36th Annual JP Morgan Healthcare Conference
Mike Mahoney
Chairman & Chief Executive Officer
36 th Annual JP Morgan Healthcare Conference Mike Mahoney Chairman - - PowerPoint PPT Presentation
36 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
Chairman & Chief Executive Officer
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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 changes in foreign currency exchange rates. Organic growth rates are non-GAAP measures that exclude the impact of changes in foreign currency exchange rates and the sales from significant acquisitions (Symetis SA, the American Medical Systems male urology portfolio and EndoChoice Holdings, Inc.) in the relevant periods. 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.
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Product Regulatory Disclaimer 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. DrectSense™ Technology Device under development. Not available for use or sale worldwide. 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. Drug Eluting Stent – Below-the-knee indication Device under development. Not available for use or sale worldwide. Eluvia™ Drug eluting self-expanding SFA stent CE Marked. U.S.: Caution: Investigational Device. Limited by Federal (or U.S.) law to investigational use only. Not available for sale. Lotus Edge™ U.S.: Caution: Investigational Device. Limited by Federal (or U.S.) law to investigational use only. Not available for sale. ACURATE™ 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. WATCHMAN™ FLX Pending CE Mark. Not available for use or sale in the U.S.
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Caring Meaningful Innovation High Performance Global Collaboration Diversity Winning Spirit
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– Q4 2017 sales growth1: 8% operational*, 7% organic* vs Q4 2016 organic* comp of 10% – FY 2017 sales growth1: 8% operational*, 7% organic* vs FY 2016 organic* comp of 10% – FY 2017 profitability and EPS2: +100 bps adj. OM*, +11-14 adj. EPS growth* – 2015-2017E: organic revenue* CAGR1 +7% and adjusted EPS CAGR2 +14-15%
– Gaining share globally via portfolio innovation and economic value drivers
– Diversified portfolio today + entering new high-growth markets totaling ~$15B in 2021E
– 2018E-20E: organic rev.* CAGR +5-8%, adj. OM* gains, flat mid-teens tax rate, EPS CAGR +DD – Strong adj. free cash flow*: est. $6.3B cumulative in years 2018-2020 with limited contingencies
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$0.3B, +14%
2017 Revenue1 and Operational Growth1*: (Total company: $9.0B, 8%; Organic Growth* 7%)
Rhythm Management Interventional Cardiology Structural Heart Peripheral Interventions
$2.4B, +6% $1.1B, +7% $275M+2
CRM Electrophysiology
$1.9B, +2%
Endoscopy Urology & Pelvic Health Neuromodulation
$1.6B, +12% $0.6B, +14% $1.1B, +12%
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Reported Revenue, Y/Y operational* growth Y/Y Organic* growth rates 18.9% 20.2% 22.3% 24.1% 2013 2014 2015 2016 2017E 25% – 25.25% $7.1 $7.4 $7.5 $8.4 $9.0 2013 2014 2015 2016 2017 +2% +6% +8% +12% +8% +4% +5% +10% +7% $0.73 $0.84 $0.93 $1.11 2013 2014 2015 2016 2017E +11% +15% +11% +20% +11%
$1.24 - $1.27
Sales growth consistent > mkt 7% organic CAGR ’15-’17E Delivering on margin expansion goals Consistent double digit EPS growth: 14-15% CAGR ’15-’17E
1 2 2
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Business
2017E Market Size 2017E Market Growth 2020E Market Size ’17 - ’20E Market CAGR
Key Investment Areas, New Markets
Cardiovascular Cardiology $7.5B 1% $8B 0-1% Complex PCI, PCI Guidance, Heart Failure Structural Heart $4B 21% $6B 15-20% TAVR, LAAC, Mitral Replace & Repair Peripheral $6B 6% $7.5B 6-8% Drug-Eluting, Oncology, Venous, CLI Rhythm Mgmt. CRM + Diagnostics $10B 1% $10B 0-2% S-ICD/Leadless, Diagnostics, Heart Failure EP $4B 12% $6B 9-11% Mapping, Navigation, Therapeutic Solutions MedSurg Endoscopy $5B 5% $6B 5-6% Endo-Luminal Surgery, Visualization, Pulmonary Urology & PH $3.5B 5% $4.5B 5-6% Stone, Prostate, ER, OAB, Globalization Neuromodulation $3B 14% $4B 10-15% Pain, Brain, Movement Disorders WW Total ~$43B 4-5% ~$50B 5-6% Continuing to invest in higher growth areas
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2017 Sales1 Market ~ 2021E Growth Accelerators
$275M+ ~$6B
~$50M ~$2B
~$50M ~$2B
40%+ growth ~$1B
~$50M ~$2B
IC: TAVR + LAAC PI Drug Eluting Endo new markets Uro/PH new markets Neuromod - Brain
~$15B <$500M
