Boston Scientific Corporation (BSX) Earnings Call Transcript & Summary

Good morning, everyone. I'm Robbie Marcus, the medical device analyst here at JPMorgan. I'm very happy to kick off the medical device track for day 2 of the conference. Happy to introduce Mike Mahoney, Chairman and CEO of Boston Scientific. Mike?

Thanks, Robbie. Good morning, everyone. I forgot my clicker. Good morning, everyone. Thank you for your interest in Boston Scientific and for being here bright and early in the morning. And we look forward to sharing with you the exciting future that this company has and we'll try to do this in 25 minutes this year. Here are our safe harbor and forward-looking statements that I won't read through but you can see. And also, the IR team has done a nice job of laying out our regulatory disclaimers and we have this pretty comprehensive deck that you'll see in the webcast materials. And also, many of you may have seen that we did announce fourth quarter sales as well as our GAAP EPS and adjusted EPS in the press release, and I'll highlight that in the presentation. And also, you'll see our financial disclaimers here. You may see slides like this throughout the conference. They may seem redundant, but this is critical to Boston Scientific. We take employee engagement very seriously. We think it's a differentiator for the company to engage our employees closely with our patients. We impacted over 35 million patients in 2019 and we bring these patient stories and real-life experiences to our employee base. I won't go through all our values of the company but they remain consistent year-to-year. And we modify our operations, strategic imperatives throughout the years but these really stayed bedrock for the company and help knit our regions and divisions together, and they really help engage our employees. So I think the company does a really nice job in executing this area. I think, importantly, for this conference, for our leadership team and our employee base, we think about the next chapter of Boston Scientific, call it years '20 through '22, similar to what we talked about at Investor Day. We're quite bullish that the next 3 years will be better than the past 3 years at our company. And so it always starts with people and culture at Boston Scientific. We have a highly engaged and driven, a very experienced leadership team, tremendous depth of leaders within the company. Most of our key positions, all would be internal backfills. That's all very patient centric. Our strategy has always been about category leadership, where we want to be a preferred service line provider to our key customers across our businesses and build a highly differentiated portfolio within that to drive above peer market growth, and you'll see the -- some information on that. It's all about the pipeline. I'll talk about our R&D cadence in this presentation. And the focus on corporate responsibility and social responsibility is not new to the company. We're glad to see the attention on this and I'll finish the presentation with some of our highlights in that area. But importantly, for an investor perspective, similar to Investor Day, we aim to deliver organic growth, continuing our execution above our peer group towards the high end of the med tech peer group. And we're quite comfortable in a 6% to 9% organic CAGR from '20 to '22. Importantly, you've seen the margin expansion capabilities of the company and we're quite confident in our ability to continue on that type of a cadence, at least for the next 3 years, we won't detail out beyond 3 years. And all of that will continue to drive double-digit EPS growth for the company. So here's a quick overview of our whole company by revenue and I want to read the notes on this one, but please note that these are preliminary unaudited results for the fourth quarter of 2019. And we will provide audited fourth quarter '19 results and first quarter and 2020 guidance during our fourth quarter earnings call on February 5. So 2019 sales was yet again above our peers, with 11% operational and 7.3% organic. And across the company, we organize by 7 different businesses across 3 segments: Cardiovascular, Rhythm Management, Neuro and MedSurg. All of our businesses, which is really important to us, with the exception of our EP business, grew equal or faster to the market in 2019. And our fourth quarter preliminary organic growth rate of 7.3% is a good result but approximately $30 million below the midpoint of our fourth quarter guidance range, which was 8% to 9%. Importantly, all of our key growth drivers continue to build momentum and we drove double-digit organic growth in our MedSurg, which is our Endo and our Urology business. Also in our Cardiovascular segments with IC and PI with double-digit growth in PI. And also great growth in our Urology business, as I mentioned, Endo and Neuromodulation. So the primary cause of our fourth quarter shortfall versus the guidance that we provided primarily was in our Rhythm Management business, where we saw some slowdown in our high-voltage as well as our EP business in fourth quarter. Importantly, from an EPS standpoint for the fourth quarter, we estimate that we will exceed our previously issued guidance for GAAP earnings income, primarily due to a significant onetime noncash tax benefit arising from an intra-entity asset transfer of IP that was completed in the fourth quarter of 2019. And as importantly, on an adjusted basis for fourth quarter, we won't give you the exact number today, but we expect EPS to be well within our previously issued guidance range for the fourth quarter and the full year. So with that being said, let's talk about some of the key growth drivers for the company going forward. One is our capabilities globally with the expansion of our global capabilities. And you see, these are operational growth rates and you see consistent strong growth across all 3 regions. Operational basis, Europe growing 9%, likely 3x the market, where most of our new products are sent to Europe first before they go to U.S. and Japan. Great growth in Asia Pac, where we were just a baby 6 or 7 years ago, and really had no business outside of Japan. We have a significant business now in China and other emerging markets. EMEA continues to grow very well. And U.S., obviously, is the majority of the business. Importantly, in the emerging markets when you consider Boston for the future, we may be a little bit less scale than some players, but we're catching up very quickly with tremendous capabilities, and you're seeing us drive a significant growth driver for the company where today we're about $1.25 billion in revenue. In 2019, grew almost 20%, and we are highly confident that this emerging market platform will continue to drive growth for the company and we're estimating here a 15% CAGR through 2022, which gets you close to $2 billion in that time period. I won't go through all the growth drivers within emerging markets but you can save that for breakout. I think from an investor standpoint, and anybody at Boston Scientific, it's important to look at the trajectory of the company. And this is similar to what we showed at Investor Day, the company has gone from a 6% organic CAGR in 2014 to '16, we accelerated a point the following 3 years organically, and we aim to deliver faster organic growth rate in '20 through '22 than we had in the previous 3 years. And we're quite confident that we have the pipeline, the leadership team and the focus on execution to do that. And then operational growth with tuck-in M&A would exceed the 6% to 9% organic growth CAGR for those years. Also, there's quite a good -- quite good discipline. You saw that in the fourth quarter this year, despite a $30 million miss, which will get us to our midpoint of our