37 th Annual JP Morgan Healthcare Conference

Transcription

1 37 th Annual JP Morgan Healthcare Conference Mike Mahoney Chairman & Chief Executive Officer

2 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 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

3 Regulatory Disclaimers Product LUX Dx Implantable Cardiac Monitor EMPOWER Leadless Pacer Apama RF Balloon Catheter Cryterion Cryothermal Energy Platform DirectSense Technology SAVAL Drug eluting below-the-knee stent VICI Venous Stent Ranger Drug-Coated Balloon LOTUS Edge Aortic Valve ACURATE neo Self-Expanding Valve platform ACURATE neo2 WATCHMAN FLX DFR Technology Vercise PC DBS System and Cartesia Directional Lead Regulatory Disclaimer Device under development. Not available for use or sale worldwide. Device under development. Not available for use or sale worldwide. Device under development. Not available for use or sale worldwide. Device under development. Not available for use or sale worldwide. CE Marked. Not available for use or sale in the U.S. U.S. Caution: Investigational Device. Limited by Federal (or U.S.) law to investigational use only. Not available for sale. CE Marked. U.S.: Caution: Investigational Device. Limited by Federal (or U.S.) law to investigational use only. Not available for sale. CE Marked. U.S.: Caution: Investigational Device. Limited by Federal (or U.S.) law to investigational use only. Not available for sale. CE Marked. U.S.: Caution: Investigational Device. Limited by Federal (or U.S.) law to investigational use only. Not available for sale. CE Marked. U.S.: Caution: Investigational Device. Limited by Federal (or U.S.) law to investigational use only. Not available for sale. Pending CE Mark. Not available for use or sale in the U.S. Pending CE Mark. Not available for use or sale in the U.S. Device under development. Not available for use or sale worldwide. CE Marked. U.S.: Caution: Investigational Device. Limited by Federal (or U.S.) law to investigational use only. Not available for sale. 3

4 Our Mission and Values Boston Scientific is dedicated to transforming lives through innovative medical solutions that improve the health of patients around the world. Caring Meaningful Innovation High Performance Global Collaboration Diversity Winning Spirit 4

5 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

6 Boston Scientific At-A-Glance 2018 Revenue 1 and Operational* Growth 1 : (Total company: $9.8B, 8%; Organic* Growth 1 7%) Endoscopy $1.8B, +8% NM $0.8B, +23% Urology & Pelvic Health $1.2B, +11% Above Market Growth in Most Segments Interventional Cardiology $2.6B, +7% Peripheral Interventions $1.2B, +9% APAC t $1.7B, +7% EMEA t $2.2B, +9% LACA $0.4B, +16% Strong Growth in Every Region US $5.5B, +7% EP $0.3B, +11% Cardiac Rhythm Management $2.0B, +2% 6

7 Track Record of Delivering High Performance Revenue Reported revenue, Y/Y operational* growth Adjusted Operating Margin* Adj. operating margin* goal Adjusted EPS* Adj. EPS* growth goal Y/Y organic* growth rates Operational* revenue growth goal $9.8 $9.0 +8% $8.4 +8% +7% $7.4 $ % +7% +6% +8% +10% +4% +5% +7-10% CAGR 20.2% 22.3% 24.1% 25.0% % bps Y/Y $ % $ % $ % $ % $1.38- $ % -11% +DD% Y/Y E E Sales growth consistently > mkt CAGR 15-18E: 9% operational* & 8% organic* E 2019E E Delivering on margin expansion goals E 2019E E Consistent double digit adj. EPS* growth: CAGR 15-18E: 14% 3 7

8 Continued Diversification into Faster Growth Markets High Growth Mkt ( 10% CAGR): NM (SCS, DBS), Structural Heart (TAVR, LAAC, Embolic Protection), EP, PI (Drug Eluting, Venous, Y90 4 ), 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 Estimated Market Growth Rates 2013 Revenue Mix $7B 2018 Revenue Mix 2021E Revenue Mix $10B 1 High Growth ~10% Low Growth ~40% High Growth ~20% Low Growth ~30% High Growth ~35% Low Growth ~20% Moderate Growth ~50% Moderate Growth ~50% Moderate Growth ~45% 8 Served Market Y/Y Growth ~3% ~5% ~6-7%

