Boston Scientific Corporation (BSX) Earnings Call Transcript & Summary

Great. Good morning. Thanks, everybody, for joining us this morning for our next presentation in the virtual med tech track here at the UBS Healthcare Conference. I'm Matt Taylor. UBS' U.S. medical supplies and devices analyst. And I'm really pleased to be joined by management from Boston Scientific. We have a few members of the management team on the line today: Susie Lisa from Investor Relations; Lauren Tengler also Director of IR; and we have Jeff Mirviss, who's the EVP and President of the Peripheral Interventions Group, along with Dr. Michael Jaff, who's the VP of Clinical Affairs, Innovation and Technology for the group as well. So this should be a good opportunity to talk both about COVID management, but also focus on the peripheral group, which has really got a lot of exciting product launches coming down the pipe that we'll talk about. Just one piece of orientation for the call. If you're not familiar with the format yet. This will be about a 40-minute Q&A fireside chat with me. If you have any questions that you want me to focus on, please just e-mail me or you can enter your questions through the webcast. So with that, I just want to thank the whole team for joining us, and welcome to the call. Jeff, I would like you to get started. I thought maybe it would be good for you to just paint a broader picture of what's going on in the peripheral business, maybe take a step back and talk about what was happening pre-COVID and talk about some of the factors that you see driving growth there and some of the products that you're most excited about.

Yes. Thanks, Matt. It's good to be with you and with everybody on the call and certainly we look forward to the time where we can be together live again and in person in New York and do this eyeball to eyeball. But from a peripheral standpoint, we're really excited about this sector as a whole. It's a great growth sector with a compelling outlook, mostly because we serve very large and underpenetrated disease states, and there's a significant number of patients with unmet needs. And so that's always at the center of what we do, which is helping patients around the world. And of course, you probably know, we focus on 3 areas: Interventional Oncology, venous disease and peripheral arterial disease. And there's still a ton of room to innovate in all 3 of those areas. And as a company, we focus on category leadership and the depth and breadth of a portfolio. In peripheral, that was bolstered recently by the BTG acquisition, and things are going great and are on track with regards to that integration. And we think that the BTG portfolio as well as what we're working on can help us drive --sustain above-market growth. That was our plan pre-COVID. We see that post COVID, in part because of our portfolio that I'll talk about, but in part because of the global expansion opportunities. And we know that, that can be a nice contributor to longer-term growth as well because our portfolio is perfect for geographic expansion. And so 2020 was going to be just a really strong year of new product launches. I still think it will be strong. It might be a little bit slower than what we anticipated due to COVID. I just think that the reality is a lot of the launches are going to need to be paced in a more measured way either because of the situation within hospitals, or frankly, our sales forces around the world can only handle so much and because we've got a little bit of a gap here in time as a result of COVID, we're going to need to probably pace it out and extend a few things into 2021. But we're certainly excited about that, mostly Ranger DCB, which for us in the U.S. and Japan still is on track for 2020. And of course, we'll be the only company with a combination of state-of-the-art drug-eluting stent in Eluvia, combined with a low-dose Ranger DCB, we think, is the perfect combination for patients and for our customers in terms of their PAD. So that's probably the most exciting thing we have coming up here in the back half of 2020. So with that, let me turn it back to you for some questions.

Great. Yes, that's a great start. So I'll keep on this train of thought and just ask you more about these products. I know investors are very interested in the DCB market and launch and Eluvia as well. So maybe starting with DCB. I guess I was wondering if you could just talk more broadly about the market dynamics there. Obviously, there's been some scrutiny on the use of paclitaxel-based products. How is that evolving? And how do you think Ranger's is well positioned in that kind of environment?

Yes. So maybe I'll talk about the business aspects, and I think this is perfect for Dr. Jaff to weigh in. He spent his career in this area and has done a lot of work on the paclitaxel front. So generally, from a business perspective, obviously, we saw a step back in paclitaxel use when the meta-analysis came out. And after the panel meeting, we saw things settle down and then somewhat of a return to growth. And so I think there's sort of 2 camps. There was the camp of physicians that sort of believed that the meta-analysis was not true, either based on their own experience or when they looked at the preponderance of data. And then there was a group of physicians that either thought maybe it could be true or was true. And I think over time, things have settled out, and there are more physicians that are getting back to use of paclitaxel. Obviously, I'm sort of speaking, not in terms of COVID, but just in general. And I think that the drug-eluting therapies that are available really have shown excellent durability for patients. And I think that's a big driver of what's on the minds of physicians. It's just getting the best outcomes for patients that can give them some durability. And the drug-eluting market is still a very attractive market that has returned to some growth. So maybe Michael can comment on the clinical aspects because I do think there's some important new information that can shed some light on paclitaxel.

