37th Annual JP Morgan Healthcare Conference - Mike Mahoney Chairman & Chief Executive Officer - Boston ...
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37 th Annual JP Morgan Healthcare Conference
Mike Mahoney
Chairman & Chief Executive Officer
Safe Harbor for Forward-Looking Statements This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may be identified by words like “anticipate,” “expect,” “project,” “believe,” “plan,” “estimate,” “intend” and similar words. These forward-looking statements are based on our beliefs, assumptions and estimates using information available to us at the time and are not intended to be guarantees of future events or performance. If our underlying assumptions turn out to be incorrect, or if certain risks or uncertainties materialize, actual results could differ materially from the expectations and projections expressed or implied by our forward-looking statements. Factors that may cause such differences can be found in our most recent Form 10-K and Forms 10-Q filed or to be filed with the Securities and Exchange Commission under the headings “Risk Factors” and “Safe Harbor for Forward-Looking Statements.” Accordingly, you are cautioned not to place undue reliance on any of our forward-looking statements. We disclaim any intention or obligation to publicly update or revise any forward-looking statements to reflect any change in our expectations or in events, conditions, or circumstances on which they may be based, or that may affect the likelihood that actual results will differ from those contained in the forward-looking statements. Non-GAAP Measures: This document contains non-GAAP measures (denoted with *) in talking about our company’s performance. The reconciliations of those non-GAAP measures to their most comparable GAAP measures are contained within this document including appendices attached to the end of this presentation. Financial Disclaimers: Operational growth rates are non-GAAP measures that exclude the impact of foreign currency fluctuations. Organic growth rates are non-GAAP measures that exclude the impact of foreign currency fluctuations and the sales from the acquisitions of the American Medical Systems male urology portfolio, EndoChoice Holdings, Inc., Symetis SA, NxThera, Inc., Claret Medical, Inc. and Augmenix, Inc. in the periods for which there are no prior period related sales. We define Emerging Markets as including certain countries that we believe have strong growth potential based on their economic conditions, healthcare sectors and our global capabilities. Currently, we have 20 countries in our definition of Emerging Markets. Market Estimates: Unless noted otherwise, all references to market sizes, market share positions, and market growth rates are BSX internal estimates. All financial estimates and other projections, including but not limited to pipeline, growth drivers, and investments, as well as other references throughout this document, unless otherwise noted, exclude the acquisition of BTG plc. 2
Regulatory Disclaimers
Product Regulatory Disclaimer
LUX Dx™ Implantable Cardiac Monitor Device under development. Not available for use or sale worldwide.
EMPOWER™ Leadless Pacer Device under development. Not available for use or sale worldwide.
Apama RF Balloon Catheter Device under development. Not available for use or sale worldwide.
Cryterion Cryothermal Energy Platform Device under development. Not available for use or sale worldwide.
DirectSense™ Technology CE Marked. Not available for use or sale in the U.S.
SAVAL™ Drug eluting below-the-knee stent U.S. Caution: Investigational Device. Limited by Federal (or U.S.) law to investigational use only. Not available for sale.
VICI™ Venous Stent CE Marked. U.S.: Caution: Investigational Device. Limited by Federal (or U.S.) law to investigational use only. Not available for sale.
Ranger™ Drug-Coated Balloon CE Marked. U.S.: Caution: Investigational Device. Limited by Federal (or U.S.) law to investigational use only. Not available for sale.
LOTUS Edge™ Aortic Valve CE Marked. U.S.: Caution: Investigational Device. Limited by Federal (or U.S.) law to investigational use only. Not available for sale.
ACURATE neo™ Self-Expanding Valve platform CE Marked. U.S.: Caution: Investigational Device. Limited by Federal (or U.S.) law to investigational use only. Not available for sale.
ACURATE neo2™ Pending CE Mark. Not available for use or sale in the U.S.
WATCHMAN FLX™ Pending CE Mark. Not available for use or sale in the U.S.
DFR™ Technology Device under development. Not available for use or sale worldwide.
