Thanks, everybody, for joining. We're very excited to kick off this morning with Boston Scientific. We have CEO Mike Mahoney, and we're gonna jump right in.
All right.
Thanks so much for being here.
Good morning.
It's been a strong start to the year for Medtech, Boston Scientific delivered an impressive 14% organic growth in the Q1, which sets the company up for a really strong year. Maybe you could just kick us off with a few thoughts on the state of the business at Boston Scientific.
Sure. Hello, everyone. Thanks for joining here bright and early at 8:00 A.M. Really excited about really how we exited last year. Grew about 9% last year, and Q1, we had our latest quarter. All the other companies have reported, really pleased. I think every single one of our business units grew faster than our peer set, which is terrific. We're set up to have a really strong year. I think it's really broad-based momentum, I would say, across each region. Europe was our fastest growing region. You don't say that very often. Grew almost 20%, with a lot of the products that will be launched in the U.S. over the next three years. China grew over 20%. U.S. grew in the teens, it was really across each region.
It wasn't one region or one product. Almost every business grew double digits, and we saw an improvement in procedure volume, I would say, in general for the sector, which is great. I'd say enhanced better pricing dynamics, given the mix shift that we've had, and we've got an excellent leadership team, I would say, across the board and a lot of depth in the company. We've had strong retention and really strong depth across the company. It's really excited about this year and the future.
Excellent. Thank you. Like you said, Q1 growth rates were really strong across all of Medtech. You had some, you know, easier comps in January, perhaps, but procedure volumes have been really strong. As staffing improves, maybe you're getting a little bit of backlog coming back in. Yeah, maybe can you talk a little bit about what you're seeing in the markets more recently, April, May, still seeing that good strength in procedure volume?
I refer almost like as a wait time. So even today, we have seen maybe a slight reduction, but if you wanna have a kidney stone removed or a AFib procedure, in many cases, there's still a two or three month wait list to get in. The demand is very, very strong, almost amongst all of our businesses. Spinal cord stimulation is still a bit softer, I would say, in terms of a market versus historical, but in general, the procedure demand's quite high. I think what's really important for Boston Scientific, we're an interventional medicine company, so many of our procedures are done in a setting that can be a surgery center or an outpatient center.
That just drives a lot of efficiencies for hospitals, and they're pushing for efficiency, given the staff shortage. I think, given the tailwind that we have of a interventional, same-day procedure for most of our procedures and the demand so high globally, there's sustainable tailwinds for supply.
Yeah. Good.
Demand, I would say. Supply is a bit more of a challenge. Demand.
Supply. Yeah, from a staffing perspective on the supply side, you said you still see some wait times. Is that improving? You starting to see.
Yeah, you know, you, the hospital, big systems have talked about this quite a bit. They're seeing an improvement for sure. There's less turnover, there's less of a need for the traveling nurses and staff. There's built up more infrastructure for nursing capabilities, which will help the system longer term, but overall, they'd be very, very efficient, but there still are some gaps that hopefully will continue to ease throughout the year.
Got it. After that, you know, 14% organic growth quarter in Q1, you know, you're guiding to 8% to 10% growth for 2023. You know, expect to see some strength through the rest of the year. What's the outlook on the rest of the year from here, given sort of where we are?
Well, we're quite bullish. We raised our guidance for the full year of 8% to 10%, which is strong. You know, our goal is to continue to deliver against that guidance and hopefully beat the guidance for the year. We'll see how that goes each quarter. I'm really pleased with not only the organic growth that we're seeing, but also the how we're managing still some of the supply chain disruptions, which is very, very tricky, but we have a very strong supply chain team globally that limits our back orders. That's also positive. I'm really excited about the product launch cadence that we have coming the next few years and preparing really the U.S. for those amazing products.
We're kind of doing all those in parallel. Lastly, on the margin front, just, you know, with the growth, we feel like we have done many years pre-COVID, that we can continue to improve margins at the same time. We're, we're excited to get our gross margins back over time to where they were pre-COVID, and, hopefully get to a margin profile, this year, where we were just before COVID.