Thanks, Jeff. Yes, it's been my career on trying to find durable effective therapies for patients with PAD. And really until the newly high level of science that was generated through the randomized head-to-head trials of one device versus another. We didn't have any evidence. Now we do. It's clear that drug-coated balloons and drug-eluting stents are the first line of therapy. And then when the meta-analysis came out, we were surprised by that. There's been a ton of work that's done, as you know, that's been done since that analysis came out in December of 2018. When Professor Katsanos published his meta-analysis, the mortality risk was 93% increase over bare devices. The FDA did their own analysis, released about 9 months later. That went down to 57%. And we just published a paper last week. That showed that mortality rate decreased to 27%. So that's pretty dramatic. And that's all due to reducing the loss to follow-up rate. So as we found patients who were initially deemed to be lost to follow-up, they are actually alive and well. And so that mortality discrepancy went down quite dramatically. Given the fact that we can't describe a mechanism of action, there's not a clustering of causes of death. It's not clear about a drug-device -- a drug dose relationship. This may turn out to be a statistical anomaly, and physicians know that this is the most durable category of therapies available.

Great. So just a follow-up on that. I mean I think one of the million-dollar questions is if and when the FDA will change its tune, its stance and put something out. I mean with all this data that continues to come out showing things that are moving in the other direction, is it possible to predict that? And have you had any conversations there that you're encouraged by?

Yes. I'd say it's really difficult to predict. And I don't know if the FDA ever will. And frankly, I don't know that we really need it. I think at the end of the day, it's the data that's going to drive the reality on this. And there is more and more data being collected. As Michael said, we're committed to clinical science. That's why we have done so much work in this area to be the company that delivers the contemporary evidence so that patients and physicians can benefit by evidence-based medicine. The comparative trials we've done with Eluvia and Ranger, long-term follow-up, many examples of us investing in clinical science. And I think that the data will lead us to the proper answer. And so we don't -- we're not waiting for FDA to come out and sort of make any proclamations, and I don't know that they will. And so I think time will bear this out appropriately.

Great. And just a follow-up on Ranger, you mentioned before the low dose. What else do you think stands out about Ranger and your broader offering that'll allow that to penetrate the market when you do launch it here in late '20?

Yes. Well, I think first and foremost, the combination of Eluvia and Ranger, we feel is a very powerful combination and is a sustainable competitive advantage. We're the only company that can basically stand next to the physician and say, "Whatever you feel is best for your patient, we have the tool in the toolbox to support you in that decision." Whether it's a bare metal stent, Bayer balloon, atherectomy, with or without a DCB, a drug-eluting stent, whatever you think is right for that SFA lesion, we can support you. And I think that yields a distinct advantage. From a Ranger perspective, the clinical data is very robust, and I'll ask Michael to comment on the data because I think that is very compelling for physicians. Aside from that, Ranger is built on the Sterling POBA balloon. The Sterling balloon is an [ O&A ] platform that is the market-leading balloon and has excellent deliverability. And so we think that in the hands of physicians, it'll feel essentially identical to the bare Sterling balloon. That's not always the case with other DCBs. And the particulate is very low. And so we think with some of the data that's been published and questions around particulate, we think that, that could be another nice compelling feature of Ranger for physicians that are wondering about the impact of particulate. And so Mike, do you want to comment just on the clinical data?

Jeff, I think the fact that all of the randomized data that's been generated on Ranger is so positive, has to tell a story that's compelling. RANGER I and RANGER II both looked extraordinarily good. And then, of course, compare the first ever head-to-head randomized trial of Ranger versus another market-leading drug-coated balloon really tells the story. And we believe that the lower dose with similar efficacy, similar safety, low mortality, low -- low TLR rates all tell a story that will make Ranger a very appealing strategy for docs.