guidance, you'll see us deliver on our adjusted EPS and exceed our GAAP EPS. And we've had about a 700 basis point margin improvement over the years. And we aim to deliver another 50 to 100 per year with the capacity to do so with -- as today, we still are higher than our peer group in R&D, which we will likely remain higher than our peer group. But we're also higher in SG&A. So we have a number of initiatives that we only have time to detail here to continue to do that. And I think that's a good proof in the fourth quarter that you see to deliver that. Our mantra is grow faster than our peer group towards the high end of med tech, improve margins and deliver double-digit EPS growth, and that's exactly what we have done. That's what we did in 2019 and that's what we aim to do in 2020 through '22 based on the -- all those fundamentals of the company. So double-digit EPS growth is what you should expect from the company. Underneath what's driving this acceleration of organic growth rate consistently through the years are 2 slides that I'll show here. One is the company's ability to shift to a faster served market growth rate, where historically, we were in negative growth markets as a composite of the company. And fifth -- in 2019, we estimate our market CAGR was about 5% that we competed in and we believe this will accelerate to about a 6% served market CAGR in 2022. And that's all from the reshaping of the company into faster growth markets, kind of new growth branches, if you will, that leverage capabilities that we have in the company. And that's the mix. But I think you'll see a smaller portion of our business, primarily in DES and CRM, which are important businesses for us. They drive a lot of cash for the company. We continue to take market share in many of those businesses, but the slower growth markets, and you see nearly 80% of our business is in markets that we call moderate to high growth. And fundamental to BSE besides the culture and the engagement of our people, the second major tenet is really innovation. And this is a slide on portfolio innovation, but innovation for us is everywhere in the company. It's our legal team, it's our supply chain team, it's our operations team. So we really try to empower and encourage innovation throughout the companies that everyone can make an impact on the company, and we really instill that in the lifeblood of our teams. From a more of a product standpoint, you see we invest at the high end of our peer group in R&D. In 2019, 10.5% to 11%. On the bottom of the graph, you see some of the amazing organic innovation that's created throughout the company. The breakthrough EXALT platform in endoscopy, virtually all of our products in neuromodulation, in DBS, which DBS had a fantastic quarter, actually 2x the growth from third quarter. And also, you see some of the other innovations here. On the M&A front, we've been quite active in tuck-in M&A. Super pleased with our ability to integrate these acquisitions and I'll touch on BTG in just a minute. And you'll see in the cash flow that we'll have ample capacity for tuck-in M&A over the coming years here. And also, we've been fairly creative with our VC portfolio. We have about 40 investments in VC companies that we work closely with. And also, we've created a number of spinout companies and we have also a number of various incubators that we work with across the globe. So innovation to us, whether it be commercial innovation in the region, whether it be corporate sales or R&D, is really the life blood of Boston Scientific. I could spend probably the whole 25 minutes on this slide, but I'd get kicked off. This is the -- when you look at that 6% served market CAGR from 2 slides ago, these are all the key growth platforms across our businesses that lead to this accelerated growth story. So I won't go through all of these but if you have it in the materials, bispecific BU, where most of the emphasis is on in terms of our organic R&D and commercial infrastructure is highlighted in these key products and new markets. Shown on this slide in font 6 is our pipeline for the next 3 years. And again, I will highlight 3 of our platforms in the minutes here but given we have a shortage of time, I don't have time to go through these but there's significant pipeline cadence in '20, '21 and '22 across our businesses. I'll touch on structural heart in a minute. But we do have nice additional capabilities that we're building in our coronary business, specifically in complex PCI, which is now larger than our DES business and growing high single digits. Exciting new launch with our Ranger balloon and PI to complement our arterial portfolio, and I'll talk about BTG. Really exciting launch in EP with our cryo platform, which is about a $1 billion market -- exceeding $1 billion market in EP that we look forward to launching that in the first quarter of 2020. Neuromodulation has a number of enhancements and software capabilities in DBS and pain and some important clinical readouts coming in endoscopy and uro and so on. So you see our pipeline in the materials. For the sake of time, I want to touch on 3 specific areas. Our structural heart, an update on BTG and a quick update on our EXALT platform. So on the structural heart side, as you see in the slide here, we're excited about our opportunities in WATCHMAN, TAVR embolic protection, accessories and also longer term in mitral valve repair. And I'm also pleased to report that we achieved the high end of our 2019 structural heart revenue guidance, which was $700 million to $725 million. And we're announcing today a nice growth story acceleration from an -- in 2020, to $900 million to $1 billion in this category. And WATCHMAN continues to really deliver and exceed our expectations. We had very strong results for the fourth quarter and full year '19 on new launches in Japan and of also WATCHMAN FLX in Europe, which is doing extraordinarily well, as well as strong U.S. reorder rates on increasing utilization within hospitals. We also anticipate FDA approval and U.S. launch of our next-generation WATCHMAN FLX in the second half of 2020 in the U.S. and then plan to initiate 2 important trials. One is called CHAMPION AF, which is a randomized head-to-head trial studying WATCHMAN FLX versus DOAC, and I'll touch on that a bit more in a minute. And also in TAVR, we're very pleased with the LOTUS Edge launch and growth. ACURATE neo also did very well for the fourth -- for the year, including mid-teens growth in fourth quarter in Europe and we're also enrolling in the U.S. We also look forward to launching our next-generation ACURATE neo2 in Europe, which we believe will see second half approval in midyear and second half benefit. And we continue to enroll in the ACURATE U.S. IDE trial as well as our REPRISE IV, which is our intermediate risk trial for LOTUS. Sentinel is doing quite well. It's our cerebral protection system and had its best quarter ever. And we're now in nearly 600 accounts worldwide. And we look forward to launching a protected TAVR randomized controlled trial study this year, which we believe will support establishing this critical stroke reduction therapy as the standard of care in TAVI. And finally, I'm pleased to report that we entered the clinic in December in Australia with our Millipede full annuloplasty ring for mitral valve repair. So a lot going on in this business and we expect $900 million to $1 billion in 2020. Just another few more words on WATCHMAN and our CHAMPION trial. As we said, WATCHMAN really is doing terrific for the company. A few years ago, we estimated a market in 2018 of $400 million. We're comfortable that this market could well exceed $1 billion in 2023 based on the momentum that we have in this business as well as indication expansion currently