9 Expanding into High Growth Markets Approaching ~$20B 2018E Sales 2 Market 2022E Growth Accelerators IC: Structural Heart $475M+ ~$8B LAAC Global Expansion (WATCHMAN ) TAVR (ACURATE neo, LOTUS Edge ) & Embolic Protection Mitral Repair Technologies Peripheral Interventions ~$75M ~$2.5B Drug-eluting (ELUVIA DES, Ranger DCB) Therapeutic Oncology 4 Venous Stenting & Pulmonary Embolism 4 Rhythm Management Defib +7% ~$2.5B Single Shot Cryo & RF HeartLogic Heart Failure Alert Diagnostics Neuromodulation +80% ~$1B DBS for Parkinson s Disease and Tremor Other DBS indications Endoscopy <$200M ~$2.5B Endoluminal Surgery Infection Prevention and Pathology Therapeutic Imaging Urology & Pelvic Health ~$75M ~$3.5B Visualization (Flex scope & FMS) Cancer (nvision, SpaceOAR ) Overactive Bladder <$1B ~$20B 9

10 Multiple Sources of Innovation Drive Compelling Pipeline Adjusted R&D* Spend & Percent of Sales Recent Business Development Strategic Investments & Partnerships % 3 Active venture capital portfolio 40+ investments in mixed stages of opportunity 10.9% 10.8% $1.0B $1.1B 5 4 equity investments converted into acquisitions in 2018 Multiple incubators + spin outs $0.9B 4 Strategic partnerships E 4 Tsinghua University 10

11 MedSurg: Category Leadership & Multiple New Growth Platforms Endoscopy Pancreaticobiliary AXIOS stent Jagwire Revolution guidewire Urology and Pelvic Health Stone Disease LithoVue single-use ureteroscope Comprehensive device portfolio Therapeutic Imaging SpyGlass DS visualization system EXALT single-use duodenoscope Benign Prostatic Hyperplasia GreenLight XPS laser therapy Rezūm in-office therapy Infection Prevention Compliance kits Scope valves and repair Men s & Women s Health AMS 700 Penile Prosthesis AMS 800 Urinary Control System Full mid-urethral sling portfolio Endoluminal Surgery ORISE Tissue Retractor System ORISE Gel submucosal lifting agent Additional launches to build toolkit Cancer SpaceOAR Hydrogel nvision Ovarian cancer diagnosis 11

12 Cardiovascular: Category Leadership & Multiple New Growth Platforms Interventional Cardiology Structural Heart Peripheral Interventions Drug Eluting SYNERGY DES Promus ELITE DES AGENT DCB LAAC Watchman Watchman FLX TruSeal Access System Arterial: Drug-Eluting Technologies ELUVIA DES Ranger DCB SAVAL DES for CLI Complex PCI ROTAPRO atherectomy MAMBA microcatheters SENTAI guidewires JUDO 3 & 6 guidewires GUIDEZILLA catheter Imaging Platforms OptiCross HD DFR Technology Physiology Tablet IVUS Tablet TAVR ACURATE neo2 LOTUS Edge SENTINEL embolic protection Mitral Valve Replace & Repair Millipede acquisition 4 Interventional Oncology TheraSphere Y90 4 Cryo & Microwave Ablation 4 Emerging Markets Venous VICI stent AngioJet / Zelante catheters Pulmonary Embolism with EKOS System 4 12

13 Rhythm & Neuro: Category Leadership & Multiple New Growth Drivers CRM Electrophysiology Neuromodulation Core CRM RESONATE with HeartLogic ACCOLADE MRI with INGEVITY pacing lead VALITUDE X4 Quad CRT-P Mapping & Navigation RHYTHMIA HDx LUMIPOINT software Spinal Cord Stimulation WaveWriter SCS with combination therapy RF Ablation Modular CRM: mcrm EMBLEM MRI S-ICD EMBLEM S-ICD with EMPOWER leadless pacer Single Shot Therapies Apama RF balloon catheter system Cryterion cryothermal energy platform Deep Brain Stimulation Vercise directional primary cell Brainlab partnership Implantable Cardiac Monitor LUX Dx arrhythmia monitoring device Therapeutic Catheters DirectSense technology Force Sensing technology Additional investments Multiple new neurology indications 13