Got it. And what about maybe some comments on Eluvia on a stand-alone basis, how has that been doing? How has that been received given the strong head-to-head data that you produced? And what are the future catalysts for Eluvia that could stimulate more growth?

Yes. So Eluvia has been a strong growth driver, certainly in the U.S. and Japan, where it's recently been launched. It's been doing very well. The data has been a big driver of it, especially when we announced the long-term data and showed good durability. I think for some physicians, they were waiting to see if there was a big drop off after the first year when the drug stopped releasing. And when they saw that there wasn't sort of a "falling off the cliff," that was an indicator to them that, indeed, Eluvia data was real. The fact that it has the lowest dose of any drug-eluting therapy on the market, for some physicians, was a pretty compelling aspect of it. There's just lots of questions on whether or not dose matters, but certainly is beneficial to have a lower dose versus a higher dose. So that definitely has helped in terms of making physicians feel comfortable. And then we continue to have geographic expansion with Eluvia and launching it in the new countries. Probably the biggest one coming up in the next 12 months or so would be China. We've been working on bringing Eluvia to China for years. And that, I think, will be another growth driver. I mentioned geographic expansion at the outset, and that's probably one of the big ones here coming up in the future. So we're thrilled with the growth of Eluvia. And it's finding a nice place, especially in complex patients and lesions where they're considering using a scaffold anyway. It's just why use a bare metal stent when you have the benefits of Eluvia and strong data with excellent durability?

Got it. Great. Maybe -- I want to come back to some products later in the discussion. I guess I was hoping maybe we might take a break from that and transition to talk a little bit about managing through COVID and how that's impacting your business. So the way I'll ask this question is on the earnings call, you put out as an organization in this chart that looked at the level of deferability or yield activity by category and in peripheral, there were some like liver and kidney cancer that were more emergent and then some of the venous interventions that were more elective. So with that framework, I guess I was hoping you could talk a little bit about how you expect the business to come back. And then maybe give us some sense of more recent data points, what are you seeing as some of the states and other countries start to open up?

Yes. I'd say, first, elective procedures doesn't mean that the procedure is optional. These patients need to get treated. What we're seeing is elective essentially means it can be delayed a little bit. But ultimately, the patient needs to get treated. If you were to go back a couple of months ago and ask me how -- what percentage of peripheral procedures can be essentially delayed a good number of months, I would have said a much higher percentage than what we're seeing right now. And what you probably noticed on the earnings call is that peripheral is a lot more resilient than I think at least I thought a couple of months ago. So that's a positive sign. Many of the procedures that are being done are quite necessary and acute, things like critical limb ischemia, acute limb ischemia, DVT, PE. A lot of these patients are more emergent, especially on the oncology side, where we're seeing some strong continued growth for things like TheraSphere and some of the IR procedures. So overall, it's -- our portfolio anyway, has been pretty resilient at Boston Scientific peripheral. Our projection from a procedural standpoint is that there will be a bolus of procedures that will come forward over the summer and maybe into the early fall. These are patients that have been delayed, severe claudication or other procedures that they can just put it off a little bit, but they will -- the large majority will come back into the system. Hospitals and physicians are preparing for that in a variety of ways using things like telemedicine to stay connected with patients, plan for the procedures, look at nights and weekends and other ways to have excess capacity so they can bring these patients into the hospital or outside of the hospital and like an ASC or OBL, et cetera. And then I think we hear a lot of physicians and hospitals are scenario planning for a second wave in the fall and just putting things into place so that they're better prepared if there is a second wave, so that a lot of these procedures can continue, say, in the late fall and into winter, if we end up in a scenario where there's rolling outbreaks or something like that. So I think that the growth will be there, probably accelerated growth here in the next short period of time, followed by more normalized type of growth as we get into late 2020 going forward. That's sort of our best guess as of this moment. And of course, nobody really knows, but that's the scenario that we would put forth at this point. Yes.

Okay. And you've mentioned TheraSphere. And I know that's a product that the organization is pretty excited about. Maybe you could just spend a minute or 2 talking about the size of that business, its growth opportunities, some of the differentiation that you have with the product?

