Boston Scientific Corporation (BSX) Earnings Call Transcript & Summary

Great. Hello, everybody. I'm Lee Hambright, U.S. medical devices analyst at Bernstein, where it's real to host Mike Mahoney and Susie Lisa from Boston Scientific. These are certainly unusual times. I'd like to thank everybody for joining over video conference. Just a couple of housekeeping items. First, in lieu of question cards in the room, you'll see a Pigeonhole Link available on the left side of your screen where you can submit questions during the session. And then second, at the end of the session, you'll have access to a very short investor poll through Prosensus. All right. Mike, thanks for joining. Before we jump into Q&A, maybe you can kick us off with a few opening remarks.

Good morning, Lee. Can you hear me okay? I hope.

I hear you fine. Thank you.

All right. Good. Thanks for videoing in to anybody who's out there. Maybe it's just you and I. I'll start off by saying just a quick background. I'm really pleased how the company is managing through COVID. Pre-COVID, the company builds a lot of consistent momentum year-over-year. Last year, we grew 7.3% organic, a little over 11% operational. And we've increased our organic growth profile each year over the past 7 years while improving EPS and free cash flow. So looking forward, very bullish on the company based on the pipeline, and our aim would be to accelerate that organic growth profile in normal days. With COVID, really proud of what our team has done as many companies have done incredible work to help support our customers and patients during this time. But similar to our results on our April earnings call, we have seen April, really, we believe, is the bottom in terms of sales performance and a nice progression of improvement since then. So we look forward to continuing of reopenings and procedure volume growth and really impressed with how our team has managed through this crisis to emerge a stronger company as we get through it. A lot of new capabilities being learned and developed as a result of this.

Great. Awesome. Thanks, Mike. Thanks for that. So these are really unusual times. People are working hard and not a lot of breaks. Can you just give us a sense of morale at Boston Scientific? How are people feeling?

So it is a good question. It's difficult because you can't see people as often. We're actually just opening up offices now this weekend in Mass. And obviously, our manufacturing plants have been around. But actually, we've done a lot of pulse surveys. And I would say, overall, morale is good. Sometimes it's difficult for some of our employees, especially with little kids, working from home. But everyone's figuring it out. There's also a lot of benefits to it. It's incredibly efficient globally to stay connected. We've actually seen improvement in inclusion scores. We've done a survey and diversity inclusion. We've seen improvement in inclusion scores as these digital kind of levels, the playing field for participation in meetings and discussion more than maybe traditional norms. But overall, I would say, engagement is quite high for the company, and people are excited about the recovery.

Great. So a lot of questions over the last week or so about the capital raise. You announced an equity raise last week of a little less than $2 billion. $750 million goes to paying down debt. The remainder, for general corporate purposes, including M&A. Some investors have wondered whether your view on the pace of COVID recovery may have changed. Did you really need to do this? Was it more about getting a cushion or about being ready for M&A?

Yes. The recovery curve is really so -- nobody knows. So far, it's very consistent with what we said at our April results where April is the low point, which we gave those numbers at our earnings call. And then we've seen nice improvement since then, weekly improvement through May. And we said second quarter would be the worst quarter and then an improvement in third quarter and then ideally back to growth in fourth quarter. So it's early days, but so far, that's encouraging, and we seem to be tracking very consistent with what the works that we laid out. We're not sure what the future holds in terms of second waves or mini waves or whatever the case may be. I don't think -- I think the health care societies will be able to manage it much better than the first time around. So in terms of the equity raise, it was a successful offering, one we didn't take lightly. We spent a lot of time thinking about it. And at the end of the day, it did go well. And the 2 primary purposes, the first purpose is to stay appropriately on offense. We want to continue to be at the high end of our peer group with organic growth. We've got a great pipeline. And also, as part of that, on the operational side, we've been pretty successful at some tuck-in M&A. And so we want to use some of those monies to be ready to leverage our venture portfolio, which we think is probably the most rich venture portfolio in medtech for follow-on investments or potential M&A in that area, especially during the COVID time where there may be some opportunities as well as the ability to do some tuck-in M&A similar to like an Augmenix or Vertiflex, the S-ICD, and we've done a number of them over the years. And then secondly, it would be to repay down that -- those debt maturities in 2021. And so it gives us the ability to do that as well. And I think that's smart, not knowing the recovery curve and what the future is. It's nice to have virtually eliminate any debt maturities in 2021 as we move through this cycle. So I think it allows us to be protected on the downside for a worst-case scenario and remain appropriately on offense as we continue to build momentum for the company.

