40% of the market. But the other 30 states, the other 60% of the market, it's a much more gradual ability to build out into the ASC. I think the other thing that's important here is even once you have an ASC, physicians are going to be thoughtful in asking, you know, who are the patients where you do the procedures in the ASC versus who are the patients where you still opt to do it in a hospital setting, you know, whether it's an inpatient or an outpatient basis in the hospital. And so our anticipation would be that you begin, right, by taking the simplest patients, So de novo, paroxysmal AFib, that you start with the patients who are the least frail. And those are the opposite of the patients, right, who are candidates for the concomitant procedure or Washington. The younger you are, the less comorbidities you have, the lower your risk for stroke. And so, you know, at the outset, again, it'd be our anticipation that folks begin with the easier, simpler, more straightforward cases. And those are just not patients who would have had concomitant procedures anyway. And it'll just take time to start moving more complex procedures out into the ASC. So again, net sum, we absolutely see the ASC as a positive for us. Gets back to what I said earlier to Larry. We really see ourselves as having really important differentiated advantages based on the entire FirePulse ecosystem as this transition begins.

Thanks for that. As a follow-up, Mike, maybe you could expand a little bit on your thoughts about Sanavi with the deal now closed. How do we think about this? Is renal denervation here now given the recent approvals? Is this just Boston fly-by initial checkout of the RDN scene and waiting for things to evolve? And maybe just share with us, if you can, just are there key clinical timelines or data or FDA timing? Just help us, help level set us here. Thank you so much.

Sure. Thanks, Rick. We like, we really like where we're positioned with hypertension. So we've liked the market for a while. As you know, we had a previous RF product that we discontinued a number of years ago. We absolutely feel that the ultrasound technology will be preferred. We have to prove it in a clinical trial over radio frequency in terms of its effectiveness and safety profile. So we really like the technology of Sony V. You know, we made an investment in that company and we acquired it, I guess, closed in early first quarter. So we Second quarter. So we closed recently. So it's a technology that we had been watching for quite a while. And we jumped on that and acquired it prior to this reimbursement decision. So our timing really was nice there. And we're early in our clinical trial. So we won't be first to market. There'll be two others. But our timing of anticipated approval, which we'll outline more at Investor Day, isn't that far behind. And given the relationships that we have in this marketplace, what we think is a platform that has enhanced features and benefits over the current generations, we think we'll be well positioned to take advantage of this market over the LRP and beyond. And I think this market certainly could become a multi-billion dollar market over time, not overnight. And I think given that market TAM opportunity, given the growth that we'll see, but it will still need additional key milestone takedowns on reimbursement, commercial coverage, and so forth. So this market has the potential to be quite large over time, and our positioning with the device that we have, I think, could make this very disruptive for us, assuming we have a positive clinical trial and the market develops.

Thanks, Mike.

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

Thank you. Good morning, everybody. I was hoping we could dive a little bit deeper into the evolution of the EP portfolio because clearly you've seen strong adoption on FerroPulse. But as we look at both indication expansion and new product launches, it would actually seem like there's quite a bit of runway yet to go here. So maybe we just kind of think about where you've had adoption so far, most likely in DeNovo, PVIs, maybe some use in persistence. You're accelerating your investment in mapping. TheraPoint should be coming at some point later this year, early next year. I don't think you have an ICE catheter yet. You have the Bayless portfolio. So can you maybe help us think about where you are in kind of capturing the totality of the EP market from a procedure and indication perspective, but then also as you think about the disposables used in an EP case, where you are in in capturing the totality of the opportunity there than I had one P&L follow-up.

