And gentlemen, thank you for standing by, and welcome to the Boston Scientific Q1 2019 Earnings Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will be given at that time. As a reminder, today's call is being recorded. I will now turn the call over to your host, Susan Lisa.
Please go ahead.
Thank you, Kevin. Good morning, everyone. Thanks for joining us. With me on today's call are Mike Mahoney, Chairman and Chief Executive Officer and Dan Brennan, Executive Vice President and Chief Financial Officer. We issued a press release earlier this morning announcing our Q1 2019 results, which included reconciliations of the non GAAP measures used in the release.
We've posted a copy of that release as well as reconciliations of the non GAAP measures used in today's call to the Investor Relations section of our website under the heading Financials and Filings. The duration of this morning's call will be approximately an hour. Mike will provide strategic and revenue highlights of Q1 2019. Dan will review the financials for the quarter and then provide Q2 2019 and full year 2019 guidance. And then we'll take your questions.
During today's Q and A session, Mike and Dan will be joined by our Chief Medical Officers, Doctor. Ian Meredith and Doctor. Ken Stein. Before we begin, I'd like to remind everyone that on the call, operational revenue excludes the impact of foreign currency fluctuations and organic revenue further excludes the impact of certain acquisitions, including NxThera, Claret and Augmenix in the relevant periods for which there are no prior period related net sales. Also of note, this call contains forward looking statements within the meaning of federal securities laws, which may be identified by words like anticipate, expect, believe, estimate and other similar words.
They include, among other things, statements about our growth and market share, new product approvals and launches, clinical trials, cost savings and growth opportunities, our cash flow and expected use, our financial performance, including sales, margins, earnings and other Q2 and full year 2019 guidance as well as our tax rates, R and D spend and other expenses. Actual results may differ materially from those discussed in the forward looking statements. Factors that may cause such differences include those described in the Risk Factors section of our most recent 10 ks and 10 Qs filed with the SEC. These statements speak only as of today's date, and we disclaim any intention or obligation to update them. At this point, I'll turn it over to Mike for his comments.
Thank you, Susie, and good morning, everyone. Boston Scientific continues to grow above market, improve our profitability and best for the long term to address unmet patient needs and deliver differentiated financial performance. In the Q1, our team delivered 7.8% operational revenue growth and 6.3 percent organic growth with another quarter of balance across our businesses and geographic regions. In addition, we leveraged our Q1 revenue growth to deliver 7% adjusted EPS growth to $0.35 within our guidance range despite a $0.01 charge related to the mesh market withdrawal, while generating $437,000,000 in adjusted free cash flow. We have high visibility to high single digit organic growth for 2019 even with recent unforeseen regulatory headwinds this year related to paclitaxel, transvaginal mesh and sterilization in men's health.
While we work diligently to offset these issues, the cumulative effect makes delivering on the high end or beating our original full year 2019 revenue guidance of 7% to 8.5% organic growth a lower probability. As a result, we're lowering the top end of our growth guidance range by 50 basis points and our full year 2019 operational revenue growth guidance is now 8% to 9% and organic revenue growth guidance is now 7% to 8%. We're pulling up the bottom of our full year adjusted EPS guidance from a range of $1.53 to 1 $0.58 dollars to a range of $1.54 to $1.58 which represents a 10% to 13% year on year growth excluding the benefit of the 2018 IRS settlement. With this 2019 growth outlook, we're excited for the rest of the year and our plans to build upon our global strengths and drive sustainable long term revenue gains, double digit EPS growth and to continue our momentum in 2020 and beyond. Although we're proud of our results this quarter, we're disappointed that our Q1 operational growth of 7.8 and organic of 6.3 were 70 basis points below our guidance range or approximately $15,000,000 shortfall with $5,000,000 of that related to the mesh.
I'll briefly address where we had some revenue softness in the quarter versus our plans as well as our plans to accelerate growth from here. First, although our PI business had strong growth this quarter at 11% organic, we did feel the impact of the paclitaxel concerns particularly in the second half of the first quarter after the release of the FDA's advisory letter. While the Eluvia launch in Japan remains on track, we do expect slower adoption of Eluvia to persist in the U. S. And Europe in Q2 and potentially throughout the second half.
The June FDA advisory committee panel meeting will be a key next data point and we'll continue our dialogue with FDA and Eluvia's unique design characteristics, which include controlled local release of low dose paclitaxel from a safe and proven polymer as well as clinical superiority data. However, we're assuming ongoing headwinds and cut in half our Eluvia revenue expectations for 2019 to reflect the current landscape. In UroPH, we plan to overcome some of the recent headwinds. We delivered a decent quarter for our urology public health business at 14% operational and 5% organic growth despite 2 unanticipated events. In Q1, we're impacted by unexpected Illinois state mandated shutdown of a third party sterilizer used for our men's health product lines.
Fortunately, the U. S. Situation has been resolved and we did receive FDA approval in late March to conduct sterilization of these products at our own Hennessy facilities. But we do expect softness in global supply during the Q2 and we will return full supply by the end of the Q2. Regarding transvaginal mesh, for organ prolapse, last week news will result in a full year 2019 negative impact of $30,000,000 to global revenue and a $0.02 charge to adjusted EPS.
A portion of this was booked in Q1 including the $5,000,000 sales reserve and related inventory write offs for nearly a penny impact to adjusted EPS. The mesh market withdrawal represents a 30 basis point drag to both Q1 and full year 2019 organic growth. And lastly, we did see some softness in our U. S. SCS business versus our internal plans.