Got it. Great. One question I've heard is why not -- on the M&A front, why not just wait until the deal is announced before lining up the financing?

Yes. So we obviously considered that as an opportunity. One is it could be tricky to do that at the time of a deal. And we felt really just to answer that first question is that gives us ample opportunity to do maybe 2 tuck-in deals through the course of the year; allows us to move quickly, which we've been able to do and successfully do some of these deals, the ones that make sense, which obviously won't change our financial hurdle rates and strategic fit, all the requirements. But allows us the flexibility to be agile, in particular with our venture portfolio where we've seen even over the last 45 days some opportunities for follow-on investments, and they take bigger stakes and companies where appropriate. So it gives us a little bit more flexibility and also allows us to repay down that debt in 2021.

Great. So maybe balancing a little bit the cushion and the ability to do M&A. If an M&A opportunity came up today, would you feel comfortable pulling the trigger now? Or do you need to wait a little bit until the recovery has progressed somewhat?

Yes. It's not the optimal time to be doing -- it's not optimal time now. It's more being ready. Certainly, things are getting much better. Our plants are back to work. We've been doing follow-on on BC investments. There are opportunities there, and these deals don't close overnight, and you can do remote due diligence and so forth. But I would say it's not optimal to close a deal in the next 60 days, but it's getting better. And as the year progresses, there will be opportunities.

Great. Okay. Maybe while we're on the topic of M&A, you've done quite a few deals over the past few years. Are your teams maxed out on integrating those deals now? Or can you continue to execute on the growth strategy while still taking on additional M&A?

Yes. Actually, from the operations side, we acquired BTG, and since BTG that we haven't been active outside our venture portfolio. So the BTG integration has gone great. And I would say it's called 75% done. It closed August of 2019. And thankfully, all the integration work, the bulk of it, took place pre-COVID, all the sales force integration. We're working through some of the manufacturing footprint profile strategies, but the bulk of the integration has really been completed already. And so we really don't have any ongoing -- excuse me, integrations that are impacting our -- there's really no constraints there, I would say.

Got it. Great. Okay. Maybe we'll talk a little bit about the shape of the recovery and sort of what you're seeing so far. When you reported Q1 earnings on April 29, sales were down 45% to 50% globally in April, which is expected to be the worst month of the year. You talked about a slight-but-encouraging improvement at the time, and you just mentioned earlier sort of weekly improvement through May. Have you seen continued improvement through the month? And can you talk a little bit about sort of where sales are trending for the month?

Yes. We won't give really too much color there other than what we gave -- provided at the April call. We have seen, as we suspected, consistent improvement as really in every region. The Asia region was the least impacted. And we've seen consistent improvement throughout Asia, particularly in China, which is great. Europe was impacted a little bit less in April than the U.S. and is recovering. And then the U.S., which was the most impacted, obviously, in April, has been -- you've seen -- you read the news every day. You've seen the reopenings of many hospitals, outpatient centers, elective procedures beginning to take place again. And then what's important, and we laid that out in the April call, is 2/3 of our portfolio is oriented towards outpatient settings. And I think that's really going to help Boston for the long term with outpatient hospital settings, OBLs, surgery centers. And then we also laid out in the call, about 2/3 of our procedures, although elective, really need to take place in about 100-day period based on. So they're not -- we do have some that are more elective that can be delayed similar to -- but the bulk of the elective procedures need to take place. I think those 2 combinations will help us in the recovery, and we're seeing the benefit of that so far. But it's early. It's only been 1 month since we provided that. But I would say it's pretty much on track.

Got it. Got it. So you also talked about meaningful improvement and expectation for meaningful improvement in the third quarter, followed by, hopefully, a return to positive growth in the fourth quarter. It's pretty hard to say right now, right? But is that still what you're expecting?

It's what we're projecting, yes. Yes. So we have different scenarios, further upside scenarios from what we've discussed, downside scenarios. But to the best of our forecasting ability, and we see what we see in Asia and Europe and so forth, we think that's very realistic, and that's what we're expecting.

Got it. Okay. Well, you talked about scenarios around that base case. People are a little bit worried about a second spike and what might happen. Again, how do you think about sort of risk skew around that base case to the upside or to the downside?