with the OPTION trial, where we're currently enrolling with the AF patients. And in the future here, this will be a significant investment for the company called the CHAMPION trial. We expect over 2,000 patients will be enrolled. We're working with the FDA to finalize this trial but they're certainly excited and supportive of us this type of trial and the goal here is really to expand the TAM and the indication into lower bleeding risk patients and really doing a comparison trial against the DOACs. So we anticipate enrolling in the second half of 2020. It will likely take a few years to enroll the study. And we've also announced the co-PIs for the study, as you see here in the slide. So we're quite confident in the design of this trial. We spent a long time working on this and we believe this could be a breakthrough in terms of market expansion for a critical platform, where we have significant enhancements in a multigeneral pipeline -- multigeneration pipeline for this device. The next one I want to talk about is BTG. Really pleased that we finally closed this acquisition, which was, I think, in August 2019. And we set out to do this really for a couple of reasons. One is we're focused on category leadership. And in this business, we had category leadership in arterial, but we kind of lacked scale, and we couldn't really declare that in our venous portfolio and interventional oncology, which are the 3 pillars of that business. And the BTG deal really cements category leadership and market capabilities that are unique to Boston in both interventional oncology and now in venous. So now we're the clear market share leader in interventional oncology. And you combine the accessory tools and those types of devices that we have with BSX and the power of the therapeutics that BTG brings, be it in their Y90 TheraSphere product, their cryo product as well as microwave platforms that's also coming. So we are uniquely positioned to compete and do very well in this area, and there's excellent synergies. And today, this is really a U.S. business. And beyond the current business, which grew about 9% in the fourth quarter, we expect this business to expand also outside the U.S. And we've made some investments in China, where the market is actually 2x that of the U.S. And in parallel, we're also looking at indication expansion and we have a number of different clinical projects going on in prostate, brain and also in lung. So we see tremendous long-term growth driver in interventional oncology, similarly in venous. Venous is likely an underappreciated segment within med device. We think it grows very high single digit, and now we're the largest player in venous for pulmonary embolism as well as DVT. Similarly, in terms of the financials of this deal, excited about the integration. Integrations aren't easy. We've made all the commercial organization changes happen in the fourth quarter in the U.S. So essentially, the interventional oncology team stays by itself. We combine the sales forces in our venous portfolio as well as arterial, those announcements have already been made. So we look forward to ongoing quarterly acceleration in 2020 with this platform. We're pleased to announce that we're on track and we expect to deliver the $175 million synergies by the end of year 2. The third growth driver, and I'll speed up a bit more here, is in EXALT, which is our Endoscopy business. Very proud of the team here, organic innovation built on 5 years of momentum in our LithoVue product as well as our digital SpyGlass. Really excited to see that the FDA recognized the innovation here, which is innovation not only in infection prevention but also site of care for our device as well as efficiencies. So this is, we think, a very disruptive platform for the future. The FDA gave us breakthrough designation, and you'll see a first quarter limited launch in the U.S. in 2020 and a scaled launch each quarter throughout the year. So we're really excited. We have the capabilities. We have the supply chain in place, and we're working on contracting now. Importantly, many of you have seen this. This is a platform. So within our EXALT product, you'll see every 6 months, because it's a 510(k) product, enhancements and improvements to that device, and you'll see new platforms layered on each year. And in 2020, we expect our second platform beyond our EXALT, which will be our SpyGlass Discover, which will be for surgical, primarily for a gallbladder. So this is a wonderful disruptive way to grow our business in endoscopy and we look forward to keeping you updated on that. In terms of the financials, really pleased with what the next 3 years can deliver. We -- as you know, we had a number of contingent liabilities that was almost like a full body leg cast in the company for a number of years with mesh litigation and tax issues and settlements and so forth. But I'm pleased to see that maybe -- I think maybe 5% of our free cash flow is probably earmarked for contingent liabilities now and 95% of that can be put to productive uses, be it value-creative M&A, share repurchases, also debt repay down. And in 2020, we're committed to the deleveraging at 2.6x. We wrote a check for $900 million in the fourth quarter. We'll delever another $600 million of debt paydown in 2020 to get us to about 2.6, which allows us ample room for smart tuck-in M&A, consistent with what we've done in the past. And you'll see about a 10% free cash flow growth per year. So you add all this soup together, what this is going to deliver our shareholders, we believe, is what I mentioned before, which is faster than our peers at the high end of our peer group in terms of organic growth of 6% to 9% CAGR. Operationally, traditionally, we've done a little bit there to add a couple more points on our operational growth and we expect that cadence to continue. Plans in place today to continue to drive our margin improvement. Some would like to see us drive margin improvement, 100 basis points per year. We're comfortable with the 50 to 100 because we wanted this to be a unique growth driver for many years to come while we improve operating margins in a responsible way. Importantly, our tax team is incredible. I don't get any credit for that. I don't deserve any credit, but we expect an 11% tax rate over the next 3 years, which will deliver double-digit EPS growth. And finally, another slide that resonates with our employees and obviously resonates with investors more importantly -- or not importantly, as importantly, I should say, is our focus on our people, the planet, diversity and inclusion, sustainability. And this is kind of certainly the trend, but it's not new for Boston Scientific. We treat these things very importantly. We actually set specific goals, diversity and inclusion goals that are 10, 20, 40 are widely published. We've had sustainability goals in place for a number of years and with the goal of being completely carbon neutral for the company in 2030, and we have a number of manufacturing plants today that are completely carbon neutral. So we spend a lot of time on that with our operations supply chain team. We bring patient advocacy to our employee base. We focus on diversity and inclusion. And we also have been recognized, and I won't show the -- all the awards and all that kind of stuff, but some of this has been recognized by our peer groups as well. So I'll probably close by saying the next chapter of Boston Scientific, the next 3 years, we believe, will be more exciting than the past 3 in terms of innovation, financial performance, and hopefully, shareholder returns to follow with that. We invest and think about this company for the long term and the company has never been stronger. So thank you very much for your time and look forward to the Q&A.