Great. Great. You talk about supply chain. On the Q1 call, I think you mentioned that you expect supply chain and macro inflation pressures continuing in 2023 at kind of a similar level to what you saw
Yeah
in 2022. Are you seeing anything new there on the supply chain front?
I mean, overall, there has been definitely some improvement. Freight costs have come down a bit more. We still the big carryover for us is the material costs that we have in our products. We have so many suppliers that we work with, and there are many component shortages that we've worked through for the most part, and there's been some increase in pricing from many of those suppliers, so you kinda carry those forward. But the team's absorbing all that and really reducing our back orders. We still have some, but they've made nice progress on that. All those additional supply chain costs that we carry over are built into our guidance, and we still expect to improve margins and grow nicely despite that.
Got it. Yeah, you mentioned, your goal for this year is 26.4% operating margin for 2023, which gets you just above 2019, you know, pre-pandemic levels. You've talked about kind of 50 basis points or more of annual operating margin expansion from there. You know, given all the growth drivers that you've got in place and thinking about, you know, balancing investment and growth, is that still the right way to think about it, kind of 50 basis points a year of operating margin?
Yeah. Last year, I was pleased. We grew margins last year, 2022 over 2021, which is nice. Not many companies did that in our space, and we grew nicely. We do feel for many reasons, the product mix shift that we have in the business, improved pricing dynamics. Also, we're not quite at a normal state with supply chain, but our teams are back to value improvement programs to reduce the standard cost of our products. Really a combination of all those things, and just the top line helps as well. We feel quite confident in that goal of the 50 bips.
Yeah. Great. Your SG&A, as a percentage of revenue, is a little bit higher than some of your peers. Is that, is that by design, and is that something that sort of stays there, or are there some opportunities maybe for efficiencies?
It is a bit higher, so there's quite a few levers that we have. You know, we don't run the company quarter- by- quarter. We wanna have sustainable, kind of above peers, hopefully leading peer growth and sustainable margin improvement. We could do a lot to just dramatically improve margins in the short term, which would impact our longer-term portfolio. We can ignore margin improvement and just. Yeah. We're gonna do that. We feel like we owe, you know, kind of market-leading or high-end growth and margin improvement at the same time, and there's many levers. One of it is SG&A. Our SG&A is a bit higher. We are preparing for a number of launches in the U.S., but that's a lever over time.
We can manage a bit down and get also, get our gross margins back up to where they used to be, and a combination of price as well.
Yeah.
We used to be really kind of low, -2% to -4% price, and we're getting closer to neutral on our price performance as our product mix shifts in the portfolio.
Yeah. Great. That's a big change, actually, right? Can that continue as you look at the portfolio and launches that you've got coming, you know? Is flat price kind of achievable over the next few years?
I think so. The two biggest drivers of our price decline, historically, have been drug-eluting stents, which used to be a dominant part of our business when I joined 11 years ago. Now, it'll be about 5% of our business at the end of the year. The prices have come down so much that the incremental impact is less and less, and it's a smaller piece of our portfolio. If you take that piece of it out, the rest of the businesses do fairly well with price. We do expect that a flat pricing environment is not a crazy goal.
Yeah. R&D is one place where you've invested historically, you know, 10% ± of revenue on R&D. You're starting to see some economies there, and, you know, what's the right zone for sort of R&D investment as a percentage of sales going forward?
We like where we are, so that 9-ish, 10% range. The clinical spend within that continues to increase. Of that spend, about a third of it's clinical studies, which are really important for us to expand markets, to get into new markets. We'll continue to do that. We also do a lot of work to globalize our R&D. Now we have a significant footprint in China, in Costa Rica, in India, as well as the U.S. We've globalized our R&D a bit more. We've put more of our sustaining R&D in low-cost countries. Our goal is to continue to maximize that spend. We do a pretty good job of really diagnosing that R&D spend by business unit and how much is being spent in core versus higher growth and more transformational.
