Boston Scientific Corporation

Good morning and welcome to the Boston Scientific second quarter 2026 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 1 on your telephone keypad. To withdraw your question, please press star then 2. 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 on today's call 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 Q2 2026 results, which included reconciliations of the non-GAAP measures used in this release. The release as well as the reconciliations of 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 investitures 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 the second half of 2026, subject to customary closing conditions. For more information, please refer to the Q2 financial and operating highlights deck, which may be found on the investor relations section of our website. On this call, all references to sales and revenue Our organic and relative growth is compared to the same quarter of prior year unless otherwise specified. This call contains forward-looking statements regarding, among other things, our financial performance, business plans, market expectations, 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 forward-looking statements. Factors that may cause such differences are discussed in our periodic reports and other filings with the SEC, including the risk factors 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 has filed the SEC registration statement on form S4 containing a proxy statement of Penumbra and a prospectus of Boston Scientific that contains important information about Penumbra, Boston Scientific, the proposed transaction, and related matters. At this point, I'll turn it over to Mike.

Thank you, Lauren. Thank you, everyone, for joining us today. Second quarter represented a solid quarter for Boston Scientific while we continued to navigate a dynamic environment. Total company organic sales grew 7% versus our guide of 5 to 7. driven by our interventional cardiology, endoscopy, and neuromodulation business. Q2 adjusted EPS of 86 cents grew 15% and exceeded the high end of guidance range of 82 to 84, driven primarily by some favorable tax results. Second quarter adjusted operating margin was 28.4%. Turning to our outlook, we now expect the second half to be more pressured than we originally anticipated. To that end, we are updating our full year 2026 guidance for organic revenue of 5% to 6% with our full year adjusted EPS now 328 to 332, representing growth of 7% to 8%. For third quarter, we're guiding to organic revenue growth of 3% to 5% and adjusted EPS of 80 to 82 cents. We update our guidance in Q1 with a goal of establishing the right baseline for the year. This update today is not the outcome we planned or what you've come to expect from us. Boston Scientific has had a strong record of growing above our weighted average market growth rates while delivering double-digit adjusted EPS growth. However, market conditions have evolved quickly and has been challenged to forecast effectively. Our guidance reduction is concentrated in two areas. First, Watchman, where the US market has slowed sharply and unexpectedly, primarily driven by compounding clinical evidence which has impacted referral patterns. In second EP, where we did not anticipate the degree of competitive share movement, we're now seeing in the US market. While we are sharpening our forecasting processes and taking action to address controllable headwinds, our underlying assumptions are that these dynamics continue in 27, resulting in revenue growth below our WAMGR and limited adjusted EPS growth. We expect our revenue and EPS growth Thank you for joining us today. This program will enable us to drive sustainable cost efficiencies while strategically reinvesting in our business to support a return to a strong adjusted EPS growth in 28 and beyond. So before I provide more information in regards to our second quarter performance and full year outlook, I want to reiterate my confidence in the future of Boston Scientific. While EP and Watchman have been tremendous growth drivers for the company, our other business units, which represent roughly 75% of our revenue, are expected to grow approximately 6% in the second half of the year, consistent with our historical performance over many quarters. Turning to our regional performance, the U.S. grew 6% on an operational basis driven by ICBT, interventional oncology, and neuromodulation. Europe, Middle East, Africa grew 4% on an operational basis driven by EP, vascular, and neuromod. And Asia-Pac grew 11% operationally, led by double-digit growth in Japan, China, and Korea. Across the region, performance was driven by our interventional cardiology, EP, and watchman businesses. Now some additional color on our business units. Neuromodulation sales grew 12% with double digit growth in both pain and brain. Within pain, growth was strong across the portfolio, including a full quarter of contribution from NALU, which performed well in second quarter with integration progressing nicely. In brain, we saw strong growth across the globe enabled by differentiated products, including our Cartesial leads, Illuminal programming, and DBS patient controller. Urology grew 1% this quarter, falling short of our expectations, driven by sickle