All right. Well, thanks, everyone. Happy to have Boston Scientific here this morning. I think I'll kick it off. Everyone, I'm sure, wants to talk about fourth quarter and the pre-announcement today. For those of you who didn't see it, Boston preannounced $2.9 billion, 7.3% organic top line growth, came in about $24 million below the Street, a little bit below the original guidance range. So maybe we could kick it off there. And obviously, a little below expectations, and I'm sure we'll walk through each of the different businesses. But if you just want to kick it off, what was the summary of fourth quarter in your opinion?

Sure. Are these on? Can you hear me okay? Good morning. The summary of fourth quarter is simply for the 7.3% full year result, we're happy with it. We wish it would be a bit more, but we're happy because it -- but it's part of our peer group. We delivered the high end of our peer -- or just middle of the high end of our peer group as well as double-digit EPS growth. For the fourth quarter, we're $30 million under our midpoint of our guidance. We don't like to miss guidance so we're not pleased with that. But the key is and I'll talk about why we're soft maybe first, the softness of the $30 million primarily was from our CRM business and also a bit from our EP business. So the CRM business decelerated as you saw in the fourth quarter and primarily in the December time frame. So that was a bit of a surprise for us. The good news is, if you look at our CRM business, de novo share taking, we've continued to exceed. We continue to do quite well in ICD and CRT-D and continue to take de novo share there. Replacement cycle has been kind of neutralized. So the CRM business basically underperformed versus our expectations in the fourth quarter. We haven't seen our competitors' results yet. But prior to this, we've had consecutive quarters of consistent growth as well as modest share taking. So the portfolio, we think, is quite well. So we're not sure if it's a market factor or a competitive factor until all our competitors report. But primarily, the $30 million was from the CRM as well as the EP business was a bit softer. In the U.S., we've really restructured our U.S. commercial team ahead of a launch that we expect to see in the second half of our DirectSense catheter. Our European EP business did quite a bit better, which some of our new products are. And there's maybe a little bit of softness in some other spots, but primarily it was due to the CRM and EP result. I think lastly, I'll just say, and I won't go through the whole script here, the key growth drivers for the company did quite well and we can talk about some of those.

