Boston Scientific Corporation (BSX) Earnings Call Transcript & Summary

Okay. Thanks, everyone, for joining us this morning. It's a real pleasure. We have Boston Scientific to kick off our Annual Healthcare Conference. It is a relief that this is the last health care conference. No more conferences until the holiday season. So we know representing the company, we have the CEO and Chairman, Mike Mahoney. And from IR, we have Susie Lisa and Lauren Tengler. Real pleasure to have all of you this morning.

Mike, maybe I'll start with a big-picture question. I saw the divestiture this morning, so congrats on the transaction. Before we get there, this has been an unusual year for Boston. Stock's been choppy. We've had some 2 steps forward, 1 step backward, if you will. A question that I've been getting is has anything changed at Boston? If you look at the stock, this has been such a home run over the last 5 years. Has something changed for Boston? Culturally, how would you answer that, Mike?

Sure, yes. I mean obviously, the biggest change we see has been the impact of COVID in 2020, and we're excited about the future progress. But I'd say culturally and the focus on innovation, really nothing's changed. If you looked at up until March 2020 here, we've had a very consistent track record of growing faster than our peer group, improving margins and double-digit EPS growth really from multiple years in a row, including '19 up until March and -- when the pandemic hit. And given the more elective nature of our procedures, we obviously took a big hit in the second quarter. We've seen the business improve significantly from second quarter, but still not fully at a normal basis given the impact of COVID. So it's been a challenging year. We've made some difficult but smart, we think, portfolio decisions. But as we look forward to '21 and kind of a post-COVID environment, our view in the company hasn't changed and our goal to continue to grow above the peer group and improve margins, drive double-digit EPS growth. That's really supported by, we think, a terrific portfolio and then also a much stronger balance sheet. So we think the company post COVID will be stronger than the company that we went into pre-COVID.

Great. And maybe just to -- I guess, on that point, Mike, talk about changes post COVID, right? When you say the company will emerge stronger, have there been any learnings from the pandemic that would make Boston a stronger company emerging from the pandemic?

Yes. I think a couple of things. One, Just in term -- during the pandemic, you've heard this from us and from other companies. The regulatory pathway and product approval cadence has been quite strong. So although it may be considered a lost year financially with sales impact and EPS impact, the innovation cycle hasn't slowed down in a significant way. We've had some challenges with some product launches, but the innovation cadence has been quite strong. The product approval cadence we have has been impressive as well, some of the reimbursement wins. And we can go through the portfolio as you'd like. So I'd say, one, big picture, the portfolio looks very strong. Reimbursement is strong. And also, we continue to create new capabilities. We've saved a heck of a lot of money in discretionary spend on conferences and meetings like everyone else has. Business practices have become more digitally oriented and much more productive and efficient. So we think there's some cost savings opportunities there. And then we also really have tripled down on our digital capabilities not only to work internally, but also to partner with customers more, provide remote services capabilities and really just create a stronger omnichannel marketing capability across the company. So I would say on the cost front, there's an opportunity. Digital capabilities have been enhanced, and our pipeline continues to advance despite COVID.

Got you. No, that's helpful. And I guess, starting with the portfolio, Mike, and this is -- with the recent TAVR news, LOTUS being pulled off the market, that really caused a lot of debate in the market, right? And I think the issue that the investors struggled with was -- we had TCT. It was a pretty bullish conference overall for you guys. I mean if I think about WATCHMAN, TAM being increased, LOTUS rollout being on plan. But yet a month later, I think the timing of the announcement of pulling LOTUS from the market caught people by surprise, if you will. So one, did anything happen between this month for you guys to come to this conclusion to pull LOTUS off the market, if you will?

