35 th Annual JP Morgan Healthcare Conference

Transcription

1 35 th Annual JP Morgan Healthcare Conference Mike Mahoney Chairman & CEO J A N U A R Y 10,

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 forwardlooking 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. 2

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. Caring Meaningful Innovation High Performance Global Collaboration Diversity Winning Spirit 3

4 What to Expect from Us Company pride living BSX values Transforming patients lives through meaningful innovation and a WINNING SPIRIT Consistently delivering on and exceeding financial commitments 1,2 Beating Investor Day and long range plan targets YTD Q3:16: 9% organic growth, +170bps adj. OM, 27% adj. EPS growth ex. FX Driving category leadership and expanding globally Gaining share globally while building scale & new capabilities in emerging markets Enhancing long term growth profile, investing to lead in faster growth markets 4 Diversifying into large, high-growth markets with differentiated product portfolio Building shareholder value: More to come in and beyond 1,2 2017: MSD rev. growth + OM expansion = double digit adj. EPS growth Beyond 2017: Accelerating revenue growth & significant OM improvement potential See slide 20 for footnotes. 4

5 Boston Scientific At-A-Glance Q3:16 YTD YTD operational revenue and growth 2 as of 9/30/2016 (total company: $6.7B, +13%) Interventional Cardiology $1.9B, +13% Endoscopy $1.1B, +10% Structural Heart FY16E $200M+ Urology and Pelvic Health $773M, +14% 1 (growth ex. AMS) Peripheral Interventions $815M, +13% Neuromodulation $407M, +11% Rhythm Management CRM, Heart Failure Management, Electrophysiology $1.5B, +2% $192M, +5% See slide 20 for footnotes. 5

6 Delivering High Performance Operational Revenue Growth 1,3 Adj. Operating Margin 2 Adj. EPS Growth 2 Organic revenue growth Operational revenue growth $7.5B $7.4B 6% 8% $7.1B 4% 5% $8.4B 12% 9% 17.8% ** 18.9% 20.2% 22.3% 24.3% Includes foreign exchange impact Excludes foreign exchange impact (~$0.10 in 2015, ~$0.05 in 2016E) 11% 15% 23% 11% 24% 18% 2% -2% E* -3% $7.2B Sales growth acceleration E* **Adjusted for estimated impact of Medical Device Tax (~100bps), based on actual 2013 impact ~650 bps adj. OM expansion E* Double-digit adjusted EPS growth ex-fx See slide 20 for footnotes. *2016E represents guidance midpoint issued on Q3:16 earnings call, 10/26/16 6

7 2016 Q3 YTD: Top-Tier Operating Performance Growing well above market & driving significant margin improvement 1,2,3 9% organic & 13% op. revenue growth strong new launches, global share gains +170bps adj. operating margin improvement and ~25% adj. EPS growth ex. FX Strengthening global capabilities & emerging markets 3 Operational revenue growth +15% in AMEA, +11% EU, +13% U.S., +16% in LACA +21% in Emerging Markets; new capabilities, partnerships, product launches Advancing key growth platforms for the future Emblem S-ICD, Synergy stent, Watchman LAAC device, Lotus valve, Rhythmia mapping & navigation system, Innova stent, Eluvia DES, Ranger DCB Precision Novi and Vercise systems, Axios stent, Spyglass DS visualization system, LithoVue single-use ureteroscope Enhancing category leadership via M&A and equity investments Tuck-in acquisitions & portfolio of 20+ strategic equity investments See slide 20 for footnotes. 7

8 Strategic Imperatives Align Our Global Execution STRENGTHEN Category Leadership EXPAND into High Growth Adjacencies DRIVE Global Expansion FUND the Journey to Fuel Growth DEVELOP Key Capabilities Grow faster than peers in large global markets Accelerate growth & diversify into faster segments Grow emerging markets & scale to 15% total BSX sales Increase adj. operating margin 2 to ~28% in 2020 Lead in a dynamic market & build new global capabilities See slide 20 for footnotes. 8

9 Market Growth Estimates: Investing into New & Adjacent Faster Growth Segments Business Interventional Cardio (ex-sh) '16E Market Size 4 16E Market Growth E Market Size E Market CAGR 4 Key Investment Areas, New Markets $8.3B 1% $8.6B 0-2% Complex PCI, PCI Guidance, Heart Failure Structural Heart $3.1B 30% $6.3B 20% TAVR, LAAC, Mitral Replace & Repair Peripheral Interventions Cardiac Rhythm Management $5.2B 6% $6.7B 6-8% Drug-eluting, Oncology, Venous, EM $12.1B Flat $12.9B 0-2% S-ICD/Leadless, Diagnostics, Heart Failure Electrophysiology $4.1B 15% $6.3B 10-15% Mapping, Navigation, Therapeutic Solutions Endoscopy $4.3B 5% $5.4B 5-6% Visualization, Pulmonary, Oncology, Infection, EM Urology & Pelvic Health $3.5B 4% $4.4B 5-7% Stone, Prostate Health, ER, Globalization Neuromodulation $2.5B 10% $3.6B 8-12% Pain, DBS Movement Disorders WW Total $43B 4-5% $54B 5-6% Continuing to invest in higher growth segments Markets bps vs 2015 Investor Day est. See slide 20 for footnotes. 9