Yes. Maybe we'll do a reverse here. We'll start with some of the misses and then move to the positives, end on a good note here. CRM missed the Street by $20 million in the quarter. Can you break that out? Any specifics in high power versus low power, U.S. versus international, that stood out to you in the quarter?

Yes. So of that breakdown, the mix is primarily U.S. As I mentioned, Europe did fine, Asia Pac did fine. It was primarily U.S. and primarily in the defib category. Pacer was kind of as we expected. So it's more oriented towards U.S. defib.

Got it. Any trends throughout the quarter? Because, obviously, you gave guidance sort of halfway through the quarter. Was it something you saw later in the quarter?

Yes, yes. It was more of a December impact. And so again, that's where we're not sure if it's share-related, which -- it's difficult. We don't want to state whether it's market or share, we don't see the competitors yet, but it primarily was a slowdown in December.

So maybe we'll see with the Christmas holiday and New Year's falling the way it did this year, maybe it's a push?

Yes, yes. I'm reluctant to blame it on the holidays because it sounds kind of lame but we'll see. The Christmas was on a Wednesday, which had created a longer vacation period, if you will, but I'm not -- we're not ready to say it's Christmas-related.

Understood. So EP missed the Street by $7 million in the quarter. You talked about some weakness there. Was that volume-related, new product launch-related?

No, it's a bit of a self-inflicted wound but it's really a preparation for the future. So EP -- I think next year I'm going to eat the microphone if we don't do better in EP because we have the portfolio to do it with our cryo launch in Europe in first quarter, and really, we think will be quite disruptive with that market -- with that product line as well as our improving catheter portfolio that we have. So Europe did fine. Again, this is a U.S. story in EP. A small base, but we basically reorganized the sales force. We made a number of commercial changes to that business to decouple them a bit more from our CRM business to put more emphasis on that. And within that, we had a number of commercial transitions that we expect to stabilize. And it's important that we get that right because we launched our DirectSense platform, a new catheter platform in the second half of '20. So it was really a kind of a proactive commercial change and we saw the impact of that.