We try to push that a bit more to higher growth and transformational, knowing that we have to continue to improve our products. I think by putting more of our sustaining capabilities outside the U.S., you get cost savings there, and we can invest more in organic, higher growth markets, which we continue to do.
Yeah. Great. Okay, let's turn to some of the businesses. Let's hit WATCHMAN first. WATCHMAN crossed the billion-dollar revenue mark in 2022. There's a great strategy in place to deal with competition in that business, and you're continuing to win with that product.
Yeah.
Maybe talking about market growth first, you know, you've talked about the OPTION in CHAMPION-AF trials, which could, which will expand the U.S. TAM from around two million patients today to seven million or so going forward. CHAMPION-AF, I think, enrolled in 2022. It's a three year follow-up. How do you think about market growth there? Is that kind of a 2026, 2027 event or?
Just in WATCHMAN in general, I spend a lot of time in the field, and it's just remarkable, the feedback you get from physicians. We used to have this product called WATCHMAN 2.5 and WATCHMAN FLX, and the response to FLX is really outstanding. The doctors love the safety profile of this device, and it's easy for them to use, and the procedure times are oftentimes 45 minutes, which are less than other structural heart procedures, and this environment's also helpful. We just got ICE on label to also improve same-day discharge and to move it more quickly. Beyond the safety profile, they love the ease of use of it, and the efficacy has been terrific.
There's just a very strong comfort level with WATCHMAN, and we have this product cadence to improve it with a new steerable sheath and a next-gen product that'll be approved Q4 or Q1 of 2024. We have a very strong cadence. We invested, back to the R&D question, quite a bit in clinical. We think over time, if these trials are successful, which we believe they hopefully will be, based on what we see, that this market could rival the size of the TAVI market in the future. We really have a significant, I believe, competitive advantage with the resources we have in the field and the next gen products that we continue to launch for this device.
Maybe, you know, for the generals in the crowd, this is a left atrial appendage closure. It's a kind of an insurance policy type of a procedure. You're not treating a symptom today, you're trying to eliminate a potentially disastrous adverse event going forward, stroke.
It's a great insurance policy. What it does is, if you have atrial fibrillation, you have a 4x to 5 x higher risk of having a stroke. This device can be done in the outpatient center or whatever, maybe a five hour procedure, in and out in five hours, procedure takes less than one hour. You reduce the risk of bleeding that often occurs with that, and you also reduce the risk of stroke. There's many patient benefits for it. These other trials that have already enrolled, they completed an enrollment, so we're waiting for the follow-up time. The OPTION trial will read out, I think, in 2025.
CHAMPION trial, which will hopefully make WATCHMAN first-line therapy, will read out in 2026. Those two things. The existing market's growing 25%. We think those two trials will significantly open up the patient pool even more and also globalize it more. Right now, we're a bit restricted on label in Europe and in Japan. We're confident with OPTION and CHAMPION, it will open up those markets much more, whereas today the business is about 90% in the U.S.
Yeah. Like you said, you know, safety is key here in an insurance policy-type procedure. Last thing you wanna do is have an adverse event on the day of the procedure. You know, from a competitive standpoint, safety is really important.
That's right.
Maybe could you talk a little bit about where are we right now in terms of penetration on WATCHMAN? I mean, how far can this, you know, how big can this thing be?
Well, I do you mentioned with OPTION and CHAMPION, is it 5 million patients that we say, Lauren?
$2 million today, $7 million in the future.
There we go.
10% penetrated in the existing.
I don't know if people heard that. It's about 10% penetrated in the current indication, and that market's growing about 25%. What we simply do there is we train new interventional cardiologists and new electrophysiologists on the procedure. You're also getting the hospitals becoming much more efficient. Now they're stacking patients. They'll dedicate one or two days a week for WATCHMAN, and they'll do eight patients a day. They're becoming very, very efficient at it and much more organized that way. As we said, it's about 10% penetrated in the current indication, so there's a lot of room there, and OPTION and CHAMPION widened it out quite a bit.