Yeah, David, and I'll just begin again. It's everything you just said. Strategy has always been to aim for category leadership, and category leadership includes everything you just talked about. I think, first off, just in terms of today's usage of FaroPulse, as Mike mentioned in the script, I'm pleased to have gotten the indication expansion into persistent AFib as well as paroxysmal AFib. To be frank, we were already seeing a very large amount of use in persistent population already. One of the great things about Farrow Wave is just how really elegantly, beautifully it's suited for going beyond just pulmonary vein isolation and using posterior wall ablation as well. And we've been very impressed already by seeing just how many physicians have adopted that as the predominant workflow that they're using. I think it's a very important message, right, that that PVI alone is really not sufficient to address the majority of patients who are getting ablated with atrial fibrillation today. Gets into moving into mapping. As I said earlier, I've been very pleased with the uptake of FarraView on the opal system. But it also does involve us having the complete toolkit. So involving solutions, which we acquired when we acquired Bayless. We do have an ice catheter under development. We'll have more on that at Investors Day. And then we do have a full portfolio of additional ablation catheters. One thing I'd like to point out, you know, Farrow Wave is already, we already got a second generation PFA catheter on the market. before most of our competitors have a proven first-generation catheter on the market. We will have continued iteration of FARA Wave platform. We still anticipate approval of our FARA Point catheter second half of this year. We have a so-called large focal or MAP and ablate catheter. FARA Flex that's already in its first human use trial is very pleased with how that's progressing. And I think maybe the sum here is, you know, we're not one and done with Faraway. We've got an absolute commitment to continuing to iterate both in terms of ablation catheters, but also in terms of the entire ecosystem around it.

The other thing I'll add to that, besides the widening of the portfolio, which is what Ken talked about, which we have a lot of investment in internally and through our VC portfolio and partners, There's also regional growth. As Ken mentioned, we're a third of market in Japan. Now we're the clear market leader in Japan. The Japanese market will benefit from the persistent label that will be coming in the second half of this year. So that should further strengthen it, and we continue to roll out mapping systems there. We're very, very early days in China, which is a very, very big market for us. So a lot of emphasis on that. So we put a lot of time and attention in this. We not only want to be the clear leader in PFA, but our aim is to be the overall leader in EP in the future.

Thank you. I appreciate all the perspective. And maybe just on the P&L, John, I think if you go back to Q1, you talked a little bit about a slower start to the year on OPEX. This quarter, I think you utilize OPEX as a way to offset what looks to be like a six cent headwind-ish trend. from the dynamics with accurate. Are you at a point now where given the top line, it's becoming more challenging to spend all the upside and that we should start to see more operating leverage or is there something more deliberate going on in OPEX?

Thanks, David. You hit the dynamics pretty well for the second quarter, first quarter. Say in the second quarter, there was some holdback on OpEx and investment back into the business. As you recall, as we started the quarter on April 2nd, we had the updates on tariffs. And then midway through the quarter, we announced the accurate discontinuation. So a bit of a holdback on OpEx in Q2, which was important to offset the accurate charge that we stepped through earlier. So then as we move into the second half of the year, a couple dynamics there, we'll see the tariff impact really take hold, approximately $100 million, which predominantly impacts the second half of the year. And then we do anticipate continuing to reinvest back into the business to drive differentiated revenue growth for the near and long term. So that's the focus of the company. I'd expect to see R&D tick up a bit in Q3 and in the second half of the year. A lot we're excited about across the portfolio there. And we'll likely look to invest across the commercial team and make some commercial investment as well with launch activity going on to continue to drive the growth that we're seeing. So, you know, on the whole, I'm really pleased with – you know, the 75 to 100 basis points of op margin expansion that we're expecting for the year. And I think we're doing a nice job of balancing drop through to the bottom line and op margin expansion with reinvestment back into the business. And I think you'll see more of that in the second half here.

Excellent. I appreciate all the perspective. Thank you.

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

Hey, everybody. Congrats on a good quarter. I guess kind of before later this year, you're going to be updating the LRP at the analyst day, but just kind of bigger picture how you kind of see the pluses and minuses shaking up over the next few years versus the last couple of years. And your weighted average market growth now is kind of approaching 10%. And so just think about the confidence to continue to kind of outgrow your markets as you've kind of always done historically.