Global Neuromod delivered a strong quarter with 12% organic growth and we believe SCS remains a very strong and underpenetrated market in the second of this year. We're excited to release new clinical data on WaveWriter and launch additional enhancements to both SCS and DBS platforms. But I'll provide some additional highlights in the quarter and our full 2019 outlook. So regionally, we delivered strong and balanced operational growth with Asia Pac up 10%, Europe up 8% and the U. S.
Up 7%. Emerging Markets revenue grew 22% operationally led once again by strong China growth. We also delivered balanced organic growth across all our businesses, 7% in both MedSurg and Cardiovascular, 6% in Rhythm and Neuro. Turning to some of the businesses, we delivered 8% organic growth in endoscopy, which is broad based and fueled by infection prevention performance as well as excellent results in our biliary portfolio, driven by the Axios stent and the recent launch of SpyGlass Digital 2. In addition, the quarter reflects strong early launch results from Arise gel, a key component of our endoluminal surgery portfolio and our new Jaguar Revolucine Guidewire.
And for the balance of the year, we expect continued strength in endoscopy sales due to the ongoing ramp of these new product launches as well as the ORCA pod single use valve. Importantly, we remain on track for a year end 2019 launch of our Exalt D single use duodenoscope, which is used in ERCP procedures. We believe that EXALT D can help meet a significant unmet need for hospitals and patients. And 2 weeks ago, the U. S.
FDA issued a safety communication regarding scope reprocessing. Preliminary results of the FDA report indicated higher than expected levels of contamination up to 5.4% of samples tested positive for organisms of high concern such as E. Coli and multidrug resistant pathogens. The FDA also stated that there continues to be a need for improvement of the safety of reprocess duodenoscopes and noted that in addition to its March 18 warning letters to reusable scope manufacturers, the agency continues to encourage the development of new technology and design features. The Exalt Model D single use scope has been designed to address this exact issue by eliminating scope disinfection challenges completely.
This platform represents a significant opportunity in 2020 beyond. As mentioned, urology and public health grew 14% operationally and 5% organically in the Q1 and reflects an approximate 200 basis point negative impact from mesh sales reserves recorded in the Q1. And lithovu led sales in our core stone portfolio and importantly the urology acquisitions of Augmenix and NxThera are both executing the plan. Rezum results were reinforced by publication of 4 year trial data with a low 4.4% surgical retreatment rate and no newer adverse events noted between years 34 as well as initiation of a resume specific PPT code for physician reimbursement on January 1. As mentioned, we expect softer UroPH revenue in 2nd quarter given the men's health sterilization impact and the remaining $25,000,000 expected negative revenue impact in Q2 through Q4 due to the global removal of mesh products for pelvic organ prolapse.
However, we do expect UroPH revenue growth to be accretive to the company average in second half and full year 2019 as core growth remains robust, the men's health sterilization matters resolved and recent acquisitions of NxThera and Augmenix anniversary and become organic as of May October respectively. Rhythm and neuro grew 6% in the quarter led by respectively. Rhythm and Neuro
grew 6% in the quarter led by 12% growth in neuromod, 10% in EP and 3% in
cardiac rhythm management, which are all organic. The 12% neuromodulation revenue growth was driven by continued gains in the U. S. By our WaveWriter spinal cord stimulation and precise deep brain stimulation platforms. Global SCS sales were up 7% as WaveWriter's unique ability to offer combination waveform therapies both with paresthesia and sub perception continues to resonate with physicians And we look forward to improved growth with upcoming new product enhancements and the presentation of updated 1 year real world data on WaveWriter at INS later this quarter.
And in DBS, we anticipate continued precise momentum as we roll off the Cartesia Directional Lead in the U. S. And expect MRI labeling in the second half. Global cardiac rhythm management sales grew above market at 3% organic, led by mid single digit growth in defib sales against a double digit comparison, reflecting ongoing uptake of our Resonate platform and its HeartLogic heart failure alert as well as strong growth of Emblem SICD. Our device replacement cycle is also tracking to expectations and we're now the number 2 global share player in the high voltage market.
PACER sales did decline mid single digits, which is a significant improvement compared to 2018 trends, which were low double digit declines. We anticipate a modest PACER headwind for full year 2019. Importantly, we aim to more than offset this with continued global presentation of our defib portfolio in both CRTD and ICD, resulting in another year of above market worldwide CRM growth. EP sales grew 10% organic in the quarter, led by the RHYTHMIA HDX mapping and navigation platform as well as uptake of our direct sense catheter in Europe and enthusiasm for RHYTHMIA's LumaPoint software. In the AFib single shot market, we are excited about the progress made by both our cryo and our balloon programs.
We're working to secure CE Mark approval for these technologies and begin U. S. IDE enrollments by year end 2019 pending completion of program deliverables and discussions with FDA. And last month we presented a compelling APAMA dataset Efficient 1 demonstrating the excellent balloon performance, no adverse events and attractive procedure times. Turning to cardiovascular of the group, they grew 7% organic in Q1 2019.
Peripheral interventions grew 11% organic in the quarter led by the Eluvia DES launch in the U. S. And double digit growth in interventional oncology and arterial. We're also excited about the anticipated upcoming FDA approval and launch of the VICI VENITI stent, which comes from the VENIDI acquisition of last August. And despite the paclitaxel headwind, we also expect our PI business will deliver full year 2019 organic growth that's well accretive to the company's overall growth rate.