Yes. So I would say overall, the TCT was successful -- I'll talk about LOTUS, with the expansion of WATCHMAN, Eluvia's additional reimbursement, and we got Ranger approval. And so a lot of good tailwinds. And we had some tough TAVR news at that conference with the delay -- with the SCOPE II results. So we're launching neo2 in Europe, but the SCOPE II results and then 30 days later, the announcement on LOTUS. And what you should expect from us and from any company, and we're clearly disappointed by the news. But it is to make the smart, difficult choices in our portfolio to drive -- to maximize shareholder value as well as to drive great clinical outcomes for our physicians. And it's a difficult decision, but we wanted to be very objective about our current position with LOTUS and more importantly, what we saw as the future of the next 2 or 3 years. And essentially, what we decided after doing a lot of work with our customer base and internally, essentially, the cost to invest to further advance the LOTUS device in terms of its delivery system and the timeline to do that to make it more of a workhorse valve just wasn't feasible versus other strategic options that we have in the company. And so the financial impact to do that -- because currently, it's used more in a niche way. And physicians -- many physicians really enjoyed it and saw a lot of value in it. But to make it a workhorse valve where you could drive greater share position, the time and cost and investment to do that versus other options we have in the company just didn't make sense. So it was a difficult decision to make. But I'm actually proud of our team to do that and to kind of own up to it and make that decision rather than kind of kick it down the road any farther.

No. For sure, it's not an easy decision. I mean certainly, I think in the context of Boston being perceived as a premium growth company in the market, right, I think pulling a key product, that's not an easy one. But I guess now that you made the decision, Mike, how does this impact your TAVR position in Europe? You have ACURATE neo2 rollout going on. Does the brand now take a hit? Maybe talk about your position in Europe.

Sure. Well, we have a very strong Interventional Cardiology business in Europe with our complex coronary position that we have, our drug-eluting stents, our WATCHMAN device as well as our ACURATE neo2. So I would say broadly, we have a very strong commercial team. We do a lot of clinical work in Europe and very good reputation. Clearly, it's a difficult decision, as you mentioned, to pull LOTUS off. But ACURATE neo2 is a very different valve. It's a supra-annular valve. It's been -- being used in Europe for quite a number of years. And we're launching the ACURATE neo2, which we think is a step-function improvement in PVL to complement the low pacemaker rate it has, low gradients as well as the ease of use of the device. So we think ACURATE neo2 is a, as we've always positioned, is a kind of a different category of valve from LOTUS, which is intra-annular valve. And the customers who like ACURATE are really enjoying ACURATE neo2. So we'll put a lot of focus on that, and we're excited about that launch, and we're also excited about putting, quite frankly, more focus on that platform. And going into the decision, one of the benefits will be -- it will allow us to focus more on this platform to reiterate the product and platform more quickly and put more focus on the clinical work.

Can ACURATE franchise grow above market, Mike? I mean I think one of the questions people have had is what percent of LOTUS sales could be cannibalized by ACURATE. And I know you've sort of differentiated those valves as intra and supra. Does that distinction matter? Or perhaps is this an opportunity for Boston?

Yes. I mean both valves, we've said for many years, have different characteristics and are often used in different patients. And so we don't think the removal of LOTUS will cannibalize ACURATE neo2. It's a brand-new product launch in Europe and they're often used for different types of patients. LOTUS, as you know, is typically used for the most complex, most difficult, highly calcified patients. And we see ACURATE neo2 as more of a workhorse valve platform that is significantly easier to manufacture and easier to advance in terms of new feature sets on that platform than LOTUS was. But we don't see a cannibalization issue. And given the portfolio breadth, broader interventional cardiology and peripheral, we have a strong brand in Europe.

And Vijay, I'd just add that I think we were obviously anxious in approaching physicians with the decision. But I think while there was disappointment, there was also a very strong understanding. And anecdotally, we've had in the U.S. LOTUS intermediate risk IDE sites asking to convert and become ACURATE IDE sites. So to Mike's point about the overall momentum of the franchise and the breadth of our category leadership in that space, I think that will help us continue to succeed with neo2.

That's helpful commentary, Susie. Maybe on that point, when you think about the ACURATE neo2 trial in the U.S., I know at TCT, you gave the time line of a 2024 launch timing in the U.S. Does the timing now change now that you have more resources to be focused on the neo2 platform?

We'll see. We'll do everything we can to enroll that trial as quickly as possible. But at this point, we're not going to -- we won't make any changes to the dates that we've outlined at TCT.