10 Cardiovascular: Category Leadership & Growth Drivers Interventional Cardiology Structural Heart Peripheral Interventions Synergy & Promus Premier Market-leading DES platforms Lotus Edge Differentiated, TAVR platform launching in the U.S. by YE 2017 Eluvia DES & Ranger DCB Differentiated drugeluting technologies Polaris : IVUS & Comet FFR Integrated imaging platform Watchman Left atrial appendage closure device Zelante DVT Products for Venous/DVT market; ATTRACT study read out Q1:17E Complex PCI Broadest portfolio to treat most complex patients Mitral Valve Replace & Repair Building a portfolio of replace & repair tools Interventional Oncology Embolization & tumor management 10

11 Rhythm Management: Category Leadership & Growth Drivers ICD/CRT-D Pacemaker Diagnostics Electrophysiology Resonate Next gen platform compatible with HeartLogic + MRI late 2017 US launch Accolade MRI Ingevity pacing lead; full-body MRI & remote monitoring HeartLogic Developing HF Dx solution: a composite alert to reduce heart failure hospitalizations 2 nd gen Rhythmia HDx Mapping & navigation platform Emblem MRI S-ICD MRI compatibility, remote-monitoring enabled Valitude X4 Quad CRT-P More pacing vectors; industryleading longevity Implantable Cardiac Monitor Developing arrhythmia monitoring device Atrial Fibrillation Solutions Navigationenabled, openirrigated, MiFi, contact sensing catheters EnduraLife Battery Technology Industry-leading longevity Leadless Pacemaker Developing modular system: single-chamber pacemaker with S-ICD compatibility for ATP Strategic Partnerships Portfolio of wireless, cardiac monitoring products and services Other EP Solutions Recording systems, diagnostic catheters, and accessories 11

12 MedSurg: Category Leadership & Growth Drivers Neuromodulation Precision Spectra Precision Novi Leading SCS platforms, Illumina 3D software & nonrechargeable system Endoscopy SpyGlass DS Visualization Optimizes pancreatico-biliary procedural efficiency & productivity Urology and Pelvic Health Stone Disease & LithoVue Single- Use Ureteroscope Leading platform, next gen technology, and expanding globally Vercise PC DBS System & Cartesia Directional Lead 1 st Directional System for Parkinson s, dystonia, & tremor globally; US DBS launch YE2017E Endoluminal Surgery - Oncology Endoscopic resection of lesions in colon, esophagus or stomach Men s Health Category leadership, market & geographic expansion RF Ablation Comprehensive range solutions for pain management Infection Control & Pathology Services Solutions for Ambulatory Surgery Center market Women s Health Expanding portfolio technologies & global footprint 12

13 Enhancing Long Term Growth Profile: Investing to Lead into Faster Growth Markets Estimated Market Growth Rates 4 High Growth Mkt (>7% CAGR): SCS, TAVR, LAAC, EP, DBS, PI Drug Eluting, Venous, HF Diagnostics Moderate Growth Mkt (4-6% CAGR): Endo, Complex PCI, Oncology, UroPH, WH, IC (ex. SH, DES) Low Growth Mkt (0-3% CAGR): Pacer, Defib., DES 2012 Revenue mix: $7.2B 2016E Revenue mix: $8.4B 2020E Revenue mix Low Growth 46% High Growth 13% Low Growth 37% High Growth 25% Low Growth 25% High Growth 7% Moderate Growth 47% Moderate Growth 50% Moderate Growth 50% See slide 20 for footnotes. 13

14 Driving Global Expansion: Emerging Markets Focus Global revenue mix & Y/Y growth Q3:2016 YTD Emerging Markets Growth highlights Growth drivers Operational Revenue 3 AMEA +15% Europe +11% LACA +16% U.S. +13% Emerging Markets Q3:16 YTD +21% operational revenue 3 Emerging Markets expected to reach $1B in revenue in 2016 China Q3 YTD +22% operational revenue 3 Emerging markets 12% of mix as of 9/30/2016 (vs. 7% in 2012) Global orientation Portfolio registration, new launches Talent importer MedSurg, PI focus New R&D and physician training capabilities New Malaysian manufacturing/ distribution facility See slide 20 for footnotes. 14