neuromodulation, with the recovery in that business taking longer than we had anticipated. In stone management, we continue to see pressure in the market with key portfolio gaps that we aim to fill over the next three quarters. We now expect our full year urology growth to be flat to low single digits. Endoscopy sales grew 7% with strong results across our business, another quarter of better than anticipated performance from Axios. Within the quarter, we received FDA clearance for Revos, a first of its kind single device designed to consolidate multiple exchanges, enable physicians to streamline procedural steps while performing endoscopic ultrasound biliary drainage with positive feedback received on initial cases. Turning to cardiovascular, cardiovascular sales grew 8% in the quarter. Interventional cardiology and vascular therapies grew 12%. Our interventional cardiology business had another excellent quarter, growing 15% driven by double-digit growth in our coronary therapies with continuous strength in DCB, imaging, and complex PCI. In May, data from the fracture trial was presented as a late breaker at EuroPCR, achieving all endpoints with a seismic force coronary IVL catheter. demonstrating high rates of freedom from major adverse cardiac events of 30 days, as well as procedural success in patients with severely calcified coronary artery disease. We look forward to bringing Seismic Force to market in the first half of 27. Earlier this quarter, we announced our intent to potentially reenter the TAVR market through an investment in Mirus and their differentiated Siegel TAVR valve. The Siegel valve is currently enrolling in the STAR clinical trial and upon achievement of certain clinical and reg milestones, Boston Scientific has the option to acquire 100% of the TAVR assets. This valve has been built on years of research and proprietary technology. We believe that the distinctive design and impressive early clinical results of the Segal valve may set it apart from currently available technologies. We're making great progress in our Thrive trial enrollment and valued in the Tyvus Ultrasound System for renal deterioration and the treatment of hypertension and continue to anticipate bringing our technology to market in 28. As we look ahead, we believe that our IC business and ICBT broadly will be our strongest growth driver for Boston Scientific as we enter a number of high growth adjacent markets over the coming years. Our vascular therapies business grew 8% driven by broader adoption of Varathena in our drug looting portfolio. We're pleased with the performance of our seismic IVL launch with strong reception for the clinical differentiation of the device We continue to ramp supply. We remain excited about the opportunity to add the Penumbra team in a highly differentiated and complementary portfolio to Boston Scientific. We anticipate the deal will close in the second half of 26, subject to the receipt of the remaining regulatory clearances. Our interventional oncology and embolization business grew 12% driven by strong global growth with our broad offering of innovative technologies. Earlier this month, results from the PROACTIVE, which is a large prospective real-world study evaluating therosphere and the treatment of liver malignancies were published. The study demonstrated meaningful survival outcomes across all stages of disease, including patients with larger or more advanced tumors, further supporting the use of therosphere in these populations. Additionally, we received FDA clearance for TruSelect, which is a microcatheter that combines precise navigation, and Efficient Embolic Delivery. Cardiac rhythm management sales declined 2% in quarter. In core CRM, our low voltage business declined high single digits and our high voltage business declined mid single digits. Across our CM franchise, we are seeing competitive pressure with some portfolio gaps and we expect to make progress against these portfolio gaps with precedent with a new DFID platform to be launched in second half 2027. In Q2, our diagnostics franchise grew low double digits with continuous strength across our broad diagnostic portfolio. Overall, we anticipate that our CM growth will be flat on a full year basis with slight improvement in the second half of the year with contribution from Ellu Pro, which is now in full launch. Turning to Watchman, our goal here is to provide you with more details on the LAC market dynamics, the impact, and the expectations going forward. In second quarter, Watchman grew 4% with international growth of 18% and U.S. growth of 3%. The adoption of concomitant has been swift, and we now estimate that one-third of Watchman procedures in the U.S. are done concomitantly. In second quarter, concomitant procedures grew over 60% with sequential growth of 11% for the first quarter of 2026. For the remaining two-thirds of the procedures that are standalone, we saw low teens declines versus second quarter 2025. We believe the overall LAC market slowdown is driven by two main factors. First, there has been a significant amount of clinical evidence regarding the stroke risk in AF patients published over the last nine months and integrating this evidence into practice takes time, which is impacting patient identification and referral patterns.