Rhythm Management
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Vercise™ Deep Brain Stimulation Platform 1st directional system for Parkinson’s, dystonia, & tremor globally Spectra WaveWriter ™ SCS System First platform to combine paresthesia and sub- perception therapies Additional investments for therapies in stroke and Alzheimer’s Disease Biliary Leadership Leveraging clinical innovations and core portfolio iterations Endo-Luminal Surgery Emerging alternative to surgical resection; initial focus on GI tract cancers SpyGlass DS™ Visualization Minimally invasive, single- use digital cholangioscope Women’s Health Expanding portfolio technologies & global footprint Men’s Health & BPH Greenlight XPS ™ Laser Therapy System Category leadership, market & geographic expansion Stone Disease & LithoVue™ Single-Use Ureteroscope Leading platform, next gen technology, and expanding globally
Infection Prevention & Pathology Services Solutions for Ambulatory Surgery Center market
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Complex PCI Multiple new product launches in key growth areas Synergy™ & line extensions Continued DES leadership Polaris™: IVUS & Comet™ FFR Global leader in IVUS and expanding into FFR market Mitral Valve Replace & Repair Future focus area TAVR Portfolio
annular , top-down deployment
annular, fully reversible Watchman™ LAAC Device Expanding utilization & market indications Interventional Oncology Portfolio additions + significant opportunity in Emerging Markets AngioJet Zelante ™ DVT Catheter Foundation for complete venous portfolio Comprehensive Drug- eluting Technologies
for the SFA
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Emblem™ MRI S-ICD Continued positive
clinical science Resonate ™ HV Family Next gen platform compatible with HeartLogic™ plus EnduraLife, MSP and MRI mCRM ™ Modular CRM: EMBLEM™ S-ICD with EMPOWER™ leadless pacer Connected Patients Portfolio of cardiac monitoring products and services Implantable Cardiac Monitor Developing arrhythmia monitoring device HeartLogic™ Drive share with 70% sensitivity in detecting HF events at median 34 days prior to event Apama RF PVI Balloon Catheter System Differentiated, multi- electrode, single shot RF therapy for pulmonary vein isolation Therapeutic Catheters
technology
technology Rhythmia™ HDx Second gen mapping & navigation platform
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Coronary Therapies
Structural Heart
Peripheral Interventions
CRM/EP
Endo
Urology/Pelvic Health
NMD
Coronary Therapies
Structural Heart
Peripheral Interventions
CRM/EP
Endo
Urology/Pelvic Health
Neuromodulation
Coronary Therapies
Structural Heart
CRM/EP
Endoscopy
Urology/Pelvic Health
Neuromodulation
**Intend to launch Lotus in the U.S. & EU in 2019 pending final testing & regulatory approvals
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Estimated Market Growth Rates
Low Growth 35% Moderate Growth 50% Low Growth 46% Moderate Growth 47%
2017 Revenue Mix1 $9.0B 2020E Revenue Mix 2012 Revenue Mix $7.2B
High Growth Mkt (10%+ CAGR): SCS, TAVR, LAAC, EP, DBS, PI Drug Eluting, ICM
High Growth 7% High Growth 15%
Low Growth 25% Moderate Growth 50% High Growth 25%
Low Growth Mkt (0 - 3% CAGR): Pacers, Defibrillators, DES Moderate Growth Mkt (4 - 9% CAGR): Endo, UroPH, PI (ex DES & DCB), Int. Oncology, IC (ex. SH, DES)
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China & India: Partnerships & VC investments Latin America: Expanding access
2013 2017E 2020E
$625M $900M $1.4B
registration
capabilities
capabilities
distribution facility
Tsinghua University
Seguridad y calidad, de corazón
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2013 2014 2015 2016 2017E2 2020E 25%- 25.25% 24.1% 30+% 22.3% 20.2% 18.9%
~+300 bps
SG&A productivity Accretive new products Launches & commercial scale
R&D efficiencies 5-10% annual standard cost improvements
28% Longer Term Goal
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Strong Free Cash Flow*: 2016-2020E Improved Ability to Deploy Cumulative Free Cash Flow*
** Based on adjusted free cash flow. Refer to non-GAAP reconciliations
2015-2017E: ~$4.8B 2018E-2020E: ~$6.3B
10%
Reserved Contingencies** M&A or Returning Cash to Shareholders
20% 10%
2016 2017E 2018E 2019E 2020E
$1.6B ~$1.75B ~$1.9B ~$2.1B ~$2.3B
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Post Tax Reform Estimated Effective Tax Rate*
2017E 2018E 2019E 2020E 2023E
Full access to OUS cash