To update you on the BTG acquisition, we remain on track for midyear closing, having received shareholder approval in February and we're excited for the opportunity to expand our PI and interventional oncology portfolio. And last week, BTG reported results for the 1st 12 months ended March 31. Oncology and vascular sales grew 15% to 17% in line with BTG's guidance. Spec pharma sales grew double digits ahead of guidance and royalty revenue was broadly flat versus the prior year period, reflecting the launch of U. S.
Generic competition for ZYTIGA. Our interventional cardiology business grew 6% operationally and 5% organically in the quarter. Growth in Q1 was led by strong structural audit results and mid teens growth in complex PCI products offset by softness and drug luting stents. We expect overall interventional cardiology growth to accelerate from Q1 on due to strong growth in complex coronary products, easing DES comps, the launch of PROMOS Elite and U. S.
Approval of LOTUS Edge and the continued momentum in Structural Heart with our broader portfolio capabilities and scale. WATCHMAN had another excellent quarter as we continue and to expand Watchmen's international footprint. And we're pleased with the March European launch of next gen Watchmen Flex. We also received Japan approval of WATCHMAN during the quarter. So we remain on track for reimbursement approval and commercial launch in Japan during the Q3 for WATCHMAN.
Our ACURATE TAVR valve platform is the fastest growing valve in Europe and delivered nearly 30% growth in the quarter. We plan to begin enrollment in our U. S. IDE for ACURATE NEO2 around mid year with similar European launch timing. We also began a controlled commercial launch of LOTUS Edge in Europe late in Q1 and also enrolling patients in the REPRISE four intermediate risk study and also received FDA approval last night for LOTUS.
We will begin to control immediately and we believe LOTUS Edge is a differentiated valve that will be sought after by physicians and operators, both as a workhorse valve as well as the valve that can be counted on to provide superior outcomes in complex cases, such as heavy calcified native valves and bicuspid valves. And finally, the SENTINEL cerebral embolic protection device continues to build excellent momentum. We're now in more than 200 accounts with SENTINEL where usage rates exceed 60% and we believe that protected TAVR is an emerging standard of care. So the combined strength of WATCHMAN, ACURATE, LOTUS Edge and SENTINEL position us well to deliver on our guidance for $700,000,000 to $725,000,000 in structural revenue in 2019. So to close, I'd like to share again my enthusiasm for our outlook in 2019 and beyond.
And we believe that Boston Scientific continues to be uniquely positioned drive shareholder value due to our long term growth profile, meaningful opportunity to improve margins, track record of recording double digit adjusted EPS growth and our improving ability to deploy capital. So we're looking forward to discussing this outlook and our exciting technology pipeline at our Investor Day, which will be June 26 in New York. So I really want to thank again our employees once again for their winning spirit and their ongoing commitment to advancing science for life. And Dan will now provide a detailed review of our financials.
Thanks Mike. 1st quarter consolidated revenue of $2,493,000,000 represents 4.8% reported revenue growth and 7.8% growth on an operational basis, which excludes the impact of foreign currency fluctuations. Our reported revenue reflects a $73,000,000 headwind from foreign exchange, slightly unfavorable to the $60,000,000 to $65,000,000 headwind expected at the time of guidance. Sales from the NxThera, Claret and Augmenix acquisitions contributed 150 basis points, roughly in line with our expectations at the time of guidance, resulting in 6.3 percent organic revenue growth for the quarter. This 6.3% includes a negative 30 basis point impact from the mesh market withdrawal.
Q1 adjusted EPS of $0.35 grew 7% over the prior year and was within our guidance range. While there were several puts and takes to the P and L in the quarter, on balance they net to 0, resulting in that $0.35 EPS number. To summarize quickly, we had $0.02 in charges related to the mesh withdrawal and an investment impairment, and they were basically offset by the $0.02 net litigation benefit, while the costs of the make whole call related to the February bond offering were offset by a lower tax rate. None of these items was included in the Q1 2019 guidance. The FX impact on adjusted earnings per share was immaterial as expected at the time of guidance.
Adjusted gross margin for the quarter was 71.4%, below our guidance range of 72% to 73%. This represents a 90 basis point decline over the prior year, driven by product mix, particularly lighter sales in Men's Health, neuromodulation and coronary drug eluting stents as well as mesh related inventory reserves and unfavorable manufacturing variances. Adjusted SG and A expenses were $855,000,000 or 34.3 percent of sales in the quarter, down 120 basis points year over year and outperforming our guidance range of 35% to 36%. The favorable result in SG and A was due to a combination of the operating expense reductions from ongoing optimization initiatives as well as an approximate net $25,000,000 non recurring litigation related benefit in the quarter, including a portion of the Edwards litigation settlement. Adjusted research and development expenses were $271,000,000 in the Q1 or 10.9 percent of sales, at the high end of our range and up slightly year over year due to additional mesh accruals related to the mesh withdrawal.
Royalty expense was 0.6 percent of sales, roughly flat versus the prior year. As a result, Q1 2019 adjusted operating margin of 25.6 percent increased 30 basis points year over year near the midpoint of our guidance range of 25% to 26%. If you normalize for the SG and A benefit from litigation, adjusted operating margin would have been approximately 24.6%, but then normalizing for the 40 basis point negative impact from the mesh withdrawal places us back at the low end of our range. We are reiterating our full year adjusted operating margin guidance of 26% to 26.5%, which represents a 50 basis point to 100 basis point improvement over the 2018 rate of 25.5%. Now I'll move below the line to interest and other expense.
