Boston Scientific Corporation (BSX) 2024 Q2 Earnings Call Summary

Optimistic Highlights

• Strong Q2 Performance: Exceeded expectations with operational sales growth of 16% and organic sales growth of 15%, led by the cardiovascular portfolio.
• Adjusted EPS Growth: Q2 adjusted EPS of $0.62, a 15% increase from 2023, surpassing guidance.
• Margin Expansion: Adjusted operating margin expanded by 50 to 70 basis points for the full year, indicating improved profitability.
• Guidance Raise: Full-year organic growth guidance increased from 10%-12% to 13%-14%, with strong momentum across the portfolio.
• Global Expansion: Notable growth in U.S., Europe, and Asia-Pac markets, with successful product launches and approvals, including FARAPULSE and AGENT Drug-Coated Balloon.

Pessimistic Highlights

• Gross Margin Pressure: Q2 adjusted gross margin contracted by 160 basis points due to inventory charges related to the POLARx cryoablation system and increased capital placements.
• Impairment Charges: GAAP operating margin impacted by intangible asset impairment charges related to acquisitions of Cryterion Medical and Devoro Medical.

Company Outlook

• Continued Growth: Expecting operational revenue growth of 14.5% to 15.5% for the full year 2024, with organic revenue growth in the range of 13% to 14%.
• Investment in Innovation: Emphasis on innovation, clinical evidence generation, and strategic acquisitions like Axonics and Silk Road Medical to drive future growth.
• Margin Improvement: Anticipate further margin improvement in the second half of 2024, with a full-year adjusted operating margin expansion goal raised to 50 to 70 basis points.

Q & A Highlights

• Q: Can you discuss the sustainability of growth into 2025, especially with the strong performance of PFA and Watchman? (Robert Marcus, J.P. Morgan)

  A: We aim to be the highest performing med tech company in terms of sales and EPS growth. Our portfolio shift into faster-growth markets and strong global performance support this goal. FARAPULSE and WATCHMAN are key drivers, but we also have strong growth across other business units. (Michael F. Mahoney)

• Q: What's next for Boston Scientific in terms of growth drivers beyond FARAPULSE and Watchman? (Joanne Wuensch, Citibank)

  A: Our strategy includes leveraging our portfolio in faster-growing markets, expanding indications for existing products, and strategic acquisitions like Axonics and Silk Road Medical. We also focus on clinical evidence generation to maintain leadership in EP and structural heart markets. (Michael F. Mahoney)

• Q: How sustainable is the EP share and growth, especially with upcoming competition? (Lawrence Biegelsen, Wells Fargo)

  A: FARAPULSE's differentiated advantages and clinical evidence support its rapid adoption and sustainability as a growth driver. We're competing effectively in Europe against upcoming competitors and expect to maintain leadership in PFA. (Michael F. Mahoney, Kenneth Stein)

• Q: Can you provide more color on the launch of the mapping integrated catheter and its impact on RHYTHMIA adoption? (Frederick Wise, Stifel, Nicolaus & Company)

  A: The launch of our NAV-enabled FARAWAVE catheter and FARAVIEW software on RHYTHMIA is expected to drive more adoption and provide major workflow advantages. FARAPULSE will remain an open system, but we anticipate increased utilization of RHYTHMIA with these launches. (Kenneth Stein)

• Q: How do you view the U.S. PFA market growth and capital contribution? (Vijay Kumar, Evercore ISI)

  A: We're early in the U.S. launch of FARAPULSE, and while we don't break out capital and disposable contributions, the sustainability and usage rates are very high. We've submitted for TPT and do not see pricing as a barrier to adoption. (Michael F. Mahoney, Kenneth Stein)

• Q: Could you discuss the technology and commercial strategy for EP beyond ablation? (David Roman, Goldman Sachs)

  A: Our clinical strategy includes expanding indications for FARAPULSE and developing new technologies like the FARAWAVE NAV catheter. We're also exploring the use of PFA for other arrhythmias and investing in complementary technologies like ICE to support EP procedures. (Michael F. Mahoney, Kenneth Stein)

• Q: What was the rationale behind acquiring Silk Road Medical? (Patrick Wood, Morgan Stanley)

  A: Silk Road Medical presents a strong clinical profile and growth opportunity, especially in TCAR. We believe integrating it into Boston Scientific will accelerate growth, expand our vascular surgery portfolio, and improve profitability. (Michael F. Mahoney)

• Q: Can you discuss the profitability and margin impact of FARAPULSE? (Travis Steed, Barclays Bank)

  A: FARAPULSE is early in its margin journey in the U.S., with expectations of becoming significantly accretive to gross margin as we scale up. Initial dilutive factors like inventory charges and capital placements will improve over time. (Daniel J. Brennan)

• Q: What's the update on TAVR and its potential impact? (Joshua Jennings, TD Cowen)

  A: We completed enrollment for the ACURATE IDE trial and expect to present data in the first half of 2025. This large, complex trial's timing aligns with presenting at a major meeting like ACC. (Michael F. Mahoney, Kenneth Stein)

• Q: How do AGENT DCB and Modular CRM contribute to growth beyond PFA? (Danielle Antalffy, Leerink Partners)

  A: AGENT DCB and Modular CRM are key growth drivers, with AGENT DCB expected to accelerate growth in interventional cardiology and Modular CRM to elevate CRM growth above the market. These innovations, along with our broad portfolio, support sustained top-tier revenue growth. (Michael F. Mahoney)

• Q: Can you discuss the WATCHMAN business growth and the potential impact of concomitant reimbursement? (Matthew O’Brien, Piper Sandler)

  A: WATCHMAN continues to grow strongly, with a 20% increase and ongoing product launches. We're comfortable with our market share and technology lead. Concomitant reimbursement for FARAPULSE and WATCHMAN procedures could further drive growth. (Michael F. Mahoney, Kenneth Stein)

• Q: Could you provide insights into FARAPULSE's market penetration and future outlook? (Matthew Taylor, Jefferies)

  A: While we don't break out specific metrics, the early experience with FARAPULSE supports its potential as a major growth driver. Its adoption and utilization rates are high, and we're optimistic about its impact on the market. (Michael F. Mahoney)