Yeah. Great. You talked about kind of maintaining category leadership with a lot of, you know, steady cadence of enhancements to WATCHMAN over the next few years. You know, steerable sheath, WATCHMAN FLX Pro, VersaCross Connect capability through your Baylis acquisition. You know, what kind of device upgrades and technology upgrades should we expect in the coming-
All those things, they seem, maybe to generals, like they're little tools in the toolkit, but all of those things get together. This Baylis company that we acquired a year ago, is used to cross the septum in the heart, which is maybe the most technical, or hold-your-breath moment for a procedure. It's the market-leading device to cross the septum. You combine that with our WATCHMAN device and current device, and then this new steerable sheath that allows the physician to navigate more simply to get a more difficult anatomy. All these things combined create a moat of ease of use and safety that's difficult to compete with. Once a physician uses it's difficult to wanna switch.
All those pieces together between the Baylis acquisition, which will be used with our EP products and the steerable sheath, and the next gen product will be launched, you know, say, Q1 2024. That it has a larger size matrix, 'cause there's a few appendages now that are more difficult for us to solve. So it has a wider range of sizes, also, some radiopaque markers to make it easier to use, and a coating that we think will reduce. Improve healing even faster.
Yeah. Great. Let's move on to PFA and FARAPULSE. There's been a lot of excitement
Yeah
about PFA technology. You're going to be one of the first to market in the U.S. Maybe for the generalist crowd, you could tell a little bit, sort of the PFA story and, you know, how you see the opportunity
Sure
approval in.
For our company, we grew 9% last year, and we've improved our organic growth profile and our weighted average market growth rate in the categories that we compete in each year for about 10 years. The business for Boston, that's been the biggest challenge historically, has been in electrophysiology. We have not had category leadership products in that category for many years. Now we do. After over a decade of work, we have a few products. Well, I'll talk about FARAPULSE. We have a second product called a POLARx, which is a second-gen POLARx product, where there was only one other company who had all the share, which is approximately a billion-dollar market. That product will launch in July this year.
We're really excited about that launch. Then you had Baylis. We really have a comprehensive product lines that's been approved in the U.S. that's also very differentiated. Let's see, the POLARx is a second-gen POLARx product that will do really well in the U.S. This pulsed field ablation is a company that we invested in nine years ago from our venture portfolio, and it's really exceeded all of our expectations in Europe. It's the only company that has this. It's a new thermal energy. You're either using a radio frequency to ablate the pulmonary veins to stop your AFib or hopefully stop your AFib, or using a cold balloon called cryo. This is called pulsed field ablation.
If you go to HRS, the conference, the big electrophysiology conference or the one that just happened in Europe, 80% of the talks are about pulsed field ablation. The beauty of pulsed field ablation is the safety profile. If you have a family member with atrial fibrillation, they can treat this with a higher safety profile, less phrenic nerve injuries, less esophageal injuries. The procedure times are also very, very fast. 2x the current productivity of the existing technologies, and the efficacy is at least as good. That's been demonstrated so far. We just had a MANIFEST-PF trial in Europe that about 15,000 patients, real-world patients, everyday users, across the board.
it really proved out the safety benefits, the productivity of the device, as well as the efficacy being quite good. We're also seeing the procedure times in Europe come down quite a bit, and we're seeing some sites eliminating for paroxysmal AFib, the use of general anesthesia, which also is a cost savings and a productivity benefit for patients. We're really excited about this. We're the only one that has this clinical data, we have the ADVENT trial, which is our U.S. trial, which is fully enrolled, and we'll likely be giving that data, you know, in the coming months. That's randomized against cryo and RF.
We're the company that has the most rigorous U.S. trial that doctors recognize, and we have the most data outside the U.S., and we'll be launching that product in 2024. It's really I think the EP market's one of the very best markets in medtech. We've been underweight big time for many, many years. Between our cryo product and pulsed field ablation and the commercial team that we have in the U.S., I think it's would be one of the most exciting times in the company history.
