37th Annual JP Morgan Healthcare Conference
Mike Mahoney
Chairman & Chief Executive Officer
37 th Annual JP Morgan Healthcare Conference Mike Mahoney Chairman - - PowerPoint PPT Presentation
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
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 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.
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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™ Directional Lead CE Marked. U.S.: Caution: Investigational Device. Limited by Federal (or U.S.) law to investigational use only. Not available for sale.
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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
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$5.5B, +7% $2.2B, +9% $1.7B, +7% $0.4B, +16% US LACA APACt EMEAt
2018 Revenue1 and Operational* Growth1: (Total company: $9.8B, 8%; Organic* Growth1 7%)
Strong Growth in Every Region
$2.6B, +7% $1.2B, +9% $2.0B, +2% $0.3B, +11% $0.8B, +23% $1.8B, +8% $1.2B, +11% Interventional Cardiology Peripheral Interventions Cardiac Rhythm Management EP Endoscopy NM Urology & Pelvic Health
Above Market Growth in Most Segments
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$0.84 $0.93 $1.11 $1.26 $1.38- $1.40 +DD% Y/Y +15% +11% +20% +13% +10%
2014 2015 2016 2017 2018E 2019E
20.2% 22.3% 24.1% 25.0% 25.5- 25.75% +50-100 bps Y/Y 2014 2015 2016 2017 2018E 2019E
+4% +5% +10% +7% +7% +6% +8% +12% +8% +8% $7.4 $7.5 $8.4 $9.0 $9.8 +7-10% CAGR 2014 2015 2016 2017 2018 2019E
Reported revenue, Y/Y operational* growth Y/Y organic* growth rates Operational* revenue growth goal
Sales growth consistently > mkt CAGR ’15-’18E: 9% operational* & 8% organic* Delivering on margin expansion goals Consistent double digit adj. EPS* growth: CAGR ’15-’18E: 14%
3 3 1
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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
2018 Revenue Mix 2021E Revenue Mix 2013 Revenue Mix
~3% ~5% ~6-7%
Served Market Y/Y Growth
Low Growth ~30% Moderate Growth ~50%
$10B1
High Growth ~20%
$7B
Low Growth ~40% Moderate Growth ~50% Low Growth ~20% Moderate Growth ~45%
High Growth ~35%
High Growth ~10%
Estimated Market Growth Rates
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Growth Accelerators
Embolic Protection
IC: Structural Heart Peripheral Interventions Endoscopy Urology & Pelvic Health Neuromodulation Rhythm Management
2018E Sales2 $475M+ ~$75M <$200M +80% ~$75M <$1B Defib +7% Market 2022E ~$8B ~$3.5B ~$2.5B ~$1B ~$2.5B ~$20B ~$2.5B
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Recent Business Development Adjusted R&D* Spend & Percent of Sales Strategic Investments & Partnerships
$0.9B $1.0B $1.1B 2016 2017 2018E
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10.9% 10.8% 10.5-11%
– 40+ investments in mixed stages
– 4 equity investments converted into acquisitions in 2018
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Tsinghua University
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Cancer
Therapeutic Imaging
Benign Prostatic Hyperplasia
Stone Disease
Pancreaticobiliary
Endoluminal Surgery
Infection Prevention
Men’s & Women’s Health
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Complex PCI
Drug Eluting
Imaging Platforms
Mitral Valve Replace & Repair
TAVR
protection LAAC
Interventional Oncology
Ablation4
Venous
catheters
with EKOS™ System4 Arterial: Drug-Eluting Technologies
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Core CRM
HeartLogic™
INGEVITY™ pacing lead
CRT-P Implantable Cardiac Monitor
monitoring device Therapeutic Catheters
technology
technology Mapping & Navigation
Deep Brain Stimulation
primary cell
Spinal Cord Stimulation
combination therapy
Additional investments
neurology indications Single Shot Therapies
catheter system
energy platform Modular CRM: mCRM™
EMPOWER™ leadless pacer
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Coronary Therapies
Structural Heart
Peripheral Interventions
CRM/EP
Neuromodulation
Endoscopy
Urology/Pelvic Health
Coronary Therapies
Structural Heart
Peripheral Interventions
CRM/EP
Neuromodulation
Endoscopy
Urology/Pelvic Health
Coronary Therapies
Structural Heart
Peripheral Interventions
CRM/EP
Neuromodulation
Endoscopy
Urology/Pelvic Health
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Strategic & Financial Rationale High Growth Business Segments
provides high growth and strong synergies to BSX PI
cancer therapeutics
returns
Interventional Medicine $172M, +15-17% Specialty Pharma $168M, LSD Licensing $156M
Interventional Medicine:
revenue growth
strong geographic expansion opportunities Specialty Pharmaceuticals:
attractive profitability
independent of IM business Licensing:
integration
limited/no overhead
in-line with deal expectations
Immediately $0.02 - $0.03 accretive to BSX 2019 adj. EPS* Significant synergies of $175M+ expected (yr. 3)
(Six month Interim 2018/2019 Revenue and FY 2018/2019 Growth Outlook)6
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Guide- wires Drug Elution Stents Balloons Crossing Catheters (Roxwood) Vena Cava Filter (Sentry) Coils Micro- catheters Guidewires Radio- Embolization Beads (TheraSphere™) Cryo & Microwave Ablation (Galil) Acoustic Pulse Thrombolysis (EKOS™) Superficial Venous Disease (Varithena™) Venous Stents & IVUS Mechanical Thrombectomy
Arterial Interventional Oncology Venous
Segment Size: ~$1.6B Growth: ~8% Segment Size: ~$1.4B Growth: ~7% Segment Size: ~$3.2B Growth: ~6-7%
Not all products and/or indications are available in all territories.
