The Boston Scientific Second Quarter 2024 Earnings Call has begun, with Jon Monson, Senior Vice President of Investor Relations, leading the call. He is joined by Mike Mahoney, Chairman and CEO, and Dan Brennan, Executive Vice President and CFO. A press release was issued earlier in the morning, and the duration of the call will be approximately one hour. The call will cover Q2 performance, outlook for the business, and Q3 and full year 2024 guidance. The call will also include a Q&A session with the addition of Chief Medical Officer, Dr. Ken Stein. It should be noted that operational revenue excludes foreign currency fluctuations, and organic revenue excludes acquisitions and divestitures. Relevant acquisitions and divestitures excluded for organic growth include the majority stake investment in Acotec Scientific Holdings Limited, as well as the acquisitions of Apollo Endosurgery, Relievant Medsystems, and the Endoluminal Vacuum Therapy portfolio from B. Braun.

The company's divestitures in the Endoscopy and Pathology business have been completed, and the acquisition of Axonics and Silk Road Medical is expected to close in the second half of 2024. The company's second quarter results exceeded expectations, driven by the success of their cardiovascular portfolio and strong execution in AF Solutions. The company's team is praised for their winning spirit. The call contains forward-looking statements and the company disclaims any obligation to update them.

In the second quarter, the company saw a 16% growth in operational sales and a 15% growth in organic sales, exceeding their expected range. The growth was driven by innovation, clinical evidence, and category leadership. Adjusted EPS also grew by 15% and the adjusted operating margin was 27.2%. The company has raised their full year guidance for organic growth and expects a 16-18% growth in adjusted EPS for the full year. The U.S. and Europe both saw strong growth, particularly in the EP business unit and structural heart business.

In the fourth paragraph, the company expects their momentum to continue with the launch of a new product in late 2024. They saw a 13% growth in the Asia-Pacific region, with strong performances in China and Japan. They also received approval for two products in China and expect approval for one in Japan. The company expects pricing actions to impact their growth in the second half of the year. Their urology business grew 9%, driven by direct-to-patient efforts and an upcoming acquisition. Endoscopy sales grew 8%, led by growth in their Biliary and Endoluminal Surgery franchises. Neuromodulation sales grew 16% operationally and 4% organically, with some impact from competition.

The company expects their business to strengthen in the second half of the year due to their differentiated technologies. In the second quarter, their pain franchise and spinal cord stem business showed growth, and they expect their U.S. SCS franchise to improve in the second half of the year. Their relieving business and peripheral intervention sales also saw growth, driven by their drug-eluting portfolio and EKOS and Varithena products. Their interventional oncology franchise also grew, and they anticipate closing the acquisition of Silk Road Medical in the second half of the year. In cardiology, they saw strong organic sales growth, with interventional cardiology and structural heart valves leading the way. They also completed follow-up for their U.S. ACURATE IDE trial.

During the second quarter, Watchman and Cardiac Rhythm Management sales saw strong growth, with Watchman growing 20% organically and CRM growing 3%. The Diagnostics franchise also had a successful quarter, with double-digit growth driven by a broad portfolio. In the EP segment, sales grew 125% due to the success of the FARAPULSE PFA System. The Baylis Access Solutions business also saw strong growth in the U.S. and international markets.

The paragraph discusses the strong financial performance of FARAPULSE in the second quarter of 2024, with a 14.5% reported growth and 16.1% operational revenue growth. The company also completed enrollment in a study and presented data at a medical conference, demonstrating the efficacy of their PFA system. They plan to continue generating clinical evidence and are grateful for their team's commitment. The paragraph also mentions a foreign exchange headwind and the impact of closed acquisitions on revenue growth.

In the second quarter of 2024, the company exceeded its adjusted earnings per share guidance, driven by strong sales performance. However, there was a slight decrease in adjusted gross margin due to inventory charges and increased capital placements. The company expects gross margin to improve in the second half of the year and is raising its full-year adjusted operating margin expansion goal. On a GAAP basis, there were impairment charges related to two acquisitions. Interest and other expenses were favorable to expectations.

