Boston Scientific Corporation (BSX) Earnings Call Transcript & Summary

Good morning. Welcome, everybody. Day 2 of the Wolfe Research Healthcare Conference. I'm pleased to start the day in this session with Boston Scientific. From the company, we have Chief Medical Officer, Dr. Ken Stein, and Head of Investor Relations, Lauren Tengler. Ken and Lauren, thank you for being here. Welcome.

Thanks, Mike.

Thank you.

I look forward to the discussion. We have a lot to get through. For those that don't know, Dr. Stein is an electrophysiologist. And so we're going to start our discussion focused on growth drivers, WATCHMAN in the ablation portfolio. But if we have time, we're also going to get to the broader Boston story on innovation.

So with that set up, Dr. Stein weekend before last, I was a little worked up -- AHA, some data. Specifically, I want to start with this closure trial. And it was a negative trial for LAAC. The device arm did not meet non-inferiority to best medical therapy. I want to get your top perspective. What are the major caveats of this study? And why don't you think this is going to influence real-world practice?

Yes. Thanks, Mike. So AHA, lot of good data, some data that's good. Let's talk about closure. And I want to talk about, as you say, the caveats in interpreting it. I also don't want to lose sight the fact that there was one piece of really good news in closure sort of buried in it. So I want to excavate that at the end. But failed to meet not inferiority in a very high-risk patient population that was treated over a very long time in Germany with some very old devices. Closure failed not because the device didn't prevent stroke, and I'll come back to that, right? It failed because there was an extraordinarily high rate of procedural-related complications and early bleeding with left atrial appendage closure. Now really important to note that I just said with left atrial appendage closure, I didn't say with WATCHMAN FLX. Only half of the devices in this trial were WATCHMAN devices, right? The other half, some of our competitors' devices, including first generation as well as second-generation Amulet, including LAmbre, these are devices that are known to have a higher risk of postoperative bleeding specifically then WATCHMAN FLX. And even with the WATCHMAN devices, many, if not most of them, were early generation WATCHMAN and not WATCHMAN FLX. We're just going on the presentation. It hasn't been published yet, but my take from the presentation is that if they had used WATCHMAN FLX and if they had the rate of post-operative complications that we see in the real world with WATCHMAN FLX that, that actually would very easily have met noninferiority. Second thing to pay attention to, because the time over which this trial was done, a huge amount of the patients in the trial were treated postoperatively with a medical regimen that's called dual antiplatelet therapy. And more recently, again, very clear evidence that postoperative regimen is also associated with worse outcomes with more bleeding than when patients get covered with one of the novel oral anticoagulants for that short postoperative period. So again, if not for that, and postoperative complications, we feel very comfortable that this device would have -- this trial would have hit its endpoint. And then I want to come back to where I started, right? So what's the good news to excavate from this? Well, really one of the first times in a randomized trial in an extraordinary narrowly high-risk population, right? Even using some of these legacy devices, there was an equivalent rate of ischemic stroke comparing left atrial appendage closure to best available medical therapy. And that's something that the critics of WATCHMAN have never ever acknowledged. And we've seen that now in multiple other data sources, real-world data, things like PRAGUE-17, things like the OPTION trial to show it in this high-risk population, actually, I think it's actually a really extraordinary positive.

Good color. I'm going to follow up on PRAGUE-17. So also a mixed device trial. Also, we believe, used a lot of DAPT post-procedurally. But this produced outcomes for lack that were much more flattering, almost opposite to what you see in closure, now slightly lower risk profile in PRAGUE. But how do you bridge that to closure? What operator inexperience and closure or can't tell yet because the manuscript isn't published?

The answer is -- I don't want to pin it on the operators. The higher-risk population you're treating, the higher the likelihood that you're going to have these postoperative complications, bleeding, et cetera. And I think that's probably the most likely explanation for the difference between that and some of the other trials.