Great. I'll keep going. Maybe I'll just stop and see if there are any questions. All right. Maybe next up, peripheral interventions. This came in $9 million, $10 million under Street numbers here. You said in the presentation that ACURATE grew in the mid-teens, a step down from where we've seen it earlier this year, but still positive after the trial at TCT. When you look -- was this a DES issue? Was this a structural heart issue? How do you think about maybe the delta between what happened in the fourth quarter versus guidance?

In our peripheral area or in our cardio area or what -- in interventional cardiology or peripheral, which...

I'm sort of mixing them...

That's okay. That's all right. So I would just say, I'll help, on the peripheral -- I'll start off -- so I'll take it -- I'll break it down pretty quickly. Cardio did terrific. Our DES business, kind of in line. Our complex coronary business, which is where we have more innovation, we don't talk too publicly about it. But that business is larger than our DES business and growing high single digits. And then we had excellent growth in WATCHMAN and our structural heart. So interventional cardiology did very well in the fourth quarter. Our PI business, the numbers look lower. They are lower, but they're really as we expected. So in the PI business in the fourth quarter of 2018, we had a significant amount of stocking orders with Eluvia post that approval. We also had some benefit from some competitors who weren't in the market. So we had a very difficult comp and Eluvia stocking in fourth quarter '18. So we anticipated essentially the number that we delivered in our PI business. I think what's most important about PI going forward is anybody's involved in integration, the complex piece of this integration for us, we sold the licensing, spec pharma is a separate business that we'll continue to evaluate. The only area of kind of commercial disruption, if you will, or complexity is in that vascular portfolio. And that's where we made all of those commercial changes really in the fourth quarter. So as we go into 2020, we expect acceleration each quarter in our PI business through portfolio that we have with Ranger, the IO momentum that we have with BTG. And also, you'll see improvement in our venous portfolio in terms of growth throughout 2020. So I'm pleased that we've done -- made all the hard calls at integration, and you saw on the slides that we expect to deliver 80% of the synergies in year 2, which should be August of 2021 of $175 million.

What's the latest views on the paclitaxel market here? Do you still feel confident in Ranger approval this year? Any changes in doctor's perception of paclitaxel since the last update?

I've got a doctor right here. He can help me.

Thanks, Robbie, for the question. I think there's an understanding of the reality that paclitaxel is an excellent anti-proliferative agent in 25-year history of very successful outcomes to prevent restenosis. It is a critical part of the peripheral portfolio and we're on track for Ranger approval this year. I think we and others are continuing to mount a significant body of evidence over the long term to show that this one meta-analysis -- study-level meta-analysis perhaps didn't get the story quite right.

And I think in just in that arterial space here, hopefully, with pending Ranger approval here. Again, it speaks to that category of leadership, we talked about BTG with venous and IO. But now in arterial, with our Eluvia stent and the Ranger balloon and the other products that we have, it's really -- even if the market is not as large as we anticipated a year ago. Of the market that will exist from the paclitaxel, we think we're uniquely positioned based on the profile of those products.

So maybe we can touch on BTG. You said in the presentation, you've completed the sales force integration in the fourth quarter. How should we expect that asset to trend over time? There was the integration. Do we expect the disruption to continue into first, second quarter? Is it all positive momentum from here?

I'll comment and then maybe, Dan, if you want to. On the overall PI business, we believe in 2020, we're not giving guidance here yet, but we believe we'll see sequential growth throughout the quarters in our PI business. The Interventional Oncology business performed very well. I think it was 9% -- I'm sorry, the Interventional Oncology piece of it, I think we were 9% in the fourth quarter. So that's a good result and we expect that business to deliver consistent growth throughout 2020. And I said in the presentation, besides selling well commercially current platforms, it's bringing that to outside the -- bringing to Europe as well as longer-term China and expand indications. So I think that business is essentially integrated, done, no disruption, doing well. On the rest of the PI business, we're comfortable that it will accelerate throughout the year. We do expect a lighter first quarter for that PI business as we continue to essentially solidify and get through all the sales force integration. But as I said, that's done. And there was some disruption due to the close of timing, which took quite a bit of time in some of the BTG vascular sales force. So those positions have been kind of refilled or rehired, and we have an extremely strong portfolio. That integration is taking place but we see potentially the first quarter, I won't give the number, but potentially maybe in the range of where we were fourth quarter 2019, an acceleration throughout the year.

So maybe if we turn towards some of the positives, Neuromodulation...

I think most of those were positive.

