Boston Scientific Corporation

Good morning and welcome to the Boston Scientific first quarter 2026 earnings call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Lauren Tengler, Vice President, Investor Relations. Please go ahead.

Thank you, Bailey, and thanks to everyone for joining us. With me today are Mike Mahoney, Chairman and Chief Executive Officer, 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 Q1 2026 results, which included reconciliations of the non-GAAP measures used in this release. The release, as well as reconciliations of non-GAAP measures used in today's call, can be found on the Investor Relations section of the 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 is less than a full period of comparable net sales. Guidance excludes the previously announced agreement to acquire Penumbra, which is expected to close in 2026, subject to customary closing conditions. For more information, please refer to the Q1 Financial and Operating Highlights Dex, 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 and 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 of 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 a proposed transaction with Penumbra. Boston Scientific has filed with SEC a registration statement on Form S-4 containing a proxy statement of Penumbra and a prospectus of Boston Scientific that contains important information about Penumbra, Boston Scientific, the proposed transactions, and related matters. At this point, I'll turn it over to Mike.

Thanks, Lauren, and thank you to everyone for joining us today. First quarter represented a solid quarter for Boston Scientific, with total company organic sales growth of 9.4% versus our guidance range of 8.5% to 10%. First quarter adjusted EPS of $0.80 through 6%, achieving a high-end of our guidance range of $0.78 to $0.80. And Q1 adjusted operating margin was 28%. Turning to our outlook, 2026 has proven to be a more challenging year than we initially expected. And to that end, we are guiding to organic growth of 5% to 7% for second quarter and reducing our full-year guidance to 6.5% to 8%, reflecting unanticipated headwinds and changing business patterns. that I'll cover in more detail on this call. Our second quarter 26 adjusted EPS guide is 82% to 84%, and we now expect our full year adjusted EPS to be 334% to 341%, representing growth of 9% to 11%. I and our company does not take this change lightly, as I and Boston Scientific take great pride in ourselves in consistently executing against the guidance and goals we provide. Importantly, we remain convicted in the future of Boston Scientific. We have a strong global team committed to high performance, and we continue to invest in key new and existing markets, which we believe will enable us to deliver on our fundamental goal of driving differentiated performance over the LRP. I'll now provide some additional highlights of our first quarter, along with some comments on our outlook. Regionally and on an operational basis, the U.S. grew 11% with double-digit growth in five out of our eight business units. Europe and Middle East Africa grew 1% operationally. Growth in the quarter was driven by Ferropulse, coronary and vascular therapies, and Neuromod, offset by the discontinuation of Acryx and Polarex, largely impacting the immediate region. Last year, we did announce our intent to discontinue the Polarex cryocatheter, but have accelerated that timing given some recent safety events and the availability of non-thermal ablation technologies. As we look forward, we expect that growth in demand will continue to improve with the annualization of the accurate discontinuation in 2Q and ongoing momentum from Farrah Falls, Watchman, and other key products. AsiaPAC delivered a strong quarter and grew 12% operationally, led by double-digit growth in a number of countries, including Japan and China. First quarter growth in Japan was led by our differentiated PFA ecosystem with Opal, Fairview, and Farrah Falls, as well as strong reception of Watchman FlexPro. Within the quarter, we're pleased to have received PMDA approval for the de novo indication of our coronary drug-coded blue agent ECB, expanding the patient population eligible for this differentiated technology. China also delivered strong growth, inclusive of the impact from the BVP, led by our interventional cardiology portfolio, particularly our imaging technologies. We are making consistent progress against our peripheral skulls in a competitive market in China, and received NMPA approval within the quarter for Opal HDX mapping system with Fairview, further building out the PFA platform. Now some commentary on our business units. I'll start with urology. Urology did have a difficult quarter in Q1 as sales grew 1% organically, falling short of our expectations, driven primarily by the stone management and sacral neuromodulation businesses. Within Stone, underperformance is driven by China VVP, as well as some key product gaps in the CoreStone portfolio. We expect the recent FDA approval for Insurace to unlock value within our StoneSmart ecosystem alongside LithoView Elite, and we also anticipate launching additional new products in 2026, including a slim urethroscope later this year. Our cyclone modulation business continues to see impact on commercial model disruptions. And importantly, within first quarter, we have hired and trained a significant number of new sales and clinical reps. And we do anticipate improvement in this public health franchise throughout the year as the S&M commercial organization capabilities stabilize, along with the addition of equine tubular nerve stem with the closure of Valencia Technologies in April. We expect our urology performance to improve throughout the year. However, we now expect our full-year uro growth to be low to mid-single digits in 2026. Endoscopy sales grew 7% organically, with strong results across the business and better than anticipated performance from Axios, as we were able to ramp supply and available product sizes. As we look to the second quarter, we will continue to see some impact from Axios, while also navigating other transient supply chain disruptions in endoscopy. Importantly, we expect improvement in the second half of 2026, as the underlying business is very strong and we anticipate resolution of the supply chain issues. Neuromodulation at a strong quarter with organic sales growing 15%, with our comprehensive portfolio growing low double digits, excluding the impacts from ALA. Our pain business grew mid-teens, inclusive of a strong quarter from ALA, as I mentioned, which closed at the end of January. Intercept continues to perform well, supported by compelling FIGER data demonstrating the long-term efficacy and cost-effectiveness of this treatment for chronic low back pain. In DBS, we saw continued adoption of the Cartesia X leads, and accelerating uptake of the Illumina 3D programming algorithm in the U.S. Cardiovascular-delivered organic sales grew with 11%. Within those businesses, we'll start with ICDT. Interventional cardiology vascular therapies grew organic sales 8%. This business grew 9% organically, driven by double-digit growth in our coronary therapies franchise, with strength in agent and ongoing momentum with our imaging portfolios. And