Okay. We're going to move to the -- it was OCEAN at AHA and then I'm going to drag in along, I think they're thematically similar. And my worries aren't as high on this, it seems to be a lower risk population for sure. But just remind the audience kind of why no drug or drug light post a successful ablation is not a strategy that meaningfully impairs the WATCHMAN growth vision?

Yes. I -- not only do I not worry about this trial, I love these trials. I think they're fantastic news for patients. I've had atrial fibrillation. I've had ablations, so they are pertinent to me. I think they're also really good news for us as a company because I think they're helpful for our Diagnostics division and certainly for our EP Ablation division, and I have no concern at all that it's going to -- that they're going to impair our ability to get that consistent double-digit growth for WATCHMAN. So why? So what both of these trials showed, I think pretty conclusively that if you have a low-risk patient population, and they undergo catheter ablation for atrial fibrillation and they go at least a year after the ablation and don't have a recurrence that they are at very low risk of stroke and probably don't need any long-term anti stroke strategy. But, right, the 2 big caveats there are these are very low-risk patient population. 1/3 of the patients in OCEAN had a CHA2DS2-VASc score. That's the risk score we use in evaluating whether the patients need therapy of one. Those patients have never ever had an indication for lifelong anticoagulation, post AF ablation. In fact, the OCEAN strategy for those patients, 1/3 of the patients in the trial is more conservative than what docs were doing pre OCEAN, right? Because you would just stop anticoagulation after -- 2 months after the ablation in those patients. Another 1/3 of those patients CHA2DS2-VASc score of 2. So these are not the patients who are getting WATCHMAN today. So with the OPTION trial, the average CHA2DS2-VASc score in OPTION 3.5. If you look at our real-world data, with WATCHMAN, you see average CHA2DS2-VASc of 4.5. These are not the 1s and the 2s. So we really saw no impact on WATCHMAN growth after the publication of a lone AF. Remind everyone that came out in August of this year, don't expect to see any impact. But what it does do is it gives patients another reason to come in and get AF ablation in the first place. When I was in practice, which is pretty much a stone's throw from here, half of the patients who would come into my office asking about ablation, wanted the ablation solely because they wanted to be able to come off their anticoagulants. And I just always had to say to them, well, I understand that you hate these medicines, they're awful to take over the long term. But I can't tell you that just having the ablation would enable you to do that. Now if you're at low risk, I can say that. So we see this as sustaining the high-growth in EP that we laid out at our Investor Day a couple of months ago. We see this sustaining the growth of our Diagnostics franchise as you look now at a real reason to have to monitor these patients, make sure they're not having recurrences of AF but really don't see any reason to worry about an impact on the growth of WATCHMAN, whether it's concomitant procedures or standalone.

That's good. I'm going to -- that was a complete response. I'm going to avoid the follow-up here in the interest of time. There's a lot to get to. Let's go to CHAMPION. Easy first one, do we have a date yet?

First half of 2026, aiming to present it at one of the major scientific conferences in that time frame.

And this would be AF Symposium in February, ACC March, HRS in April would be my 3 candidates?

Those are the 3.

Okay. All right. We all stay tuned. I think the recent message on CHAMPION, I feel like is emphasized, like we're really encouraged by the contemporary real-world data we're seeing in WATCHMAN. So every reason to believe this is a successful trial. But the shift to -- the focus has turned towards kind of commercial real-world uptake. And I feel like the company has emphasized a little bit more, while we'll also need some reimbursement frameworks adjusted guidelines changed. And as I watch med tech, I feel like doctors move ahead of formalities all of the time or -- maybe not all of the time, often. And this feels like one of those situations. So why -- maybe what needs to happen here on the reimbursement and guidelines front that is important for the next wave of WATCHMAN? And do you really think that this is something where data turns over, practice doesn't adjust until those formalities do?