And just to -- not to spend too much time on TAVR, Mike, maybe one last one. I think something...

Vijay, you're reading my mind.

The -- apologies. But it has been topical for you guys. So I know Boston is a lot more than just TAVR. But one of the questions has been, is enrollment an issue now that you have 2 valves on the market? How would you address that, Mike?

Well, again, I do think we're disappointed with the -- we're glad we made the decision, but obviously, disappointed about some of its impact. But the ability to focus on one valve is going to help on the product advancement as well as the clinical focus. And we felt the 2-valve strategy would work. We tried it. We realized it wasn't making the progress that we needed. And so we've essentially down selected onto one platform, which will give us greater focus on clinical, focus on R&D, focus on COGS improvement with manufacturing. And we're taking the bet on ACURATE neo2.

Understood. And maybe switching on to the medium-term growth outlook that you guys gave out, Mike, 6% to 8%. I mean that still puts Boston in the premium growth category, certainly at the high end of medtech peer group. Maybe just talk about the confidence in this range, Mike. What are the key products here perhaps that need to be perhaps firing on all cylinders to get to the high end? Or is there upside to that high end? How would you characterize that 6% to 8% range?

Yes. So we think 6% to 8% makes a lot of sense if you look at in a post-COVID environment. If you look at 2018 and 2019, we grew at just over 7%, I think, in '18 and like 7.4% or so in '19. So we were right in that range pre-COVID. And at that time, you saw limited impact in TAVR results and a WATCHMAN business that was just beginning to grow. And so if you jump off of those 2 years and you look at the portfolio that we have going forward as well as the decreasing size as a percent of our sales mix of our DES business and our CRM business, you can get comfortable with that 6% to 8% range. And in terms of the product portfolio, WATCHMAN FLX has been -- really exceeded all of our expectations in terms of the growth and the adoption of that platform. We can walk through the various products. But you've got a -- just a high level, you have a number of businesses that will grow extremely quick, led likely by our Interventional Oncology and our PI business, our endo business, our uro business, neuromod and then our WATCHMAN franchise. And we think we also have a disruptive platform with our cryo platform in EP. So you have a number of our businesses that will really grow, we think, significantly passing the peer group. We have a couple of laggards in drug-eluting stents in CRM, but those businesses get smaller as a percent of our old mix each quarter. And so if you look at '18 and '19, we feel like we get head into a post-COVID environment with a better portfolio and less concentration in the slow growth markets than we used to have.

That's a good point about the revenue mix change, Mike. And maybe let's start with WATCHMAN, which has been such a key part of the Boston story that's unique. That was a greenfield opportunity for Boston. Now we have some competition coming in. Let's maybe start with the near-term trends. If I had to go back 6 months, Mike, there was a lot of fear on WATCHMAN. This is a highly deferrable procedure. You have drugs as an alternative. Maybe WATCHMAN perhaps could lag on the comeback. But the double-digit growth in 3Q, that was impressive given some of the concerns that people had. Maybe talk about the trends in WATCHMAN franchise. I think the comment you made about WATCHMAN exceeding all expectations, that's refreshing. So perhaps talk about why you feel confident about the TAM being much larger than what Boston originally envisioned.

Sure. We've just seen quarter-over-quarter improvement in that WATCHMAN business. So we expanded the TAM to about, I think it's $1.5 billion in 2023 or so, in that range. And then a -- we think a multibillion-dollar TAM with the additional clinical work that we're doing with the CHAMPION trial and the OPTION trial. But we've seen really with WATCHMAN FLX since the launch, just very fast adoption into that platform. And so customers wanted to switch pretty quickly from our 2.5 system to WATCHMAN FLX due to the ease of use of the system, the enhanced safety profile and the, we think, very differentiated clinical data. And you're seeing more operators want to use the platform within existing sites. We've seen expansion in China and also Japan. And you also have a very nice product cadence behind WATCHMAN over the company. And you'll see new enhancements every 12 to 18 months off of that FLX platform. I think the adoption is really driven by the successful outcomes that patients are receiving and the -- just the increased awareness and benefit of the network effect of referring physicians having good outcomes, becoming aware of the ability for the patients to get off anticoagulation medicine, reduce the risk of stroke. And that awareness growing in the referring physician community as well as patient satisfaction. And so I just think that momentum is driving increased utilization and more awareness, and it's a big market. And during COVID, as you mentioned, we are also impressed with the growth of that franchise despite the pandemic in third quarter.