Yes. We are certainly excited about TheraSphere. It's doing very well for us right now, in large part because it's an excellent therapy for patients in general. But during this sort of unique time where patients and physicians want to get the patient out of the hospital quickly, TheraSphere can be done very efficiently. And so what we're seeing is rather than something like surgery or a procedure where a patient would need to be in the hospital for a number of days or even a week or longer, you can do a TheraSphere case very efficiently, get them in and out, sometimes as a bridge to transplant, other times as a goal of end therapy. And so we're seeing really a movement towards TheraSphere, which has been great. We also look at TheraSphere as a nice opportunity for geographic expansion. Again, there are a number of countries where we have a distribution channel and capabilities where BTG didn't. So we're working on bringing TheraSphere into new geographies. China is probably the biggest. BTG had been working on that for a while, and so we're sort of doubling down and bringing our capabilities to bear to bring TheraSphere to China. That's more of a longer-term project, but nonetheless, it's a good, strong future growth driver. And then we view TheraSphere as a platform technology, and so it's used right now a lot in primary liver cancer. We're looking at other solid tumors and other clinical science that we can bring to bear to expand the use of TheraSphere outside of its limited use today. So we think that the future growth prospects for this product is very bright. It's the largest product we have in our peripheral portfolio. And then, of course, we bring -- we surround the TheraSphere procedure with all of the tools in the toolbox, similar to what I described with Ranger and our PAD portfolio. We've got catheters and wires and coils and everything else that the IR would use in this procedure. And so we're seeing the opportunity for excellent pull-through as a result of the TheraSphere procedure.

I see. And then just as a follow-up on that, maybe you could just spend a minute and talk about how the TheraSphere is differentiated from some of the other embolization options out there. And when you referenced the expansion opportunities in other solid tumors, what are the time lines that we could be thinking about there for data or indication expansion?

Yes. So TheraSphere, as you know, is essentially internal radiation, where we take radiation and put it on a bead and then inject the bead into the tumor via the artery. And so there's other embolization technologies, but really only one other product available in the U.S. market that has radiation on it. There's bland beads and beads with drug that can be loaded on it for various liver type of tumors and embolization like coils and liquid and other embolization therapies that block blood flow but doesn't deliver treatment. And so TheraSphere is really unique in that it delivers internal radiation. And so we take a step back from a clinical perspective and we say what other tumors are there where an interventional radiologist can deliver radiation to help treat that patient with cancer. And so we think about brain cancer, we think about prostate cancer, we think about lung cancer and then, of course, other cancers in the liver outside of primary liver cancer, such as metastatic colorectal cancer that metastasizes to the liver. So we think that there's a lot of avenues to go, not to mention the combination of local and regional therapy with immuno-oncology, which is the other IO. So you take interventional oncology with immuno-oncology, and we are working with a number of institutions to study TheraSphere in combination with immunotherapy that could yield additional benefits for patients.

Okay. Okay, great. And earlier in the conversation, you mentioned that the integration of BTG is going well. So I guess I'm just hoping for some more color on that. What are the things that you're looking at be able to say that? And one of the real motivations for doing this deal was, as you've referenced a few times, a lot of synergy, geographic expansion opportunity. How is that starting to come to pass? And how does COVID impact that?

Yes. So on the synergies, one of the benefits of the delayed close was that it gave us more time to plan and put into place very detailed collaborative planning with BTG management. And so we took the time from, say, April to August, to double down on our synergy plans, validate our hypotheses and really put the building blocks in place to go very, very quickly. So within a matter of weeks to months, we had all of our organizations designed and developed. We had plans on cost synergies and manufacturing and just bringing the capabilities of Boston Scientific to bear with BTG. And so we moved at lightning speed in the fall and into the winter. And of course, we had no idea that COVID was going to take place. But it's really helped us because we've got the majority of the work behind us before COVID hit. And so I feel very confident that we will meet or exceed both the overall amount of synergies and the pacing of the synergies. And so I'd say, really COVID is 0 impact in terms of our ability to execute on BTG from a synergy perspective.

