Boston Scientific Corporation (BSX) Earnings Call Transcript & Summary

But overall, if you try to blend all these years together and if you look at the history of the company and as we continue to advance in faster-growing markets and fueled by the pipeline, we continue to expect to be at the higher end of our peer group on sales. We continue to expect improved margins like we've done for many years. Our free cash flow is strong. And importantly, our kind of legal liabilities have never been lower than they are now. And hopefully, we'll never get back to where they were. So that's all good. And our balance sheet is actually stronger now than it was a year ago.

Mike, you touched upon the WATCHMAN FLX and our recent checks are consistent with what you're saying, very positive feedback, easier to implant. What -- is that -- what kind of impact do you think that could have? You said that -- I was surprised a little by your earlier comment that, that could have the biggest dollar impact. Any more color on why FLX could have such a big impact?

Well, just -- I say just a dollar impact because of the size of the business now. And if it can continue to grow at a healthy rate, those -- that dollar growth, maybe not percent growth, but dollar growth should be strong for the company.

Go ahead, please.

Yes. So we see continued strength in Europe where the market is smaller. But in terms of our share position in Europe, we're encouraged by that with FLX as a precursor for the future. And we just see reimbursement continues to improve in that category. And doctors have become very comfortable with the procedure. And I think in the future, you're seeing that sites do more work on the procedural efficiency of the LAAC procedure itself. And it's just that Mayo Rochester, and in many cases, they're doing same-day procedures without anesthesia. And so the efficiency of the procedure is becoming more streamlined over time. And so procedure becomes more efficient, the device is easier to use, it's safer. Doctors get more comfortable with it. Reimbursement is good. It's a nice category for us.

And then I'd just add longer term, too, Larry, recall there's trials like OPTION, which will expand the market into post-afib ablation patients. And then the big one, this is much longer term, but CHAMPION AF as first-line therapy and our head-to-head versus DOAC should start, I think, early next year.

Thanks, Susie. And Mike, you had some positive and to some degree, unexpected news on Eluvia recently with the New Tech Add-on Payment. And I guess, what are you seeing in terms of the recovery of that category? And how impactful do you think the New Tech Add-on Payment could be?

Sure. The category is not where we thought it would be in, what, I guess, early '19 because of the paclitaxel issues. But I would say it's improved on a nice slope since it kind of bottomed out first quarter or second quarter of '19. So it continues to improve, although be at not the levels that we think it should be. And we think that more and more paclitaxel data will be coming out and so we think the category will continue to strengthen for many years, well in advance of any Everolimus-type products, which are multi-years away. So we think that whole category will continue to improve as more data comes out. And clearly, the reimbursement is a strong signal on the safety and efficacy and the differentiation of our product versus our peer. And that's for the inpatient setting, which is a nice segment, but it's more heavily weighted towards outpatients. And so in the future, we'd hopefully like to get some halo benefits from that inpatient procedure code towards outpatient reimbursement. But nonetheless, it's certainly a tailwind for us versus not having and it shows the clinical benefit of the Eluvia stent, which we believed in all along. And so we feel like we're thankful to get it, but we'd also like to deserve it.

Mike, sticking with Peripheral, how are you feeling about your Peripheral business with the BTG acquisition? Peripheral is one of the most resilient businesses through COVID.

Yes. I mentioned that really -- we got this one right. Years ago, we doubled down in the peripheral space whereas a long time ago, legacy Boston, it was kind of a bit of an afterthought and we doubled down internally with -- in the arterial space, which you just talked about with our drug-coated balloon called Ranger, which we hope to get approved, hopefully by end of the year here and to launch in the U.S. in '21 and also with Eluvia that you just talked about. But the 2 categories that we were not category leaders in that we played in were IO and venous. And BTG completely really solidified a strong leadership position in interventional oncology and I would say a good leadership position in venous. And we have a lot of internal R&D program to support venous and IO. As well as taking those products outside the U.S., which they're very underpenetrated now. And we have some venture investments in those categories as well. So you'll continue to see us invest maybe disproportionately more in that whole PI IO business based on strong reimbursements, new innovation and growing markets.

That's helpful. Mike, sticking with Cardio. How are you feeling about your TAVR business? You have neo2 launching in Europe in the second half. Personally, I felt that, that's a pretty important product for you guys, maybe a little underappreciated. You got CE Mark earlier this year. COVID was going on. It didn't get a lot of attention. That looks like a nice product.

