Boston Scientific Corporation

Good morning and welcome to the Boston Scientific fourth quarter 2025 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 Lauren Tangler, Vice President, Investor Relations. Please go ahead.

Thank you, Drew, and thanks to everyone for joining us. With me today are Mike Mahoney, Chairman and Chief Executive Officer, and John Monson, Executive Vice President and Chief Financial Officer. During the Q&A session, Mike and John will be joined by our Chief Medical Officer, Dr. Ken Stein. We issued a press release earlier this morning announcing our Q4 and full year 2025 results, which included reconciliations of the non-GAAP measures used in this release. The release as well as reconciliations of the non-GAAP measures used in today's call can be found on the investor relations section of our website. Please note that on the call, operational revenue excludes the impact of foreign currency fluctuations and organic revenue further excludes certain acquisitions and divestitures for which there are less than a full period of comparable net sales. Guidance excludes the previously announced agreement to acquire Valencia Technologies Corporation which is expected to close in the first half of 2026, and Penumbra, which is expected to close in 2026, each subject to customary closing conditions. For more information, please refer to the Q4 financial and operating highlights deck, which may be found in the investor relations section of our website. On this call, all references to sales and revenue are organic, and relative growth is compared to the same quarter of the prior year, unless otherwise specified. This call contains forward-looking statements regarding, among other things, our financial performance, business plans, and product performance and development. These statements are based on our current beliefs using information available to us as today's date and are not intended to be guarantees of future events or performance. If our underlying assumptions turn out to be incorrect or certain risks or uncertainties materialize, actual results could vary materially from those projected by the forward-looking statements. Factors that may cause such differences are discussed in our periodic reports and other filings with the SEC including the risk factor section of our most recent annual report on Form 10-K. Boston Scientific disclaims any intention or obligation to update these forward-looking statements except as required by law. In addition, this call does not constitute an offer to sell or the solicitation of any offer to buy any securities or solicitation of any vote or approval in connection with the proposed transaction with Penumbra. Boston Scientific will file the SEC a registration statement on Form S-10-K Four, containing a proxy statement of Penumbra and a prospectus of Boston Scientific that will contain important information about Penumbra, Boston Scientific, the proposed transaction, and related matters. At this point, I'll turn it over to Mike.

Impressive, Lauren. Thank you. Good morning. Thanks, everyone, for joining us today. In 2025, we achieved over $20 billion in sales and for the second year in a row delivered mid-teens growth, surpassing our financial goals that we set at the beginning of the year. This outstanding and highly differentiated performance was fueled by innovation and execution across our business units and the winning spirit of our global team. In the fourth quarter of 25, total company operational sales grew 14%. Organic sales grew 13, achieving the high end of our guidance range of 11 to 13, with continuous strength across many of our businesses, including EP, Watchman, IO, Endo, and ICTX. Full year 25 operational sales grew 19%, while organic sales grew 16, exceeding our guidance of approximately 15.5. Q4 adjusted EPS of 80 cents grew 15%, exceeding the high end of our guidance range of 77 to 79 cents. Full year adjusted EPS of $3.06 grew 22%, also exceeding the high end of our guidance range of 302 to 304. On a full year basis, we expanded the adjusted operating margins by 100 basis points to 28%. Balancing dropped through on the strong revenue performance throughout the year with the reinvestment back into the business to drive long-term growth. Now for our 2026 outlook. We expect our differentiated financial performance to continue in our guiding to organic growth of 8.5% to 10% for Q1 and 10% to 11% for the full year. Our Q1 adjusted EPS guidance is $0.78 to $0.80, and our full-year adjusted EPS guidance is $3.43 to $3.49, representing a leveraged double-digit EPS growth of 12% to 14%. And John will provide more details. I'll now provide some highlights in Q4 and the 25 results, along with comments on 26 outlook. So regionally, on an operational basis, the U.S. grew 17% in the fourth quarter and 26% on a full-year basis. with exceptional performance across the business units, particularly EP, Watchmen, and ICTX. Operationally, Europe, Middle East, and Africa grew 5% in Q4 and 3% full-year. Excluding the impact of the accurate discontinuation, full-year EMEA growth would have been high single digits. EP also grew strong double digits in Q4 as we continue to lead with our ecosystem approach, offering differentiated technologies and comprehensive commercial support. As we look ahead to 2026, we anticipate