Well, I think we have like half a day with you at Investor Day to talk about your question. So as nothing break through here, but our goal is to continue to improve our weighted average market growth rate through our organic portfolio choices we make at our venture and our M&A, which we've done over many, many years. So we anticipate that to continue. At the same time, we expect our leaders to grow faster than the markets. Not every division, every region does it every quarter. but the majority of them do. So we have a strong track record of growing faster than our weighted benchmark growth rate. And we are, as John mentioned, we are enhancing our R&D spend. And we have many, a number of important shots on goal to drive differentiated growth over the next five years. And we'll talk a lot about that investor day.

Great. Thank you. And then, John, just quickly on the tax rate, with some of the new legislation that came out, and if there was any and how you're thinking about the tax rate going forward.

Yeah, so we previously, Travis, as you know, expected a 200 to 300 basis point headwind to the tax rate under the TCJA and certain rates there that were set to increase in 2026 and beyond under that now old legislation. Under the OBBB, with new rates that were established there and other provisions, that headwind has largely gone away. So that's the impact to Boston Scientific from the new tax legislation. As we get to the normal course and the Q4 earnings call, we'll update on our specific guide for tax for 2026. But that was... for the team here, good outcome from the recent legislation.

Great. Thank you. Yep. The next question comes from Michael Pollark with Wolf Research. Please go ahead.

Hey, good morning. I have one on Medicare rulemaking. Another thing that came out during rate season was the physician fee for LAA was proposed down 16%. Year on year, the societies came out against this. There's so much going right in that business with Watchman, form factor innovation, concomitant, champion ahead. How much of a challenge does this present, if any? And do you agree with Medicare's maps? Thank you.

Yeah, Michael. We certainly think payment ought to be appropriate, the amount of work that's involved in doing a procedure. And I to say, you know, my concern, you know, as someone who's done procedures is, you know, whether they are really appropriately valuing the complexity of the decision-making that's involved in managing these patients. You know, we certainly are committed to giving the medical societies the support that they need from us to help mitigate any impact of this proposal. You know, I think, frankly, you know, in terms of impact on growth, you know, I still firmly believe docs are going to do the right thing for patients and are going to pick the most clinically appropriate treatment. You know, when it comes to something as important as preventing stroke, you know, I'd be very hopeful that this kind of a reimbursement, if it does persist into the final rule, still, you know, will not prevent patients from getting the treatments they need.

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

Hey, good morning, everyone. Thanks so much for taking the question, and I'll add to everyone's congratulations on another very strong quarter. Just two questions for me. Number one, on Watchman and Sarah Pulse, and asking the question from another direction, and that's capacity, which I appreciate, you know, the recent approval in the AIC, that's definitely helpful. But, you know, a lot of these EPs are also doing Watchman procedures. Yes, now they can do it concomitantly. But at what point do we start to see capacity be an issue? And I guess the follow-up, are you seeing that yet? And then the follow-up question is related to that. You know, you guys had said you're still pretty early in the TheraPulse launch. I mean, you're a year in, but you're still not getting into the sort of lower volume centers. Have you guys started to get into these lower volume centers? Are you seeing previously pretty low volume centers doing higher volumes at this point? Because now they have access to this device that democratizes ablation. Thanks so much. Thank you.

Sure. Hi, Danielle. Thanks for the question. I'd say just on capacity, really no difference versus previous comments. Thankfully, the procedure is very safe to parapulse, watchman, or concomitant. It's a very safe and effective, albeit complex, procedure that docs have a lot of confidence in. The hospitals do a good job of knowing the predictability and time allotment for these procedures because they've done a lot of them, so they're able to better plan We don't like the proposed reimbursement cuts for physicians. However, on the hospital side, these are strong procedures in terms of profitability for hospitals. So we do see some hospitals investing more and more in adding additional labs and potentially prioritizing as best they can for these types of procedures. So to date, we don't see a big increase There's still a pretty healthy backlog across most centers for Watchman, Farrah Pauls, or concomitant, which I guess is a good sign for the future. And as Ken talked about earlier, this ASC potential ruling, which is going to affect in 26 if it all goes through, we see about 20 states in the U.S. that potentially could act on this that don't have certificate of needs that would represent about 40% of the AFib volume. So that won't happen overnight, but over time, you'll see more and more of the PVI, posterior wall, these types of procedures moving more to the ASC, which will provide some additional capacity. So I think the ASC ruling will help with the capacity, and we continue to work on technology solutions to drive better procedure time, more productivity in concomitant procedures. There was a second part of the question.