Absolutely. I mean that third quarter number was -- certainly, I wasn't expecting double-digit growth in 3Q. It was impressive. When -- any change in that trajectory, Mike, just given the second wave and concerns when you think about WATCHMAN?

No. I mean we don't give any numbers on the call here in our quarter. But we don't see any change to the momentum that WATCHMAN continues to generate.

Understood. And then when I think about WATCHMAN for next year, you have 2 sort of data points. One is the FLX launch, which I think it's going to be pretty exciting. You also have a potential new entrant to the market. Does that change anything at all? Because I mean, if I had to go back, the historical analogy would be in TAVR when that market went from a 1 player to a 2-player market, if you will. The market rate, the growth rate actually accelerated because of increasing awareness. So perhaps maybe comment about this fear on a new competitor coming into the market.

Sure. It's still a very -- it's an early market. So we're the only player in the U.S., which is the largest market. Having another entrant come in, obviously, we're not going to have 100% share in the U.S. But we have a -- we think we have a very, very strong share position given the clinical benefits and the ecosystem that we've built in the U.S. and the clinical reps and awareness and so forth. But I do think having another entrant in there can only help the TAM of the market because this is a procedure that's still early days and driving more physician awareness and patient awareness of the great outcome of getting off anticoagulation medicine and reducing stroke is a great thing. And so we'll certainly battle for share. And we've got a very significant lead with FLX. But we do think having another player in the market, hopefully, will help with TAM acceleration.

Great. And perhaps one last one on the WATCHMAN topic. You mentioned the TAM expansion driven by clinical trials. CHAMPION AF, OPTION trial, any updates on enrollment? I think it's fair to say that the pandemic has taken a toll on enrollment. When do you think we'll get back to normal enrollment status in those trials?

Yes. So there has been some impact, but CHAMPION just started enrolling recently. So that -- both trials are enrolling now. OPTION's obviously ahead of CHAMPION. But we'll put a lot of focus on both of those trials, and we'll give updates over time. I don't know, Susie, if we've given any interim updates on either one of those at this point in terms of timing.

No. I mean the good and bad of this market, right, is these are long follow-up periods for the clinical trials. So the TAM that we've talked about, the $1.5 billion in 2024 and then the $3 billion plus in 2026 plus, OPTION and CHAMPION's even beyond that time frame. So there's still lots of room to go in the core indication for nonvalvular AFib with an elevated risk for stroke. But they do continue to -- and CHAMPION just started. OPTION's enrolling nicely, but there's still a long way to go.

Got you. And I guess switching on to mitral, Mike, Millipede, I feel like it's a really interesting product, and I do think the annular reduction market, it's an interesting space. Just given the approaches in mitral, there are numerous approaches, right? Perhaps how should we think about Boston's position in the mitral race? Is there an opportunity for a look at other types of assets? And how should we think about the Millipede trial itself? Does it pull forward the trial now?

Sure. Of all the programs, we're putting more focus on WATCHMAN and ACURATE neo, and Millipede is more in this early phase. And so we're excited about Millipede because it's a different platform. It's not an edge to edge repair device. As you've mentioned, it's an annuloplasty device. So we think that mitral market is very fragmented in terms of these types of procedures and solutions that are being used. And so we think that Millipede device will be very unique versus competitive offerings in that specific annuloplasty area. However, the product is very early. And so we're still doing -- that product has been impacted by COVID in terms of advancing our clinical work outside the U.S. So we're still working on trying to accelerate clinical trials and clinical activity with Millipede. And you'll get more updates over 2021 as the pandemic slows, and we can drive more clinical work. But we're encouraged about it, but it has been slowed down throughout 2020 due to our inability to do much clinical work with it.