Adjusted interest expense for the quarter was $83,000,000 This is a $22,000,000 increase from Q1 2018, largely due to exercising the make whole call to retire early our 2020 notes, given the favorable market conditions for our February public bond offering. Our average interest expense rate was 4.7% in Q1 2019 compared to 4.1% in Q1 2018 and reflects the offering, which totaled $4,300,000,000 aggregate principal amount of senior notes, the proceeds from which will in part be used to finance a portion of the proposed BTG acquisition. We remain committed to our BTG delevering goals targeting $1,000,000,000 in debt repayment within 18 months post deal closing and a leverage ratio of 2.5 times debt to EBITDA within 2 years. Adjusted other expense was $28,000,000 in the quarter and includes a minor investment impairment related to one of our venture holdings. The remainder of adjusted other consists of dilution from our equity method investments and exchange losses related to our hedging program.
Our tax rate for the Q1 was 7.1% on a GAAP basis and 6.9% on an adjusted basis, below our guidance range of approximately 11% for the quarter due to a higher than expected benefit from stock compensation accounting in the quarter as well as a reduction in our estimated annual effective tax rate, which I will discuss as part of full year guidance. Adjusted free cash flow for the quarter was 437 $1,000,000 compared to $283,000,000 in Q1 of last year. In the quarter, we used cash primarily to fund the closing of the Millipede acquisition. We continue to expect full year adjusted free cash flow to be $2,200,000,000 We believe we're approaching the resolution of mesh litigation with over 95% of all known claims now settled or in the final stages of settlement. Our total legal reserve of which mesh is included was $699,000,000 as of March 31, 2019.
In the quarter, the known claim count was essentially flat at $53,000 and we made cash payments of $2,000,000 into the qualified settlement fund and still anticipate full year payments into the fund to total $250,000,000 which would then resolve all significant existing contingencies. As a reminder, this liability is released from our balance sheet as payments are made out of the qualified settlement fund to plaintiffs. Capital expenditures for the Q1 of 2019 were 60 $3,000,000 and we continue to expect capital expenditures to be in the range of $375,000,000 to $400,000,000 for the year as we build capacity, integrate acquisitions and position the company for continued growth. We ended Q1 with 1,408,000,000 fully diluted weighted average shares outstanding. I'll now walk through guidance for Q2 and full year 2019.
And as a reminder, the guidance I'm providing does not include the proposed BTG acquisition, which is not yet closed. For the full year, we expect 2019 reported revenue to be in the range of approximately 7% to 8% with year over year growth of 7% to 8% on an organic basis and an additional 110 basis points contribution from the NxThera, Claret and Augmenix acquisitions. Given our Q1 result and Q2 guidance, which I will discuss shortly, we fully recognize the implied acceleration in second half organic revenue growth to deliver on our full year guidance. There are several significant drivers of this acceleration, including multiple anticipated key product launches, such as LOTUS Edge, which we received approval for last night and VICI in the U. S, Eluvia and WATCHMAN in Japan and Exalt D globally.
We have continued momentum in our core. We'll have enhanced supply in the Men's Health and our SENTINEL products. We anniversary some of our 2018 acquisitions, which thus turn organic in 2019. We have the April anniversary of the 2018 price cuts in Japan and also the normalization of selling days in the first half versus second half of the year also has a meaningful impact. And while we expect foreign exchange to be a $110,000,000 to $120,000,000 headwind to revenue for the full year 2019, we continue to expect FX to be neutral to EPS for the year due to our hedging program.
There's no change to our expectations for adjusted gross margin as a percentage of sales to be in the range of 72% to 73% for the full year. We expect a positive mix shift as men's health supply stabilizes, SCS and DBS trends improve with new data and products and coronary DES faces easier comps. In addition, we'll continue to execute on our ongoing standard cost reductions and also expect a positive full year FX impact to adjusted gross margin of 50 basis points. We continue to expect full year adjusted SG and A to be in the range of 34.5% to 35% of sales, a 40 basis point to 90 basis point improvement versus full year 2018, but increasing slightly from Q1 due to the non recurring litigation benefit in Q1. There's also no change to expectations for full year adjusted R and D spend to be in a range of 10.5% to 11% and the full year royalty rate to remain at less than 1% of sales for 2019.
These target metrics imply a full year 2019 adjusted operating margin in a range of 26% to 26.5%, unchanged from prior guidance, up 50 basis points to 100 basis points versus 2018, consistent with the improvement goals we outlined last September and positioning us well to deliver on our long term goal of 30% plus adjusted operating margin. We now expect our full year 2019 adjusted tax rate to be approximately 10%. This assumes an operational tax rate of approximately 11% before an approximate 100 basis points of benefit from the accounting standard for stock compensation, of which a significant portion was already recognized in Q1. This compares to our original full year 2019 tax rate guidance of 12% after stock comp. The 200 basis point improvement in our full year adjusted tax rate reflects roughly 100 basis points of benefit from our current year geographic mix of profits and another 100 basis points of benefit resulting from refined estimates following recently released proposed U.
S. Treasury regulations implementing tax reform. We now expect below the line expenses, which include interest payments, dilution from our venture capital portfolio and costs associated with our hedging program to be approximately $325,000,000 to $350,000,000 for the year, a slight increase from prior guidance, primarily due to the earlier than expected refinancing of the 2020 bonds in February to take advantage of favorable market conditions and a minor investment impairment both recorded in Q1. Note that along with other relevant aspects of the P and L, we will update our below the line expense guidance after we close the BTG acquisition as interest expense related to the acquisition is currently excluded from adjusted results. We also expect a fully diluted weighted average share count of approximately 1,409,000,000 shares for Q2 2019 and 1,410,000,000 shares for the full year 2019.