Vercise™ PC DBS System and Cartesia™
CE Marked. U.S.: Caution: Investigational Device. Limited by Federal (or U.S.) law to investigational use only. Not available for sale.
Directional Lead
3
Our Mission and Values
Boston Scientific is dedicated to
transforming lives through innovative
medical solutions that improve the
health of patients around the world.
Meaningful High Global
Caring Diversity Winning Spirit
Innovation Performance Collaboration
4
What to Expect from BSX
• Strong track record of delivering high performance & strong shareholder value
• Consistent diversification into high growth markets
• Compelling and differentiated pipeline via organic investments + M&A
• Consistent top tier revenue performance
• Double-digit EPS growth via differentiated margin expansion & strong free cash flow
5
Boston Scientific At-A-Glance
2018 Revenue1 and Operational* Growth1: (Total company: $9.8B, 8%; Organic* Growth1 7%)
LACA
Urology & $0.4B, +16%
Pelvic Health
$1.2B, +11%
Interventional APACt
Cardiology $1.7B, +7%
$2.6B, +7%
Endoscopy
$1.8B, +8% Above Market Strong Growth
Growth in in Every Region US
Most Segments $5.5B, +7%
Peripheral
Interventions EMEAt
NM
$1.2B, +9% $2.2B, +9%
$0.8B, +23%
EP
Cardiac Rhythm
$0.3B, +11% Management
$2.0B, +2%
6
Track Record of Delivering High Performance
Adjusted Operating
Revenue Adjusted EPS*
Margin*
Reported revenue, Y/Y operational* growth Adj. operating margin* goal Adj. EPS* growth goal
Y/Y organic* growth rates
+DD%
+7-10% +50-100
Operational* revenue growth goal Y/Y
CAGR bps Y/Y $1.38-
25.5-
$1.40
25.75%
$9.8 25.0% $1.26 +10%
$9.0 24.1%
+8% $1.11 -11%
$8.4
+8% +7% +13%
$7.4 $7.5 +12% 22.3%
+7% $0.93
+20%
+6% +8% +10% $0.84
20.2%
+4% +5% +11%
+15%
1
2014 2015 2016 2017 2018 2019E 2014 2015 2016 2017 2018E 2019E
3
2014 2015 2016 2017 2018E 2019E
3
- 2020E - 2020E - 2020E
Sales growth consistently > mkt
Delivering on margin Consistent double digit adj. EPS*
CAGR ’15-’18E: 9% operational* &
expansion goals growth: CAGR ’15-’18E: 14%
8% organic*
7
Continued Diversification into Faster Growth Markets
Estimated Market Growth Rates
High Growth Mkt (≥10% CAGR): NM (SCS, DBS), Structural Heart (TAVR, LAAC, Embolic Protection), EP, PI (Drug Eluting, Venous,
Y904), Endo (Endoluminal Surgery, Single-use Scopes), Uro (Prostate Cancer, MIS BPH)
Moderate Growth Mkt (4 - 9% CAGR): Endo (Core), PI (Arterial Core + Core Oncology), UroPH (Core), IC (Complex Coronary)
Low Growth Mkt (≤3% CAGR): Pacer, Defibrillators, DES
2013 Revenue Mix 2018 Revenue Mix 2021E Revenue Mix
$7B $10B1
Low High
Low Growth High Growth Growth
~40% Growth Low
High ~30% ~35%
Growth ~20% Growth
~10%
~20%
Moderate
Growth Moderate Moderate
~50% Growth Growth
~50% ~45%
Served Market
Y/Y Growth
~3% ~5% ~6-7%
8
Expanding into High Growth Markets Approaching ~$20B
2018E Market
Sales2 2022E Growth Accelerators
• LAAC Global Expansion (WATCHMAN™)
• TAVR (ACURATE neo™, LOTUS Edge™) &
IC: Structural Heart $475M+ ~$8B Embolic Protection
• Mitral Repair Technologies
• Drug-eluting (ELUVIA™ DES, Ranger™ DCB)
• Therapeutic Oncology4
Peripheral Interventions ~$75M ~$2.5B
• Venous Stenting & Pulmonary Embolism4
• Single Shot Cryo & RF
Defib
Rhythm Management +7%
~$2.5B • HeartLogic™ Heart Failure Alert
• Diagnostics
• DBS for Parkinson’s Disease and Tremor
Neuromodulation +80% ~$1B • Other DBS indications 2023+
• Endoluminal Surgery
Endoscopy
Multiple Sources of Innovation Drive Compelling Pipeline