Yeah. Great. Yeah, you're right. HRS, everybody, all the talk was about PFA.
Yes.
I think what's unique about this market is it's already a big, you know, $8 billion market, growing 12% to 15%. You got a lot of physicians out there who are already trained on how to do these procedures, and I think the thought is, with this new technology, like you said, it's safer, it's faster and potentially more efficacious. The market could actually move pretty quickly.
Yep.
How do you think about, you know, the introduction of PFA in the U.S.? I mean, Is it about share capture, kind of movement from RF to PFA? Could it be market expanding? You know, how do you think about the path?
I think it's gonna be. What we're seeing in Europe is the users, whether they're cryo user or RF, many are moving to PFA if they can get their hands on it because of the things you said, it's safer and it's faster, and it's at least as efficacious. Initially, I think you're gonna see hospitals and physicians switch for those reasons in the U.S. Over time, given the safety profile and the productivity, you may over time actually see market expansion with patients who have AFib diagnosed earlier, actually become treated with it. At minimum, it will be a mix shift, but we think given the profile, it likely will expand the market as well.
Yeah. Got it. The product's been so popular in Europe, you've had some supply challenges trying to
Yeah
meet demand. Where do you stand on supply at the moment?
That's been our challenge. We acquired this company, I don't know, 18 months ago or so, and the challenge has been the supply chain issue, with all the components and boards and so forth, and ships. We've invested quite a bit in building out our own capabilities while we sign long-term contracts with our existing suppliers. We'll maintain those long-term existing supply contracts. We're also building in-house capability, which we're quite confident we'll have really in place and up and fully operational by year-end. It is a bit supply constrained in Europe right now for sure.
It'll get a bit better in the second half. By the year-end, we believe, with the internal capabilities we have and all of our plans, we'll be ready for the U.S. launch to be able to build that scale so we don't have to be so selective where we launch now.
Got it. You've got a arrhythmia mapping system that you're working to integrate with
Yep
FARAPULSE technology. Where does that integration stand, and could that be ready for U.S. launch?
Yeah. What you see in Europe is some physicians will use. The more complex the procedure, the mapping will become, you know, more important. You're seeing many physicians in Europe use FARAPULSE without any mapping system, given how quick it is and efficient it is. We really essentially want to provide an option. For physicians in the U.S. or anywhere in the world, they can use the FARAPULSE platform without any mapping system. They can use it with their existing mapping system, or they can integrate it, which would be the most elegant way to do it, with our arrhythmia system. That will come out right around the launch time or potentially shortly thereafter, but close to the U.S. launch. The physicians can use the arrhythmia mapping system along with FARAPULSE.
The more complex the procedure is, the more likely they'll want to use the mapping system. The more straightforward, they may choose not to use the mapping system.
Yeah. Okay, great. Excellent. Let's shift to TAVR. You know, I think some investors will remember your Lotus, you know, drama over the years. Great product, but had some technical issues, and ultimately, you kind of cut bait there and moved on to a new product, which is now very promising in ACURATE neo2. Seeing really strong growth in Europe, and looking to launch next year in the U.S. Can you just talk a little bit about TAVR and sort of what success looks like with the Neo2 launch?
Yes, we've had this for about six years now, the ACURATE neo2 platform, what's great about this platform, it's I wouldn't say relatively easy, but it's pretty straightforward to manufacture, which was our problem with the first generation product that we had with Lotus. The team has done an amazing job of building enhancements across that portfolio. That valve and accounts that we're in have about 20% to 25% share in Europe. It's doing extremely well there. The product gap we have there, similar to WATCHMAN, is having a larger size, which will be approved at the time of the U.S. launch, which is about a third of the patients, that'll help our European business as well as the U.S.