As Mike discussed, we are raising the low end of our full year 2019 adjusted earnings per share guidance to $1.54 and maintaining the high end of $1.58 The go forward impact of reducing our Eluvia forecast by 50% basically offsets the Q2 to Q4 tax rate benefit, minus $0.02 for Eluvia, plus $0.02 for tax. And we have plans to offset the penny resulting from the lost mesh revenue in Q2 to Q4. This $1.54 to $1.58 range represents 10 percent to 13% adjusted earnings growth, excluding the 2018 net tax benefit of $0.07 in the base. On a GAAP basis, we expect EPS to be in a range of $1.09 to $1.13 While there are a lot of moving parts and some noise in the quarter, our trajectory and targets for 2019 remain strong. 7% to 8% organic revenue growth, 50 to 100 basis points of margin expansion and double digit adjusted earnings per share growth at all points in our guidance range.
Now turning to Q2 2019, we expect reported revenue growth to be in a range of approximately 5% to 7%. This represents year over year organic growth in a range of 6% to 7% with an additional 140 basis point operational growth contribution from NxThera, Claret and Augmenix. Note that the NxThera acquisition anniversaries in April and therefore revenue from May June is included in organic guidance. We expect the foreign exchange impact on Q2 revenue to be a $45,000,000 to $50,000,000 headwind.
For the
Q2, adjusted earnings per share is expected to be in a range of $0.37 to $0.39 per share, representing 6% to 12% growth, excluding the Q2 2018 net tax benefit of $0.06 in the base, and we do not expect any adjusted EPS impact from foreign exchange. GAAP EPS for the Q2 is expected to be in a range of $0.23 to 0 point Q1 2019 financial and operational highlights, which outlines Q1 results as well as Q2 and full year 2019 guidance, including P and L line item guidance. With that, I'll turn it back over to Susie, who will moderate the Q and A.
Thanks, Dan. Kevin, let's it up to questions for the next 30 minutes or so. Please limit yourself to one question and one related follow-up. Kevin, please go
ahead. Thank
you. First question is from the line of Bob Hopkins, Bank of America. Please go ahead.
Thank you and good morning. So just one housekeeping item to start. Just to clarify, was there a selling day difference in Q1?
There was a slight selling day difference. We had it included in our forecast, but there was a slight selling day difference if you look at it. We did mention that as part of the acceleration into the second half because there's a difference there where there's about a day fewer in the first half and a day more in the second half. So it's a the reason for the acceleration going first half to second half. But there was one in Q1, but we didn't mention it.
Okay. Thank you for that. And then more importantly, just on the Q1 growth rate of that there was a little lower than your guidance. I think you called out stents and men's health and neuromod were the kind of the primary culprits, if you will. So wondering if you could give a little more color on these issues and whether or not these issues impacting growth in Q1 are temporary or lasting?
So just a little more color on those 3, please.
Sure. Good morning, Bob. Good morning. Yes. So we're obviously don't take this slight revenue miss in the Q1 lately.
I think it's first time we've missed in close to a decade. And we pride ourselves in delivering our commitments and very excited about the future. But specific to a couple of those comments, 1, in interventional cardiology, you're seeing that strong diversification with structural heart and complex coronary growing well and DES has been softer for us. We do anticipate some improvement in DES. As you look at the second half of the year in particular based on improved comps for drug eluting stents as well as new product portfolio with a product called Elite, as well as really just the ongoing diversification of high growth markets for that basket in cardiology overall.
So and then you obviously have the LOTUS approval. The second one was paclitaxel. We're seeing some usage in the U. S, but some IDNs are not using it based on upcoming panel. So we saw some softness there.
We took that revenue down for the full year as highlighted. But to date, the Japan launch is right on track. We you mentioned Men's Health that issue has been resolved. That supply issue, so we'll be back to full supply call it in mid June. So that'll be strong for the second half of the year.
And then the other one is spinal cord stim. We did grow nicely 12% neuromod. We do feel like the market was a bit lighter in Q1 than we anticipated, but overall we see that as a strong growth market going forward and we continue to take share. So there were clearly some one time events in the Q1. Dan mentioned the selling days impact as well, but we have full confidence in the 2nd quarter guidance and the 7 to 8 organic for the full year and we'll be stronger company at the end of the year heading into 2020.
Thank you. Next question is from the line of David Lewis, Morgan Stanley. Please go ahead.
Good morning. Mike and Dan, I just want to start with the forward outlook here. I think 2019 guidance is pretty consistent with our view. It's the 2nd quarter, a lot of conversation this morning on second half. But if you think about the Q2, how risk adjusted is the Q2?
And what factors sort of provide the confidence given Eluvia in mesh get a little worse in the Q2, pretty significant momentum step up just into 2Q? So one, what is that what is your confidence in the Q2? What are factors that drive that? And in 2019 guidance broadly, is the reflection of the reduction simply Eluvia and mesh? Or does it also reflect kind of a slower start
to the year? And then I had a quick follow-up.
Yes. So just on the second one, in terms of the full year guidance, it's simply I said in the words carefully, if you look at our history, we typically are in the higher end of the range if not beat on revenue. And of course, you guys track all that stuff. And so we essentially lowered it to 7% to 8% because we didn't feel the high end of the guidance or beating the 8.5% was as feasible as it was 4 months ago. So that's why we felt it was prudent to reduce the guidance of the top end from 7% to 8%, so we can kind of carry on our tradition.
