Boston Scientific Corporation (NYSE: BSX) reported its third-quarter financial results on October 30, 2024, showcasing a significant increase in operational and organic sales. The company exceeded expectations with its adjusted earnings per share (EPS) and raised full-year guidance due to strong performance. The U.S. market experienced impressive growth, particularly in the electrophysiology sector, and the company is gearing up for the acquisition of Axonics, as well as several new product launches. Despite concerns over trial pauses, Boston Scientific remains confident in the FARAPULSE system and its global adoption for atrial fibrillation procedures.
Key Highlights:
– Total operational sales grew by 19%, with organic sales up by 18%, surpassing the forecasted 13% to 15%.
– Adjusted EPS for Q3 reached $0.63, a 27% increase year-over-year, exceeding the expected range of $0.57 to $0.59.
– Full-year guidance was raised to approximately 15% growth, with adjusted EPS projected at $0.64 to $0.66.
– The U.S. market saw a 24% growth, while Europe, the Middle East, and Africa saw a 14% increase.
– The company announced the upcoming acquisition of Axonics and new product launches, including the ACURATE Prime Valve and the FARAPULSE PFA system in Japan.
Company Outlook:
– Boston Scientific anticipates a 14% to 16% organic growth in the fourth quarter.
– Full-year 2024 reported revenue growth is expected to be around 16.5%, with adjusted EPS between $2.45 and $2.47.
– The company is optimistic about growth in various medical segments and is focused on expanding capacity and efficiency.
Investor Insights:
– Boston Scientific’s market capitalization stands at $126.98 billion, highlighting its significant presence in the Healthcare Equipment & Supplies industry.
– The company’s revenue growth aligns with reported operational sales growth in Q3, supported by a healthy gross profit margin.
– Despite a high P/E ratio, Boston Scientific is trading at a low ratio relative to its earnings growth potential, indicating market confidence in its expansion and innovation.
– With strong financial results and raised guidance, investor confidence in Boston Scientific remains high, supported by its robust pipeline and strategic investments in key medical technology areas. This presentation includes forward-looking statements regarding our financial performance, business plans, and product development. These statements are based on current beliefs and information available as of today’s date and are not guarantees of future events or performance. Actual results may vary from projected results if underlying assumptions are incorrect or if certain risks or uncertainties materialize. Factors that may cause differences are discussed in our periodic reports and filings with the SEC. Boston Scientific does not intend to update these forward-looking statements, except as required by law. Now, over to Mike. Globally, we have treated over 500,000 patients with the WATCHMAN device, demonstrating our commitment to innovation, clinical evidence, and patient awareness. Key upcoming catalysts for WATCHMAN include the recently implemented DRG for concomitant LAAC and AF ablation, as well as the data readout from the OPTION trial at the American Heart Association Conference on November 16th. We have also begun enrollment for the SIMPLIFY trial, studying a less intensive post-procedure drug regimen with our latest generation WATCHMAN FLX Pro.
In the Cardiac Rhythm Management sector, sales grew by 2% in the quarter. Our Diagnostics franchise saw high-single-digit growth driven by our implantable cardiac monitors, LUX-Dx, which received CE Mark. In Core CRM, strong international growth was offset by below-market growth in the US. Exciting new product launches in this business include the expanded indication of our INGEVITY lead for conduction system pacing and the submission of our EMPOWUR leadless pacemaker to the FDA.
Electrophysiology sales experienced exceptional growth of 177% in the quarter, driven by continued commercial execution, increased procedure volumes, and efficiencies gained with FARAPULSE. We have treated over 125,000 patients with FARAPULSE, leading to a rapid conversion to Pulsed Field Ablation (PFA). We anticipate PFA to exceed our previously communicated range of 40% to 60% of global AF ablations by 2026.
We are excited about the recent FARAPULSE approvals in Japan and China, as well as the USA approval of the FARAWAVE NAV Catheter. The completion of Phase I of the ADVANTAGE AF clinical trial is a significant milestone, and we expect to submit the results to the FDA soon. The AVANT GUARD trial is studying drug-naive persistent AF patients, with enrollments temporarily paused to assess observations.