momentum in EP and Watchman to continue in Europe and growth to be higher in the second half of the year once the impact of the accurate discontinuation is annualized. Now the Asia-Pac region. It grew 15% operationally in Q4 and 14% for the full year, led by mid-teens growth across Japan and China. Japan's growth in the quarter was driven by Watchman and EP, fueled by OPAL mapping system placements, and increased ferropulse cathode utilization, where we continue to gain share. China had another quarter of double-digit growth driven by EP, Watchman, and ICTX. We expect EP momentum to continue into 2026, supported by a recent NMPA approval of our Ferrowave Nav device, as well as indication expansion into the persistent AF population. Now some commentary on our business units. Fourth quarter urology sales grew 13% operationally and 3% organic on a full year basis. And the full year basis grew 23% operationally and 5% organically. Our performance in euro this year was below our expectations. And we expect that our overall business will return to market growth in 26 with supply chain issues behind us, new product launches, and the strengthening of our sacral nerve modulation franchise. We look forward to expanding our pelvic health with a recently announced acquisition of Valencia, which is expected to close in the first half of 26. Endoscopy delivered organic growth of 8% in both Q4 and for the full year and delivered a very strong year. Q4 growth was driven by our endoluminal surgery, imaging systems, and endobariatrics franchises, with the later receiving positive reimbursement support for ESG procedures. In December, we initiated a product removal for certain sides of our Axios device, due to a manufacturing variation. We do understand the issue and are working to bring these unique devices back to market in full by mid-year and anticipate lower endo growth in the first half of the year as a result. Neuromodulation had an excellent quarter, growing 10% in Q4 and delivering 8% organic growth for the full year. Our Brain franchise grew low double digits on a full year basis, led by the Cartesia X and Illumina 3D offerings, providing the full benefit of directional stimulation also improving efficiency and programming time. The pain franchise continues to strengthen and grew high single digits on a full year basis. This strong growth is a result of a deliberate strategy to expand our pain portfolio to bring options to the physicians, patients, and hospitals we serve. This is further strengthened by the close of the NALU acquisition, adding peripheral nerve stimulation, PNS, to our portfolio. And within the quarter, we received expanded reimbursement to coverage for the intracept procedure, initiated a full market launch of the Intracept Edge Stylet designed to improve the treatment experience. Our cardiovascular segment delivered 16% growth operationally in organic in fourth quarter and 22% operationally and 21% organic on a full year basis. In January, we announced agreement to acquire Penumbra, which is expected to close in 26. Penumbra offers a highly differentiated portfolio that operates in high growth segments where Boston Scientific lacks offerings, including mechanical thrombectomy and neurovascular. The deal is both strategically and financially attractive to Boston Scientific and delivers significant value to patients and customers globally. Within cardiovascular, interventional cardiology therapy sales grew 10% in Q4 and 8% on a full-year basis. We're very proud of the Coronary Therapies franchise, delivering double-digit growth in both the quarter and full year as we have shifted our underlying business to high-growth markets. Agent DCV has been a standout performer all year with its differentiated clinical benefit and reimbursement support, lifting our drug-eluting technology growth to over 20% on a full-year basis. We continue to make progress in other areas of the portfolio, and we're pleased to have completed an enrollment in the FRACTURE trial, studying our seismic IVL system. We anticipate presenting data from this trial later this year and continue to expect this differentiated technology in the first half of 2017. In Q4, we did reorganize the reporting structure of our peripheral interventionist divisions, and we've aligned the peripheral vascular business led by Kat Jennings with interventional cardiology therapies to amplify both commercial and R&D opportunities across similar technologies while retaining customer call point focus. This new business unit will now be called interventional cardiology and vascular therapies, Interventional oncology and embolization will continue to lead by Peter Patterson as a standalone business, and this structure will enable focus on this broad and unique portfolio. The peripheral vascular business grew 6% organically in Q4, with operational growth at 15%. Our two-year growth in Q4 was driven by double-digit performance in TCAR, supported by the recent launch of EnRoute in China. Within the quarter, we completed our first cases in the U.S. with a seismic IVL system. We're excited to add this differentiated and complementary technology to our portfolio and expect to expand our indication to include below the knee in the second half of the year. In Venus, low double-digit fourth quarter growth was driven by a