J.P. Morgan - Boston...
Transcript of J.P. Morgan - Boston...
J.P. Morgan 34th Annual Healthcare Conference
January 12, 2016
Mike Mahoney President and Chief Executive Officer
2 Boston Scientific – J.P. Morgan 34th Annual Healthcare Conference – January 12, 2016
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.
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This presentation includes products that have not been approved or cleared by the U.S. Food and
Drug Administration and are not available for sale in the U.S.
In the U.S., the Eluvia™ Peripheral Stent, Lotus™ Valve System, Ingevity™ Pacing Lead,
Acuity™ X4 CRT Lead, Vercise™ DBS system, and MRI-safe defibrillators are investigational
devices and not available for sale.
In the U.S., the Watchman™ FLX device, Emblem™ MRI S-ICD device, Ranger™ Paclitaxel-
Coated PTA Balloon Catheter, implantable loop recorder, and leadless pacemaker system are not
available for sale.
All future product approval and launch dates are based on estimates of completion of regulatory
submissions, review and approval or clearance, as well as other business considerations.
For reconciliations of non-GAAP financial measures used in these presentations to the most
directly comparable GAAP figures, please refer to the addendum to this presentation and the
Investor Relations section of our website at www.bostonscientific.com. Footnotes referenced in
this presentation can be found on slide 20.
Disclaimers
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BSX: What to expect from us
Consistently delivering on and exceeding financial goals1,2
• Strong culture fostering a “WINNING SPIRIT”
• 2015 Q3 YTD: 5% organic growth, +250bps adj. OM, ~20% adj. EPS growth ex FX
Transforming patients’ lives and leading in large global markets
• Entering faster growth segments, driving category leadership
• Building emerging markets scale and capabilities
Launching innovative new product cycle in 2016
• Driving consistent organic revenue growth with a long runway
Leading globally: More to come in 2017-2018 and beyond
• Launching into large, high growth markets with meaningful innovation
• Creating value: MSD rev. growth + adj. OM expansion = DD adj. EPS growth ex FX
See slide 20 for footnotes
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Interventional
Cardiology
Neuromodulation
Endoscopy
Urology and
Pelvic Health
Rhythm Management
CRM, Heart Failure Management, Electrophysiology
$1.7B, +7% YTD
$369M, +8% YTD
$479M, +21% YTD
CRM $1.5B, +1% YTD EP $182M, +9% YTD
Boston Scientific at-a-glance
$723M, +15% YTD
$1.0B, +6% YTD
$75-100M FY15
revenue goal
Peripheral
Interventions
YTD operational revenue and growth as of 9/30/153
Structural Heart
See slide 20 for footnote
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Strong execution: Performance since 2012
Operational Revenue Growth1,3
Adj. Operating Margin2 Adj. EPS Growth2
Sales growth acceleration ~500 bps adj. OM
expansion
Double-digit adj. EPS
growth ex FX
17.8%
18.9%
20.2%
22.5%
2012 2013 2014 2015E
11%
15%
2012 2013 2014 2015E
$7.5B
-3%
4.5%
2012 2013 2014 2015E
8% 4%
18% Excludes foreign exchange impact
(~$0.08 in 2015E)
Includes foreign exchange impact
Operational revenue growth
Organic revenue growth
-2%
* * *
8%
6%
$7.4B
2%
$7.1B
$7.2B
**Adjusted for estimated impact of Medical Device Tax
(~100bps), based on actual 2013 impact
**
*2015E represents guidance midpoint issued on Q3:15 earnings call, 10/28/15 See slide 20 for footnotes
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2015 Q3 YTD: Strong operating performance
Growing above market and driving margin improvement1,2,3
• 5% organic and 7% operational revenue growth
• +250bps adj. operating margin improvement & ~20% adj. EPS growth ex FX
Strengthening emerging markets3
• +11% operational rev. growth and new capabilities, partnerships, product launches
Advancing key growth platforms for the future
• Emblem S-ICD™, Synergy™, Watchman™, Lotus™, Rhythmia™, Innova™, Eluvia™,
Precision Novi™, Spyglass DS™ product lines
Enhancing category leadership via M&A and equity investments
• AMS Male Urology portfolio, CeloNova interventional oncology
• Equity investments in multiple companies
See slide 20 for footnotes
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STRENGTHEN
execution to
grow share
Strategic imperatives align execution