Adjusted R&D* Spend & Recent Business Strategic Investments &
Percent of Sales Development Partnerships
• Active venture capital portfolio
– 40+ investments in mixed stages
10.5-11%
3
of opportunity
5
$1.1B – 4 equity investments converted
10.8% into acquisitions in 2018
10.9% $1.0B
• Multiple incubators + spin outs
$0.9B 4 • Strategic partnerships
2016 2017 2018E 4 Tsinghua University
10MedSurg:
Category Leadership & Multiple New Growth Platforms
Urology and
Endoscopy
Pelvic Health
Pancreaticobiliary Stone Disease
• AXIOS™ stent • LithoVue™ single-use ureteroscope
• Jagwire™ Revolution guidewire • Comprehensive device portfolio
Therapeutic Imaging Benign Prostatic Hyperplasia
• SpyGlass™ DS visualization system • GreenLight XPS™ laser therapy
• EXALT™ single-use duodenoscope • Rezūm™ in-office therapy
Infection Prevention Men’s & Women’s Health
• Compliance kits • AMS 700™ Penile Prosthesis
• Scope valves and repair • AMS 800™ Urinary Control System
• Full mid-urethral sling portfolio
Endoluminal Surgery Cancer
• ORISE™ Tissue Retractor System • SpaceOAR™ Hydrogel
• ORISE™ Gel submucosal lifting agent • nVision Ovarian cancer diagnosis
• Additional launches to build toolkit
11Cardiovascular:
Category Leadership & Multiple New Growth Platforms
Interventional Peripheral
Structural Heart
Cardiology Interventions
Drug Eluting LAAC Arterial: Drug-Eluting
• SYNERGY™ DES • Watchman™ Technologies
• Promus ELITE™ DES • Watchman FLX™ • ELUVIA™ DES
• AGENT™ DCB • TruSeal™Access System • Ranger™ DCB
• SAVAL™ DES for CLI
Complex PCI TAVR Interventional Oncology
• ROTAPRO™ atherectomy • ACURATE neo2™ • TheraSphere™ Y904
• MAMBA™ microcatheters • LOTUS Edge™ • Cryo & Microwave
• SENTAI™ guidewires • SENTINEL™ embolic Ablation4
• JUDO™ 3 & 6 guidewires protection • Emerging Markets
• GUIDEZILLA™ catheter
Venous
Imaging Platforms
• VICI™ stent
• OptiCross™ HD Mitral Valve
• AngioJet™ / Zelante™
• DFR™ Technology Replace & Repair
catheters
• Physiology Tablet • Millipede acquisition4
• Pulmonary Embolism
• IVUS Tablet
with EKOS™ System4
12Rhythm & Neuro:
Category Leadership & Multiple New Growth Drivers
CRM Electrophysiology Neuromodulation
Core CRM
• RESONATE™ with Spinal Cord Stimulation
Mapping & Navigation
HeartLogic™ • WaveWriter™ SCS with
• RHYTHMIA™ HDx
• ACCOLADE™ MRI with combination therapy
• LUMIPOINT™ software
INGEVITY™ pacing lead • RF Ablation
• VALITUDE™ X4 Quad
CRT-P
Modular CRM: mCRM™ Single Shot Therapies
Deep Brain Stimulation
• EMBLEM™ MRI S-ICD • Apama RF balloon
• Vercise™ directional
• EMBLEM™ S-ICD with catheter system
primary cell
EMPOWER™ leadless • Cryterion cryothermal
• Brainlab partnership
pacer energy platform
Therapeutic Catheters
Implantable Cardiac
• DirectSense™ Additional investments
Monitor
technology • Multiple new
• LUX Dx™ arrhythmia
• Force Sensing neurology indications
monitoring device
technology
13Strong Product Pipeline Supports Top Tier Growth
2019E 2020E 2021E / 2022E
Coronary Therapies Coronary Therapies Coronary Therapies
• SYNERGY™ DES 4.5/5.0 • SYNERGY™ XD Stent and 48 Stent • AGENT™ Drug Eluting Balloon
• MAMBA™ microcatheters • MEGATRON™ Stent • Physiology/IVUS Multi Modality Tablet
ROTAPRO™ Atherectomy System • COMET™ II pressure wire
• Structural Heart
• OptiCross™ HD Structural Heart • WATCHMAN FLX LAAC Device – China
Structural Heart • WATCHMAN FLX™ LAAC Device – U.S. • ACURATE neo™ Valve expanded sizes – U.S.