earlier this year, we completed enrollment in our fracture trial, studying the seismic IVL device in coronary arteries, with data to be presented at EuroPCR on May 19th. We continue to expect launch in the US in the first half of 27. Our vascular therapies business had a nice quarter, growing 7% organically, driven by double-digit growth in TCAR and Barathena. And this is offset by a large VBP impact on the arterial business in China. which is expected to annualize in second quarter. We expanded our launch with our seismic peripheral IVL for above the knee with positive physician feedback on performance. We expect to ramp our manufacturing supply chain over the course of the year and continue to anticipate launching our below-the-knee indication in the second half. In first quarter, positive data from HyPyto was presented at ECC, evaluating ECOS plus anticoagulation versus anticoagulation alone. providing new clinical evidence that can help physicians make more informed treatment decisions for patients with acute pulmonary embolism. We remain excited about the opportunity to have the Penumbra team and highly differentiate portfolios at Boston Scientific. We anticipate that the deal will close on the 2nd of April 26th, subject to the Penumbra shoulder vote on May 6th, and the receipt of the remaining obligatory clearances. Our interventional oncology business had a nice quarter with organic cells growing 15% driven by our broad offering of cancer therapy technologies. Within the quarter, we received FDA clearance of any day dosing and initiated a limited market release. Any day dosing is enabled by the TheraSphere 360 Y90 management platform, allowing physicians to schedule treatments on more days of the week and offering more streamlined ordering and operational efficiencies. Cardiac rhythm management sales declined 3% in the quarter. Our low-voltage business saw some impact in the quarter as we navigated our physician advisory and came up against a tough comp within our first quarter 2025 change-outs. On the high-voltage side, we saw some impact from the Middle East conflict impacting this particular business. In the first quarter, our diagnostic franchise grew low-level digits with continuous strength across our broad diagnostic portfolio. And overall, we anticipate that our CRM business will return to growth in the second quarter and expect low single-digit growth of the year, supported by our full launch of the loop row in second quarter within the U.S. Turning to Watchman, Watchman grew 19% organically in first quarter, which was below our expectations, with pressure on volumes in the U.S. as the quarter progressed. We believe this reflects the annualization of the initial concomitant adoption tailwind and a softening in standalone Watchman cases driven by hospital capacity, related procedure prioritization, the evolving reimbursement dynamics. Importantly, we remain focused on expanding physician and patient education within the approximately 5 million patient-indicated population today. We expect data from Champion to support a return to 20% market growth over the LRP. In late March, Champion data was presented as a late-breaker at ECC with the trial achieving all primary and secondary endpoints, reinforcing the safety and efficacy of watchmen, highlighting the high burden of clinically relevant bleeding on oral anticoagulation. As a next step, in addition to submitting for a label update, we are working with medical societies to support consideration of changes to LAAT guidelines using the totality of Watchman clinical evidence ahead of any update to the national coverage determination. We also have additional data being presented to HRS this weekend that championed post-ablation analysis which will provide further insights on this patient population. Across the globe, the results from chanting provide important evidence to support the expansion of the patient population eligible for Watchmen over time at large markets, including the US, Japan, China, and Europe. For full year 26, we now expect global Watchmen growth to be mid-teens, with low to mid-teens in the US. In the US, while concomitant demand continues to strengthen, We anticipate overall watchman growth to decelerate with tougher comps and expect standalone watchman procedures to improve over the course of the year as it takes time for the totality of this clinical evidence to translate into clinical practice. We remain very confident in the long-term outlook of the business, supported by great clinical evidence, market development, and new product innovation. Turning to EP, organic sales grew 22%, 18% in the U.S. and 30% internationally. International growth is driven by our innovative portfolio, including our expanded opal mapping footprint and catheter utilization, with strong double-digit PFA growth in Europe, in a highly competitive environment supported by the launch of Fairpoint. U.S. growth is driven by continued expansion of the opal, strong catheter utilization in Fairpoint, our PFA focal point catheter, which is performing ahead of our expectations and has moved into full launch. Looking ahead, we now expect our global EP business to grow approximately 10% in 2026. And within the U.S., we are updating our full-year expected growth to be in the mid-single-digit range, with continued strength internationally at plus 20%, inclusive of full-year impact of approximately $35 million from the discontinuation of PolarX. This outlook is a change from previous commentary, but we feel it's prudent and reflects ongoing competitive dynamics offset by strength in our evolving FerroPulse PFA catheter and mapping portfolio. We are highly confident in our ability to maintain our leadership position in PFA, both in the U.S. and internationally, through investment in commercial capabilities, ongoing clinical evidence, our expanding mapping footprint, and an impressive next-generation catheter launches, including our Fairway of Ultra in the first half of 2017. And this weekend, Avangarder studied FerriPulse, a new patient population of drug-naive persistent AF patients, will be presented as a late breaker at HRS. Additionally, we will see data from our person-human elevate PS study studying FerriPlex, which is our large focal mass in a blade catheter for more complex arrhythmias. We anticipate initiating our IDE later this year and continue to expect launching FerriPlex in the U.S. in 2028. So in closing, I'd like to share again my confidence in our team and the future of Boston Scientific. While this year has proven to be more challenging than we anticipated, we believe Boston Scientific is competing in the right markets. With a WAN here of approximately 8%, we continue to be uniquely positioned to drive differentiated top-line growth. We will continue to do this through strategic internal innovation, clinical evidence, external VC and M&A investments, along with a disciplined approach to expanding operating margins. all of which have resulted in our track record of delivering double-digit adjusted EPS growth. I'm very grateful to our talented team of global employees who work every day to advance science for life and have confidence in the sustainability of our top-tier financial performance. With that, I'll hand it over to John.