Boston Scientific (BSX)

Q3 2011 Earnings Call

October 20, 2011 8:00 am ET


Michael F. Mahoney - President

Sean Wirtjes - VP of Finance and Treasurer

Jeffrey D. Capello - Chief Financial Officer and Executive Vice President

Ken Stein - Senior Vice President and Associate Chief Medical Officer of Cardiac Rhythm Management

William H. Kucheman - Interim Chief Executive Officer, Executive Vice President, President of Cardiology, Rhythm & Vascular Group and Director


Bruce M. Nudell - UBS Investment Bank, Research Division

Glenn J. Novarro - RBC Capital Markets, LLC, Research Division

Michael N. Weinstein - JP Morgan Chase & Co, Research Division

Frederick A. Wise - Leerink Swann LLC, Research Division

Tao Levy - Collins Stewart LLC, Research Division

Charles Chon - Stifel, Nicolaus & Co., Inc., Research Division

Larry Biegelsen - Wells Fargo Securities, LLC, Research Division

Kristen M. Stewart - Deutsche Bank AG, Research Division

James Francescone - Morgan Stanley, Research Division



Ladies and gentlemen, thank you for standing by. Welcome to the Boston Scientific Q3 2011 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Sean Wirtjes. Please go ahead.

Sean Wirtjes

Thank you, Greg. Good morning, everyone. Thanks for joining us. With me on the call today are Hank Kuchemen, Chief Executive Officer; Mike Mahoney, President; and Jeff Capello, Executive Vice President and Chief Financial Officer.

We issued a press release earlier this morning announcing our third quarter 2011 results, which included key financials and reconciliations of the non-GAAP financial measures used in the release. We posted a copy of that press release, as well as reconciliations of the non-GAAP financial measures used in today's conference call and other supporting schedules to the Investor Relations section of our website under the heading Financial Information.

The agenda for this morning's call includes opening comments from Hank and some brief introductory remarks from Mike, followed by a review of third quarter financial results and business performance, as well as updated Q4 and full year 2011 guidance from Jeff. Hank will then complete our prepared remarks with an update on our business progress and his perspectives on the quarter overall before we open the call to questions.

During today's question-and-answer session, Hank and Jeff will be joined by other members of our executive committee including our Chief Operations Officer, most of our business and regional presidents and the chief medical officers for our CRB group and CRM.

Before we begin, I'd like to remind everyone that this call contains forward-looking statements within the meaning of federal security laws, which may be identified by words like anticipate, expect, project, believe, plan, estimate, intend and similar words.

These forward-looking statements include, among other things, statements regarding our market share; markets for our products; new product approvals; launches and performance; clinical trials; our cost reduction and growth initiatives; our investments in emerging markets; the timing and volume of share repurchases; the strength of our balance sheet, capital structure and cash flows; our future financial performance, including sales, margins and earnings for the fourth quarter and full year; and our future tax rates and expenses. Actual results may differ materially from those discussed or implied in these forward-looking statements. Factors that may cause such differences include, among other things, future economic, competitive reimbursement and regulatory conditions; clinical trial results; product approvals; intellectual property rights; litigation; financial market conditions; future business decisions made by us and our competitors; and the other factors described in the Risk Factors section of our most recent 10-K as updated in the 10-Qs we have filed or will file hereafter.

These statements speak only as of the date hereof, and we disclaim any intention or obligation to update them.

At this point, I'll now turn it over to Hank for some opening comments. Hank?

William H. Kucheman

Good morning, and thank you, Sean. And thank you, everybody, for joining us. Before we turn the call over to Jeff, I'd like to share with you several of my perspectives, perspectives that have been shaped by a 21-plus year career with Boston Scientific, a company that has a demonstrated track record of delivering differentiated technology solutions that address unmet clinical needs, advanced clinical science and most importantly, have either improved or saved lives of millions of people around the world.

Despite continued pressure on global health care costs, the opportunity in this industry continues to be significant. Economic realities dictate that companies like Boston Scientific not only continue to develop technology that improves health care, but do so in ways that contribute to reducing the overall episode of treatment costs, their frequency and/or need for patient reintervention or even potentially the co-pays that patient incurs from their insurance carrier.

Innovative technologies that address true unmet clinical needs and/or successfully address these emerging economic criteria will be valued not only by health care systems, but payers as well. In other words, these are the technologies that will be truly differentiated. This spells opportunity for revenue growth, and we, as a company, are focused on capitalizing on this opportunity.

There are also millions of people worldwide who have limited or no access to health care. Emerging markets like India, China, Brazil are rapidly expanding their respective health care infrastructures to address unmet health care needs within their countries. This also spells opportunity, a major opportunity that we, as a company, are acutely focused on vis-a-vis our POWER strategy. As it pertains to our POWER strategy, this is a strategy that was led by Ray Elliott, but formulated by the entire executive management team and based upon both customer and employee input from around the globe. POWER is a cogent strategy, and one that I and the entire executive management team, including Mike Mahoney, remain committed to successfully executing in the future.

Will there be enhancements to POWER over the course of time? Sure. Will there continue to be opportunities that we look for to improve and accelerate our growth outlook? Absolutely. But the key to realizing the promise of POWER lies in our ability to execute, execute the imperatives we are already pursuing in a constant, consistent and effective manner. More on this front later.

Finally, a few brief comments on how Mike and I intend to team up. As you know, Mike and I previously worked together at the Global Health Exchange when Mike was President and CEO, and I was a member of the GHX Board of Directors. We share the same philosophy about people, the importance of team execution, results orientation and technology innovation that meet the needs of the customers we serve. In short, we have a track record of working effectively together, and we'll continue this legacy of collaboration moving forward.

Since Mike is only 72 hours into his tenure as President at this point, he will not be participating in today's Q&A. However, I would like to invite him to make some brief introductory remarks at this point. Mike?

Michael F. Mahoney

Thank you very much, Hank, and good morning, everyone. It's really great to be here and to join this talented team and to begin what I anticipate, will be a very long career at Boston Scientific. I'm excited about working with Hank in leading our Endoscopy and CRM businesses, all supporting a number of our critical functions.

I started just this past Monday on October 17, and I could not have imagined a warmer welcome during my first 3 days. I've had the opportunity to meet with Hank and several members of our team in order to learn more about the company and the exciting opportunities in front of us. I look forward to spending quality time getting up to speed with many more new colleagues. And even just these first few days, I have confirmed that I've made the right decision in joining this company. I have incredible respect for what Boston Scientific represents today and the anticipation of what it will represent in the future.

The execution of the POWER strategy is underway, and I expect it to continue to provide us a dynamic and durable roadmap for a strong and a profitable future. I have tremendous confidence in this company and the senior leadership team and our 25,000 employees around the world. As you can tell, I'm very eager to get out and meet with customers, employees, visit our major facilities and work with Hank and the leadership team to continue delivering on the company's core mission and that is to improve the quality of patient care. I have made a very long term commitment to Boston Scientific. I'm excited about this opportunity, and I intend to make the most of it.

Now I'd like to turn the call over to our Chief Financial Officer, Jeff Capello.

Jeffrey D. Capello

Thanks, Mike. Let me begin by providing some overall perspectives on the quarter before getting into the details.

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