Well, that's -- part of the reason we took out the equity offering, to ensure in a very downside scenario that we have significant -- plenty of capacity there. That was part of the rationale. I don't think -- I think the -- this has brought to light many things. One is the hospitals. Obviously, we've been hurting financially as a result of this, as many companies have. The hospitals are much more geared to how to manage this effectively. And patients need procedures. So I think even in subsequent potential waves, I don't think the impact would be quite as severe because of the experience that everybody has. So I think in the downside scenario, there would be an impact but I don't think to the same levels that we saw in April. And so these would all be downside scenarios. Also, I think it's nice to see we've set ourselves up financially with enough liquidity to manage any of those significant downside scenarios. And also, our company has shown the agility. We moved pretty quickly in reducing variable spend across the company. And so I think agility-wise, I think our company moves fairly quickly. It can adapt to scenarios on the upside to continue to invest faster or to move quickly to reduce appropriate spend if we see these second waves or third waves coming.

Got it. Great. A question from the audience. What do you see is the biggest opportunity arising from the pandemic? And what CapEx dollar are you incrementally more likely to spend?

In the near -- I would say we wouldn't spend more CapEx than what we outlined. That's for sure. And that's not going to happen. But in terms of incremental investment in CapEx, within that CapEx budget, it's absolutely all within the IT area. We did have a lot more CapEx associated to facilities that's being cut because we have so many people working from home, and we see a lot of that being permanent. So we'll actually be taking out CapEx in some of the facility builds beyond manufacturing. And then the biggest investments in all things IT-related. So the biggest opportunities would be business model innovation with our digital capabilities and the ability to help physicians remotely. And so there's been lots of write-ups of examples where we're connecting remotely in our rhythm management business to help doctors put in ICD, CRT-D devices remotely, leveraging our 3,300 programmer and IT capabilities. We've helped proctor physicians in Japan on LOTUS cases from Europe. And we've opened up new centers with EXALT in Milan from Marlborough, Massachusetts. So I think anything related to digital education, infrastructure, it would be further accelerated.

Got it. Great. Still around that topic. Is there a possibility that the role of the sales rep might change during the course of the pandemic? I mean with the opportunity to do more remote training and education, could you see potentially fewer reps in the operating room or in hospitals?

So there's a potential for some business model innovation there, for sure. But it's also been consistent with some of the trends that we've seen. But recently, over the last 90 days, you've seen a massive increase in telehealth capabilities within hospitals. Patients enjoy interacting that way. So one, the digital capability is to align and match to that is what we've referenced earlier. Oftentimes, our clinical people are really -- it's very extremely helpful for them to be in the procedure in the cases. And so they're a big part of it. And then our salespeople will always be important and critical for the company in these large networks. But there may be some of the mix of that investment can be reallocated in some ways. But you're always going to need great salespeople and great clinical people, but we'll certainly be looking at that equation and optimizing the capabilities and mix combined with our digital strategies.

Got it. Great. Okay. So as we think about the shape of the recovery curve for elective procedures, there will be constraints on both supply and demand. So starting on the supply side, there's clearly a limit to how far hospital capacity can flex up to make up some of these deferred procedures. How should investors think about kind of quantifying that ceiling?

I mean quantify the ceiling on…

On the hospitals' supply side, the supply of ORs, of doctors, nurses, PPE equipment to do elective procedures.

Yes. So I think the supply side is potentially more ready than the demand side right now, and -- but it's improving. I think hospitals have done a really nice job of setting themselves up, not every city, not every country. But in general, they're obviously marketing directly to their patients now on the safety of coming back to the hospital. Many of them have pushed more into outpatient settings or they set up separate COVID wings of hospitals or if they're a large system, separate hospitals. And so they've been planning for this for a while. And so I think the supply is getting better and better. It's really on the demand side that's most important. And I think hospitals are doing a really nice job. That relationship and credibility between the patient and the doctor, patient hospitals really is everything. And so you're seeing a lot of outreach directly to patients from the hospital or physicians on the safety and giving patients confidence to come back. And so that's where you're seeing the -- really the weekly improvement. So I think the supply side seems to be fine. It's the demand side that will continue to be -- needs to be worked.

Yes. Got it. On that demand side, like you said, patients are anxious, and patient survey suggests many people are nowhere near ready to go back to health care settings. How do you think patients will balance the fear of waiting longer for a procedure versus the fear of going back into a hospital?