• WATCHMAN FLX™ LAAC Device – EU • ACURATE neo™ Valve expanded sizes – EU • ACURATE neo2™ Valve System – U.S. & Japan
• WATCHMAN™ LAAC Device – Japan • LOTUS Edge™ Valve System – Japan • LOTUS Edge™ Valve expanded sizes – U.S. & EU
• ACURATE neo™ Valve System – Int’l expansion • Sentinel™ CPS – Int’l expansion • Millipede IRIS Transcatheter Mitral Valve Repair - EU
• ACURATE neo2™ Valve System – EU Peripheral Interventions Peripheral Interventions
• LOTUS Edge™ Valve System – U.S. & EU • Ranger™ DCB SFA – U.S. & Japan • SAVAL™ Drug Eluting Stent BTK
• Sentinel™ CPS – Int’l expansion • Interventional Oncology Embolic Coils CRM/EP
Peripheral Interventions • Athletis™ PTA Balloon • Empower™ Leadless Pacing/modular CRM – U.S.
ELUVIA™ DES SFA • IVUS Catheter
• • Next Gen CRM PG
• VICI™ Venous Stent – U.S. CRM/EP • Apama RF & Cryterion PVI Balloons – U.S.
CRM/EP • LUX Dx™ ICM Monitoring • Force Sensing Catheter – U.S.
Apama RF & Cryterion PVI Balloons – EU • Force Sensing Catheter – EU
• Neuromodulation
Neuromodulation Neuromodulation • SCS & DBS Next Gen – U.S./EU
Expanded DBS platform • SCS & DBS Next Gen – U.S. & EU
• Endoscopy
Endoscopy Endoscopy • Single-use scope platform expansion
SpyGlass™ Visualization System next gen • Single-use scope platform expansion
• Urology/Pelvic Health
EXALT™ single-use duodenoscope launch • AXIOS™ Stent expanded indications – U.S.
• • Multiple launches in Stone
Urology/Pelvic Health Urology/Pelvic Health • Multiple launches in Men’s Health
• LithoVue™ Ureteroscope next gen • nVision MAKO 7 Device with expanded claim
• 5 additional launches in Stone • Multiple launches in Stone
• SpaceOAR™ – Int’l expansion • Multiple launches in Men’s Health
• Next Gen Greenlight fiber for BPH
14BTG At-A-Glance:
Strong Strategic Fit + Compelling Value Creation
Strategic & Financial High Growth Business Segments
Rationale (Six month Interim 2018/2019 Revenue and FY 2018/2019 Growth Outlook)6
Interventional Medicine:
• Durable double-digit
• BTG Interventional Med revenue growth
Interventional
provides high growth and • Revenues 90% U.S. based;
strong geographic Medicine Licensing:
strong synergies to BSX PI expansion opportunities $172M, +15-17% • Requires no
integration
• High growth expansion in • Cash business with
limited/no overhead
cancer therapeutics Specialty Licensing • Zytiga ruling (Nov 19)
Pharma $156M in-line with deal
• Strong margin & cash flow Specialty Pharmaceuticals: $168M, LSD expectations
• Unique portfolio with
attractive profitability
• Compelling shareholder • Lean business; largely
returns independent of IM business
• Execution sweet spot
Immediately $0.02 - $0.03 accretive to BSX 2019 adj. EPS*
Significant synergies of $175M+ expected (yr. 3)
15Provides a Differentiated and Comprehensive Portfolio in the
Fast Growing Peripheral and Oncology Market
Radio- Cryo & Acoustic Pulse Superficial Vena Cava
Embolization Microwave Thrombolysis Venous Filter Crossing
Beads Ablation (EKOS™) Disease (Sentry) Catheters
(TheraSphere™) (Galil) (Varithena™) (Roxwood)
&
Guidewires Venous Guide-
Coils Micro- Mechanical Stents
Stents wires
catheters Thrombectomy Drug
& IVUS Balloons
Elution
Interventional Oncology Venous Arterial
Segment Size: ~$1.6B Segment Size: ~$1.4B Segment Size: ~$3.2B
Growth: ~8% Growth: ~7% Growth: ~6-7%