Lower volume centers?

Lower volume centers, for sure. You know, we have put the majority of focus in Europe and U.S. and Japan on the highest volume centers for obvious reasons. But as we continue to expand the rollout in Europe primarily and U.S. and Japan, we are moving into some smaller centers as we continue to scale our commercial capabilities and our clinical footprint.

And I understand there's time for one last questioner. That's right. That will come from Matthew O'Brien with Piper Sandler. Please go ahead.

Good morning. Thanks so much for squeezing me in. Maybe I think Mike talked about the incommodant percentage, about 60% of all procedures now, or all of your doctors have done at least one incommodant procedure. How has that trended over maybe the last six to 12 months? especially following the option readout, and then I do have a quick follow-up.

Maybe just to clarify, so the 60% is of the electrophysiologists who do Watchman implants. And, of course, it's a mix of interventional cardiology, structural heart physicians, as well as electrophysiologists who do these procedures. But of the ETs who do the procedures, who are also the ones who do ablations, 60% of EPs who have been Watchman implanters have already jumped onto the concomitant bandwagon. Now, I think just in terms of understanding where the growth there is, remember, although some folks were doing concomitant procedures even before CMS established the unique DRG to pay for it, really, we only have reimbursement at the hospital level for concomitant beginning in October of last year. And then the option data was only released in November of last year. So, right, this is all still a very new phenomenon. And we still, right, see physicians needing to understand how do you adopt into the workflow. So, you know, sequentially still seeing important growth in the concomitant procedure.

Okay. Yeah, I know. Thanks for that, Dr. Stein. I know we're early days there. I guess the follow-up question would really be kind of dovetailing off of David Roman's question about the breadth of the portfolio that you have here, you know, in mapping now with concomitant with, you know, obviously best-in-class product with Watchman by a mile. You know, just your ability, because I know a big concern that investors have is just competition coming in. You've got some established competitors with big mapping companies. footprint out there. So just your ability to kind of defend yourself or just said another way, the moat you're building here between Opal, all the catheters, plus, you know, concomitant cases, how wide is that moat in your opinion and how much wider can it get?

Well, we continue to aim to be, as I mentioned, the clear PFA leader, and we aim to be the number one overall in EP. As we widen that portfolio, I think a good testament is what happened in Japan. You know, we're a third to market in Japan. without a persistent label indication, which our competitors had. And now we're the clear leader in Japan, and we'll be adding persistent label to it. So we do feel like we have some unique advantages that are highly differentiated with Ferripulse and Ken detailed out, and you'll see it in Investor Day quite a bit, how we're widening the portfolio. Plus, the underlying market growth is nearly 20% right now. Clearly, that will slow down over time, but it'll still be likely mid-teens growth and the largest, fastest-growing market in med tech. There wasn't a question on this, but I feel like I want to call out our interventional cardiology team. Our ICTX business is one of our largest businesses in the company, and no questions on it today. And most companies don't talk about coronary therapies. They think of drug-loving stents, but it's a great example of of a business unit that, and our team focused on this across all of our business units, on moving into faster markets and having unique technology backed by clinical support. And our coronary therapies business this year, I'm sorry, this quarter, grew high double digits, which is pretty unique for coronary therapies. And given the size of that business, and a lot of that's being driven by our imaging business, which continues to enhance and the execution of our agent DCB in terms of its clinical study, the positive coverage decisions we've received, and the execution of that commercially. So I think it's a good example of how our business units revamp their portfolio within their own businesses, and you have a business now in what's considered a very slow market growing strong double digits.

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