That's interesting. I wouldn't have necessarily expected to hear that, but that's good to hear. And I guess, wanted to go back and think about some other bigger-picture consequences of this transition. So you talked about the resilience and some of that base case recovery scenario. I guess I was wondering if you could comment on. What are the main things that you're watching to see if that base case scenario is coming to fruition? Talk about case rates or daily sales, China, what are some of the things that you're looking at, that you've been able to point to recently to say things are going positively or negatively?

Yes. I'll make a couple of comments and then maybe Michael can chime in as well because he's very close to a lot of the docs in the field and hospital administrators. I'd say the first thing is that as everybody knows, we're a global business. And we're very, very close to the management teams around the country. I talk to our China leader weekly. And the first bright spot that I would say is elective procedure volume in China coming back quite well post their COVID experience. And of course, like a lot of companies, we were dealing with COVID pretty substantially in early January. And I remember being on calls at night, talking about what they were dealing with. So we've been able to learn a lot from them and sort of watch how things are playing out in China, and that's encouraging. In other countries around the world, you do see a lot of variability. Just look at Germany procedure volume versus, say, Italy or Spain. So we see Germany doing quite well. And so that's not only just positive in terms of data points, but it's also allowed us to be very agile and nimble in terms of pointing resources and moving inventory and providing support to the countries that are sort of picking back up at a faster pace or didn't have as much of a detriment. And then in the U.S., I would say, not an insignificant amount of our business is outside of the hospital in outpatient labs. And we've been able to support them. They are eager to get back to their full run rate. And we do see, as part of this bolus that I talked about, we do see the outpatient labs being early in that journey. And we're starting to see very strong green shoots of outpatient labs beginning to get back. So we're optimistic that we're at the, not at the very beginning of this bolus, but it's -- we see that it is starting. Michael, any comments from you?

I think this is an interesting time, Jeff, where all the constituents are incredibly aligned. Hospitals clearly need this elective for margin volume to come back quickly. Patients are eager to get their chronic conditions managed and carried for under the attention that they've become accustomed. We're eager to help support our docs and their patients get the care they need. And of course, physicians desperately need to do this. They've been kind of put on the sideline in an uncharacteristic way or they've been redeployed into areas like COVID respiratory units. And so this is a unique moment in time, and I think we're going to see a strong return.

Yes, it's interesting to hear your feedback on this. I mean this is a topic of some debate, as I'm sure you know, with not only a lot of centers chomping at the bit to get back and doing things like you're saying, adding hours, adding days. There's also things they have to deal with that kind of hamper efficiency, right, testing, cleaning those protocols. Can you talk about how you're seeing some of the outpatient labs kind of managed through those things that are a little bit of -- down in the works, too?

Yes, I'll make a few comments, and Michael can help out here. But one of the nice things about the outpatient lab is it's relatively small and efficient. So they can schedule patients much more effectively so that you don't have a waiting room full of a whole bunch of patients. They can get patients in and out quickly. And they're also, because they're relatively small and few people, there's not a lot of bureaucracy and big policies and procedures. They can sort of move on a dime. And so what we're seeing is that they're doing the best they can to provide very safe procedures and a safe environment for themselves, their staff and patients. And I just think they can move quicker. And they also, being sole proprietors in a lot of cases, they also have the incentive to continue to keep their business open and running where it makes sense and where it's safe. Michael, any thoughts from you?

What's interesting, Jeff, is hospitals have done what we knew they were going to do. They have come up with their own policies for what patients need to get tested before they get their procedures and what about testing the staff, testing visitors, et cetera. But as you mentioned, OBLs are pretty much on their own. And so one of the distinct advantages, I think, we have is that back in January, the company formed this clinician emergency response team to help address the safety of our employees and kind of continuity of business first. But now how to make sure we get our workforce back safely. And we've been able to help talk to OBLs about the policies and plans we've put in place that I think are really best-in-class. I haven't heard of others doing something quite as robust. And so I think we've been helping from that side of the fence as well.

What are some of those things that you referenced that you're doing?

Well, we have an amazing team of physicians within Boston Scientific, led by Ian Meredith, our Global Chief Medical Officer. And we have a bunch of really smart people who have been scouring the literature, looking at best practices, determining pluses and minuses of both engine PCR, immunity testing, et cetera, and have already had in place, as Jeff can tell you, a very robust plan for how we manage our own employees. And that's actually demonstrated incredible foresight to getting people back into hospitals and OBLS.