All estimated tax rates are adjusted and exclude discrete tax items, such as the benefit related to adoption of ASU 2016-09
Pre Tax Reform Expected Effective Tax Rate*
Full access to OUS cash through 2018
Partial access to OUS cash 2019+
15% 16% 17% 20% 2017E 2018E 2019E 2020E 2023E 14%
Expected increase of 100 bps per year for access to OUS cash
14% ~16% ~15%
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2017E 2015-2017E CAGR Goals 2018E Goals 2019 & 2020E 2018E-2020E CAGR Organic Revenue* 7% 1 +7% +5-6% +5-8% +5-8% Operational Revenue* 8% 1 +9%
+6-9% Adjusted
25%-25.25% 2 ~175 bps
Improvement annually
+50-75bps
w/MDET repeal
+~25bps
w/MDET reinstated
~100+ bps
Improvement annually
28% in 2020 Effective Tax Rate* 14% 2 ~16% ~15% Adjusted EPS* Growth 11%-14% 2 +14-15%
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– Q4 2017 sales growth1: 8% operational* , 7% organic* vs Q4 2016 organic* comp of 10% – FY 2017 sales growth1: 8% operational*, 7% organic* vs FY 2016 organic* comp of 10% – FY 2017 profitability and EPS2: +100 bps adj. OM*, +11-14 adj. EPS growth* – 2015-2017E: organic revenue* CAGR1 +7% and adjusted EPS CAGR2 +14-15%
– Gaining share globally via portfolio innovation and economic value drivers
– Diversified portfolio today + entering new high-growth markets totaling ~$15B in 2021E
– 2018E-20E: organic rev.* CAGR +5-8%, adj. OM* gains, flat mid-teens tax rate, EPS CAGR +DD – Strong adj. free cash flow*: est. $6.3B cumulative in years 2018-2020 with limited contingencies
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Recognized for progressive life/work policies and programs Ranked #35 based on employee ratings Ranked #16 in the U.S. Ranked #3 on U.S. Large Company list Scored 100% for the 4th consecutive year Scored 100% for the 2nd year in a row Highest recognition for Guard/Reserve employee support Ranked 6th in industry category
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SpyGlass DS is the first and only minimally invasive, single use, single operator digital cholangioscope
GI specialized pathology services and dedicated commercial team servicing $600M ASC opportunity
Enhanced safety for patients and healthcare providers in $775M global market
Safer, less costly, minimally invasive alternatives to traditional surgery
Portfolio expansion and new indications for Axios, the world’s first transluminal stent
Market Size (2017E) ~$3B Market Growth (2017E) +5% 2017-2020
+5%-6% BSX 20171
Operational Growth*
+12% Share Position #1
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Add to our core portfolio along with developing clinical and economic evidence; evolve commercial model to meet demands of global healthcare market
Lead with stone portfolio to gain critical mass and commercial presence; then selectively launch additional franchises in regional markets
Evolve our portfolio with new adjacencies and tools that add value beyond our current portfolio, differentiated by excellent medical education
Market Size (2017E) ~$3.5B Market Growth (2017E) +5% 2017-2020
+5%-6% BSX 20171
Operational Growth*
+12% Share Position #1
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First and only SCS system able to combine paresthesia and sub-perception therapies
Personalized therapy with neural targeting algorithm (Illumina 3D ™) and lead portfolio
Treatment options for pain patients
First MICC-based directional system
Under-penetrated market opportunity in both pain and brain
Market Size (2017E) ~$2.5B Market Growth (2017E) +14% 2017-2020
+10%-15% BSX 20171
Operational Growth*
+14% Share Position #2
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Diversify coronary revenue to higher growth, less price sensitive product lines through portfolio execution
Protect DES leadership position with tiered portfolio and Synergy line extensions
Multiple launches of new Complex PCI specialty products
Expand footprint into $400M FFR market and maintain leadership in IVUS
Market Size (2017E) ~$7.5B Market Growth (2017E) +1% 2017-2020
+0%-1% BSX 20171
Operational Growth*
+6%
(including SH)
Share Position #1
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Expanding market with excellent outcomes, therapy development and expanding indications
Global expansion through commercial integration, a unique feature set and outstanding clinical outcomes
Differentiated TAVR platform providing complete control and lowest PVL
Expand valve portfolio into $3B potential new market
Market Size (2017E w/Mitral) ~$4B Market Growth (2017E) +21% 2017-2020