Yes. That's where that acuity mix that we've laid out in April so important. So there are some companies who are less impacted by COVID based on the types of portfolio that they have. And we certainly have been impacted. But the fact that, as I mentioned, about 75% of our procedures are elective, but they really need to take place within about 100 days or so based on the patients in severe pain or just can't do further procedure. Some of our procedures like Neuromod for pain can be deferred a little bit longer. And so there -- that's where we're helping those pain specialists and those pain physicians on capabilities to help met -- to help outreach directly to patients. So I think broadly, that acuity mix, although it hurt us in April, they can't be deferred forever, will help us. And we have, versus some other companies, maybe a less referability in our procedures than some other companies do.

Got it. So you've seen hospitalization rates for acute conditions like heart attack and stroke and cancer that have all really fallen dramatically over the last 3 months as patients have actively avoided hospitals due to coronavirus fears. By delaying treatment, long-term outcomes will obviously suffer from many of these patients. And what needs to happen, do you think, in the coming weeks and months to effectively alleviate those patient concerns and kind of minimize the collateral damage of patients waiting due to COVID-19?

Sure. It's -- to me, it's all about the key indication between the hospital and the position and directly to the patient. Because your mother or family member is going to trust their doctor, he's going to trust the hospital. And I think on the supplier side, we can do so much to try to help them. But ultimately, it's that trust between the patient and the hospital and the doctor. And that's where you're seeing a lot of outreach directly to patients from physicians and hospitals, be it digital means, via advertising, via phone calls. And that outpatient setting environment that we have is a setting where patients seem to be more willing to come back more quickly than spending 4, 5 days in the hospital. But then again, there's some procedures that just need to be done. Our Interventional Oncology business for BTG has held up extremely well during COVID and primarily for liver cancer and other interventional cancer treatments. So that business continues to do quite well and hasn't really had an impact. So there's some procedures that just need to take place. I think the communication and the trust with hospitals is critical, and it's clearly where hospitals have put a lot of efforts.

Got it. And maybe last kind of supply-demand question. You mentioned supply is not a problem right now. Do you think it's a…

I don't think it's not a problem. I think it's less of an issue than -- I wouldn't say it's not a problem at all. It depends on what city you're in, too. But it's broadly less of an issue, I think, than the demand side.

Got it. Makes sense. Do you think it's fair to expect that volumes will be initially constrained by demand, as you said, by patient psychology in the near term? And then by supply kind of in the medium term, does it make sense to -- that demand might sort of surpass supply for elective procedures by the end of the year?

I don't know. We'll see. We'll see. I think there has been a few benefits with all this telemedicine going on. We've had a number of discussions with doctors on the productivity improvements they're seeing in terms of patient scheduling and patient visits that are being done just like we are talking here. And so the productivity and cycle time of scheduling patients in those premeetings and prediscussions have actually been much far more efficient. So I think that's been an upside. And I think doctors, as long as the reimbursement holds on that, will continue to want to interact with patients in this way. So I think that actually helps build the funnel. On the downside, you're seeing hospitals smartly add a little bit more time in between procedure setup. So it may require an extra 15, 20 minutes to ensure that the room is completely safe and ensure adequate PPE and so forth, those smart precautions like that. But also, they are looking at extending hours of doing interventional procedures and sometimes even doing them over the weekends where they may not have done that in the past. So hospitals have lots of tools that they're using to try to create an appropriate level of windows for those procedures to take place.

Got it. You mentioned your exposure to outpatient procedures, 2/3 of the company and outpatient procedures might recover more quickly in some cases than inpatient. Of the remaining 1/3 of your business that's inpatient, how many of those procedures could potentially move to the outpatient setting as the health care system works its way back through the backlog of deferred procedures?

Yes. You've seen a consistent trend over the years of that happening from our interventional -- our Peripheral Interventions business. You're seeing more cardiology procedures being done in that type of outpatient setting. So I think there's a lot of demand. It's one benefit of being a primarily interventional medicine company. So if you think about the next 5 years, you think interventional procedures will only increase and the innovation that we have around there. So that kind of goes with the tide of where hospitals want to go and where patients certainly want to go. I think in terms of -- regionally, the U.S. is more advanced than Europe and Asia in this regard. And so I think you'll see more work done in Europe to move a bit more towards this outpatient orientation, similar to what the U.S. has been doing for a number of years. I think the U.S., that train left the station, and we're really ideally suited for that based on our capabilities, and that's what we do. But as -- around the world is not set up that way everywhere. So I think in Europe, there's probably more of an opportunity to move in that direction.