And when you think about mitral valve on the valve replacement side, Mike, your peers, they've started their Phase III trials or at least the second player is about to start one. Why shouldn't Boston, I guess, leapfrog on the mitral side? When you think about the valve replacement side, is there an opportunity for Boston with your existing valve portfolio?

Yes. I won't give too many details. We have a lot of people to look at this all the time because you can certainly leverage our valve -- our structural heart portfolio and look at valve and ring solutions and all kinds of different designs, and many different VC companies out there in mitral. So it's an area that we continue to scan. We have internal capabilities, but we're not going to announce anything here. Our current play in mitral is focused on Millipede and we'll continue -- and we believe that the repair annuloplasty ring is really the best place to start. And we'll look at other options in the future based on our assets that we have as well as our VC portfolio.

That is great. This is certainly not the ACC conference to announce key products. I would agree with that. On the peripheral side, Mike, I was interested to see some of the commentary coming out, not just yourself, but your peers as well. It looks like that market is coming back perhaps. But I did -- maybe this is me, but I did think that you guys were sounding more positive than -- on Eluvia. Maybe talk about -- on the peripheral side between Eluvia and Ranger. And should we be perhaps a little bit more optimistic on Eluvia going forward?

Well, so we're very pleased with our position there with both Eluvia and Ranger. So we have -- the only company that offers the drug-eluting stent and the DCB balloon with the lowest dose of paclitaxel that's performed very, very well in clinical trials. So we think we're uniquely positioned. When you combine that with the rest of our arterial portfolio, it's quite -- it's an advantage for us in contracting as well. So we think we're physician-strong from a product standpoint. We've got a very expansive commercial team all over the world. So we're in a good position to do that. And we've seen continued improvement in trends in that category over the past -- since the FDA decision 18 months ago or whatever the date was. So we see very encouraging trends. We're excited about the Ranger launch. And each year, I think you'll see more and more data come out from Boston as well as our peers on the benefits and safety. And so as we continue to see that clinical work, I think we'll continue to see an uptick in that market. So it's not back to normal levels yet, but it has improved since the decision about 18 months ago.

And Vijay, I'd just add I think we and many others were really encouraged by the VOYAGER PAD results at TCT, long-term follow-up, high degree of follow-up, pretty definitive. And I think in many physicians' minds, continues to confirm that there isn't causality here. And then the other just thing I'd point out is the Eluvia NTAP on the inpatient side, from CMS, awarding that new tech add-on payment I think, too, is a good indication of hopefully where things are headed long term.

Understood. No, that's helpful, Susie. Then I guess switching gears, Mike, to MedSurg. One of the key products has been EXALT-D. Obviously, the launch was impacted. But if I just take a step back, this was a $1 billion product for you guys. And maybe time lines have shifted with the pandemic. But are you still comfortable with EXALT being a $1 billion-plus product category? And how should we think about sort of the '21 launch curve? Is that still a transition year given the pandemic or post-pandemic effects? Or perhaps should '21 be a more normalized year for EXALT-D adoption?

Yes, so on the market itself, we have the EXALT-D platform, which you mentioned, as well as our EXALT B, the bronchoscope platform as well as surgical. So we see -- and then we have other products coming beyond that. We see that as a multibillion dollar market overall. And clearly, the EXALT B platform has the most established market, really with one major competitor, and that we'll be launching into in the second half of 2021. So the market opportunity, we do see as a multibillion-dollar platform across all 3 of those, with one of the markets already established and us have a -- hopefully disrupt that and then us creating the duodenoscope market. So we're comfortable with the market call as you mentioned. It has been impacted by COVID in terms of -- we've seen -- we have about 100 units placed now. So we're seeing increased utilization of the device and improvement in workflow and knowledge and how customers and staff could best optimize EXALT-D. So we're getting very, very good learnings with our customers, and 2021 clearly will be a lot better than 2020. But I don't think we're going to be completely out of COVID impact, at least in the first quarter in 2021. So It will be a significantly better year for EXALT-D than '20 was, and it will be a nice growth driver for the company in '21. But as you look for the next 3 years, the impact of EXALT-D and B in surgical will be quite significant. And even independent of that, those platforms, the endo business likely would be accretive to overall Boston Scientific even if you exclude all of our scope business. So that is a very strong business for us, with our AXIOS platform, our digital SpyGlass, what we're doing in endoluminal surgery. So it's an exciting franchise and the whole single-use scope business. We are very comfortable with the multibillion dollar call and our leadership position in it.