+15%-20% Share Position #3
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Differentiated portfolio backed by unparalleled clinical program
Significant opportunity in Emerging Markets
Large, underpenetrated market
Only company pursuing DES Below The Knee
Mindshare with physicians and contracting advantage
Market Size (2017E) ~$6B Market Growth (2017E) +6% 2017-2020
+6%-8% BSX 20171
Operational Growth*
+7% Share Position #1
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Next gen platform with HeartLogic™ Heart Failure Alert, MRI, MSP (CRT-D), and EnduraLife
Drive share with diagnostic that offers 70% sensitivity in detecting HF events at median 34 days prior to event
First and only S-ICD with continued positive outcomes and
EMBLEM ™ S-ICD with EMPOWER ™ leadless pacer
Diagnostic-only device – target launch H1:2019E
Market Size (2017E) ~$10B Market Growth (2017E) 1% 2017-2020
0%-2% BSX 20171
Operational Growth*
+2% Share Position WW #3 US #2
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Second gen Mapping and Navigation system Rhythmia HDx with LUMIPOINT ™ software module
Full portfolio of navigation and non-navigation enabled therapeutic catheters
Launching now in Europe and H1:2018E in the US
Expands therapeutic portfolio in $800M market opportunity – EU launch 2019E
Differentiated, multi-electrode single shot RF therapy to address fast growing ~$500M market
Market Size (2017E) ~$4B Market Growth (2017E) +12% 2017-2020
+9%-11% BSX 20171
Operational Growth*
+14% Share Position #4
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*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 9, 2018 2Based on guidance issued October 26, 2017
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(Low) (High) (Low) (High) Estimated GAAP EPS $0.71 $0.75 180% 196% Estimated acquisition-related net charges 0.01 0.00 Estimated restructuring and restructuring-related charges 0.06 0.06 Estimated amortization expense 0.35 0.35 Investment impairment charges 0.02 0.02 Litigation-related charges 0.09 0.09 Estimated Adjusted EPS $1.24 $1.27 11% 14% Less: Estimated impact of foreign currency fluctuations
Estimated Adjusted EPS, excluding FX $1.32 $1.34 18% 21% Full Year 2017 Estimate Estimated Growth
Revenue Growth Q4 20171 Q4 2016 Revenue growth, as reported 9.9% 11% Less: Impact of foreign currency fluctuations 1.8% 0% Operational Revenue Growth 8.1% 11% Less: Impact of significant acquisitions 3.0% 1% Organic Revenue Growth 6.8% 10%
Revenue Growth 2015-20171 (CAGR) 20171 2016 2015 2014 2013 Revenue growth, as reported 7% 7.9% 12% 1% 3%
Less: Impact of foreign currency fluctuations
0.1% 0%
Operational Revenue Growth 9% 7.8% 12% 8% 6% 2% Less: Impact of significant acquisitions 2% 1.2% 2% 3% 2% Organic Revenue Growth 7% 6.6% 10% 5% 4%
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Interv entional Cardiology 6.2% 0.1% 6.1% Peripheral Interv entions 6.5%
6.6% Cardiovascular 6.3% 0.0% 6.3% Cardiac Rhythm Management 2.5% 0.2% 2.3% Electrophysiology 14.5% 0.1% 14.4% Rhythm Management 3.9% 0.2% 3.7% Endoscopy 12.4% 0.1% 12.3% Urology & Pelv ic Health 11.8% 0.2% 11.6% Neuromodulation 14.2% 0.1% 14.1% MedSurg 12.5% 0.1% 12.4% Total Company 7.9% 0.1% 7.8% 1.2% 6.6% Revenue (in billions ) As Reported Less: FX Impact Operational* Total Company 9.0
9.1 FY2017 Preliminary / Unaudited Net Sales FY2017 Preliminary / Unaudited Net Sales Growth as compared to FY2016 As Reported Less: Impact of Foreign Currency Operational* Less: Impact of Significant Acquisitions Organic*
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Emerging Markets Revenue (in millions) 2013 Revenue, as reported 589 $ Less: Impact of foreign currency fluctuations (36) Operational Revenue 625 $ Emerging Markets Revenue (in millions) 2017E Estimated Revenue, reported 917 $ Less: Impact of foreign currency fluctuations (8) Estimated Operational Revenue 925 $ Emerging Markets Revenue (in billions) 2020E Estimated Revenue, reported 1.4 $ Less: Impact of foreign currency fluctuations
1.4 $ Emerging Market Revenue CAGR 2017E-2020E 15%
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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 Gross Margin: Excludes from GAAP gross margin the impacts of forecasted acquisition- and divestiture- and restructuring-related charges or credits. Adjusted SG&A: Excludes from GAAP SG&A the impacts of forecasted acquisition- and divestiture- and restructuring-related charges or credits. 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.