Second, the focus

The fast adoption of concomitant procedures has created inefficiencies in the system with regards to operationalize both standalone and concomitant and allowing for sustained growth. With these key challenges understood, we are executing against three priorities to re-accelerate growth. First, we're driving greater clinical understanding through expanded physician education and evidence dissemination, which we expect will help referrers and implanters More easily identified patients appropriate for watchman. Second, we're also strategically investing in our commercial organization to increase account engagement and unlock growth across both concomitant and standalone segments. And finally, we're accelerating and direct to patient investments to stimulate demand, increase patient activation, and reach more patients in the state of care journey, in the start of care journey. Together, these actions are designed to increase the number of patients treated and improve the LAC market over time. So given these market dynamics we're seeing, we are updating our full year outlook for global watchman growth to be flat to low single digits with the second half of 2026 declining mid to high single digits on a year-over-year basis. In the U.S., we anticipate that Q3 sales will decline mid-single digits sequentially versus second quarter, resulting in flat full-year growth. We anticipate that year-over-year concomitant growth will materially slow in the second half due to higher comps from 2025. Our outlook does not anticipate any improvement in standalone procedural growth trends in the second half. We absolutely believe in this therapy and that Watchman is the best treatment for patients who can't, won't, or shouldn't take oral anticoagulation for stroke prevention. We expect that the actions we are taking today will support the LAAC market over time However, we are not assuming improved Watchman growth in 2027 until we see these dynamics actually change. Electrophysiology sales grew 9% to 3% growth in the U.S. and 23% internationally. Growth was driven by our innovative portfolio, including our continued expansion of our Opal mapping footprint, strong cathode utilization, and continued momentum with our Fairpoint launch. We continue to be pleased with the progress of expanding our Opal mapping footprint, supported by the Opal HDX 7.0 software release, which improved map quality. Our software releases every six months continue to enhance capabilities and support the expanding FerroPulse platform. We have seen significant growth in our EP business with our differentiated FerroPulse technology, enabling the transition to PFA faster than we anticipated. We believe that the US PFA revenue now makes up approximately 80% of the AFib market, which does limit our ability to offset some competitive pressures. Going forward, we have adjusted our market share assumptions to ensure a more realistic outlook given these developments, while our team continues to focus on bringing our leading PFA ecosystem to more physicians and their patients who may benefit from the therapy. In light of this, we now expect our second half 26 global growth for EEP to be flat. In the U.S., we anticipate our Q3 sales will sequentially decline mid-single digits versus second quarter, resulting in full-year growth of flat to low single digits. We expect continued strength internationally with full-year growth of approximately 20%. As we look ahead, we anticipate that our U.S. EP performance will improve in the second half of 2027 after the introduction of Ferrowave Ultra, which is a high-density mapping and ablation catheter, as well as our entry into the ice market. We expect further improvement in 2028 as Fairflex, our novel large focal high density map in oblate catheter becomes available. And importantly, earlier this month, we commenced enrollment in the pivotal Faradime trial, evaluating the safety and effectiveness of Fairflex mapping in PFA catheter for the treatment of patients with paroxysmal and persistent AF. So in closing, we're not satisfied with our near-term outlook. We believe we now have a clearer picture of the dynamics in our business and our updated guidance reflects a realistic view of the second half of 26. I remain confident in our long-term outlook for a number of reasons. Our performance is strong across many business units with interventional cardiology, neuromodulation, IO&E and vascular, all delivering double-digit growth through the first half of the year. We also have an impactful cadence of catalysts in 27. that we expect to drive a significant improvement to our growth profile in 2028 and beyond. And even as we work through near-term top-line pressures, we continue to be disciplined with our spending while investing in future growth drivers to ensure a return to meaningful adjusted operating margin expansion and adjusted EPS growth in 2028 and beyond. So while we continue to navigate current challenges, our foundation, values, and purpose haven't changed. Boston Scientific focuses on improving patient lives through a relentless pursuit of innovation. We are confident that the qualities that have defined this company over many years will continue to shape our future as we evolve and build on those strengths with a highly skilled global team and a winning spirit. So with that, I'll hand it over to John for more commentary.