So and the reasons for that were stated and we're confident in that second acceleration per Bob's earlier question. I think in terms of Q2, we obviously have some visibility here. It's near the end of April. We spent a lot of time on our Q2 guidance because we don't plan on making this a habit. We plan on continuing a longer streak of hitting our guidance commitments.
But specific to Q2, we do have good momentum across the regions. Our emerging markets are very strong. Dan mentioned there is a little bit of selling day favorability in Q2 as well. But more importantly, the launches and we finally got FDA approval for LOTUS, which we're excited about. Eluvia is beginning to sell in Japan, Flex in Europe, this Vici stent we have for PI.
And we just have very good momentum with ACURATE and SENTINEL. And as I mentioned also the DES comps. So we spent a lot of time on Q2 as you could imagine and on the full year guidance even more than normal to ensure that we had the right confidence to conviction. So at the end of the year, we still believe that 7% to 8% organic and 8% to 9% operational double digit EPS is very good and sets us up for a bright future.
Thank you. Next question is from the line of Rick Wise, Stifel. Please go ahead.
Good morning. Hi, Mike. Turning to LOTUS and talk to us
a little bit about the LOTUS
launch from two angles. I think if I remember correctly, there were 60 original pivotal U. S. Sites. Is that where you start?
Is that what you're targeting? Talk a little bit about how you're going to address the U. S. Market. And I'll just go ahead and ask a separate related question.
When might we see some more data on LOTUS Edge that specifically addresses where the technology is now? And last, just on SENTINEL, you said you're in 200 accounts. I mean, is this the place you start with LOTUS? Again, any color on the launch would be great. Thank you so much.
Sure. Thanks, Rick. And I'll have Ian jump in on some of the data questions in a few minutes. We're really excited about getting LOTUS over the goal line here with the FDA and the LOTUS Edge. LOTUS Edge is a terrific platform.
We have begun our launch in Europe. And essentially we'll be primarily initially focused on many of the customers that we've been involved in our clinical trials. And they have more experience with LOTUS and LOTUS Edge is a lower profile delivery system. So obviously, we would spend quite a bit of time with those customers who have been part of the REPRISE studies and are part of the current intermediate risk study. And those represent a significant slice of the TAVR market.
So that will be our focus and then we'll expand out from there. We want to obviously do this very well. We think this is unique product and we want to have great outcomes and so we'll initiate there and then we'll expand to the large centers beyond that. And our clinical team and sales force is obviously excited to bring this on. SENTINEL is doing very well.
Quite frankly, our operations and manufacturing team have done a great job of increasing supply. We bought a smaller startup company and we are significantly increasing the supply capacity, which has really been the limiter so far because the demand of SENTINEL is quite high. And so we'll continue to grow SENTINEL likely at a faster rate in the second half given increased supply and launch it a little bit more outside the U. S. And as we've talked about in the past, we have to win with the clinical benefits of our TAVR as a standalone platform with the safety and efficacy of it.
And then we have all the other components surrounding LOTUS, which are compelling, like the safari wire, like SENTINEL and our other products, that meet the needs for interventional cardiologist. But really excited about getting LOTUS approved. And Ian, if you're on mute, maybe you could provide some views on the upcoming data.
Thanks very much, Mike, and thanks, Rick, for the question. So, as you alluded to, have the REPRISE IV study, which is the independent RIT study, 896 patients. That trial is now underway in the U. S. And that will provide very important data as to the safety and efficacy of the LOTUS Edge platform in the intermediate risk patients.
That trial should recruit pretty quickly. It's a single arm study. There is a nested registry within NASH for 100 patients with bicuspid valve disease. And so we very much look forward to those results that probably be mid next year. As well as that, we have the RESPOND EDGE trial, which will be 200 patients in 16 sites in Europe.
That trial is are just getting underway. And of course, we have the REPRISE 3 nested registry, which was the U. S. Initial experience with LOTUS Edge, which is underway and continues to recruit. So we should have, towards the end of the year and next year, significant body of data about the confirming the safety and efficacy that we've actually seen from the original LOTUS Edge 30 day data from the PREE's Edge and BIM C trials, of course, which showed, as you know, very good results in low pacemaker rates.
And next question is from the line of Bruce Nudell, SunTrust. Please go ahead.
Good morning. Thanks for taking the question. I guess for Mike and Ian, I attended the CRT panel meeting at in, I think, February or January and it really didn't the paclitaxel peripheral vascular arguments really didn't seem
to have a
coherent mechanism of action. I was just wondering what your thoughts about that might be. And secondly, is the product family forever tainted irrespective of the merits of the meta analysis that really caused this whole thing? And I have a follow-up.
Mike, can you happy if I take the one?
Sure.
Yes. So thanks, Bruce.
So I
think it's an important question. It's disappointing to say the least. Paclitaxel has had a pretty stellar 25 year history since the approval. And as you know from the TAXIS data, we have an extraordinary body of data there in the coronary circulation where there were more than 5,000 patients in randomized trials, 36,000 patients in registries. There was never an all cause mortality signal at 5 and even the SIRTAX trial after 10 years.
So there was from time to time, a signal for cardiovascular mortality related to stent thrombosis, but the overall mortality and suggesting a non cardiac cause just wasn't there. And it doesn't seem to be a plausible explanation. So it is disappointing, but we will work very assiduously alongside the FDA and VIVA and NAMSA to make sure that we thoroughly analyze this signal in any available trials. But we still have considerable confidence in paclitaxel as a antirestenotic agent. And I think we should point out that Eluvia is in a sense a very differentiated product here.