16 Not all products and/or indications are available in all territories.Opportunity for Differentiated Operating Margin Expansion
Opportunity beyond 2020 for 30%+ adjusted OM* Key Contributors
• SG&A productivity
30+% – Functional expansion of Global
+50-100 bps Y/Y Business Services
– Optimizing ‘back office’ via
25.5-
25.75% Centers of Excellence
25.0%
– Implementation of robotic
24.1%
process automation (RPA)
22.3%
• Launches & commercial scale
20.2% of acquisitions + key products
• R&D efficiencies
• 5-10% annual standard cost
improvements
2014 2015 2016 2017 2018E
3
2019E 2020E Long Term • Ongoing manufacturing site
optimization
17Long Term Operational Tax Rate7 of ~13%
Tax Reinvestment Post-Reinvestment Estimated Tax Rate7
• Previously expected operational tax rate7 of ~15% in
2019+
• Now, expect an operational tax rate7 of ~13% in
2019+, which reflects roughly equal benefit from 13% ~13% ~13%
both our tax reinvestment strategy and favorable
OUS tax rates
‒ Q2:18 adjusted EPS included $82 million, or $0.06, benefit
from finalization of the IRS Stipulation of Settled Issues
‒ Reinvested substantially all this $0.06 benefit in Q4:18 to
2017 2018E 2019E 2020E
3
optimize our structure, leveraging differences in tax rates
by jurisdiction
18Strong Cash Flow Outlook, Conservative Capital Structure
Strong Adj. Free Cash Flow* Outlook Building on Strong Fundamentals
• Improved ability to deploy adj. free cash flow*
– 5% of 2019E-2020E adjusted free cash flow* reserved for
~$2.4B legal/tax audit settlements vs. 65% 2015-2018E
~$2.15B
• Continued financial discipline around acquisitions
~$1.9B and investments
• Commitment to investment grade ratings
• Targeted Debt/EBITDA Leverage Ratios including
BTG acquisition4:
2018E 2019E 2020E
3
~2.6x by YE 2018E
95% of 2019E-2020E adjusted free cash ~3.3x by YE 2019E
~2.6x by YE 2020E
flow* available to deploy
19Consistent and Strong Financial Outlook
Goals
2018E 2019E & 2020E
Operational
+8%1 +7-10%
Revenue* Growth
Contribution +80bps1 inorganic +150bps
from Recent M&A (Symetis, NxThera, Claret, Augmenix)
(organic/inorganic split TBD based
on deal size & timing of anniversaries)
Organic ~+6-9%
+7%1 (organic/inorganic split TBD based
Revenue* Growth on deal size & timing of anniversaries)
Adjusted
+50-75bps3 Y/Y +50-100bps Y/Y
Op. Margin*
Adjusted Tax Rate* ~12%3 ~13%7
Adjusted EPS* Growth +10-11%3 Double-digit goal
20Appendix
References and Non-GAAP Reconciliations
21Business Development Activity
Max Potential Target
Closing Upfront Milestone Total Commercial
Target Business Description Date ($M) Comments
($M) ($M) Launch
Acquisitions – 2018
"Drop in the bag" for biliary
1 Endoscopy RF ablation for GI cancer Mar-18 10 — 10 franchise; 2018
minor revenue contribution
Rhythm Esophageal temp "Drop in the bag" for EP franchise;
2 Mar-18 40# 10 50 minor revenue contribution 2019
Management monitoring
Urology / Pelvic Minimal invasive therapy # Category leadership for urologist in-
3 Apr-18 240 85 325 office prostate health 2018
Health for BPH
Potential platform for Confirmatory study underway with
Urology / Pelvic Apr-18 150 125 275 results targeted H2:19E; 2020
4
Health earlier diagnosis of
ovarian cancer minor revenue contribution
Rhythm Single shot therapy - # Target CE Mark YE19;
5 pulmonary vein isolation Jul-18 202 — 202 minor revenue contribution 2020
Management