Thanks, Mike. Second quarter consolidated revenue of $5,442,000,000 represents 7.5% reported growth versus second quarter 2025 and includes a 50 basis point tailwind from foreign exchange, which was in line with our expectations. Excluding this $28 million foreign exchange tailwind, operational revenue growth was 7.0% in the quarter. Organic revenue growth was also 7.0%. versus our second quarter guidance range of 5% to 7%. Second quarter 2026, adjusted earnings per share of 86 cents grew 15% versus 2025, exceeding the high end of our guidance range of 82 cents to 84 cents, primarily driven by favorable discrete tax items. Adjusted gross margin for the second quarter was 70.3%, which represented an 80 basis point increase versus the second quarter of 2025. Second quarter adjusted operating margin was 28.4%, which was in line with expectations and represented 70 basis points of expansion versus the second quarter of 2025. On a gap basis, second quarter operating margin was 21.6%. These results include an approximate $75 million charge related to certain product liability cases, as well as the recognition of approximately $80 million of refunds on previously paid IEPA tariffs representing substantially all the refunds that we expect to receive. Moving to below the line, second quarter adjusted interest and other expenses totaled $120 million, which was slightly unfavorable to expectations driven by FX volatility and certain unhedged currencies. On an adjusted basis, our tax rate for the second quarter was 10.4%. which was better than expected and includes favorable discrete tax items. Fully diluted weighted average shares outstanding ended at $1,475,000 in the second quarter reflecting the repurchase of approximately 40 million shares under our previously announced accelerated share repurchase agreement which reduced our share count more than initially anticipated. As a result, we now expect full year 2026 weighted average shares outstanding to be approximately $1,000,000 Thank you all for joining us today. and our gross debt leverage ratio was 2.0 times. Our capital allocation approach is disciplined and growth-oriented. Our top priorities remain strategic tuck-in M&A and opportunistic share repurchases, while we continue to evaluate and fund the opportunities that we believe will create the greatest long-term value for our shareholders. Consistent with that framework, we announced a $1.5 billion investment in MIRAS, which includes an exclusive option to acquire its TAVR business, and we completed our previously announced $2 billion accelerated share repurchase program. In addition, we look forward to the close of Penumbra in the second half, which we believe will strengthen our long-term growth profile through its innovative portfolio and strong strategic fit within our cardiovascular business. I'll now walk through guidance for the third quarter and full year 2026. We now expect full year 2026 reported revenue growth to be in a range of 5.5% to 6.5% versus 2025. Excluding an approximate 50 basis point tailwind from foreign exchange based on current rates, we expect full year 2026 operational and organic growth to be in a range of 5% to 6%. We believe this guidance reflects a comprehensive and realistic view of our end market dynamics. For the second half of 2026, this outlook contemplates approximately flat growth in our global electrophysiology business, A mid to high single digit decline in our global watchman business and a steady base business growing approximately 6% consistent with our historical performance over many quarters. We expect third quarter 2026 reported revenue growth to be in a range of 3% to 5% versus third quarter 2025. We anticipate no impact from foreign exchange based on current rates and therefore expect third quarter 2026 operational and organic growth to also be in a range of 3% to 5%. We expect full year 2026 adjusted gross margin to be below full year 2025, reflecting a less favorable product mix than previously anticipated, primarily driven by our lower sales outlook for Watchman and Electrophysiology. Additionally, we continue to make incremental investments in our global supply chain and quality systems. We now expect to expand full year 2026 adjusted operating margin by zero to 25 basis points. Despite pressure on margins this year, we remain disciplined on spending while continuing to invest in our highest priority growth opportunities supported by our recently announced restructuring program. We anticipate this comprehensive company-wide program will deliver run rate savings of approximately $500 million exiting 2029 in the areas of supply chain optimization, targeted functional transformation, org structure evolution, as well as focused reductions in indirect spending to drive sustained cost efficiencies. We expect to realize over half of our run rate savings and incur over half of our program spend exiting 2027. This will position the company to return to meaningful operating margin expansion and strong adjusted EPS growth in 2028 and beyond. We now expect full year 2026 adjusted below the line expense to be approximately $485 million, reflecting the financing impact associated with our strategic investment in MIRAS in our accelerated share repurchase agreement. Under current legislation, including enacted laws and issued guidance, we now expect a full year 2026 adjusted tax rate of approximately 11.5%. We expect full year 2026 adjusted earnings per share to be in a range of $3.28 to $3.32 representing 7% to 8% growth versus 2025, including an approximate 5 cent headwind from foreign exchange. We expect third quarter adjusted earnings per share to be in a range of 80 cents to 82 cents. In closing, I'm confident in the long-term outlook for the company and our team's ability to navigate the current environment. While the challenges we face today will weigh on near-term financial performance, We are taking decisive actions to sharpen our organizational focus, adjust our cost structure, and position the business for the future. We remain focused on executing our full year 2026 guidance of 5% to 6% organic revenue growth, 0 to 25 basis points of adjusted operating margin expansion, and 7% to 8% adjusted earnings per share growth. We remain confident that the actions we are taking today will position Boston Scientific to return to differentiate financial performance in 2028 and beyond. For more information, please check our investor relations website for second quarter 2026 financial and operational highlights, which outlines more details on second quarter results in 2026 guidance. And with that, I'll turn it back to Lauren, who will moderate the Q&A.