It's a controlled focal release at a dose 120th that has been used in other DCB products. So we have faith in this, and we will work alongside the FDA, NAMSA and VIVA to elucidate this.
And I guess my follow-up is on WATCHMAN. Clearly, the product has continued very strong momentum given the guidance. Could you just talk about the commercial factors, either reimbursement or marketing initiatives, just kind of the state of play and what will take to really unlock the potential of what I think is a huge product opportunity?
Sure. Yes, just again, just to reinforce Ian's point, we think Eluvia is a superior platform and we think it's different than the class. And so we're making the case on that. And obviously we're supporting the industry in the whole paclitaxel theme with the upcoming panel. But we're very we spend a lot on this platform.
We feel like it's a unique device for all the characteristics that Ian said. So we'll be pushing our point in that regard. On WATCHMAN, it continues to do extremely well. In the U. S, we're increasing utilization rates.
It's less about opening up new centers now in the U. S. Because many of so many have been opened up. It's more about increasing utilization, it's driving great outcomes. It's increasing physician awareness through our digital efforts and through working with the WATCHMAN coordinators at the hospitals.
And so we're continuing to see WATCHMAN utilization expand with our commercial organization, our clinical organization. And then in Europe, you're seeing WATCHMAN Flex be launched, which we're really excited about to gain share, not as big a market in Europe, but also a lot of progress in China. And we're really excited about the launch, which will impact the second half in Japan. And Ken, do you want to maybe speak to some of the clinical efforts with WATCHMAN to expand the market, the OPTION trial?
Yes. Thanks, Mike. That's I think that's important to mention, Bruce. If you talk about what unlocks it, I think the next step, right, that unlocks it is indication expansion. And so we are launching a trial called Option, it's 1600 patient randomized trial at roughly 100 centers globally.
And the trial is in patients following atrial fibrillation ablation who have indications for stroke prevention, and will be randomized to WATCHMAN or NOAC. And this would change the indication in that this would be the first trial where WATCHMAN would be used in patients who are explicitly candidates for either an oral anticoagulant or the WATCHMAN device.
Thanks Bruce.
Next question is from the line of Jason Mills, Canaccord Genuity. Please go ahead.
Hi, Mike. Thanks for taking the question. With respect to the organic growth profile you laid out and the acceleration that you're anticipating through the end of the year, the tenants of that premise seem like they would continue into the first half of next year and I can appreciate that you're not ready to give guidance for next year yet. But as we digest that coupled with the metrics you laid out with respect to BTG, I assume your expectations for the organic growth that BTG will generate haven't changed given their strong results recently. So it seems like it's setting up that this could accelerate further in the first half of next year.
What I'm getting at is as we look at a forward 15 to 18 months, can you give us any color? Were you willing to give us any color as it relates to just beyond that end of this year? Because it seems like it could accelerate further.
I want to give Q1 2020 and Q2 2020 guidance, but Dennis will not let me at this point, especially after our little miss here on sales in the Q1. Dan laid out in his script clearly why we are confident in the second half momentum through the product launches that he rattled off, the anniversary of the M and A activities. Another significant opportunity for us in the second half is Japan will return to a strong growth in the second half because of new product launches and less pricing cuts than we've experienced in the past. And the supply challenges are significantly better for some of those key products. And Dan also mentioned the selling days.
So that's the second half acceleration. And then I'm not going to comment really much beyond that in 2020. What you will see is a full year benefit in 2020 of many of these different product launches that are happening kind of a different quarters throughout the year in 2019. But our goal will be continued to be a top tier revenue grower in the future to deliver double digit EPS growth And we are excited about BTG. They put up really nice results, very consistent with our thesis when we acquired the company.
So we look forward to closing that likely in the late June July timeframe.
And next question is from the line of Larry Biegelsen, Wells Fargo. Please go ahead.
Hey guys, thanks for taking the question. I'll ask both of mine upfront. On Eluvia, I can understand the 50% cut implied in the guidance, but look and hopefully the panel will go well. But the question I have I guess is, if things don't go as well as expected, what's your ability to offset a further reduction in Eluvia if things don't go well? And then just secondly, I heard your comment on SCS and your business in the market, but you are the 2nd company to report a meaningful deceleration in SCS growth.
So could you just put a little bit more meat on the bone kind of around what's going on in the market and why you're confident that we won't see a further deceleration in SCS, which you kindly gave in the slides today, grew about 7% year over year in Q1? Thanks for taking the questions guys.
Yes. So Eluvia is an important growth driver for PI And we clearly aren't giving up on it because we think it's a uniquely good product that helps patients. And we're seeing many customers in the U. S. Continue to use it, some have not, but many are.
And in Japan, we're launching essentially right now. So we remain optimistic, but also smart. That's why we saw you saw us take down the guidance for Eluvia in terms of that impact. But there's just there's also many growth drivers within PI business on its own. For example, this new VICI stent we'll be launching likely in the Q2 once the FDA approved and the full impact of VPG and all the synergies that come with that both revenue and cost.
So we clearly want ILUVI to do very well, but there's many growth drivers within PI and across the company that give us a confidence for the second half guidance that we full year guidance that we gave as well as the outlook for 2020. And the second question is on SCS. It was a bit softer than we anticipated in the Q1. This traditionally been a strong double digit growth market and we believe that will be the case, although Q1 was a bit softer. So we haven't seen any somatic reasons why SCS should be a bit softer this quarter, given the unmet patient demand that we see out there.