For -- to your point, in the U.S., we've heard some anecdotes of hospital systems moving a lot of elective procedures to freestanding ASCs to avoid kind of mixing patients. Do you think that will become kind of a trend? And do you think that COVID recovery could potentially accelerate that shift of certain procedures to ASCs on a more permanent basis?

Yes. Just -- I do. It's similar -- I think that, that trend has been going on a while, and this will boost it further. So I think that trend will definitely continue to enhance, and it plays into our capabilities.

Great. I think some investors worry that as procedures start to shift to ASCs, you might see incremental price pressure on devices. Is that a valid concern? Is that the way you see it?

Yes. I think there's always -- I think I've been in medtech for a while. And every year, the #1 issue, concern, if you look at headwinds and tailwinds, is always price. And so it's really no different. And I think what's most important when we look at it, it's our category leadership strategy that we have. So you take any business that we have, our Endoscopy business, for example, we've got a very, very broad portfolio with hundreds, thousands of SKUs. And so what we try to do is drive new unique innovation within that business, whether it be our digital spyglass, for example; our EXALT-D our AXIOS platform and many others in what we're doing endoluminal surgery. And so simply try to have a unique innovation that has great clinical efficacy and reimbursement and also help pull through that core portfolio, which may be less differentiated based on the categories. And that contracting bill allows us to partner with hospitals or OBLs or outpatient settings. So there's always price pressure, but we always factor that in. And we drive standard cost productivity with our operations in our plants, and we try to mix in unique innovation to help our contracting capabilities to offset the natural pricing pressure.

Got it. Okay. Maybe let's shift to talking about product launches a little bit. You've got quite a few launches underway and even more slated for the second half of 2020. Given, I think, many clinicians in this environment will kind of solve for speed, sort of do what they do best, do what they do the fastest just to pound through the backlog of deferred procedures. Will they have time to consider new product adoption sort of doing things differently over the next few months?

Yes. It depends on if the new product requires significant new training or not. So some of our launches don't, and some of them do. So we really have to go through by business, but you might take a watch-and-flex device, which will be the device we'll be launching in the second half of the year here. So that won't require new training, new proctoring, and it makes the procedure easier and likely faster. And so things like that will be very frictionless. Products like EXALT-D or LOTUS, which do require more training to open up new centers, have been impacted. And -- but we'll improve over time here as we can train more remotely or train within the hospital. So it really depends. We have a product, Ranger, our Drug-Coated Balloon, which we expect second half this year, won't need training and proctoring. So there's really quite a mix of launches that we have, which are significant in the next 18 months. Some require a heavier new training capability, and some don't at all.

Great. Okay. That's a good segue maybe to go into the businesses, maybe cardiology first. There's a question from the audience about the shape of the recovery across the different segments within cardiology. Coronary therapies have been a little bit more resilient than disruptual heart business. And then within structural heart, it seems as though TAVR has held up a bit better than WATCHMAN. But all of these products address very serious underlying conditions. And as you said before, these procedures can't be deferred very long without putting patients at risk. So across the Cardio segment, which procedures do you expect to come back first? And which will take the longest?

Yes. So it's played out like we've anticipated so far. The complex coronary procedures where oftentimes, the only way to help or save the patient who can't go under cardiac surgery is using interventional complex PCI. So our -- I would say our complex coronary and PCI business has -- of the 3 segments, has been the least impacted and coming back. Secondly, I would agree with you, the TAVR based on maybe more extreme, high-risk patients are more apt to come back more quickly. Maybe the low risk can defer off a little bit longer. And then thirdly, WATCHMAN. But we have seen a nice improvement in WATCHMAN in April. But there's a peak component of WATCHMAN that really can't be deferred that are very high risk of bleed, high risk of stroke, GI, fleet issues. And so those are emergent, and some can be more elective. But overall, we've seen really a nice improvement off of a low base in April in all 3 of those segments. But I would say the recovery curve is kind of segmented that way, but we have seen improvement in all 3 of those.

Got it. Within each category, is there a percentage of deferral -- deferred procedures that may never come back?