15 ADVANTICS Solutions: Enhancing Category Leadership Partners Capital Financing Performance Optimization Service Development Managed Services Disease Management Turnkey setup & Care process Patient referral Managed Care variation equipment improvement management cathlabs & ORs and financing Maintenance & Supply chain optimization Growth advisory Materials management standardization opportunities servicing Heart Failure financing patient support Upgrade facilities Improve operational effectiveness Increase patient access to therapies Share risks and accountability Standardize HF care to improve outcomes and reduce costs 15

16 A Track-Record of Driving Operating Margin Expansion AND a Significant Future Opportunity 24.3% 25%+ ~+300bps Accretive new products ~28% 18.9% 20.2% 22.3% Reduce SG&A Less adjacency dilution 5-10% annual standard cost improvements 17.8%* Optimize plant network R&D productivity AMS benefit Shared services 2012A 2013A 2014A 2015A 2016E** 2017E Adjusted OM 2 Improvements 2020E * Adjusted for estimated impact of Medical Device Tax (~100bps), based on actual 2013 impact ** 2016E represents guidance midpoint issued on Q3:16 earnings call, 10/26/16 See slide 20 for footnotes. 16

17 Cash Flow Outlook, Capital Allocation Priorities Strong Cash Flow Adjusted FCF 5 : E Capital Allocation Priorities M&A $1.3B $1.4B ~$1.6B ~$1.8B ~$2.0B ~$2.2B Share repurchases Resolve contingencies/liabilities Reserved contingencies ~$2B ~$4B M&A and Share Repurchases 2014A 2015A 2016E* 2017E 2018E 2019E See slide 20 for footnotes. *2016E represents guidance issued on Q3:16 earnings call, 10/26/16 17

18 Disciplined & Balanced Approach to M&A Future Pipeline LumenR Tuck-in M&A Peripheral Vasc. VC (Selected) 18

19 What to Expect from Us Company pride living BSX values Transforming patients lives through meaningful innovation and a WINNING SPIRIT Consistently delivering on and exceeding financial commitments 1,2 Beating Investor Day and long range plan targets YTD Q3:16: 9% organic growth, +170bps adj. OM, 27% adj. EPS growth ex. FX Driving category leadership and expanding globally Gaining share globally while building scale & new capabilities in emerging markets Enhancing long term growth profile, investing to lead in faster growth markets 4 Diversifying into large, high-growth markets with differentiated product portfolio Building shareholder value: More to come in and beyond 1,2 2017: MSD rev. growth + OM expansion = double digit adj. EPS growth Beyond 2017: Accelerating revenue growth & significant OM improvement potential See slide 20 for footnotes. 19

20 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, adjusted earnings per share, and adjusted earnings per share excluding changes in foreign currency exchange rates 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, debt extinguishment charges, pension termination charges, discrete tax items, amortization expense and/or changes in foreign currency exchange rates. 3. Operational revenue growth is at constant currency, and excludes divested businesses. 4. Unless otherwise noted, all references to market sizes, market share positions, and market growth rates are BSX internal estimates 5. 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 20

21 Regulatory Disclaimers Product Eluvia Drug-Eluting Vascular Stent System Ranger TM Drug-Coated Balloon Lotus Valve System Tachy MRI Rechargeable Vercise Deep Brain Stimulation System Insertable Cardiac Monitor HeartLogic TM /Cardiac Diagnostics & Monitoring Leadless Pacemaker RESONATE TM Mitral Valve Technologies Next Gen LAAC Next Gen Ablation Regulatory Disclaimer CE Marked. US: Caution: Investigational Device. Limited by Federal (or US) law to investigational use only. Not available for sale. CE Marked. US: Caution: Investigational Device. Limited by Federal (or US) law to investigational use only. Not available for sale. CE Marked. US: Caution: Investigational Device. Limited by Federal (or US) law to investigational use only. Not available for sale. CE Marked. Not available for use or sale in the U.S. CE Marked. US: Caution: Investigational Device. Limited by Federal (or US) law to investigational use only. Not available for sale. Devices under development. Not available for use or sale worldwide. 21

22 Acronyms Used Acronym TAVR LAAC DES DCB WH ER DBS EU LACA EM Definition Transcatheter Aortic Valve Replacement Left Atrial Appendage Closure Drug-Eluting Stents Drug-coated Balloon Women s Health Erectile Restoration Deep Brain Stimulation Europe Latin America, Canada Emerging Markets 22