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

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

Great. Good morning and thank you for taking the question. Wanted to ask, you know, we're coming off a beat in second quarter here, and I realize there have been a number of downward revisions over the past few quarters as some of the end markets have been moving. How do you frame this latest guidance update, particularly with respect to EP and Watchman? Is this based on a level of conservatism where you can eliminate, you know, hopefully any future negative revisions? Or is this based more on trends you're seeing exiting second quarter and so far into third quarter? And any early commentary you could give on 2027? I believe buy side is settling out somewhere around 5% organic growth coming into today. How does that sound to you going into second half of this year? Thanks a lot.

Thanks, Robbie. Yeah, we are pleased with our second quarter results. And we did mention in the script that basically 75% of our business continues to grow 6% consistent with 2025. And we anticipate that set of businesses that are 75% will improve over the coming years. as we strengthen our urology business, launch CRM and continued momentum there. So 75% of the business kind of growing 6% and waiting for that to improve in the future. The challenge, as you know, has been in the two areas, EP and Watchman, that had hyper growth, unusually differentiated growth in 24 and 25. And now we expect more pressure in 26 and 27. And specifically EP, we see that rebounding in second half 27. and we expect to get back to kind of at market or above market growth in EP in 28. So when you look at the second half, really it's the EP and Watchman is driving the bulk of the guidance reduction and we're clearly not pleased with this change. It's not the outcome that we planned for, it's not what you expect from us and I do take responsibility for the guidance reduction and it's primarily driven by EP and Watchman. As I mentioned in the script, On the Watchman side itself, we do expect second half declines globally in the mid single digit to high single digit results. And that is based on a trend that we've seen that we have not seen uptick in the first half of the year. So we think that's the appropriate prudent conservative guide for Watchman based on the existing market that we're seeing. Now we're assuming in the Watchman guide that despite the efforts we are making, which we aim to improve, that those do not benefit the existing Watchman market. So if the three things that we laid out today continue to enhance and if labeling occurs in 2027, there obviously could be some upside to those numbers. But for guidance purposes, we're assuming the existing market that we're seeing today does not change. And that market change is very dramatic and pretty sudden. over the past six months. So the Watchmen is the biggest piece of it. And secondly, on EP, we're overall on EP, we're actually quite pleased with our performance in the quarter. And we're quite pleased with the portfolio roadmap that we have with Altra being launched kind of this time next year, the entry into ICE, and the Altra platform just initiating its IDE. So that team is executing well. But with specific to EP, We did under call the competitive pressures in the US in terms of share taking. We continue to be the PFA leader, but our share has come down. And the second attribute there is the PFA market has really accelerated to about 80, 85% of the market share. We don't see that in Europe and Asia where we continue to grow about 20% of our EP business. So the second half guide down is primarily driven by Watchman and EP for the reasons stated. In 2027, to be appropriately conservative again, we would say that in 2027, we aim to do better than our guide for the second half of 2026. So assuming our 2027, we're being appropriately conservative with our Watchman market call, and we aim to get back to stronger performance in EP, and we're confident that 75% of the business, which is growing at 6%, will improve over time. with urology and CRM specifically. I hope that answered some of your questions.

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

Hey, good morning. Thanks for taking the question. Mike, regarding Watchmen, I think you said mid to high single digit decline in the second half of 26. So when you say no improvement in 27, are you referring to the full year guide of flat to low single digit growth or second half guidance? And how are you thinking about new competition next year, the 20% cut to the position fee? And just lastly, do you still expect the first line label based on the three-year champion data? Thank you.

Yeah, the... Again, on EP, we under-called the share. The Watchmen, we're not looking for a pass, but it has changed dramatically over the past six months. So when we look at second half, our assumption for them, we're talking about the market here, because we're about 91% share of the market. We do think the market declines that high single-digit range. It's primarily based on high comps with concomitants. And as I mentioned, declining So that's the call for second half. In terms of the market in 2027, we obviously aim for that to get better based on educating the referral community, the clinical messaging, expanded commercial coverage, and increase in DTP. But for now, we think it's prudent to assume that the 2027 market is consistent with the trends that we're seeing now. and we'll be happy to change that call once we see improvement in the Watchmen market if that occurs. As you mentioned, we do anticipate a competitor at some point in 2027. We have high confidence that Watchmen will continue to be clearly the market leader, but likely we'll have some share erosion in 2027 with the introduction of a new competitor. So Watchmen will be absent a change in the market which we have not assumed in this guidance despite the efforts that we are taking. We expect Watchmen will be difficult in 2027.