I don't think so. I mean I -- it may take some time, but with WATCHMAN, in particular, it's a -- one, the financial health is also an important consideration for these hospitals. And a product like WATCHMAN has nice reimbursement for hospitals. The reimbursements improve each year. The doctor's comfort level in doing the device continues to increase. Utilization pre-COVID was growing significantly, and patient awareness has also enhanced significantly over the years. And we're seeking a broader indication with the 2 major trials that we're investing in right now. So the underlying patient demand and need will still be there. So it may take a bit more time. But I don't see that opportunity set to decline. If anything, with WATCHMAN, in particular, we expect to ideally expand that into a multibillion-dollar market based on the additional clinical work that we're doing.

Great. Great. On WATCHMAN, it's been a powerful growth story for Boston Scientific. How does flex help you sort of extend the leadership in the category?

Yes. So what it does, it just -- it's a -- it doesn't require additional new training, as I mentioned, but the device had great clinical data at HRS. It's easier to implant. It's -- you can actually reposition the device, which the current WATCHMAN device is unable to do that. I think for some doctors, the sizing matrix is excellent with it. And there potentially could be additional reduced risk of perforation based on the closed deal of it. So I think the device gives doctors enhanced confidence in the safety and efficacy and may open up some additional new users as well. But it's really just -- it's an easier device to use. The data has been terrific, and we think it will drive more adoption with the physicians.

That's great. When do you expect more competition in the U.S. in LAAC?

I don't know. I don't know what -- I'm not sure what the latest is on our competitors' time line. I assume sometime in '21, I would imagine.

Got it. Good. Okay. So maybe shifting over to MedSurg. EXALT-D, you noted on the Q1 call that the rollout of EXALT-D is progressing a little bit more slowly due to COVID-19, but you continue to view the single-use coat market as a multibillion-dollar opportunity. How has the pandemic impacted EXALT-D launch? On one hand, there's more focus on infection prevention than ever before in hospitals. But then on the other hand, it's clearly a difficult time to get hospitals and physicians to consider a paradigm shifts of this type.

Yes, both those things are right on. So some hospitals that we've done installations with have positioned it as really critical for reduced risk and infection and have adopted it. But it has been impacted by the COVID just getting access to hospitals has been difficult over the past 90 days. So that's starting to loosen up now. And there is a small capital component. And importantly, Boston Scientific has a very small percent of our business that's capital related. We're getting capital -- financing approval through a hospital these days is extremely difficult. And so we're working with hospitals to eliminate or reduce down that burden as much as we possibly can, so they don't have to go to capital committee. And now it's simply as things are getting better, enabling our teams to set up and do some small training with the hospitals. So that's starting to improve, but it was impacted over the past 100 days. But I think as you said, the infection risk is real and we think will be a tailwind for products like EXALT. And so we're very bullish about the future of it. There's just been about a 90-, 100-day slowdown in terms of our impact that we expected on a normal days. But then we've also had our surgical SpyGlass, I'm sorry, surgical scope recently approved. And we're actually seeking to invest harder on our bronchoscope to hopefully launch that in 2021 as well. So there's a suite of platforms there. We've seen -- we have great experience with digital SpyGlass and LithoVue. You see competitors also seeking to enter this market. So I think it makes sense. There's a lot of -- I think COVID will ultimately be a tailwind and catalyst for it, albeit the first 100 days here have been slower because of the inability to access some accounts.

Got it. All right. In Urology and Pelvic Health, on the Q1 call, you announced an effort to reallocate resources to higher-return investments within the category. Can you elaborate a little bit more on these decisions, kind of why and why now? And talk about where you see the highest ROI investment opportunities within Urology and Pelvic Health going forward?

Yes. So both -- sure. On the urology side, that business has been a really nice grower for us for a while. We made this a few months ago to reduce down the width, I would say, of our portfolio. And so we did that small divestiture. And the primary reason is our ability to innovate in core urology in men's health and women's health as well as with the Augmenix platform is quite significant. And so we essentially just narrowed our focus a bit more in those categories to provide additional R&D dollars to seek potential M&A options within those areas. And that was the portfolio decision that we made. And the other nice thing about urology, it continues to grow outside the U.S. It was really a U.S. business. And now we consistently are fueling more investment dollars in Europe and Asia Pac to bring that portfolio really around the world.

Got it. Okay. Maybe shifting to Rhythm and Neuro. Neuromod sales were down pretty heavily in the first few weeks of April. Given that Neuromod market growth has been a little unpredictable over recent quarters, is it possible that either SCS or DBS procedures take significantly longer to recover post-COVID?