23 Appendix A: Non-GAAP Reconciliations Nine Months Ended Revenue Growth Rate 09/30/16 Revenue growth rate, as reported 13% Less: Impact of foreign currency fluctuations 0% Operational revenue growth rate 13% Less: I mpact of AMS acquisition 4% Organic revenue growth rate 9% Nine Months Ended Adjusted Operating Margin 09/30/16 09/30/15 Basis Points Change Operating margin, as reported 5.0% -1.0% Less: Non GAAP adjustments -19.3% -23.6% Adjusted operating margin 24.3% 22.6% 170 Nine Months Ended Adjusted EPS, excluding FX 09/30/16 09/30/15 % Change EPS, as reported 0.16 (0.07) Less: Non GAAP adjustments (0.65) (0.74) Adjusted EPS Less: Impact of foreign currency fluctuations (0.04) 0.00 Adjusted EPS, excluding FX % 23

24 Appendix A: Non-GAAP Reconciliations Revenue Growth (%) As Reported Less: FX Impact Nine Months Ended September 30, 2016 Constant Currency Less: AMS Acquisiton Interventional Cardiology 12% -1% 13% 0% 13% Peripheral Interventions 12% -1% 13% 0% 13% Cardiac Rhythm Management 1% -1% 2% 0% 2% Electrophysiology 4% -1% 5% 0% 5% Endoscopy 10% 0% 10% 0% 10% Urology & Pelvic Health 60% -1% 61% 47% 14% Neuromodulation 9% -2% 11% 0% 11% Organic Nine Months Ended September 30, 2016 Revenue (in millions) As Reported Less: FX Impact Constant Currency Less: AMS Acquisiton Organic Interventional Cardiology 1,695 (175) 1, ,870 Peripheral Interventions 757 (58) Cardiac Rhythm Management 1,378 (103) 1, ,481 Electrophysiology 179 (13) Endoscopy 1,060 (88) 1, ,148 Urology & Pelvic Health 731 (42) Neuromodulation 395 (12)

25 Appendix A: Non-GAAP Reconciliations Full Year 2016 Estimate Estimated Growth FY 2016 EPS Guidance (Low) (High) (Low) (High) Estimated GAAP EPS $0.32 $0.34 Estimated acquisition and divestiture-related net charges Estimated restructuring and restructuring-related charges Estimated amortization expense Litigation-related charges Estimated Adjusted EPS $1.09 $ % 19% Less: Estimated Impact of Foreign Currency Fluctuations -6% -6% Estimated Adjusted EPS, excluding FX 23% 25% Revenue Growth - FY 2015 Revene growth, as reported 1% Less: Impact of foreign currency fluctuations -7% Operational Revenue Growth 8% Less: Impact of Bayer & AMS Acquisitions 3% Organic Revenue 5% Revenue Growth - FY 2014 Revene growth, as reported 4% Less: Impact of foreign currency fluctuations -2% Operational Revenue Growth 6% Less: Impact of Bard & Bayer Acquisitions 2% Organic Revenue 4% Revenue Growth - FY 2013 Revene growth, as reported -1% Less: Impact of foreign currency fluctuations -3% Operational Revenue Growth 2% Revenue Growth - FY 2012 Revene growth, as reported -5% Less: Impact of foreign currency fluctuations -2% Operational Revenue Growth -3% 25

26 Appendix A: Non-GAAP Reconciliations Adjusted Operating Margin - FY 2015 Operating margin, as reported -4.4% Less: Non GAAP adjustments -26.7% Adjusted operating margin 22.3% Adjusted Operating Margin - FY 2014 Operating margin, as reported -4.1% Less: Non GAAP adjustments -24.3% Adjusted operating margin 20.2% Adjusted Operating Margin - FY 2013 Operating margin, as reported 1.7% Less: Non GAAP adjustments -17.2% Adjusted operating margin 18.9% 26 Adjusted Operating Margin - FY 2013 Operating margin, as reported -53.4% Less: Non GAAP adjustments -72.2% Adjusted operating margin 18.8% Less: Estimated impact of Medical Dev ice Tax 1.0% 17.8%

27 Appendix A: Non-GAAP Reconciliations Nine Months Ended September 30, 2016 Less: Impact of Foreign Currency Regional Revenue Growth Rates Reported Fluctuations Constant Currency AMEA 17% 2% 15% EU 10% -1% 11% U.S. 13% 0% 13% LACA 2% -14% 16% Emerging Markets 8% -13% 21% China 16% -6% 22% Adjusted Free Cash Flow (in millions ) FY 2015 FY 2014 Operating Cash Flow, as reported $ 600 $ 1,269 Less: Capex (248) (259) Free Cash Flow 352 1,010 Plus: Restructuring Payments Plus: Contingent Payments Plus: Special Tax Refunds/Credits (74) (72) Plus: Legal Settlements Plus: Other Adjusted Free Cash Flow $ 1,366 $ 1,261 27