Got you. And it's interesting, you -- the way you characterize the opportunity, Mike. There has been some concerns on pricing, competitor coming in at a lower price point. And it's been hard, and I'll be honest with you, it's been hard in general for investors to understand. Are there any key product differentiations? Because this is not a market where you have big, randomized trials like structural heart. So maybe perhaps address on your pricing strategy in that market. And why you feel confident about the market opportunity?

Yes, so we're less concerned about, I think the pricing impact as some of the investors are. Because we've seen some nice reimbursements in the outpatient setting. It fits within the financial realities of our customers in the inpatient setting, and maybe over time, there'll be additional reimbursement for the inpatient setting. So that's been a bit less of -- there's -- obviously, a cheaper price is always better for the customer, but we think it's properly priced given the value that it provides to reduce the risk of infection, to help patients who are most compromised and can't afford the infection. And the ease-of-use and deliverability that the device provides, we think is very, very in line with the reusable scopes that they're used to every day. So we think that's a very difficult technology feat to accomplish. We think EXALT-D does that. And over time, we can always look at the price point of the product as we continue to drive more volume and improve our gross margins. We can always look at price impact. But we have a -- we've run a very similar playbook. I think this should give you some confidence with our scopes in urology and our SpyGlass scope at endo. When we first launched our urology scope, it was considered too expensive and only used for very nichey patients. And over time, that product's, over the past 5 years, now have grown into a very mainstream product that's used in urologist workflow and is the key growth driver for that urology business. And same thing with our SpyGlass system. Early perceived as a niche, perceived as too expensive. The device continued to evolve. We have contracting capabilities. We can partner with hospitals. And most importantly, the doctors get used to using it and see the benefit of it. And then they want more of it, then we find ways to work with them to help them do that. So there -- we've run a similar play twice now in endo and uro that we're running with the single-use scopes.

That's a helpful analogy case study. Perhaps something for us to dig into. But maybe switching gears, Mike, you had some news on BTG this morning. I don't think this was overly surprising, just given some of the news flow in the public markets. But when you think about -- I guess the question people had was the deal -- I think the deal accretion was $0.05 or $0.06. And a lot of -- I know that pharma business was highly profitable. Can the deal still be accretive in fiscal '21 post today's divestiture?

Can we -- I'm sorry, can what?

Can the deal still be accretive? $0.05 to $0.06, I think, was the number, the accretion -- EPS accretion number. Should we still be thinking about the -- or how should we think about EPS contribution accretion next year post the pharma divestiture?

Yes. So I would say broadly just on the deal itself -- and then we're not going to give any EPS guidance for 2021, which is difficult to do at this point here. But if you look at the overall deal itself, I think on an enterprise value basis, when you take out the divestitures, we paid about $2.65 billion for the company for the price that we wanted which is the Interventional Medicine business. And that business is growing, we think, high single digits to double digits for the future. It's been very COVID-proof. And to date, the team is actually ahead of our cost synergies number, which is $175 million. So we were acquiring a $400 million business in 2019. Obviously, we'll grow from there. We're driving ahead of our cost synergies. If you look at that price point, we're quite pleased with the value that we're receiving, especially versus comps of similar growth assets at that type of a scale. So we think it was a smart deal. It was difficult to pull off some of those divestitures. But now we're left with a plus-$400 million business that's going to grow faster than Boston, and the synergies are exceeding it. So in terms of the EPS impact, the spec pharma business was about $0.08 or so in 2020. In 2021, we think it will be between $0.07 to $0.08 if we held on to it for 2021. And then going forward in '21 when we provide, hopefully, guidance in the future, then we'll package together all of our EPS targets you wanted and beyond. But it's difficult to call out this specific goal for BTG without giving you broader context or EPS goals.