Positive versus the Street in the quarter. How about that? Beat by $11 million. Maybe you could walk us through some of the drivers here? Was it deep brain stimulation? Was it spinal cord stim? How's the Vertiflex acquisition performing in the quarter?

So we're just in our neuromod team yesterday, it's an impressive group. And I think what's important for us here, and many of you know, we diversified our business there. It used to be just a U.S. spinal cord stim business. So I think -- was it 8% growth in the fourth quarter?

That's right.

For neuromod overall? And essentially, the soup that makes up neuromod is incredibly strong Vertiflex momentum, our best quarter ever. So you can see great growth in Vertiflex in 2020 and it will go organic, the second half of the year. The RF business continues to do very well. And then the SCS business improved sequentially fourth quarter over third quarter. So we see a strong -- we see improvement in the U.S. SCS business that improved and also we'll anniversary the very difficult comps that we had in 2018 as we certainly enter 2020. So we expect the Neuromod business to be accretive to the overall BSC growth profile for sure in 2020. The other big catalyst for that is our DBS platform. We went from a 0 share position in Europe 6 years ago to nearly a 50% share position in Europe based on the platform that we have and we saw surprisingly strong growth in the U.S. in the fourth quarter in DBS. And there's new software enhancements, new imaging capabilities with our Brainlab partner, new programming capabilities and a second-gen system in the future that we won't discuss here. So we think DBS will do very well in 2020 and neuromod overall will do well. I think the -- in terms of the SCS market, we expect the SCS market to return to growth in 2020. We're reluctant to call a number, but in 2019, it was down, obviously. But we expect, based on the trends, that we're seeing improvement in that market in '20.

Right. I'll pause for questions.

Yes. So we all focus on this organic growth number every quarter in 2019. 2 quarters, you missed the organic number. Does that -- in fact, how do you look at giving those guidance going forward? I know all of you for a long time and we haven't had a year like this. So I'm just curious what your thoughts are.

Yes, thanks for the question because I'd be dishonest if I said it is...

[indiscernible]

Sorry, the question was we missed our sales guidance 2 quarters in 2019, and does that irritate you? And does that help you -- does that -- how do you think about the future was the question, I think. So it irritates us because we're not used to missing this. And so '19 was a bit frustrating in terms of our guidance performance. On the overall performance of the year, you pull back and you go -- grew 7.3%, improved margins a lot, grew double-digit EPS growth. Now you have free cash flow they can use, pretty good. Retired all these ridiculous contingent liabilities. So the company going forward is good. But when my wife says, "Why are you in a bad mood?" Well, we missed our $30 million of sales, the midpoint of our guidance. "Why should you care? It's a big company?" We care, they care. We want to -- yes, we care, we all care. We want to be -- we want you to count on us and you should count on us. We've delivered for a number of years in a row. You know what our pipeline is. Based on the experience, it's a good question. We likely will provide a slightly higher -- wider range in '20 than maybe we normally would because we don't want to miss. And we're frustrated that we missed this $30 million. The company is strong. But we want you to trust BSX, as you should. I think you deserve that. And I showed the financial commitments that we have for the future, which we believe in. But as a result of this, we might -- we're not exactly sure yet, we may provide a slightly wider range in '20 than we typically have.

Any others? Maybe if we could touch on endoscopy. You received approval for the EXALT-D duodenoscope the end of last year, launching in 2020. How should we think about the trajectory of this? There is a huge market, there's FDA support for single-use scopes here, but there's large entrenched competitors. So how should investors think about the adoption rate throughout this year and into the future?

Yes. So this is the most exciting platform that I think I've seen in my career in med tech. It's organic and it comes at a beautiful time where the market's there for us and the FDA is supportive of it and doctors want it. And so I think you'll see accelerating growth throughout the year as we drive adoption of this. And we have experience in doing this with our digital SpyGlass platform as well. We think it's a $2 billion platform. When you consider all of the opportunities that we laid out on the slide, we think the EXALT-D is about $1 billion -- we said a $1 billion market TAM, specifically for that product. And so what we'll -- initially, we'll focus on all the doctors who are focused or working with us in our first-in-human trials, and all of our Advisory Board leaders, which are all the big interventional GI docs across the -- primarily in the U.S. So we'll focus with those large docs and large hospitals that have been part of the solution for a number of years now. And then in terms of the patient, you look at immunocompromised patients as an ideal subset for that. But the enthusiasm for this amongst the hospital community is quite strong. There's economics that we have to work through. The fact that we had breakthrough status gives us the ability to compete for a higher reimbursement, which will -- a decision will be made on at some point in 2020, but this gives us the ability to compete for that. If we get it, there could be additional tailwind. If we don't get it, we believe there's sufficient room in the DRG and outpatient and inpatient to support this platform. So the risk of infection continues to be a top-of-mind concern for hospitals. And I think what will be underappreciated is the ability for the users of this to have more efficiency in their department as well as take it to other sites of care. So the -- some of the headwinds we'll face, there is some capital involved. So we have to get on contract with hospitals. They have to buy the capital equipment. We're not going to give it away. But we have a nice plan in place with supply to make this to be a meaningful growth driver in '20. And a, we think, a breakthrough growth driver in this CAGR -- 3-year CAGR period.

