Boston Scientific's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Boston Scientific (BSX)

Q1 2012 Earnings Call

April 19, 2012 8:00 am ET

Executives

Sean Wirtjes -

William H. Kucheman - Chief Executive Officer and Director

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

Keith D. Dawkins - Senior Vice President and Global Chief Medical Officer

Michael F. Mahoney - President

Analysts

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

Frederick A. Wise - Leerink Swann LLC, Research Division

David R. Lewis - Morgan Stanley, Research Division

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

Larry Biegelsen - Wells Fargo Securities, LLC, Research Division

Bruce M. Nudell - Crédit Suisse AG, Research Division

Raj Denhoy - Jefferies & Company, Inc., Research Division

Presentation

Operator

Ladies and gentlemen, thank you very much for standing by, and welcome to the Boston Scientific Q1 Earnings Call. [Operator Instructions] Also as a reminder, today's conference is being recorded.

I would now like to turn the conference over to your host, Mr. Sean Wirtjes. Please go ahead.

Sean Wirtjes

Thank you, Perky. Good morning, everyone. Thanks for joining us. With me on today's call are Hank Kucheman, Chief Executive Officer; and Jeff Capello, Executive Vice President and Chief Financial Officer.

We issued a press release earlier this morning announcing our Q1 2012 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 to the comparable GAAP measures and other supporting schedules to the Investor Relations section of our website under the heading Financial Information.

The duration of this morning's call will be approximately one hour. Hank will begin our prepared remarks with an update on our business progress and his perspectives on the quarter. Jeff will then review our Q1 financial results and business performance, as well as Q2 and updated full year 2012 guidance. We'll then open the call up to questions.

During today's Q&A session, Hank and Jeff will be joined by our President, Mike Mahoney, as well as our Chief Medical Officers, Dr. Dawkins and Dr. Stein.

Before we begin, I'd like to remind everyone that this call contains forward-looking statements within the meaning of federal securities 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 growth; market share; markets for our products; product pipeline and quality systems; new product approvals, launches and performance; clinical trials; cost reduction and growth initiatives; investments in emerging markets and business development opportunities; the timing and volume of share repurchases; free cash flow and its uses; our future financial performance including sales, margins and earnings guidance for the second quarter and full year 2012; and future tax rates, R&D spending and other expenses.

Actual results may differ materially from those discussed or implied in these forward-looking statements. Factors that may cause such differences include those described in the Risk Factors section of our most recent 10-K filed with the SEC. These statements speak only as of the date hereof, and we disclaim any intention or obligation to update them.

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

William H. Kucheman

Thank you, Sean, and good morning, everyone, and thanks for joining us. I'll begin today with some comments on the first quarter financials and then move on to update you on the progress we continue to make on our key initiatives to drive revenue and EPS growth.

First quarter revenue of $1.866 billion was down 3%, both on a reported basis and in constant currency and excluded the Neurovascular divestiture. This was in line with both Street consensus and the midpoint of our guidance range. Our PI, Endoscopy, Urology and Neuromod businesses all delivered mid- to high single-digit growth in the quarter. We expect to see continued good growth from these businesses and improvement in our other businesses over the balance of the year.

We continue to see global pricing pressure in our IC and CRM businesses and lower defib procedure volumes in the U.S. compared to a year ago due to the factors you are already aware of by now.

However, the positive signs we saw in U.S. last quarter suggesting possible stabilization in de novo implant volumes in the defib market and some easing on the pricing pressures in DES continued in the quarter. With significant new products coming into the market in both of these businesses in 2012, we remain optimistic about our future outlook.

From an earning standpoint, we delivered adjusted EPS of $0.15 in the quarter. This was above Street consensus and exceeded the high end of our guidance range of $0.11 to $0.14 and was driven by good gross margin improvement, continued cost control and lower-than-expected tax rate.

Let me now move on to the progress we're making with new products. We continue to be excited about our rejuvenated product pipeline, which we expect will help us return to growth later this year and support continued revenue growth after that.

In Peripheral Interventions, our increased investment in new products over the past few years is now paying dividends and we believe that this will contribute to continued attractive growth moving forward. We have regained our #1 PTA balloon position in the U.S. on the strength of our recently launched Mustang, Gladiator, Charger and Coyote devices, which continue to see strong acceptance in the marketplace.

We also began the full launch of our TruePath CTO crossing device in the U.S. in the quarter. We expect to move to full launch of TruePath in Europe and other international markets this quarter and to begin the full launch of our OffRoad CTO Re-entry catheter in approved markets this year.

In addition, we are seeing a strong sales of our Epic self-expanding stent outside the United States, which, by the way, just received FDA approval last week. As a result, we now will be able to operate complete line of advanced iliac solutions with both balloon expendable and self-expanding stents in the U.S. market commencing next month. We believe these product introductions will contribute to continued above-market growth in this business.

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