Overall, we are confident in the unique performance of FARAPULSE based on clinical evidence and commercial real-world experience. Our consolidated revenue for the third quarter of 2024 was $4,209 million, representing 19.4% reported growth. Adjusted earnings per share grew by 27% to $0.63, exceeding expectations primarily due to strong sales performance. We expect full year adjusted operating margin to be approximately 27%, reflecting a balance of margin expansion and investment in driving top-line growth. Our free cash flow for the quarter was $822 million, and we anticipate full-year free cash flow to exceed $2 billion. Our top capital allocation priority remains strategic M&A followed by share repurchases. We expect full year 2024 operational revenue growth to be approximately 17%. Thank you for the question, Robbie. The upcoming OPTION trial and the recently started reimbursement for concomitant procedures are both expected to have a positive impact on our WATCHMAN and FARAPULSE franchises. The concomitant reimbursement is a significant economic and safety benefit for hospitals and patients, which will drive increased usage of both platforms. The clinical evidence supporting WATCHMAN and the promising results of FARAPULSE provide a strong foundation for continued growth. As we await the results of the OPTION trial, we anticipate potential long-term benefits for both platforms, especially in expanding indications and improving patient outcomes. The positive momentum from these developments is expected to drive growth in the first half of 2026. Anticipating the trial to be completed in early ’26, which will compare WATCHMAN against the new oral anticoagulants in all patients.
Robert Marcus: Thank you.
Operator: The next question is from Joanne Wuensch with Citi. Please proceed.
Joanne Wuensch: Good morning and thank you for the question. I would like to discuss the impressive results of FARAPULSE that were recently released. Specifically, I am intrigued by your goal to capture 40% to 60% of global AF procedures by 2026. Can you provide more insight on this? Thank you.
Michael Mahoney: Absolutely. We have been incredibly pleased with the success of FARAPULSE. Our operations and supply chain team have done an outstanding job in keeping up with the high demand for the product. The commercial and clinical teams have also been performing exceptionally well in the field. Physicians are quickly adopting FARAPULSE for AF procedures, surpassing our expectations from a year ago. We initially estimated around 120,000 procedures, but now we are confident that we will exceed that and reach the high end of 40% to 60% market share by 2026. The rapid uptake of FARAPULSE for PVI procedures, supported by the results from the ADVENT studies, has positioned us as the market leader in PFA. We have plans in place to further enhance our product and maintain our leadership position in the market.
Joanne Wuensch: Thank you.
Operator: The following question is from Larry Biegelsen with Wells Fargo. Please proceed.
Lawrence Biegelsen: Good morning. Congratulations on a fantastic quarter. Dr. Stein, could you provide more details on the AVANT GUARD trial and the recent observations? Additionally, with new PFA ablation choices entering the market, what factors will influence existing FARAPULSE customers to continue using the system or attract new users? Thank you.
Kenneth Stein: Thank you, Larry. Regarding the AVANT GUARD trial, we decided to temporarily pause enrollment due to some unexpected observations in the study involving drug-naive patients with persistent AF. While these observations were not life-threatening, we are taking the time to better understand them before resuming enrollment. This pause does not impact our confidence in the overall performance of FARAPULSE, and we remain committed to expanding its indications for drug-refractory persistent AF patients. As for maintaining category leadership, FARAPULSE offers a unique and easy-to-use ablation system with extensive clinical data supporting its efficacy. The positive outcomes demonstrated by the device, along with its published clinical data in over 20,000 patients globally, make it a compelling choice for physicians. The superior efficacy outcomes shown in the ADVENT data further solidify FARAPULSE’s position as the leading PFA system in the market. Our focus on continuous improvement and clinical differentiation will ensure that FARAPULSE remains the preferred choice for PFA procedures. We have dedicated leaders and global teams focused on our peripheral interventions, interventional oncology, endoscopy, urology, neuromodulation, and ICTx divisions. These teams are constantly driving growth and innovation in these established categories. While we have made significant investments in the manufacturing ramp of PFA and enhancing our mapping sales force, we have not taken away resources from these other important businesses. We continue to prioritize capital allocation to maintain ongoing support for these franchises and drive growth through unique innovation and a strong global execution strategy. We are incredibly pleased with our performance this quarter and are confident in our ability to continue to grow above market rates. While we cannot provide specific details on our 2025 outlook at this