Embolic protection (TAVR, US NTAP reimbursement in effect
6 IC - Structural Heart etc.) Aug-18 220 50 270 Oct 1, 2018 2018
Peripheral # "Drop in the bag" for PI Venous
7 Interventions Peripheral venous stent Aug-18 108 52 160 franchise; filed PMA mid-2018 2019
Organ protection in Category leadership for urologist in-
8
Urology / Pelvic prostate cancer radiation Oct-18 500 100 600 office prostate health; 2018
Health therapy ~$50M sales FY2018E
Total: $ 1,470 $ 422 $ 1,892
Pending Close – 2019
TMVR - Full annuloplasty 450
1 IC - Structural Heart ring for mitral repair Q1:19E 325# 540 Initial $90M investment made 2018 TBD
Peripheral IO, venous and arterial Includes specialty pharmaceuticals
2 portfolio additions H1:19E 4,200 — 4,200 2019
Interventions and licensing segments
22 #Previously held equity investment; purchase price represents cash paid for remaining stake not already ownedReferences
*Non-GAAP measure; for reconciliations of non-GAAP financial measures to the most directly comparable GAAP figures, please
refer to Appendix A of this document.
1Based on preliminary, unaudited sales results issued January 7, 2019
2Based on preliminary, unaudited internal estimates
3Based on 2018 guidance issued October 24, 2018
4Millipede and BTG acquisitions are signed, pending close
5Based on midpoint of 2018 guidance issued October 24, 2018 and preliminary, unaudited sales results issued January 7, 2019
6Results six months ended Sept 30, 2018 and outlook twelve months ending March 31, 2019, as reported in BTG interim results
7Estimated tax rate is operational and excludes discrete tax items, such as the benefit related to adoption of ASU 2016-09
tPriorperiod segment amounts revised in accordance with ASC 280, Segment Reporting, to reflect the reclassification of
Neuromodulation from the MedSurg segment to the Rhythm and Neuro segment, effective January 1, 2018. In addition, regional
totals reflect the reclassification of Middle East and Africa from the former AMEA region to Europe, also effective January 1, 2018.
23Supplemental Non-GAAP Disclosures 24
Supplemental Non-GAAP Disclosures 25
Supplemental Non-GAAP Disclosures 26
Supplemental Non-GAAP Disclosures
The following is an explanation of the adjustments that management excluded from GAAP measures to calculate
the following forward-looking non-GAAP financial measures:
Adjusted R&D: Excludes from GAAP R&D the impacts of forecasted acquisition- and divestiture- and restructuring-
related charges or credits.
Adjusted Operating Margin: Excludes from GAAP operating margin the impacts of forecasted acquisition- and
divestiture- and restructuring- and restructuring-related charges or credits and amortization expense.
Adjusted Tax Rate: Excludes from GAAP tax rate the tax impacts related to forecasted acquisition- and divestiture-
and restructuring- and restructuring-related charges or credits and amortization expense.
Adjusted Free Cash Flow: Adjusts GAAP operating cash flow to include the impacts of forecasted capital
expenditures and excludes the impact of estimated after-tax acquisition- and divestiture-, restructuring- and
litigation-payments.
Please refer to our Safe Harbor for forward-looking statements disclosure in conjunction with any forward looking
information presented within.
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