In the second quarter, the company's adjusted tax rate was 13.1%, with an operational tax rate of 13.6%. Free cash flow for the quarter was $660 million, with $814 million from operating activities and $155 million in net capital expenditures. The company expects full year free cash flow to exceed $2 billion in 2024. They also announced the acquisition of Silk Road Medical and closed the acquisition of SoundCath. The company's legal reserve decreased by $32 million in the second quarter. For the third quarter and full year 2024, the company expects reported revenue growth of 13.5% to 14.5%, operational revenue growth of 14.5% to 15.5%, and organic revenue growth of 13% to 14%.

The company expects a revenue growth of 13% to 15% in the third quarter of 2024, with a 100 basis point headwind from foreign exchange. They also anticipate a full year adjusted below the line expenses of $300 million and a full year operational tax rate of 13.5%. Adjusted earnings per share are expected to grow by 16% to 18% in 2024, with a $0.04 headwind from foreign exchange. The company has provided more details on their Q2 results and 2024 guidance on their investor relations website. The moderator will now open the floor for questions.

The company had a successful first quarter with strong performance from PFA, Watchman, and other businesses. They are expecting 14% organic growth for the rest of the year and aim to be the highest performing med tech company for many years to come. The company's portfolio shift towards faster-growing markets, strong growth across the world, and the durability of their businesses are driving this growth. The cardiovascular portfolio is also getting stronger.

The speaker discusses the company's recent success and their plans for future growth. They mention the impact of their EP franchise and Drug-Coated Balloon on their revenue, as well as the potential for ASC centers to benefit the company. They also mention their goal to distinguish themselves from their competitors and their strong product cadence in fast-growing markets.

The speaker discusses the strong performance of the EP and WATCHMAN markets in MEDTECH and their leadership position in PFA. They also mention plans to launch in Asia and increase the TAM for WATCHMAN. The company's playbook remains the same, but they continue to execute well and make strategic M&A bets. The next question asks about the sustainability of EP growth and share, to which the speaker responds that they have captured 15% of the US EP market and are confident in their ability to compete with other companies. They also mention their strong clinical evidence and physician feedback.

The FARAPULSE platform, combined with Baylis and clinical data, is expected to be a major growth driver for Boston Scientific in the coming years. Atrial fibrillation is a highly underpenetrated market and competitors are expected to release their own products soon, but the advantages of FARAPULSE are expected to maintain its rapid adoption.

Rick Wise from Stifel asks about the potential impact of the launch of FARAWAVE and FARAVIEW on RHYTHMIA adoption. Kenneth Stein responds by stating that they are still projecting approval for both products in the second half of the year and expect it to drive more adoption of RHYTHMIA. He also mentions that FARAPULSE will remain an open system and that FARAVIEW and FARAWAVE NAV will provide major advantages in terms of workflow.

In this paragraph, the speaker emphasizes the importance of the new mapping and navigation system, FARAVIEW, which is specifically designed for PFA procedures. They mention its unique features such as dynamic visualization of the catheter and field tagging for PFA energy, which could potentially reduce the need for fluoroscopy and catheter exchanges. This, along with the success of the FARAPULSE system, is expected to drive increased procedure volume and revenue in the future. The speaker also mentions that the 220% growth in U.S. PFA procedures includes both capital and catheter contributions.

The speaker responds to a question about the company's TPT and pricing for their medical technology. They mention that they will not break down the pricing for capital and disposable products, but the pricing is at a premium due to the clinical benefits and efficiency. They also mention that they have submitted for TPT and are not seeing pricing as a barrier to adoption. The next question asks about the company's technology and commercial strategy for their EP portfolio. The speaker discusses the importance of mapping and access in their business and mentions the potential for new opportunities in the non-AF ablation market. They also mention training for mappers on other products and the overall benefit to the portfolio.