Yes. There are a couple of things that will come into play should CHAMPION be positive. And obviously, we don't know. We're still blinded to the results. And so let me maybe break out 3 different effects that a positive champion could have that, again, enable that sustained market growth that we've talked about. One is just reinforcing confidence in the current indication. There are devices still underpenetrated into the current use case as second-line therapy. And there are plenty of people who are enthusiastic about it. There are still some of these boobirds on the sidelines. And I think a positive CHAMPION helps bring that in. In the U.S., perhaps as important internationally, where use is much more restricted today than it is in the United States. And that's the sort of effect that you can see, again, relatively quickly ahead of anything else. The getting into the first-line use case, which is really what CHAMPION is studying, right, is this a first-line alternative, the best available medical therapy. That would require a change in the label for us to be able to promote it, would require a change in the United States to reimbursement. And this is governed by a national coverage determination under Medicare. And so you really can't do that in the U.S. today and get reimbursed for Medicare. And docs will do a lot of things off label, but not things you don't get paid for.

And maybe I can give a little bit more on just the logistics of that. So we like the approach because it does give us a sustained 20% grower in that WATCHMAN business. So just for logistics and for our proxy, took us about 7 or 8 months to update the label on WATCHMAN with the OPTION data. And then once we have that label update, we can go to CMS and ask for the NCD to be opened up, and they have up to 12 months to rule on that. So that's sort of the time line that we're talking about.

Only clinical data so far. So let's go to numbers. So WATCHMAN is accelerating. After all that, sorry, but just market likes to look ahead. WATCHMAN is clearly accelerating in the U.S. The message has been this is concomitant on the heels of OPTION primarily. So my question, what do you think is really going on? Kind of is it simply the high risk for stroke ablation patients are now being offered WATCHMAN 2 for 1, and you think that is kind of really what's revitalizing the rate of growth? Or is it something else?

Yes. I prefer vitalizing to revitalizing. I don't know that it needed to be revitalized.

Okay. Okay. Fair enough.

Yes. I mean certainly huge growth in the concomitant procedures since the publication of OPTION and concurrently with that publication but getting good CMS coverage for those procedures in the hospital, Lauren remind me, what proportion of our WATCHMAN implants today are concomitant?

Exiting 2025, it will be 25%?

And I think it is pulling in patients who otherwise would not have been referred for WATCHMAN very clearly. Again, when we look at our data pre OPTION, about 10% of WATCHMAN patients had an ablation in -- within a year of the WATCHMAN procedure. And so I think it's really clear that these are patients who are not immediately plan to have a WATCHMAN. There is also an interesting other phenomenon, which is as much as it's helping to continue to vitalize WATCHMAN growth, it's also part of the story of the ablation growth. Because we're also seeing patients who are getting referred in for WATCHMAN, where the EP is saying, well, as long as we're under the procedure, now with something that's as safe and effective and predictable as FARAPULSE, let's also give a try at ablation where I think in previous years, you would have just gone ahead and done the WATCHMAN and not had the attempted ablation.

And just for numbers, Mike, maybe -- so there were 4 million patients indicated under the original NCD for WATCHMAN globally. Roughly 50% of those are in the U.S. With OPTION, you've got another 1 million to 2 million more patients now indicated for WATCHMAN. And again, roughly half of those are in the U.S. And one other step that I find really helpful because we get asked a lot around what can concomitant get to, just recall in the U.S. 60%, 65% of procedures are done by the EP who also do ablations. The rest are done by ICs who just do WATCHMAN and don't do ablations.

It sounds bidirectional if you were to hazard a guess, is WATCHMAN better enabling ablation or is ablation -- the ablation flow opening up WATCHMAN or difficult to tease out?

Yes. I don't -- again, I think it's bidirectional. It's FARAPULSE, right, enables you to do more of these concomitant, what we're calling FARAWAVE procedures, I won't do that.

Not yet.

Not yet.