Great. Maybe, Dan, a question for you. You said in the presentation, $1.55 to $1.58 for the year, which is within the guidance range. Off the slightly lower top line, that implies little better margins through the quarter. I know you haven't provided the full details, but are there any onetime items you would point out? Or was this just better cost control?

Well, I think it -- we're not going to give you the specific numbers for margin. We'll do that on February 5, on our call. But I think it speaks to the commitment that we've talked about for many years, and I think exhibited, which is at various points within the range of the top line, there's a commitment to still deliver the bottom line, deliver the EPS growth. And so as Mike said, yes, very disappointed that we missed the top line, but we're not going to miss the adjusted EPS range.

And I want to make sure everyone saw it. You had been talking about tax in the lower teens going forward. I think it was the first time I've seen it on paper, 11% tax rate over 2020 through 2023 time frame, with 100 basis points offset for stock option. Maybe just talk to how you're keeping the tax rate in that range and why the 100 basis points.

I think Mike mentioned it in the presentation, just a very astute and smart tax group that works hard to make sure that we have the right structure in place to keep that where it is. So that is new. The 11% is our goal for 2020, '21 and '22, the operational rate at 11%. And then as you say, Robbie, we've experienced about 100 basis point benefit from stock comp over the last few years. So 10% all in after the 11% operational.

Great. Questions?

In terms of your long-term plans, now we've got this tax reform that removed it permanently, does that change your thinking at all? Or was that kind of your base assumption?

On the med device tax? It was our -- I'm sorry, your question was med device tax, now that it's been repealed, which was terrific, does that change our operating model and our strategy? Quite frankly, not really. We invest in the company. We want to deliver each quarter but we invest for the long term as we see a significant pipeline of investments that won't even hit until 2022, '23 and beyond in mitral and many other areas in the company. So we always invest for the long-term health and higher end of our peer group on sales. And so quite frankly, we would have done that either way because -- so we're glad that it got appealed, but it really didn't change the strategy of the company.

Any others? Maybe if we could talk about capital allocation for a second here. You had a very acquisitive 2018. You took a break in 2019 to close and integrate the BTG acquisition. You've committed to a $1 billion of debt paydown. But as I look out over the next few years, there's a substantial amount of free cash flow coming your way. How should we think about the priorities for use?

I think it's one of the most exciting parts of the story. And again, Mike touched on it in the presentation, that we're entering a period where almost all the cash that we have with where we look at the balance sheet today can go towards strategic uses, which we haven't had over the last 5 years. And so you look at smart, high-quality tuck-in M&A. You can fill in on the back of that with share repurchase over time. Again, we don't have a dividend and no plans in the short term to initiate one. So as we look at -- $2.1 billion is the goal for 2019 for adjusted free cash flow. That grows 10% a year in terms of our goals that Mike showed. So you're in the round $6.5 billion, $7 billion of cash that we can look to add fuel and continue to grow the company.

It's been a long time since we talked about share repurchase at Boston Scientific. Any reason, in the absence of larger M&A, we can see $1 billion a year going forward?

Yes. From our perspective, M&A, again, high-quality tuck-in M&A is the priority to continue to fuel the growth for the next 5-plus years of the company. So it's not something that is the first priority. But if there are not the opportunities that we like and we have the opportunity to go out and repurchase, then we can do that.

I would say we have a pretty high bar on our tuck-in M&A. And you saw a slowdown in some of our M&A in '19, partly because we want to digest what we did with BTG, but partly because some of the valuations expectations were too high in our view. And so we have a healthy venture portfolio, but we have a pretty high bar in terms of the financial returns that we expect from our M&A as well as, obviously, the strategic fit. So the extent, as Dan said, that we don't see appropriate valuations that make sense, then we would accelerate more share repurchase.

Great. Any last questions? All right. We're out of time. Thank you very much.

Thank you.

Thanks, Robbie.