Thank you. The next question comes from Joanne Wench with Citibank. Please go ahead.

Good morning and thank you for taking the question. If I heard you correctly, 2026 revenue growth of 5% to 6% organic is probably a good starting place to think about 2027 and then reaccelerating in 2028. Could you sort of confirm that's the right parameters to think about? And then if you could comment on what the new products are that you think will be the main drivers as we think about going into 2028? Thank you.

Yeah, so it's We gave our guide for 26. It's difficult to give you a precise guide, which we won't in 2027 until January. But for now, we at least want to give a framework that we aim to improve 2027 versus our second half 2026 guidance. And again, that's kind of assuming that the Watchman markets don't change, which we obviously aim for them to improve. When you look to the 2028 and beyond, so I guess I would say, first of all, we are taking action. The company has delivered very, very high performance over many, many years, the last four or five years. We had a decent first half of this year, growing 8% top line, 10% EPS growth for the first half. And we've given our guide for 2026. We do expect a challenging 2027. But if I could just touch on the future there in 2028 and beyond. So we are restructuring this year to help take some costs out. But why we're so confident in improvement as you point to the second half of 27 and 28 is one, the WAM groups that we compete in are 78%. We have a number of businesses now that are growing double digits. We expect that 75% of our business that's growing 6% will improve over the coming two years. In addition to that, Based on investments that we've made over the past two or three years, we'll be entering seven new meaningful launches that exceed about a $25 billion TAM in 2028. And those launches basically are highlighted in our press release there. Our IVL, hypertension, the closing of Penumbra, entry into ice imaging, fairway of ultra, and if the Meyers clinical trial continues to go as planned, the future acquisition of Meyers as well as the additional circulatory supports. So we really see the ICVTX sector being a significant growth driver for the company in 28, 29, 30. And we expect that core 75% of our business to strengthen over that time period. And then on top of that, you layer in seven meaningful platforms that exceed about a $25 billion TAM market opportunity. In addition to that, we're confident that the EP business will get back to at market or beyond growth in 2028 and improve nicely in second half 2027. The Watchman market's tougher to call. We'll keep you as updated as we can, but we feel like the combination of all those elements will drive us to higher high performance and peer leading performance again in 28 and beyond.

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

Good morning. Good morning. I have two questions. First, my first question is I was hoping you could expand on your restructuring comments. We all I read the release, the AK, earlier this week, and you spoke about some of the benefits and the efficiencies in the timeframe, but could you talk a little bit more about the impact as we think about the next several years on the P&L? Where will we see it? To what extent are you going to reinvest some of those savings, which I think with some of the language in the AK, where are you going to reinvest them in your growth initiatives? How do we think about that?

Yeah, thanks, Rick, for the question. It's John. Yeah, so comprehensive enterprise-wide program that we're initiating. So goal of driving better speed and cost efficiency. targeting $500 million of savings within the next three years. Based off of the phasing of that program, I would expect to realize over half of those savings exiting 2027. So we'll start to see those savings come in in 2027. And that will position us to drive more meaningful operating margin expansion and strong EPS growth in 2028 and beyond, as Mike has indicated. as well as continuing to fully fund those high growth opportunities. It might just tick through several of those, but we have them across the businesses. So broad program, as far as where we'll see those savings, I'd expect to see them materialize in S&A first and then COGS later over time. So I feel like it's the right program for Boston Scientific given where we are and will help position us to return to strong growth in meaningful EPS expansion and growth in 20 and beyond.

Thank you. The next question comes from Michael Pollard with Wolf Research. Please go ahead.

Hey, good morning. Thank you for taking the question. Follow up on Watchman and the topic of compounding clinical evidence impacting referral patterns. I think we've all seen these studies, obviously, closure champion ocean alone. The question is, what can you do to change that? Is it a new round of clinical evidence generation? Is it the form factor innovation? Just talk to me about the fixed playbook for those shifting referral patterns for Watchmen. Thank you.