Fair enough, Mike. I mean I was doing this math earlier this morning. It looks like you guys paid on a synergized basis, sub-15 turns EBIT/EBITDA for a high single, double-digit asset. That's pretty impressive. The spec pharma, just to be clear, that was $0.07 to $0.08 of contribution in fiscal '20 from spec pharma?

It's about $0.08 in '20. And we think $0.07 to $0.08 in '21, if we would have held on to it. So we would had slightly declining EBITDA and revenue in '21 versus '20.

Understood, that's helpful. And then maybe in the last few minutes, Mike, touching upon the second wave and fiscal '21. One, based on J&J's comments, I mean, it looks like Q4, companies aren't seeing a whole lot of impact right now from the second wave. Is that a fair comment in your view when we think about sequential procedures? And on -- I guess, let's start with that.

Yes. I think I wouldn't say that you're not seeing any impact. Business is not normal yet. We're assuming -- I think hospitals are doing an amazing job of managing elective procedures during the spike of the pandemic here. And you're seeing a significantly better improvement that you saw in second quarter. And we saw that in the third quarter. So I think it's difficult to say there's no impact. There's certainly some impact with COVID. You're not getting as much elective procedure growth as you typically would. But it's remarkably better than it used to be. And the hospitals, they're doing an amazing job of doing that despite the surge. But I would say there certainly is an impact. But it's impressive how hospitals have been able to manage this with the physician community. And we've actually been surprised with that, but it certainly still has an impact.

Understood. And perhaps, I mean, I guess, sequentially 3Q to 4Q, I guess, from the 3Q jump-off point, should -- things shouldn't get materially worse. Is that a fair characterization, Mike?

Well, we'll see, we'll see how December goes. We'll let you know in the near future. But I just -- I'll repeat it. The hospitals are doing an amazing job. Our clinical teams are in there with them. And elective procedures are still being done, but not at the same levels as we would expect pre- or post pandemic.

Understood. And in the last minute that we have left, Mike, one, should 2021 revenues be in line with 2019? Because if I look at Street EPS, it's about 2019. So I don't know if you had any comments on that. And then the follow up to that would be, if I look at the share repo, the -- excuse me, the secondary that Boston did at the depth of the pandemic and the issuance of the $34.25. Stock's below that. Why not buy back stock? I know it's as crazy as it sounds, but the market seems to have unduly punished the stock here. So I'm curious how we think about share repurchases at these levels.

Yes. So I think in terms of the capital allocation, our balance sheet is stronger really than it's ever been. And our free cash flow has been quite good during the pandemic given some of the -- despite some of the softness in sales. As a result of it, the discretionary spend has gone down, so the cash flow has been quite good. So our focus will continue to be on tuck-in M&A and if appropriate, share repurchase. So we obviously know where the stock is trading today. But our goal is to continue to advance the growth profile of the company, improve margins and drive double-digit EPS. And with that, we'll continue to look at tuck-in M&A as the primary source of use of funds and then also consider share repurchase as appropriate.

And sorry, on '21, Mike, should '19 revenues -- can '21 revenues be at '19 levels? Some Street EPS certainly seems a tad aggressive to us, but I'm curious if you had any comments.

Not yet. We'll provide more insights in the near future here as to what '21 should hold for the company. And a lot of it is kind of COVID impacted, but it's great news on the vaccine front recently. And we're excited about rounding the corner and jumping to '21 and getting back to positive growth numbers for the year for sure, albeit off of easy comps. But we'll give you a better sense in the near future.

Great. And I think with that, we're at the end of the time. Mike and Susie, thank you so much for taking the time this morning. I appreciate the time. And all the best to Boston for '21. I know '20 was challenging for a lot of us. And knock wood, hopefully, '21 is a lot better than '20.

Thank you, Vijay. I appreciate your time.