14 Strong Product Pipeline Supports Top Tier Growth 2019E 2020E 2021E / 2022E Coronary Therapies SYNERGY DES 4.5/5.0 MAMBA microcatheters ROTAPRO Atherectomy System OptiCross HD Structural Heart WATCHMAN FLX LAAC Device EU WATCHMAN LAAC Device Japan ACURATE neo Valve System Int l expansion ACURATE neo2 Valve System EU LOTUS Edge Valve System U.S. & EU Sentinel CPS Int l expansion Peripheral Interventions ELUVIA DES SFA VICI Venous Stent U.S. CRM/EP Apama RF & Cryterion PVI Balloons EU Neuromodulation Expanded DBS platform Endoscopy SpyGlass Visualization System next gen EXALT single-use duodenoscope launch Urology/Pelvic Health LithoVue Ureteroscope next gen 5 additional launches in Stone SpaceOAR Int l expansion 14 Coronary Therapies SYNERGY XD Stent and 48 Stent MEGATRON Stent COMET II pressure wire Structural Heart WATCHMAN FLX LAAC Device U.S. ACURATE neo Valve expanded sizes EU LOTUS Edge Valve System Japan Sentinel CPS Int l expansion Peripheral Interventions Ranger DCB SFA U.S. & Japan Interventional Oncology Embolic Coils Athletis PTA Balloon IVUS Catheter CRM/EP LUX Dx ICM Monitoring Force Sensing Catheter EU Neuromodulation SCS & DBS Next Gen U.S. & EU Endoscopy Single-use scope platform expansion AXIOS Stent expanded indications U.S. Urology/Pelvic Health nvision MAKO 7 Device with expanded claim Multiple launches in Stone Multiple launches in Men s Health Next Gen Greenlight fiber for BPH Coronary Therapies AGENT Drug Eluting Balloon Physiology/IVUS Multi Modality Tablet Structural Heart WATCHMAN FLX LAAC Device China ACURATE neo Valve expanded sizes U.S. ACURATE neo2 Valve System U.S. & Japan LOTUS Edge Valve expanded sizes U.S. & EU Millipede IRIS Transcatheter Mitral Valve Repair - EU Peripheral Interventions SAVAL Drug Eluting Stent BTK CRM/EP Empower Leadless Pacing/modular CRM U.S. Next Gen CRM PG Apama RF & Cryterion PVI Balloons U.S. Force Sensing Catheter U.S. Neuromodulation SCS & DBS Next Gen U.S./EU Endoscopy Single-use scope platform expansion Urology/Pelvic Health Multiple launches in Stone Multiple launches in Men s Health

15 BTG At-A-Glance: Strong Strategic Fit + Compelling Value Creation Strategic & Financial Rationale High Growth Business Segments (Six month Interim 2018/2019 Revenue and FY 2018/2019 Growth Outlook) 6 Interventional Medicine: BTG Interventional Med provides high growth and strong synergies to BSX PI High growth expansion in cancer therapeutics Strong margin & cash flow Compelling shareholder returns Durable double-digit revenue growth Revenues 90% U.S. based; strong geographic expansion opportunities Specialty Pharmaceuticals: Unique portfolio with attractive profitability Lean business; largely independent of IM business Interventional Medicine $172M, % Specialty Pharma $168M, LSD Licensing $156M Licensing: Requires no integration Cash business with limited/no overhead Zytiga ruling (Nov 19) in-line with deal expectations Execution sweet spot Immediately $ $0.03 accretive to BSX 2019 adj. EPS* Significant synergies of $175M+ expected (yr. 3) 15

16 Provides a Differentiated and Comprehensive Portfolio in the Fast Growing Peripheral and Oncology Market Radio- Embolization Beads (TheraSphere ) Cryo & Microwave Ablation (Galil) Acoustic Pulse Superficial Thrombolysis Venous (EKOS ) Disease (Varithena ) Vena Cava Filter (Sentry) Crossing Catheters (Roxwood) & Coils Guidewires Microcatheters Guidewires Venous Stents & IVUS Mechanical Thrombectomy Stents Drug Elution Balloons Interventional Oncology Venous Arterial Segment Size: ~$1.6B Growth: ~8% Segment Size: ~$1.4B Growth: ~7% Segment Size: ~$3.2B Growth: ~6-7% 16 Not all products and/or indications are available in all territories.