The med tech market is worth $10 billion and the company is doing well in the $6 billion afib market. They are working on expanding into other areas such as mapping and have an organic ICE program in development. The company is also conducting clinical trials to widen the indication for FARAPULSE and is working on developing new technology including the FARAWAVE NAV catheter, FARAPOINT point catheter, and FARAFLEX mapping and ablation catheters.

The speaker discusses the company's interest in using their technology for various arrhythmias, including atrial fibrillation and tachycardia. They also mention the success of their EP performance and the synergy between their different products. The speaker then switches to discussing the acquisition of Silk and the potential for it to drive sales and contribute to the company's overall success.

The company acquired a stand-alone business that was leading the rejuvenation of a particular field through their clinical evidence and performance. The acquisition was made at the right price and the company plans to grow it faster in the U.S. and improve its margin profile. This acquisition will make the company more important for vascular surgeons and allow them to present a broader portfolio. The company has also raised its margin and EPS guidance, and is working on getting FARAPULSE to full margins.

The company is seeing a positive impact on gross margin from the launch of FARAPULSE, which is expected to continue to improve over time. However, there are some initial dilutive factors such as inventory charges and under-absorbed manufacturing costs. The European team has also seen strong growth in TAVI with ACURATE Neo2.

In paragraph 22, the company discusses their plans to launch their next-generation ACURATE Neo2 valve in the fourth quarter of 2024 or the first quarter of 2025. They also mention completing enrollment for a 1,500 patient trial and expect to present the data at the ACC meeting in the first half of 2025. The company believes this is an extensive trial and the appropriate timing for presentation. In response to a question about gross margin, the company confirms that it is not likely to improve in 2024 but is confident in their overall operating margin and expects all lines of the P&L to contribute to margin expansion in 2025 and beyond.

The speaker is responding to a question about the profitability and reinvestment plans of the company. They mention that the TAVR trial data will not be released until the ACC meeting and that the company is balancing reinvestment and profitability, as seen in their guidance raise. They also mention that they are reinvesting in commercial functions.

The company is focused on leveraging their back office and administrative areas to sustain their high revenue growth. They plan to reinvest in the whole portfolio, not just FARAPULSE, to continue delivering top line performance. In addition, they have upcoming launches in the CRM and Interventional Cardiology portfolios that will contribute to elevated growth in the future.

Medtronic is experiencing significant growth in their imaging business, particularly with their IVUS imaging platform. They have received approval for AGENTS and are awaiting a decision on TPT in January, which they believe will drive market growth and improve their margin profile. The company also continues to invest in clinical science, their structural heart portfolio, and their VC portfolio, managing dilution while investing for the future and improving margins. The CRM business has lagged behind, but the international business has performed well. The team is proud of the results of the S-ICD with the modular platform and plans to launch it in 2025. The Endo and Uro businesses have also seen significant growth, with the Axonics acquisition expected to have operational benefits in 2025 and organic benefits in 2026. Overall, the company is excited about the future and aims for differentiated performance.

A Piper Sandler analyst asks about Boston Scientific's WATCHMAN business, which grew 20% in the quarter. The analyst mentions that a competitor reported 45% growth and asks if Boston Scientific is losing market share or if the market is accelerating. The analyst also asks about the workflow for clinicians if concomitant reimbursement is obtained. Boston Scientific's CEO and CMO respond that the growth is excellent and they are launching new products. They are confident in their high market share and technology lead.

The speaker discusses the potential advantages of combining the WATCHMAN FLX and FLX Pro procedures with FARAPULSE, stating that it would create a unified ecosystem with safety and efficiency benefits. They highlight the benefits of performing both procedures at once, rather than separately, and emphasize the importance of using technologies that enable safe and efficient concomitant procedures. The speaker declines to provide specific numbers on the usage and placement of FARAPULSE devices, but notes that their early experience has not changed their views on the potential of the market.

The speaker discusses the high utilization rates and sustainability of FARAPULSE, a med tech product. They mention the potential for selling more consoles to larger centers and opening new accounts. They also apologize for forgetting a question and provide information for accessing a recording of the conference.

This summary was generated with AI and may contain some inaccuracies.