Boston Scientific Corporation (BSX) Earnings Call Transcript & Summary

Got it. And you brought up Sentinel. So I want to go there. You mentioned last night some positive data points for Sentinel. So maybe talk about what you're seeing in the adoption curve with Sentinel in the U.S. and how that's helping the TAVR business, if it is? I don't want to put words in your mouth.

Yes. Definitely. I think coming in with -- certainly, Sentinel, we talked about it being in close to 20% of all U.S. TAVR procedures. And so clearly, it's being used with valve beyond LOTUS Edge in the U.S. And I think that's really encouraging trend and saving a lot of stroke rates. So there are different commercial packages, whether you're using Sentinel stand-alone or with LOTUS Edge. So I do think that that's helpful. And back to that, we're not just trying to pick off a product here or there. It's a portfolio and trying to see category leadership for solutions for those patients broadly. Within -- so it was actually -- it was, I would say, perhaps neutral or negative article in JAMA, but there were surprisingly positive data points within it, if you dug into it for Sentinel. So it's a retrospective look at, I think, over 11,000 patients in the valve registry in the U.S., looking at those that use Sentinel and those didn't. And it essentially showed, from a statistical standpoint, that there was equivalence in stroke rates. But if you dug into it, numerically fewer strokes as well as debilitating strokes and mortality within the Sentinel arm. So statistically the same, numerically fewer as well as interestingly, over one day shorter length of stay with Sentinel patients, which is important, right? And then I think, we'll see. And this is exactly why we're doing the protected TAVR study. So this is a randomized clinical study that we started this quarter. That is kind of all-comers, all valve types, either you're randomized to using Sentinel or not in your TAVR procedure, 3,000 patients. And we would look -- it's a fairly acute endpoint, 72-hour per procedural stroke. So we're encouraged for that. But if you dig into the data on this retrospective observational study, I think -- and the authors admit that there is no way to calculate sort of learning curve with Sentinel or risk stratification. And there was no -- importantly, there's no neurological assessment. And we know broadly that in TAVR, there's an underreporting of stroke. But I think it'd be reasonable to have two things in this study. And this is why we have to do a randomized study to figure it out, but that physicians will be more likely to use Sentinel in patients they thought were at higher risk of stroke. So that could be confounding it. And then afterwards, if you use Sentinel, probably more likely to go looking for stroke side effects than if you didn't. So I think some -- potentially some confounding factors. Interesting data, but speaks to why we're doing protected TAVR.

Yes. It makes sense. And I would say, numeric reduction in stroke is good enough when you're talking about something like stroke.

Right. Strictly if you're the one, right?

Exactly. Let's stick with structural heart for a second here in WATCHMAN. I mean, that has been such a strong growth engine for the last few years. How long is the runway here? And you do have a competitor that will be coming to market at some point. So how to think about the next few years growth trajectory for WATCHMAN? How sustainable is this?

Yes. I think it continues to be exciting times for WATCHMAN. So just recently at our national sales meeting for Interventional Cardiology and got to send -- there are a lot of WATCHMAN people at Boston Scientific, I'm happy to say. And really a lot of excitement. So not only from all the direct-to-patient and direct-to-referral work that we've been doing that, I think, is kind of finally hitting critical mass. Things like having worked through all the aspects to be able to let referring physicians know how their patients are doing 45 days post implant when they're off oral anticoagulants, which is a, I think, a bigger deal than many of us appreciate just what that means to people and their lifestyles and freedom from worry and risk. So on the -- all the market development work is going very, very well. We continue to push things clinically. And I think that's where a lot of the rep excitement has been as well. So enrolling a couple of trials. ASAP-TOO is looking at patients with an absolute contraindication to oral anticoagulant. And then the OPTION study is in a new patient population. So beyond just the current indication. This is looking at post-ablation procedures for atrial fibrillation patients, randomizing them to either getting WATCHMAN or oral anticoagulants. These are younger patients who are told, "Oh, you're cured of your Afib. This ablation procedure works, but go take oral anticoagulants for the rest of your life." So they're pretty motivated, I think, to come off those. So we're excited about that. And then the big one that will start later this year is CHAMPION AF, which is looking at a low bleed risk population and expanding really head-to-head versus DOAC. So excited about all of that. And then on the product side of things, so kind of three buckets: market, clinical and then the product itself is FLEX, is coming to the U.S. the back half of this year. It's a more forgiving implant. It's repositionable. It's retrievable and, I think, has some really nice features versus the competition as well. And so we're expecting that, I believe, in '21. And I think we're well positioned with WATCHMAN and WATCHMAN FLEX to continue to grow. And it's still early days of a very large market.

Yes. So on the clinical side, especially the post-ablation market opportunity, I mean, how do the -- that, to me, makes a ton of sense. So I feel like that -- how quickly can that be on-label indication? And can you talk about how that expands the TAM?

Yes. So the good and bad news about this market, these are long studies, right? Typically, with, I think, 18- to 24-month follow-up. So OPTION is still definitely, I think, a couple of years away for sure. But I think in the U.S. alone, I have to check. But I believe that's about 300,000 procedures a year.

I think that's right. And growing double. I mean, growing 10% to 15% now.