17 Opportunity for Differentiated Operating Margin Expansion Opportunity beyond 2020 for 30%+ adjusted OM* Key Contributors bps Y/Y 30+% SG&A productivity Functional expansion of Global Business Services 20.2% 22.3% 24.1% 25.0% % Optimizing back office via Centers of Excellence Implementation of robotic process automation (RPA) Launches & commercial scale of acquisitions + key products R&D efficiencies 5-10% annual standard cost improvements E 2019E 2020E Long Term 3 Ongoing manufacturing site optimization 17

18 Long Term Operational Tax Rate 7 of ~13% Tax Reinvestment Post-Reinvestment Estimated Tax Rate 7 Previously expected operational tax rate 7 of ~15% in Now, expect an operational tax rate 7 of ~13% in 2019+, which reflects roughly equal benefit from both our tax reinvestment strategy and favorable OUS tax rates 13% ~13% ~13% 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 optimize our structure, leveraging differences in tax rates by jurisdiction E 2019E 2020E 18

19 Strong Cash Flow Outlook, Conservative Capital Structure Strong Adj. Free Cash Flow* Outlook Building on Strong Fundamentals Improved ability to deploy adj. free cash flow* ~$2.4B 5% of 2019E-2020E adjusted free cash flow* reserved for legal/tax audit settlements vs. 65% E ~$1.9B ~$2.15B Continued financial discipline around acquisitions and investments Commitment to investment grade ratings E 2019E 2020E 95% of 2019E-2020E adjusted free cash flow* available to deploy Targeted Debt/EBITDA Leverage Ratios including BTG acquisition 4 : ~2.6x by YE 2018E ~3.3x by YE 2019E ~2.6x by YE 2020E 19

20 Consistent and Strong Financial Outlook 2018E Goals 2019E & 2020E Operational Revenue* Growth +8% % Contribution from Recent M&A +80bps 1 inorganic (Symetis, NxThera, Claret, Augmenix) +150bps (organic/inorganic split TBD based on deal size & timing of anniversaries) Organic Revenue* Growth +7% 1 ~+6-9% (organic/inorganic split TBD based on deal size & timing of anniversaries) Adjusted Op. Margin* bps 3 Y/Y bps Y/Y Adjusted Tax Rate* ~12% 3 ~13% 7 Adjusted EPS* Growth % 3 Double-digit goal 20

21 Appendix References and Non-GAAP Reconciliations 21

22 Business Development Activity Target Business Description Closing Date Upfront ($M) Max Milestone ($M) Potential Total ($M) Comments Target Commercial Launch Acquisitions Endoscopy RF ablation for GI cancer Mar Rhythm Management Esophageal temp monitoring Mar # "Drop in the bag" for biliary franchise; minor revenue contribution "Drop in the bag" for EP franchise; minor revenue contribution Urology / Pelvic Health Minimal invasive therapy for BPH Apr # Category leadership for urologist inoffice prostate health Urology / Pelvic Health Potential platform for earlier diagnosis of ovarian cancer Apr Confirmatory study underway with results targeted H2:19E; minor revenue contribution Rhythm Management Single shot therapy - pulmonary vein isolation Jul # 202 Target CE Mark YE19; minor revenue contribution IC - Structural Heart Embolic protection (TAVR, etc.) Aug US NTAP reimbursement in effect Oct 1, Peripheral Interventions Peripheral venous stent Aug # "Drop in the bag" for PI Venous franchise; filed PMA mid Urology / Pelvic Health Organ protection in prostate cancer radiation therapy Oct Category leadership for urologist inoffice prostate health; ~$50M sales FY2018E 2018 Pending Close IC - Structural Heart TMVR - Full annuloplasty ring for mitral repair Total: $ 1,470 $ 422 $ 1,892 Q1:19E 325 # Initial $90M investment made 2018 TBD 2 Peripheral Interventions IO, venous and arterial portfolio additions H1:19E 4,200 4,200 Includes specialty pharmaceuticals and licensing segments # Previously held equity investment; purchase price represents cash paid for remaining stake not already owned

23 References *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. 1 Based on preliminary, unaudited sales results issued January 7, Based on preliminary, unaudited internal estimates 3 Based on 2018 guidance issued October 24, Millipede and BTG acquisitions are signed, pending close 5 Based on midpoint of 2018 guidance issued October 24, 2018 and preliminary, unaudited sales results issued January 7, Results six months ended Sept 30, 2018 and outlook twelve months ending March 31, 2019, as reported in BTG interim results 7 Estimated tax rate is operational and excludes discrete tax items, such as the benefit related to adoption of ASU t Prior period 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, In addition, regional totals reflect the reclassification of Middle East and Africa from the former AMEA region to Europe, also effective January 1,

24 Supplemental Non-GAAP Disclosures 24

25 Supplemental Non-GAAP Disclosures 25

26 Supplemental Non-GAAP Disclosures 26

27 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 restructuringrelated 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 divestitureand 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. 27