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The -- it's a very diminutive term when you think about it. So it goes both ways. Again, it's FLX, FLX Pro, the predictability and safety profile of that device, the unique data that we've got with FLX from OPTION but also FARAPULSE. I think in an earlier world, if this was an RF ablation taking a couple of hours with a variety of risks. And if this was earlier generation devices that are a little more complicated to use, you would not see the kind of growth that we see today.

All right. Let's go to PFA. The company has described PFA penetration globally, 50%. My team and I were trying to figure out the U.S., where are we? Our best guess is it's going to be above that, maybe 60%. But I think it's important for folks to understand. When you -- your denominator here excludes redos. I think that's an interesting confirmation just for market penetration? Is that right, Lauren?

We don't have indication for redos.

So this 400,000 U.S. AF ablation number that has been recently cited, that's a de-novo estimate?

Yes.

Okay. So I think Dr. Stein the question for you is, one, do you agree that the U.S. is maybe in '25, a little bit higher than this kind of global 50%?

Absolutely.

And tour us around the different use cases, kind of de novo paroxysmal, de novo persistent, some of the off-label stuff, what are you seeing in terms of use rates across all the different types of patients in for FARAPULSE today?

Yes. So again, we're seeing a high degree of use for FARAPULSE both de novo paroxysmal, which was our initial label indication and de novo persistent AF. And part of that is the catheter is just really beautifully designed both for doing pulmonary vein isolation, which is the standard of care today for paroxysmal AFib and posterior wall isolation, in addition to PVI, which has become the standard of care now for persistent AFib. And actually, we're seeing a striking amount of posterior wall isolation, even in the paroxysmal population today. Historically, right, the market is broken down, call it, roughly 2/3 of cases being de novo ablation, roughly 1/3 being redo. And we are studying the combination of FARAWAVE catheter and FARAPOINT catheter -- FARAPOINT, we pay people to name these things. But FARAPOINT, in redo patients in a trial called REMATCH, I think the redo population is important. It's also part of the reason that we acquired an AF mapping company called Cortex that actually uses an AI-based technique to identify AF sources that we think may be particularly useful in a tough redo patient. And we recently began enrollment in our -- that device is FDA cleared already, but the data are pretty scanty at this point. So we did recently begin enrollment in a large-scale randomized trial to, again, convince every one of the utility of that technique. What I do want to emphasize, though, because I don't know that the community recognizes it, is that 2/3, 1/3 breakdown is historic at this point. When we look at our data with FARAPULSE, our published clinical trials and our real-world evidence, we are down to single-digit level redo rates when people get their de novo ablation. And so I also do think that it's predictable that the market is going to switch from this 2/3, 1/3 to a mix that's much more heavily weighted by de novo. Some way it's very similar to what happened with coronary intervention a couple of decades ago with the introduction stents and then drug-eluting stents, where you went from these very high redo rates with planal balloon angioplasty now to very low red rates with coronary intervention. And I'd expect we're going to see something similar with AF ablation.

Is that single-digit rate, something measured out one year in your internal data?

That's measured one year.

Okay. Helpful. How about mapping OPAL is one of the growth drivers here. Historically, Boston hasn't had much share, if any, in mapping to large incumbents that holding on and navigating the shift to PF on the ablation catheter side for now. Why will OPAL win now?

I think OPAL is becoming an incredibly competitive system, and it does offer some unique advantages versus either the incumbent mapping systems. First off, it is the first system that really was purpose built around PFA and purpose built around FARAWAVE. So it does give much better catheter visualization than either of the competitors that are on the market, it does give the ability to actually understand where the PFA energy is going to intersect tissue. And so we have what we call field tags. So docs before they give the energy delivery really know that they're going to be ablating in the area exactly where they want. Our latest software release adds contact sensing to that. And I think one of the things that people are going to find particularly as ablation start to move into an ASC environment, ambulatory surgical center environment, is that being able to provide safe procedures predictable procedures, but also cost-effective procedures is going to become really important. And the ability to do a FARAWAVE procedure map it on OPAL without having to pull out any additional hardware, any specialized mapping catheter, makes it an incredibly attractive economic offering to physicians and hospitals.