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20.2% 22.3% 24.1% 25.0% 25.5- 25.75% +50-100 bps Y/Y 30+% 2014 2015 2016 2017 2018E 2019E 2020E Long Term
Key Contributors Opportunity beyond 2020 for 30%+ adjusted OM*
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– Functional expansion of Global Business Services – Optimizing ‘back office’ via Centers of Excellence – Implementation of robotic process automation (RPA)
improvements
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2017 2018E 2019E 2020E
13% ~13% ~13%
2019+
2019+, which reflects roughly equal benefit from 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
by jurisdiction
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~$1.9B ~$2.15B ~$2.4B
2018E 2019E 2020E
– 5% of 2019E-2020E adjusted free cash flow* reserved for legal/tax audit settlements vs. 65% 2015-2018E
and investments
BTG acquisition4:
~2.6x by YE 2018E ~3.3x by YE 2019E ~2.6x by YE 2020E
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95% of 2019E-2020E adjusted free cash flow* available to deploy
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2018E Goals 2019E & 2020E
Operational Revenue* Growth +8%1 +7-10% Contribution from Recent M&A +80bps1 inorganic
(Symetis, NxThera, Claret, Augmenix)
+150bps
(organic/inorganic split TBD based
Organic Revenue* Growth +7%1 ~+6-9%
(organic/inorganic split TBD based
Adjusted
+50-75bps3 Y/Y +50-100bps Y/Y Adjusted Tax Rate* ~12%3 ~13%7 Adjusted EPS* Growth +10-11%3 Double-digit goal
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Target Business Description Closing Date Upfront ($M) Max Milestone ($M) Potential Total ($M) Comments Target Commercial Launch
Acquisitions – 2018
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Endoscopy RF ablation for GI cancer Mar-18 10 — 10 "Drop in the bag" for biliary franchise; minor revenue contribution 2018
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Rhythm Management Esophageal temp monitoring Mar-18 40# 10 50 "Drop in the bag" for EP franchise; minor revenue contribution 2019
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Urology / Pelvic Health Minimal invasive therapy for BPH Apr-18 240# 85 325 Category leadership for urologist in-
2018
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Urology / Pelvic Health Potential platform for earlier diagnosis of
Apr-18 150 125 275 Confirmatory study underway with results targeted H2:19E; minor revenue contribution 2020
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Rhythm Management Single shot therapy - pulmonary vein isolation Jul-18 202# — 202 Target CE Mark YE19; minor revenue contribution 2020
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IC - Structural Heart Embolic protection (TAVR, etc.) Aug-18 220 50 270 US NTAP reimbursement in effect Oct 1, 2018 2018
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Peripheral Interventions Peripheral venous stent Aug-18 108# 52 160 "Drop in the bag" for PI Venous franchise; filed PMA mid-2018 2019
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Urology / Pelvic Health Organ protection in prostate cancer radiation therapy Oct-18 500 100 600 Category leadership for urologist in-
~$50M sales FY2018E 2018 Total: $ 1,470 $ 422 $ 1,892 Pending Close – 2019
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IC - Structural Heart TMVR - Full annuloplasty ring for mitral repair Q1:19E 325# 450 540 Initial $90M investment made 2018 TBD
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Peripheral Interventions IO, venous and arterial portfolio additions H1:19E 4,200 — 4,200 Includes specialty pharmaceuticals and licensing segments 2019
#Previously held equity investment; purchase price represents cash paid for remaining stake not already owned
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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 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 tPrior 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, 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.
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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 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.