continuous strength of Varathena and ECOS. We're pleased to have the high PIPO, our clinical study studying ECOS versus standard of care anticoagulants, accepted as a late breaker at ACC to be presented on Saturday, March 28th. Our interventional oncology and embolization business grew 17% operationally and 12% organically in Q4 and achieved nearly $1 billion in a full year, 25 sales, operational growth of 16, and organic of 12. Q4 organic growth is driven by our category-leading embolization and cancer therapies portfolio with ongoing strength in cryoablation, which treats a broad number of cancer types. And as we look ahead, we expect to continue to outpace the underlying market growth supported by new product offerings, such as TheraSphere 360 Y90 management platform, which is a web-based platform to simplify the entire process for patients and physicians. Cardiac rhythm management sales grew 1% organically in both the Q4 and for the full year 25. On a full year basis, our diagnostics franchise grew high single digits and now represents nearly 20% of our overall CRM business. In core CRM, our high-voltage business grew low single digits, and our low-voltage business was flat in the quarter. We continue to see demand for our conduction system pacing offerings, and at Q4, we began enrollment in the synchronicity trial, evaluating left fungal branch pacing compared to conventional cardiac resynchronization therapy. So as we look to 2026, we anticipate that our growth will be closer to market in CRM over the course of the year, driven by the addition of our complimentary bio-envelope and ongoing momentum within our diagnostics business. Our Watchman business delivered an outstanding 29% growth in Q4 and on a full-year basis, exiting the year with strong double-digit growth across all major global markets. We are extremely pleased with the performance of this franchise, with above-market growth driven by the strong adoption of concomitant procedures. We have now treated more than 25,000 patients concomitantly with Watchman. As we look ahead, we continue to invest in our portfolio, clinical evidence, and driving efficiencies for physicians. In the quarter, we announced a strategic partnership with Siemens Healthineers to develop and commercialize their next-generation 4D ice catheter called AccuNav, intended to offer physicians an innovative imaging option for standalone watchmen or Farrow watch procedures. And last month, we completed enrollment in the Simplify clinical trial, evaluating two single-drug regimens, as post-procedural alternatives to dual antiplatelet therapy, with data expected in the second half of 26. Importantly, our champion trial, a large randomized trial studying Watchman Flex versus novel oral anticoagulation was accepted and will be presented as a late breaker at ECC on Saturday, March 28th. If positive, this data would support Watchman as a first-line therapy for stroke prevention as an alternative to OAC and would expand the number of indicated patients from approximately 5 million today to $20 million globally. We're extremely proud of our global EP performance in the quarter, with organic growth of 35% in the fourth quarter, resulting in 73% growth on a full-year basis. As we enter our third year in the U.S. with our market-leading PFA technology, we believe that approximately 70% of AF ablations in the U.S. in 25 were done with PFA, with that number closer to 50% globally. Within the quarter, global growth is driven by PFA catheter utilization supported by OPAL placements and a scaled, high-performing commercial organization. We continue to invest in our ecosystem approach to innovation and recently received approval and limited market release in both Europe and the U.S. for our FairPoint PFA catheter. NAV enables that can create focal lesions initially indicated for atrial flutter. We're also studying FairPoint in the rematch AF trial for use in redo procedures. with data expected in 2027. We're pleased to have initiated the optimized trial studying the Cortex OptiMap mapping technology with the Ferripulse PFA system, which is intended to address our unmet needs in identifying sources of AFib as an alternative to traditional anatomic approaches, a capability that may be particularly important to more complex patients. As we look to 2026, we anticipate that the EP market will grow approximately 15%, and we expect to outpace that market growth led by our differentiated PFA portfolio, ongoing expansion utilization of mapping systems, and continued adoption of PFA across the globe. Importantly, Boston Scientific is uniquely positioned with its leading AF solutions portfolio and commercial team in the value to physicians and patients with our concomitant FairWatch procedure, supporting operational efficiency and capacity. So in closing, I'm extremely proud of our team and our performance in 2025, and we believe that our 26 guidance, along with our 26 to 28 goals of sales growing 10% plus, adjusted operating margin expansion of 150 basis points, and leveraged double-digit EPS growth continue to be highly differentiated. We have an incredibly strong global team that's focused on advancing science for patients globally while delivering differentiated results today, setting us up for a strong 2026 and beyond. With that, I'll turn it over to John.