Okay. Got you. Got you. All right. Well, let's move on again. I think we just have about 5 minutes left, and we haven't talked much yet about the venous business. It probably doesn't get as much airplay, but you do have a lot of nice growth drivers there, too, including some new stents that you've launched. So I was hoping we could discuss those maybe first, and then I wanted to move on to a couple other products in the portfolio.

Yes. I'll just make a couple of product comments and then see if Michael wants to chime in just on the market and the clinical space because we see this as a very strong growth driver for the future. Overall, we see the venous market is, call it maybe like $1.5 billion TAM and upper single digits type of growth. And we think there's 2 things that are going to continue to help this market drive growth. The first is clinical data. Because there is a paucity of clinical data in the venous field. And just like in other areas like in oncology and in PAD, we want to be the company to deliver the clinical science to help inform appropriate treatment for patients. And so we are investing in more clinical data, and we think that this will help the market grow. And then the second is technology. We have just an outstanding pipeline, again, sort of the -- all the tools in the toolbox approach from balloons to stents, to wires, EKOS, AngioJet, and other products that are in the near future that will set us apart. I can't imagine what it would be like today to be a single-product company trying to break into a hospital system during this sort of pandemic times. But with the depth and breadth of our portfolio, combined with new product launches, we feel we're an important part of the solution in this recovery. And if you're a hospital administrator, wondering how to be more efficient and streamline vendors and make things easier and better in the hospital. Certainly partnering with a company like Boston Scientific Peripheral that essentially has all the tools in the toolkit, we think, is a really nice position to be in. And so I think venous will continue to be a bright spot in our portfolio and our future growth. Michael?

Yes, I'm excited about this given that I spent so much time in my clinical career taking care of these patients. Matt, COVID presents an interesting perspective on this, given that there's this huge prevalence and explosion of thromboembolic disease that's occurred in COVID patients. It's clear to all of us that this is not only a pulmonary disease, but a systemic endothelial disease. And when you link this cytokine storm with immune system revved up, the coagulation cascade cross links with that. And the fact that patients are presenting days to weeks after coming out of an ICU with catastrophic venous and arterial events, this poses a real opportunity for Boston Scientific's products to get patients out of trouble quickly through effective therapies.

Got it. Yes. Definitely heard reports of that. It's interesting to hear your perspective there. I guess I was hoping also just to ask about the underlying trends, kind of pre-COVID. How have some of your key products like AngioJet, EKOS, the ones that you mentioned for DVT and PE been performing pre-COVID? And how much are you actually seeing that increase because of these issues that you're talking about?

Yes. So pre-COVID, our venous portfolio was an accretive growth driver for peripheral. And I think the space is growing nicely. And I think there's emerging technologies that don't use lytics that are also growing nicely, and the market is sort of understanding in which patients does it make sense to use a lytic and in which patients may it not be appropriate. We certainly think that it's a large market and use of a lytic will continue to be the dominant approach. And that will settle out as time goes on and more data is available, because there isn't a lot of data in some of these applications, especially in DVT. And in COVID, one of the nice things about some of the procedures is they're very efficient, and you can get a patient in and out of a hospital same day. So these procedures like an AngioJet procedure for an acute DVT or acute limb ischemia or something like that can go very quickly. Skin-to-skin might be well less than an hour or 2. So I think this portfolio, in particular, is set up well to capture some of those patients during the COVID pandemic. Any comments from you, Michael?

No, I think you're absolutely right. Certainly, in cases like PE, serious PE, the fact that we've used OPTALYZE data to modify the dosing protocols for EKOS so that these patients can have catheters placed, put into holding areas as opposed to sent into an ICU and then brought right back to finish the procedure really has changed the paradigm for this.

Got it. Well, I think we're basically out of time here. I think we've covered a lot. It's been really helpful to get your feedback, especially at a time when there's so much going on. So we really appreciate you spending time with us. I know investors on the line do, too, and just wish you the best of luck as you continue to manage through some really big challenges here.

Thank you.

Thanks, Matt. Stay safe.

Great. Thanks a lot. Thanks, you too.

Take care.

Take care. Bye now.