Yes. We think DBS will take a little bit longer than SCS. DBS procedures need to be done in the hospital. They're critical, but they can be -- they're more elective in terms of the timing. So patients obviously need them. But that would fall in the category of more elective orientation, although kind of life-changing and incredibly impactful. So that business for us was growing extremely well, and then it will get better, but likely will take a little bit longer to come back versus the other businesses in Boston. We have seen nice improvement in the Spinal Cord Stim business since April. And so I think that what's going to help us in that business really is the portfolio that we have. We're not just competing against our competitors in Spinal Cord Stim. We offer RF capabilities as well as Vertiflex. So the breadth of our portfolio to treat a wide range of pain beyond just our SCS, which is also a terrific platform, I think it will be very helpful for physicians. And that comprehensive portfolio, I think, is differentiated versus our peer group. And we're doing a lot of work in the digital area to help those physicians as well. So that business is getting better, but it was impacted the most.

Got it. In CRM, ICDs make up 70% of your CRM business. You performed quite well there. But in pacing, you've seen some share loss. Can you talk a little bit about your plan to reverse that trend in pacing?

Yes. So on the pacemaker side, we have put more investment mix dollars, I would say, broadly in ICD CRT-D. But that being the case, the patient market is still important to us. We just launched a new lead pre-COVID, which is important for us. And so we expect -- under normal circumstances, you would have seen slightly better pacer performance versus 2019, although not the growth rates that we want, but improved performance based on additionally the INGEVITY+ Lead this is called that we've launched. In the future, you'll see the -- our leadless pacemaker, which will be eventually paired with S-ICD continues to progress and will be in clinical. And so I think for the longer term, the base portfolio will get better with new lead technology and then the leadless pacemaker in the future will get better. So I think you'll see us improve there, but we expect to have continued greater success and emphasis in the ICD in the CRT-D area. And then you saw at the virtual HRS terrific data on S-ICD, which is really amazing to see because that was really a breakthrough technology 7 years ago. I think it was the first acquisition I was part of at Boston Scientific and really transformational. And now you've seen the data play out over many years where it shows a fewer inappropriate shocks than standard ICD CRT-D as well as significantly reduced risk of infection or lead complications. And so for a patient, that's pretty compelling long-term data. And we expect S-ICD should have a boost based on that data globally once things continue to normalize.

Got it. In that high-power segment, one of your competitors has talked about a launch of a new Bluetooth-enabled products, ICDs and CRT-Ds. Do you expect to see more competition in that segment going forward?

There's always -- they're similar competitors. They aren't any new competitors in that area, but that's -- it's not one of our higher growth markets. I think every company is chasing remote capabilities, digital capabilities in this area. We have this new programmer that's being launched that enables our reps to work very effectively while being outside of the interventional room, sometimes at their home or in another city. So every company is going to be working on continued connectivity and digital capabilities with their active implantable devices.

Got it. All right. Electrophysiology. So category leadership has been the hallmark of your corporate strategy rather than being everything to everyone. You've been really focused on building out strong portfolios within those 7 specific categories. How does your strategy in Electrophysiology where you got less market share fit with that approach?

Yes. So it's -- EPs is a business that we're not #1 or #2. I do think in the future, we'll be more disruptive in that marketplace. We have very strong relationships with that physician customer given our CRM business. And it's maybe the best, largest market in medtech that grows double digits consistently. And also, there's a lot of new innovation. It's not -- it's clearly not a mature market and in terms of this growth profile as well as new innovation that's coming. And so we have a lot of good things going there. In the second half of this year in Europe, you'll see really a very full portfolio. We'll be the only company in the world of EP in Europe who will be able to offer a physician a single-shot cryo balloon that we think is differentiated from the existing incumbent as well as a full-service mapping platform and a force-sensing catheter, combined with our DIRECTSENSE catheter. So all those tools will be available in Europe in the second half of the year. And that portfolio is actually wider than the current market leaders. And so we've put a lot of investment in this business. Some of these products will take longer to come to the U.S. because of the clinical trials that are required. We have seen some nice product approvals in Japan, ironically faster than the U.S. So that will help that Japanese business, which is a large EP market there. And in the U.S., we're launching a new product called DIRECTSENSE, which is a new therapeutic catheter. So you'll -- although we haven't -- we're not the market leader, we expect the second half of '20 and 2021 for this to be a nice grower for the company, in the long term, very important business given the market opportunity.