Preferred
category leader
gaining share in
large global
segments
New commercial
capabilities to
lead in dynamic
markets
Adjusted
operating margin
target of 25%+
by 2017
Grow emerging
markets +500bps
as % total sales
2012-2017
Accelerate
growth &
diversify into
faster segments
DEVELOP
Key
Capabilities
FUND
the Journey
to Fuel Growth
DRIVE
Global
Expansion
EXPAND into
High Growth
Adjacencies
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------- Estimated market* -------
Business 2015
Size
2015
Growth
2015 – 2020
Growth Investing in Faster Growth Segments
Endoscopy $3B 4% 4-6% Visualization, pulmonary therapies, endo ultrasound
Urology and
Pelvic Health $3B 4% 4-6% Stone, BPH, ED, visualization, international
Neuromodulation $2B 5% 5-7% Severe pain, Parkinson's, OAB, international
CRM $10B 2% 0-2% S-ICD & leadless solutions, HF diagnostic solutions
Electrophysiology $3B 14% 10-15% Atrial fibrillation, mapping & navigation
Peripheral $4B 4% 4-6% Drug-eluting SFA, atherectomy, oncology, liver cancer
IC (ex SH) $8B 1% 0-3% Complex PCI, FFR, & bioresorbable technologies
Structural Heart $1.8B 35% 15-20% TAVR, LAAC, mitral
WW Total ~$35B ~3-4%
* Market size and growth rates at constant currency and are BSX internal estimates
Market outlook and investment focus
~3-6%
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Cardiovascular growth drivers: 2016 & beyond
Eluvia™ DES &
Ranger™ DCB Differentiated drug-eluting
technologies
Atherectomy, DVT &
Thrombectomy clinically differentiated
products
Interventional
Oncology embolization & tumor
management
Interventional
Cardiology Structural Heart
Peripheral
Interventions
Synergy™ & Promus
Premier™
Leading DES platforms
Polaris™: IVUS &
Comet™ FFR Integrated imaging
platform
Complex PCI Broadest portfolio
to treat most
complex patients
Lotus Edge Differentiated, 2nd
generation TAVR platform
Watchman™ and 2nd
Gen Watchman FLX Left atrial appendage
closure device
Mitral Valve
Technologies
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CRM growth drivers: 2016 & beyond
ICD/CRT-D Subcutaneous-ICD Pacemaker
Autogen™ Platform X4 Quad CRT-D
MINI & MRI-safe
EnduraLife™ Cost effective;
Replacement cycle
Improves in 2017-2018
Latitude Remote
Monitoring Improved compliance
and clinical outcomes
Emblem™ S-ICD Smaller, longer lasting,
LATITUDE remote
monitoring-enabled
Emblem™ MRI S-ICD MRI-Safe H2:2016E
Future development:
leadless pacemaker
Clinical Programs Market development,
expanded indications
Leadless Pacemaker Single-chamber
pacemaker, plus S-ICD
compatibility
Accolade™ MRI Ingevity™ pacing lead
Full-body MRI scans
& remote monitoring
Valitude™
X4 Quad CRT-P More pacing vectors,
Industry leading longevity
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Rhythm Management growth drivers:
2016 & beyond
Diagnostics Electrophysiology
Rhythmia™ Mapping &
navigation platform;
frequent software
iterations
Atrial Fib Solutions Portfolio of navigation-
enabled, open-irrigated,
and MiFi therapeutic
catheters
Other EP Solutions Recording systems
Diagnostic catheters
Accessories
Strategic Partnerships Portfolio of wireless,
cardiac monitoring
products and services
HeartLogic™ HF solution for in-patient,
readmissions and chronic
disease management
Loop Recorder Active project to
develop an arrhythmia
monitoring device
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MedSurg growth drivers: 2016 & beyond
Neuromodulation Endoscopy Urology and
Pelvic Health
Vercise™ DBS Parkinson’s, dystonia,
essential tremor
indications in EU
Precision Spectra™
Leading SCS platform
Illumina 3D™
software
Precision Novi™
Enter primary cell /
non-rechargeable market
Xlumena EUS-guided devices
provide minimally invasive to surgery
New Therapies Pulmonary:
asthma, cancer
SpyGlass DS™ Visualization
Malignant & benign
tumors
BPH, Erectile
Dysfunction, Male SUI Category leadership,
market & geographic
expansion
LithoVue™ Single-use, disposable
ureteroscope
visualization platform
Stone Disease Leading platform &
expanding globally
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Innovation beyond products: ADVANTICS
Reduction in
supply chain
costs*
67%
Average
reduction in
lab turnover*
20%
Increase in
productivity*
18%
Triple patient
readiness
from 30%*
80%
* These are real results from ADVANTICS programs. Results may vary.