One potential possibility where there's kind of fewer large product launches from BSC and our competitors over the past 6 months. I think you're going to see a ramping up of that clearly from us in the second half of this year with new enhancements to WaveWriter and some more clinical data. So we don't really have a great response other than we feel like it's a long term at minimum high single digit growth, but more likely double digit growth market given the unmet patient need. And importantly, this is a lot of innovation in this space, which I think will continue to excite act.
Thank you. And next question is from the line of Vijay Kumar, Evercore. Please go ahead.
Hey guys, thanks for taking my question. So Mike, maybe just on Larry's question, if I think about the first half versus second half, right, is I guess, Sterigenics improves, the sterilization plant closure. Do we know what the impact of that in Q1 was? And I guess, specifically, if the adcom goes bad, is there a chance that maybe Eluvia needs to be cut again for the back half?
Well, we gave guidance assuming bad things. So we gave what we felt very conservative. We built in our model very conservative growth for Eluvia based on the paclitaxel panel. So wouldn't be responsible for us to do otherwise. So as I mentioned, we are seeing that the launch in Japan, we're seeing customers use it today, but we've assumed far less than planned Eluvia sales in our Q2 and full year guidance.
Thank you, Andrew.
And we're not going to quantify the specifics of the sterilization issue in men's health in the quarter.
Next question is from Matt Taylor, UBS.
I just wanted to follow-up on the earlier question on the LOTUS launch and it's sort of a 2 part thing, but wanted to understand how we should think about the pace of launch in Europe and the U. S. And you did hit the timelines for the timing of launch in each region. I just wanted to make sure that you were still sort of on track where you thought you'd be in the beginning of the year. And then how can you characterize how the Sentinel supply could improve through the year?
It sounds like where you can sell it, you're seeing good uptake.
Yes. So consistent with previous comments on LOTUS, we're selling our ACURATE valve extremely well in Europe and we'll also we're also selling LOTUS. You're going to see that mix likely be higher with the ACURATE valve versus LOTUS in Europe, give the momentum that we have there. But there are many customers who want LOTUS in Europe. So we'll be able to sell it in both places.
But in terms of a mix, which we likely won't break out, it will be quite a bit higher in the U. S. Versus Europe. And so that's why this is this FDA's approval is important for us. It's kind of on schedule per our commitment, but you'll see greater waiting in the U.
S. And SENTINEL is simply just that ops team has done a great job of enhancing supply, because we've been more limited in our ability to open up new centers. And so as this quarter goes on in the second half, we'll be open up new centers and supply them with it. And then we'll be able to expand it more in Europe and other countries, which quite frankly haven't had the benefit of using it, given some supply capacity. So it's not our ops team did nothing wrong.
They simply bought a small company and now there are significant increase in the capacity for it.
Thank you. Next question is from the line of Chris Pasquale, Guggenheim. Please go ahead. Okay. That question dropped.
Next question from the line of Danielle Antifi. One moment please. Danielle Antifi, SVB Leerink. Please go ahead.
Hey, guys. Good morning. Thanks so much for taking the question. Just a quick question, question, follow-up on some of the TAVR conversation we've been having. Can you talk about what you're seeing now that you've relaunched LOTUS from a pricing perspective in Europe?
And what you expect to see in the U. S? So now you're it's going from a 2 player market to a 3 player market, potentially into a 4 player market here in the U. S. So we just love to get your high level thoughts and any color you can give on how you plan to price LOTUS Edge here in the U.
S. Relative to some of your competitors? Thanks so much.
Yes. We're probably not going to give as much as you want on the question. I think in the U. S. We're very confident in the capabilities of Lotus valve.
This is not a low tier segment offering. And so you'll see LOTUS priced at competitive rates with the market in the U. S.
And just a follow-up on that. So is it priced competitively in Europe as well or is it priced at a discount?
Well, we won't provide much thought there. We offer now with LOTUS, we offer 2 different valves in Europe. And so they're both uniquely good. And it provides us some contracting capabilities along with SENTINEL, which are helpful. But at the end of the day, the valve does need to stand alone in terms of its clinical efficacy, safety and the benefits.
Doctors typically aren't going to use a TAVI valve just because it costs less money. And so we're delivering very good outcomes with ACURATE. You've seen a lot of the clinical data there and also LOTUS. So pricing obviously is important, but this is not a it's a different environment than drug eluting stents.
Next question is from the line of Matthew O'Brien, Piper Jaffray.
2 of them real quick here. In the past, you said in the tablet market, you thought you can get to 20% share, then you had kind of backed off that with the LOTUS withdrawal. And then now you have SENTINEL, which is pretty differentiated. So as you think about where your share can go over time with this triple threat now, would you like to revisit where you think the share can get to? And specifically, do you think you can get to 20 percent?
And then the second question is just on Ranger as we think about the launch next year with all the paclitaxel commentary. Just should we think about that launch now? Should we dial back our expectations for it? Thanks so much.
Yes. Ranger is a smaller revenue contributor historically in Europe and Ranger will I think the panel will certainly have an influence on the potential for Ranger. But again, I think our PI business is blessed with many growth drivers across the board and then also with BTG closing. And we wouldn't comment on share. Right now, we just get 0 in the U.
S. So it's all upside. And so with the indication expansions we've seen clinical data and the size of this market and the uniqueness of LOTUS and our breadth of commercial coverage, we feel like we can do a nice job in this area, but we're not going to provide a share goal publicly.
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