Right. Right. And that's completely outside of where WATCHMAN is being used today.

Okay. And speaking of ablation, let's talk about your EP business because that was the pain point in Q4. And just curious as to -- you've been growing below the market or you did in Q4 at least. And how Boston is approaching that market to ultimately succeed? Or is this going to be a pain point for a while?

Yes. No, it's -- we've been below market consistently for several years now. But I think kind of the light at the end of the tunnel is getting close. And if you look consistently at our results, our European sales have been closer to market. They've been at mid-teens or at least low double digits. And really the reflection of the global number is that we're in -- we have bigger exposure to slower-growing aspects of -- the slower growing segments of the market in the U.S. But our strategy here is to really be in all 3 buckets of what we view as that EP -- of the EP market. So we have our RHYTHMIA mapping and navigation system, which has faster map capture. You can see things with RHYTHMIA we're told that you can't with others, so we know it's a very competitive system. Then you have that whole sort of diagnostic and therapeutic catheter bucket. And that's where we've really been -- had some gaps there that we're starting to get closer to filling. So DirectSense has been an important step in that direction, help drive that mid-teens growth in Europe. That's coming to the U.S. this year. And then we'll get a force sense in catheter in Europe this year. In my understanding, that's still a majority of all therapeutic cases. So to not have that has been -- we've actually -- I know you don't keep score this way. We've actually done pretty well considering we didn't have the type of catheter that's used in majority of cases. And then the third bucket is, today, has been a monopoly in the whole single-shot market. And whereas our -- the 2 kind of entrenched competitors in mapping and navigation and therapeutic catheters, they don't have this single-shot technology. We'll be the only with all 3 single-shot, a fuller therapeutic catheter portfolio, complete in Europe, and then mapping and navigation, we hope that, that -- having, again, that category leadership across all three buckets will help us get back to or exceeding market growth.

Yes. Which actually, I didn't think of that when we were speaking about this last night. But that could be very important because it's not often you talk to docs who just do the single shot. Usually, they like to have options. So, it's interesting.

That's right. Yes.

Okay. Let's talk about -- let's shift gears again to MedSurg. And EXALT-D is another big launch you're undertaking this year. From my perspective, I was surprised to hear you've already gotten through some of these value assessment committees. And to me, that seems validating of the value proposition of the EXALT-D. Maybe talk about what you're seeing? I know it's early days, but how much should we think of this contributing to 2020? Or is this more likely 2021 and beyond given the fact that you have to go through all these facts?

Yes. And I think it definitely will continue to grow over time. But we've just said, don't expect much contribution in Q1 because of this longer sales cycle with the valuation assessment committee aspect of it, given there is a capital component to the sale. But I think we're really encouraged by physician appetite and potential uptake for it and increasing concern about contamination and infection risk. And so -- and this is a very large patient population, right? There's 1.5 million of these ERCP procedures done each year. So I think that we continue to see single-use as a really important building block within our Endo business. And we've talked by 2024, we see it being a $2 billion incremental TAM to our existing Endo markets. We have nothing in this space today. We don't sell any reusable scopes. And about half of that is from EXALT-D. And then half is from the other single-use scopes that we'll be launching in a cadence of one a year. So Spy Discover will be the launch in 2020. And then we haven't given specifics, but there's a gastroscope and a bronchoscope in the pipeline behind that.

Okay. And I ask you this question pretty much every time I see you, but what do you think is still underappreciated by investors as it relates to Boston Scientific? Because I feel like it's a very positive product story that seems well understood. So where are we not understanding?

I think that our MedSurg businesses are still a challenge to understand just -- many of them are 510(k) products, over 1,000 products in each of those portfolios and fewer publicly traded competitors. So I think that's still one where it's also our most profitable business from an adjusted OM standpoint and I think one where we have good visibility. We've talked about a $3 billion goal for Endo revenue and a $2 billion goal for Euro, which both imply kind of low-double-digit CAGRs for both of those businesses. And they recognize it's harder to understand or get kind of underneath the hood of that, but it's portfolio diversification and entering new high-growth adjacent markets in both of those. And I think probably people are understandably still skeptical around our EP outlook and hopefully can put some numbers on the board over the course of this year and into '21 to establish that our -- we've had the right strategy.

And last question for you in the 30 seconds or so that we have. How -- Boston Scientific has over the last few years been seemingly very successful at accessing the higher-growth markets within med tech. And how will you keep doing that? Is it going to be more organic, inorganic? Maybe talk about how you're thinking just overall about the strategy going forward for Boston Scientific.

I think it's a mix of organic and inorganic. I mean, that's where our R&D teams are focused. Deep brain stimulation is a really good example of that. EXALT-D is a great example of that. It's like, again, category leadership and deep physician relationships, understanding the unmet needs, help inform that. And then on the M&A side of things, our venture investments, that portfolio of kind of 40-plus companies, that helps inform and educate our thinking. And we'll continue to do that and then look opportunistically for other types of opportunities.

All right. With that, we're out of time. We didn't even get to talk about BTG. Sorry about that.

Thanks, Danielle.

All right. Thanks, everyone.

Thanks, everyone.