We have 5 minutes. There's so much that we could get to. I want to ask on PFA competition. Your peers reported this morning, this discussions is competing with their call classic. I don't make the calendar. How do you see their best product coexisting with your portfolio in the market? I mean is it the lines are well drawn and defined, and this is a major rising tide and there was room for more than just one player to participate? Or do you find that -- it is incremental tension for FARAPULSE's ability to continue gaining share?

Yes. I think -- first off, rising tide does lift all boats, and the AF epidemic is so huge and ablation today is so underpenetrated. The market growth itself is a really important driver for us. And in some ways, maybe more important than share. I'd also say their use case right now is very different than FARAWAVE. It's still a point by point ablation paradigm, which is, frankly, it's tedious, more expensive procedure. Where they're seeing a niche today is in the redo cases. We think we've got a very compelling competitive offering when it comes to redos. But if I got to win somewhere, I'd much rather win in the much bigger market, which is de novo ablations.

Okay. Lauren reminded me that you're the Chief Medical Officer for all Boston Scientific. So we're going to get out of the EP lab. I am going to stay in cardiology, one, renal innovation, potentially a big growth area for the industry. You won't be the first mover, but you might be a fast follower. Ultrasound could be a better mousetrap. What gives you confidence the safety box will be checked for your device, no cooling system, just using natural blood flow. I'm interested in what can I go dig up on the interwebs that is going to make me feel good that this will work on the safety side of things?

Yes. So right, the ultrasound catheter, the company that we bought is unique. I think first of all, as you said, I think it is a better mousetrap. There's a lot of reason to think that ultrasound is a better technology for doing denervation as opposed to sort of getting back to the bad old days of RF. We've got a huge amount of experience in other vessels that says that high blood flow can cool sufficiently to avoid endothelial damage. And the thing that is unique about the TIVUS approach. That's the company that we bought, right, is it has these fins that stabilize the catheter within the vessel so that you can deliver the ultrasound energy without occluding blood flow. The ultrasound catheter is on the market has to use a balloon to stabilize itself in the artery to deliver the ultrasound. And as a result, occludes flow, so heating is a real issue. But flow in the vessel, right, is so fast. And again, you're bringing blood that's heated at 98.6 degrees, right, that's constantly cooling. And I just say we've got a very large experience with other energy sources like RF that heat and in other areas, including intracardiac ablation that say that, that kind of cooling is absolutely sufficient.

Two minutes, a final word to you, Dr. Stein, 3 things elsewhere in the portfolio, Street sleeps on -- okay, 4, you are really excited about?

AGENT Drug-Coated Balloon, that's also a phenomenal product for us, has had a phenomenally successful launch, shouldn't get lost in all the appropriate excitement about FARAPULSE WATCHMAN. Looking forward, both getting into intravascular lithotripsy for calcified coronary lesions, having a fantastic competitor, shockwave. And then I think, outside of cardiology, the 2 things -- it's like naming like your favorite children, I'm going to stop with 2 other things because I'm looking at the clock. Our endoluminal bariatric surgery within our Endoscopy division. I think having the only devices right now that are FDA cleared for doing endoscopic bariatrics is extraordinarily important. I think the GLP-1s are our best friend in really bringing the forefront the importance of treating obesity and the downstream effects that has on health overall. And then I'd also say our Interventional Oncology and Embolization division and the opportunities that we've got, particularly with our Y-90 beads for treating a variety of solid tumors. I think really exciting in terms of where we're going to be not just over the next year or 2, but really over our long-range plan and beyond.

That was excellent. We packed in a lot, five seconds to spare. Dr. Stein and Lauren, thank you for being here.

Thanks so much.

Thanks, Mike.