time, we see several opportunities for growth in the coming years. We have a rich pipeline of products in our business units, and we continue to improve our margin profile. We did experience a slight slowdown in procedure volume in the summer months, but we saw a nice bounce back in September. We are still early in the launch of FARAPULSE in major markets, and we are seeing accounts increase their utilization of the system. The efficiencies of our platforms are driving procedural efficiency and economic benefits for hospitals. We are confident in the safety and efficacy of FARAPULSE and are excited about the future growth opportunities. We are excited about the estimated 15% growth of ’24 compared to the 12% of 2023, and we anticipate a nice comp of approximately 15% as we head into 2025. There are many positive developments happening within the company, such as PI, ICTx, and neurology businesses growing at double-digit rates, the strength of endo, and our focus on strengthening neuromod and US CRM. Looking ahead to 2025, the key highlights will be focused on FARAPULSE and WATCHMAN. We believe that the launches in Japan and China will drive significant growth for the franchise. Additionally, there are plans to open new accounts in the US and increase penetration in current accounts to boost volume for both FARAPULSE and WATCHMAN. Procedure volumes have been relatively consistent, with a slight slowdown in July and August but a strengthening in September. We expect procedure volumes to remain strong, and we see strong global performance overall. While there may be more challenging comps and increased competition in PFA, we are confident in our ability to navigate these challenges. The AGENT product has also been performing well, and we are awaiting reimbursement updates in the coming weeks, which should further enhance the momentum of that franchise. Our annual operating plan process is ongoing, and we will provide more insights on our 2025 outlook at our Q4 earnings call. We are committed to providing a differentiated user experience with the OPAL mapping system and FARAPULSE, while still allowing flexibility for physicians to use competitive mapping systems if they choose. We believe the integration of OPAL with FARAPULSE will offer a more streamlined and differentiated user experience. We are confident in the value and differentiation of our products and look forward to the future developments in our TAVR strategy, including the upcoming ACURATE Neo2 trial results and potential FDA filings. Thank you for your continued support. You reviewed the results from the third quarter, where we continued to grow above the market. A shoutout to the team for the successful launch of Prime, the next-generation ACURATE Neo2, now being implemented in Europe.
Vijay Kumar: Do you expect to file with the FDA, Mike? And what defines a successful launch?
Michael Mahoney: We don’t provide specific share goals but aim to grow the business. The market is large and growing, and we are doing well in the US. More information will be shared at the TCT investor call.
Operator: Next question from Matt Miksic with Barclays.
Matt Miksic: Congrats on the impressive quarter. Can you discuss the dynamics in the gross margin line and how you see it evolving in 2025?
Daniel Brennan: Q3 saw a slight decline in gross margin due to foreign exchange. We expect the full-year adjusted gross margin to be below last year’s. However, we are driving operating margin expansion through various avenues. Going into 2025, all lines of the P&L could contribute, with product mix, including FARAPULSE and WATCHMAN, playing a significant role.
Matt Miksic: Thanks for the insight.
Operator: Next question from Josh Jennings with TD Cowen.
Joshua Jennings: Congratulations on the strong quarter. Any concerns about manufacturing capacity for FARAPULSE next year? Also, can you discuss your positioning in the mapping segment?
Kenneth Stein: There are no supply issues for FARAPULSE. As for mapping, the FARAWAVE NAV Catheter is a single-use device indicated for PVI in patients with paroxysmal atrial fibrillation, with plans for label expansion in the future. Once again, it is important to highlight the significant advantages that FARAVIEW offers compared to other systems currently available for mapping and navigation of PFA catheters. These advantages include dynamic visualization of the catheter shape, field tagging capabilities, and the ability to plan lesion placement during ablation procedures. In terms of the diagnostic mapping catheter portfolio, Boston Scientific already has a high-density mapping catheter called ORION, which can be used with the OPAL system. Additionally, there are plans for future catheters in the FARAPULSE family, such as FARAPOINT and FARAFLEX, that will combine high-density mapping with PFA ablation capabilities. While the launch of FARAPULSE in China may be slower than in the US and Japan due to regulatory processes, Boston Scientific remains confident in the safety and efficacy of the system. Despite recent challenges, the company continues to grow in China and is optimistic about the future. If you have any further questions or need additional information, please feel free to reach out to our Investor Relations team. Thank you for your interest in Boston Scientific.