Great. A couple of BTG questions from the audience. First, what is -- what's the dream case in Interventional Oncology? How big could that business be? And what does it take to get there?

It's a terrific market. So I won't -- to answer the question -- thank you for the question whoever asked that one. It's a market that's not as crowded. And now Boston Scientific is the only company who can offer therapeutic -- the array of therapeutic capabilities besides the access capabilities that we have from legacy BSC. So this year, we'll be launching a microwave platform combined with the cryo platform as well as our Y-90 radioactive beads, and that business is growing extremely well. So the breadth of that portfolio is very good. And what's -- what we like about BTG is its highly clinically -- highly clinical nature. So it's less price sensitive than other businesses, and it's very clinically science-oriented. And the dream scenario for us is to, one, in the near term, expand this more outside of the U.S. and longer term in China where the opportunity is 2 or 3x more than the U.S. And so we have a partnership in China that we've established over the past 6 months to begin in progress there. So the first dream would be to expand us globally. And the second dream that we have, which is we're working now, is to expand indications. And so particularly with Y-90, we have some neuro applications and pancreatic applications that we're in early clinical trials -- early clinical work with. So to expand that capability. So what's unique about Boston is our ability -- we have the therapeutic agents, as I mentioned, microwave cryo, Y-90 TheraSphere and then all the interventional tools that we have where we can uniquely deliver capabilities deep in the body, leveraging all of our interventional capabilities across the company. So when you can directly place therapeutic agents, leveraging our wires, our balloons, our digital capabilities, our IVUS, you can really target cancer more precisely. And so we're excited about the opportunity to expand the clinical indications beyond where we are today in liver and lung.

Great. One more quick one on BTG. Spec pharma business you talked about as being noncore. What have you learned about the business since deal closed? And what would have a potential buyer of that business find attractive?

Yes. We've learned that snakes don't care about COVID. They seem to be immune, and they still bite people. And so we've seen that be completely resistant to any COVID tail or headwinds, which has been great. The business runs really independently within Boston Scientific. It's led by a great leader, and they're doing an extremely good job. So it's -- the financial performance has been quite good. And as you mentioned, it's not an interventional business consistent with what Boston Scientific has across our playbook. But currently, they're doing a terrific job. They're managed well, and they're delivering strong performance. And in the future, we'll continue to look at that asset.

One more audience question. The U.S.-China relationship seems increasingly uncertain with a growing focus on nationalized supply chains. How do you think about Boston's outlook in China? And are you considering any supply chain adjustments?

No. The China is a super important business for us. We've had great capabilities there. We do beyond our commercial teams. We do have software engineering there. A lot of physician training takes place there. So it's important strategically for us. But in terms of supply chain, we have less concentration in China than maybe many other companies do. So that's why I said no because we're really not dependent in a significant way there. But we have some key suppliers in China that are important to us. And through COVID, we've worked hard to balance any choke points there to have redundant supply capabilities even more so than we had prior. But we don't currently offer manufacturing in China. So we have a large plant in Malaysia. So we don't have any manufacturing dependencies in China at this point. So we don't see any significant operational supply chain modifications coming through. If anything, we want to continue to invest in the country, invest in the business there, given its potential and match to our portfolio.

Great. So zooming out, just maybe 2 strategic questions to wrap up. We're asking this question to every one of your peers this week. As you think through and beyond the pandemic, how do you expect your priorities to shift, especially as they relate to cutting costs or increasing levels of investment?

I think on the priorities, you'll see us continue to stick with this category leadership strategy, organic R&D innovation, augmented with business development and continuing to expand our global footprint. So I think that strategy makes sense, and we see a lot of opportunities there. I think what has changed is what you really addressed in the very beginning of the call. We expect some business model innovation to come from this. Hospitals working this way as we are in the call has become normal now for hospitals. And we think there's a lot of benefits for patient intimacy, patient care. And you'll see us and other companies look to optimize their business model using these remote digital tools for training, proctoring, more efficiencies. So I think capabilities along those lines will continue to -- need to be enhanced and invested in. And I think that will drive potential closer contacts, relationships with customers as well as potentially some additional productivity benefits.

Great. All right. I think our time is up. So thanks so much, Mike, for joining us today. I'd just remind investors to click on the Prosensus link on the left side of your screen for a very short poll on Boston Scientific. But thank you very much, Mike. Really appreciate the time.

Thank you.