Reduction in
HF 30-day
readmissions
50%
Increase in %
of patients
treated to
guidelines*
43%
*
• Reduce readmission rates and penalties
• Improve patient experience and engagement
• Optimize length of stay and site of care
• Improve utilization, patient experience and staff engagement
• Reduce supply chain costs and ensure product availability
Improve quality and standardize care for chronic cardiovascular diseases
Drive operational excellence in cardiovascular and GI labs
Powered by
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• EM +11%
operational revenue3
Q3 YTD
• China +20%
operational revenue3
Q3 YTD
• Est. EM $1B in 2016
• Est. EM 12% of
mix in 2016
(vs. 8% in 2012)
• Strong team
• Expanded
distribution
• Product
registrations
• R&D & training
centers
• China JV
(Frankenman)
Driving global expansion
U.S. 52% (+8% YTD) Europe
22% (+7% YTD)
AMEA 20% (+7%
YTD)
LACA 6% (+6% YTD)
Global revenue mix
2015 YTD
---------------- Emerging Markets ----------------
Growth highlights Growth drivers
Operational Revenue3,4,5
See slide 20 for footnotes
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• Accretive new
products
• 5-10% annual
standard cost
improvements
• Optimize plant
networks
• AMS benefit
• Reduce SG&A
• R&D
productivity
• Reduce
adjacency
dilution
• Outsourcing/
offshoring
• Lean business
initiatives
• AMS benefit
2012A*
2013A
2014A
2015E**
Gross Margin
Operating
Expenses
2017E
25%+
~+100bps
~+150bps
20.2%
18.9%
17.8%
Significant adjusted operating margin2 expansion:
Estimated +700bps from 2012-2017
22.5%
**2015E represents guidance midpoint issued on Q3:15 earnings call, 10/28/15
*Adjusted for estimated impact of Medical Device Tax (~100bps), based on actual 2013 impact
See slide 20 for footnote
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• Accretive new
products
• 5-10% annual
standard cost
improvements
• Optimize plant
networks
• AMS benefit
• Reduce SG&A
• R&D productivity
• Reduce
adjacency
dilution
• Outsourcing/
offshoring
• Lean business
initiatives
• AMS benefit
• Accretive new
products
• 5-10% annual
standard cost
improvements
• Optimize plant
networks
• Reduce SG&A
and adjacency
dilution
• R&D productivity
• AMS benefit
• Outsourcing/
offshoring
2015E*
Gross Margin
Operating
Expense
Reductions
2017E
Operating
Margin
Improvements
2020E
25%+
Adjusted OM expansion opportunities beyond 2017
22.5%
27-28%
~+100bps
~+150bps
~+200 to
300bps
*2015E represents guidance midpoint issued on Q3:15 earnings call, 10/28/15
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1. Debt repayment
2. M&A in adjacent, high-growth markets
3. Maintain flexibility
– Litigation / tax contingencies
Cash flow outlook, capital allocation priorities
2014A 2015E* 2016E
$1.26B
$1.3B+
~$1.5B
Strong Cash Flow
Adjusted FCF6: 2014 – 2016E
2016 Capital
Allocation Priorities
*2015E represents guidance issued on Q3:15 earnings call, 10/28/15 See slide 20 for footnote
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BSX: What to expect from us
Consistently delivering on and exceeding financial goals1,2
• Strong culture fostering a “WINNING SPIRIT”
• 2015 Q3 YTD: 5% organic growth, +250bps adj. OM, ~20% adj. EPS growth ex FX
Transforming patients’ lives and leading in large global markets
• Entering faster growth segments, driving category leadership
• Building emerging markets scale and capabilities
Launching innovative new product cycle in 2016
• Driving consistent organic revenue growth with a long runway
Leading globally: More to come in 2017-2018 and beyond
• Launching into large, high growth markets with meaningful innovation
• Creating value: MSD rev. growth + adj. OM expansion = DD adj. EPS growth ex FX
See slide 20 for footnotes
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Footnotes
1: Organic revenue growth excludes the impact of sales from divested businesses, changes in foreign
currency exchange rates and sales from the acquisitions of the interventional business of Bayer AG and
the American Medical Systems male urology portfolio over the prior year period.
2: Adjusted operating margin, and adjusted earnings per share are non-GAAP and exclude goodwill and
other intangible asset impairment charges, acquisition and divestiture-related net charges, litigation-
related charges, restructuring and restructuring-related charges, pension termination charges, discrete
tax items and amortization expense.
3: Operational revenue growth is at constant currency, and excludes divested businesses.
4: Percent of revenue shown on a constant currency basis.
5: LACA = Latin America and Canada; AMEA = Asia, Middle East , and Africa
6: Adjusted Free Cash Flow excludes any potential amounts related to acquisition-, divestiture- and
litigation-related items, significant tax audit settlements and restructuring and restructuring-related items.
For reconciliations of non-GAAP financial measures to the most directly comparable GAAP
figures, please refer to the addendum to this presentation and the Investor Relations section of
our website at www.bostonscientific.com.
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Supplemental Non-GAAP Disclosures
Nine Months Ended September 30, 2015
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Supplemental Non-GAAP Disclosures
Nine Months Ended September 30, 2015
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Supplemental Non-GAAP Disclosures
Twelve Months Ended December 31, 2014, 2013, & 2012
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Supplemental Non-GAAP Disclosures
Twelve Months Ended December 31, 2012, 2011
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Supplemental Non-GAAP Disclosures
Twelve Months Ended December 31, 2014, 2013
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Supplemental Non-GAAP Disclosures
YTD September 30, 2015
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Supplemental Non-GAAP Disclosures
YTD December 31, 2014
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Supplemental Non-GAAP Disclosures
Twelve Months Ended December 31, 2017 Estimate
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Supplemental Non-GAAP Disclosures
Twelve Months Ended December 31, 2012