It is. I think you hit it well. It was kind of under the -- all things COVID-related and maybe drowned out. But we acquired that company a few years ago, and this is a -- I wouldn't call it a second-generation product, but a significant improvement. We believe in PVL rates for that device. And so we're excited to launch that in Europe. And we're enrolling the trial in the U.S. as we speak, which is starting to pick up as COVID's starting to kind of settle down a bit more. So the trial enrollment starting to improve with ACURATE neo2. So the European team will be in good place with LOTUS as well as neo2 as you look at '21. SENTINEL is not quite as large in Europe. That's why we're running that SENTINEL trial. But for our neo2 program in LOTUS and SENTINEL, we're in very good position in Europe. And we're enrolling neo2 in the U.S. as well as continue to enhance our LOTUS Edge launch.

And Mike, as far as I know, the late breakers have not been disclosed yet for TCT, I checked this morning. Is there anything that you expect from Boston Scientific at TCT -- the virtual TCT media in October?

Yes. And Susie would know, I think we're having Joe Fitzgerald, who I think the team knows well there. He used to run our CRM and EP business. He used to run Peripheral Interventions, he used to run neurovascular. So a very experienced global leader for us. He's running an Interventional Cardiology business for us now. So he'll be giving an overview of that. As well as Jeff Mirviss to talk on our peripheral vascular business. And so you'll see that. You'll see likely highlights on WATCHMAN, our clinical work, SENTINEL clinical work, neo2 as well as Scope II data likely will be presented there as well.

Scope II data will likely be at TCT?

I believe so, yes.

Okay. That's good to know. Mike, just jumping around a little bit, maybe we can go for a couple of minutes. A couple of minutes over here. Just on EXALT-D, obviously, an important pipeline product, you touched upon it earlier. It seems like your competitor in the U.S. has been delayed a little bit. What are you seeing so far? Maybe the answer is nothing because of their delay. And I know I asked about this on the earnings call, but the price premium that you have now is relatively large. Any updated thoughts on that?

The market is so early. I think right now, it's difficult to launch EXALT-D, basically made very little progress in the second quarter with COVID. And now you're starting to see some movement in progress with units being in place and utilization starting to enhance. And so we'll get a nice benefit for full year '21, but it's not going to move the needle much in 2020, given the issues we all had to deal with. But we expect to be a nice growth driver for '21 and I would say it's too early to assess the competitors because the competitor isn't out in the market yet. And we just know this is a device that's not easy to do in terms of manufacture and design a device that feels like a reusable scope in the duodenum. So we're excited about the clinical and R&D work that's been placed in this for many years, and we don't think that's easy to replicate. And so we expect to have a nice uptick in '21 of that. And then secondly, our bronchoscope, which we touched on, which actually is an easier device to make than our duodenoscope, we'll get some benefit from that in '21 as well.

Maybe one last question, Mike. On M&A, you did an equity raise earlier this year. So you have a little bit more capacity. You did take a pause, we haven't seen you do any deals recently. When do you think you'll be back in the kind of markets to be able to do M&A?

We're always -- we're always looking. We've been very active with our Venture portfolio, which is less visible to you over the past 6 months. So we've been active with new companies that we've invested in are follow-ons. So we're pleased with our position with that, and we continue to look at tuck-in acquisitions like we always have. But we've got a pretty good screen that they need to be the right strategic fit, the right return on invested capital and so we're always active in looking in that area, but we've been active with our Venture portfolio over the last 6 months.

Mike, before we kind of close, anything else you want to add? Again, really sorry about the technical issues on my end. But wanted to give you a chance to make some closing remarks.

Well, I think just high level, for many years and we think we've talked about delivering the higher end of our peer group in revenue, which we believe we have the pipeline to support, especially as COVID begins to -- is more manageable, I would say, although not gone, so that's certainly over the next 6 months we'll have to continue to manage that. But as you look at the second half of '21 and clearly when hopefully vaccines are more prevalent, we're very comfortable with the pipeline that will grow faster than most all of our peers. We still have room for margin improvement with consistency, and we have significantly less legal obligations than we did in the past. So well, our free cash flow will be strong. And I think the other thing that's -- it's been part of our playbook, but the other businesses, you didn't mention in the lack of time, our Urology business, our Neuromod business, our DBS business, our EP business, we talked about PI, structural heart. They continue to gain more and more strategic importance. And DES and CRM are always important for us. But they're slower growth categories, they're becoming a smaller portion of overall Boston Scientific every quarter. And these other categories continue to gain more scale that helps our long-term growth profile.

Perfect. All right. Mike, Susie and Lauren, thanks for being on hand. I hope the rest of the day goes more smoothly.

See you later. Thank you.

Thank you.

Thank you.

Bye.