Dr. Stein, if you want to take that one.

Yeah, yeah, sure, Mike. And again, I think it's pretty clear that there was a much bigger impact than we anticipated dating back to last November, the release of ocean closure. And then I think, you know, some of the confusion around Champion certainly hasn't hasn't helped with that. We have seen, for instance, a much greater use of this so-called ablate and wait strategy in patients with a CHADS-VASc score of three following ablation. And while concomitant is continuing to grow, that has affected the growth trajectory of concomitant. When we look at standalone watchman procedures, what we're really seeing more than anything else is a drop-off in referrals for the so-called soft indications for the device. Patients who really just prefer not to be on an oral anticoagulant without having a really well-defined reason to seek an alternative. And I think the solution is sort of everything that you listed and everything that Mike listed that we're doing. It's continuing to educate on the totality of clinical data to come back to what What Mike said in the prepared remarks, that this is still the only proven and the best option for patients who can't or who won't or who shouldn't be on long-term blood thinners. I remind all of you that somewhere between 30% and 40% of patients who need stroke prevention and atrial fibrillation currently don't get anything. So there's, again, a very sizable gap. and many more. And I think it's important to note that there's a lot of unmet medical need that the Watchman device serves. In addition to continuing our education on the current data, there's more data to come. I'd highlight our simplified trial, which we expect to be released second half of this year, which, you know, if it meets its endpoints, could help simplify the drug regimen post-implant, We've talked about continuing to iterate our device platform with the upcoming clinical trial evaluating the Watchman Elite device. And again, we continue to believe that the data from Champion and the overall totality of the clinical data merit an update to our labeling from FDA and merit a reconsideration of the CMS national coverage decision.

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

Hi, everybody. I wanted to ask about the limited EPS growth coming in 2027. Is that flat EPS? Is that EPS growth kind of in line with the 3% revenue growth in 2027? Or is there some leverage still? And then 2028, do we get back to double digit growth? and maybe also maybe address why the lack of EPS growth in 27 is just a lack of higher margin revenue growth or needing to invest more in growth drivers.

Yeah, thanks, Travis. We'll get into much more detail on 27 expectations as we always do on our Q4 earnings call. But based on what we're assuming today, and you heard Mike outline Watchman and EP Dynamics. We expect those to extend into 2027. We expect limited EPS growth in 2027 and improving op margins will be a challenge. That is due to gross margin pressure from continued softness in Watchman and EP, as well as the initial impacts of Penumbra. Anticipate that will close in the second half of this year. Excited to add Penumbra, but as we've previously disclosed, expect Penumbra to be slightly dilutive to our op margins and EPS in 2026. Now, again, we are taking action to ensure a return to meaningful operating margin expansion and strong EPS growth. We'll maintain a disciplined approach to spending across Boston Scientific. Again, we'll continue to fully fund those areas of the portfolio that we see Thank you. The next question comes from Matt Taylor with Jefferies. Please go ahead.

Hi, thanks for taking the question. I wanted to see if you could be a little bit more specific on 2027 assumptions for EP growth. You talked a little bit about the Watchman outlook. Could you discuss EP as well? And I guess when do you expect some of these pipeline contributions to help the EP growth outlook?

Sure, yeah, I mentioned it a little bit earlier. Really pleased with the momentum and execution of our EP, R&D, and innovation team, broadly speaking. And as we know, we have FerroPoint that we're launching or launched this year. But the big meaningful launch is that will widen our ecosystem and widen the number of patients that we can treat and provide a more full, comprehensive solution beyond current FerroPulse. really started in 2027 where we launched our next generation FerroPulse alter device, which we anticipate launching right around this time next year at scale. And then entry into the, you know, really the greater than a billion dollars or so growing quickly ice market will happen again in 2027 where we're not currently playing. So those two launches will help us considerably as we look at second half of 2027. So we basically see the first half of 27 looking like similar dynamics that we see today in second half 26. But we do see improvement in 2027. And then in 2028, we have our alter device, which is now a clinical trial, which we think is a breakthrough device for us, which will again widen the patient indication and kind of full service solution that we can offer an EP customer. So we're very confident in 2028 getting to at or above market growth again in EP based on that portfolio of Ultra Ice and Fairflex.

Thank you. The next question comes from Marie Thibault with BTIG. Please go ahead.

Hi, good morning. Thanks for taking the questions. I wanted to ask a question here on one of the bright spots for your business, which has been The ICVETX segment. What are the products that are doing best? What are sort of the catalysts to look for in that business? And how can we sort of have confidence in the sustainability of some of the, you know, above WAMGR growth that you've been showing there? Thanks for taking the question.

Yeah, we think that this will be our largest set of businesses in the company in the future here. If you look at interventional cardiology, vascular, ideally closed by the end of this year, addition of Penumbra. And the adjacencies that we may enter, I talked about the Mirviss TAVR valve in my script. So there's just numerous, first of all, they have excellent momentum now. And that's being driven by our complex PCI portfolio, our imaging capabilities, and our agent drug-coated balloon, which we're looking to continue to widen indication expansions with our current trial. So that business is performing at a very high level. And then as we look over the years here, we're excited to enter the IVL market, which is a multi-billion dollar market in 2027 and coronary. We're making a lot of momentum on our hypertension enrollment in our trial. And we expect to finish that hopefully by the end of this year or first quarter of 2028. And so we expect to launch that product no later than 2028, which we think will be very nice timing based on potential enhancements that continue to need to be made in the reimbursement landscape. And then we'll have the closing of Penumbra. So there's just a number of large adjacencies that we're moving into in that sector, and they're riding continued momentum. And as John said, with this restructuring, We are clearly protecting these high growth markets that allow us to enable to grow to high end performance again in 20 and beyond.

Thank you. The next question comes from Jason Bedford with Raymond James. Please go ahead.

Good morning. I may have missed this, but in answering an earlier question, but What do you think your WAMGR is today, just given the slowdown in the LAAC market? And then just a quick one, what can be done in sacral neuromodulation? I'm just curious, is it more market or share related? Thanks.

Yeah, we would estimate our WAMGR is probably seven to eight. So tick down probably a point. Keep in mind, Watchman is a great product for us, but it's less than 10% of our revenue. So we would call our WAMGR in the 7% to 8% range, and hopefully that'll enhance over time based on the closing of Penumbra and the potential entry in some of these other markets that I mentioned. Neurology, you know, we're frustrated with our results year to date. We do anticipate kind of flattish growth, maybe up 1% for the full year. And that business, we're confident, and we've been saying this for a while, but we're confident that's going to improve in 2027. We have three key launches in our core stone portfolio over the coming two or three quarters. We're expecting to get closer to at-market growth in 2027 in that area. And sacral neuromodulation, as we've discussed at numerous calls, we had a significant kind of disruption of the commercial capabilities Those gaps have been filled. We've trained and hired and are now in the field activating a number of new clinical and sales reps. We anticipate that business should get better as the quarters progress here in 26 and with a more mature team in 2027. We aim for our urology business to get closer to their urology market growth rate in 2027. Thank you.

I understand that there is time for one last questioner that will come from Josh Jennings with TD Cowan. Please go ahead.

Hi, good morning. Thanks for the question. I wanted to follow up on Jason's webinar. Does that hold for 2027? And just hoping for an updated outlook on the USEP market growth. And does Boston expect a fair wave to maintain leadership in the AFib ablation catheter segment in front of the fair wave ultra launch? And just an update on how Boston's doing in the non-ablation catheter segments of the USEP market. Sorry, multi-layered, but appreciate you taking it.

I think the 7-8 call for the Whamgers is, I think, the appropriate number. In terms of PFA leadership, we have it now. We have lost some share in the U.S. We continue to do extremely well in Europe and Asia-Pac where the PFA penetration is not quite as high. And we've seen all the competitive launches there. But we do continue to expect some competitive launches. We'll impact performance in second half 26, which is the guide. And then we see that continued trend occurring through first half 27. And that's when we launched our next generation Ultra and eventually our ICE device. So we expect that business to strengthen in second half 27 and in 28.

Thank you. This concludes our question and answer session. I would like to turn the conference back over to Lauren Tangler for any closing remarks.

Thanks for joining us today. We appreciate your interest in Boston Scientific. If we were unable to get to your question or you have any additional follow-ups, please don't hesitate to reach out to the investor relations team. Before you disconnect, Drew will give you all of the pertinent details for the replay. Thank you, everyone.

Thank you. Please note, a recording will be available in one hour by dialing either 1-877-344-7529 or 1-412-317-0088 using replay code 1147211 until August 5th, 2026 at 1159 PM Eastern Time. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.