When we launch in the U.S. in 2024, we'll have all risk indications. We completed a trial for a high risk, moderate risk, and low risk, which some of our competitors have not done, who are launching right now. We'll have all risk indications. The product has been well vetted out in Europe. It has extremely low PVL rates, very low pacemaker rates, and very strong hemodynamics and easy to use. We've learned a lot over the years, we'll be able to manufacture this product at scale with a highly trained sales force, with a physician base that we know very well. The data out of Europe is quite strong.
We feel like we're, you know, we're not gonna be number one or number two overnight, but we do believe over time, we'll have a respectable share of the market in a very big marketplace.
Yeah. A couple of the advantages of Neo2, on one hand, it's easy to use, like you said, it's kind of point and shoot. You know, a lot of people like the Edwards platform because it's so easy to use. On the other hand, it's a taller, supra-annular valve, so it has
Right
potentially strong durability.
Right
which is more and more important. How do you think about targeting as you launch in the U.S., and which types of doctors might be interested in the Neo2 platform?
Well, we think it'll be a everyday valve. As you said, it's the valve has excellent hemodynamics. The we're confident in the durability of it, and also maintains what you call coronary access, given the design of it. Once you have a valve in place, you want to have coronary access to be able to put stents and other products through there to treat heart disease. Physicians love the ease of use. They maintain access to the coronaries once they put this valve in place, and the hemodynamics are quite well, quite good. The response has been positive. You know, given some of the history, I don't think many investors give us much credit yet.
What we see in Europe, we continue to, off a smaller base, granted, growing quite a bit faster than the competition in Europe. When the full portfolio launches in the U.S. with a larger size, we think it'll be a significant growth driver for us.
Great. Great. Let's talk about interventional oncology. I think this is one of those areas that hasn't been talked about quite as much. You know, such an appealing idea in the sense that you're not poisoning the whole body with chemotherapy or radiation. You're delivering those powerful therapies in a very targeted way to the site of the tumor. Can you just talk a little bit about the interventional oncology business and where you see that headed over the next few years?
Yeah. We acquired a company called BTG a few years ago, and the key product that we wanted there was two, which is a cryo product, which is used to treat cancer, and also these radioactive beads called Y-90. It's a therapeutic radioactive bead to help treat HCC primary liver cancer. We have a lot of success with that in the U.S. We're doing a big trial in China, which will take a few years because there's a significant higher population of liver cancer in the U.S., and we're also rolling this out more thoughtfully across Europe. We're expanding it globally, but the clinical data for Y-90 in liver cancers is excellent.
It's a procedure, again, it's done same-day delivery, oftentimes by interventional radiologists. We're also investing in expanding, back to the clinical spend, the clinical indications for this. It's very early, but we're early on in a safety trial to go after a glioblastoma, which would be remarkable. We'll see how that safety profile plays out in the second half of this year, and we also have an indication to do an early feasibility trial in prostate. The primary driver of Y-90 is liver cancer today, but we hope to expand those indications, and that business continues to grow, you know, kind of double-digit area for us.
Great. Yeah, like you said, a big part of the upside here is bringing additional clinical evidence to the table and expanding indications. Can you remind us a little bit, the timelines there? Any key dates to expect here over the next couple of years?
It's gonna be a while. The bulk of our business for interventional oncology will be current indications in really liver and also the cryo product, which is primarily in lung, I believe. That'll be the current indication for the next, call it, the next few years, and we're expanding that globally. We'll see if these new indications potentially can expand the market into these other glioblastoma and the prostate. The MANDARIN trial in China could significantly increase the size of the market pending the enrollment of that trial, which will be probably two or three years away.
Great. We can't hit every product in the portfolio. There's too much to talk about, but maybe we'll hit a couple more. Maybe, in Urology, you know, you just received FDA approval and initiated limited market release for your single-use flexible Ureteroscope. It's great.
Well said.
Fun word to say. Yeah, exactly. What impact can you expect from that product in 2023?
Yes. Our Urology business, we really focus on this category leadership, which other companies coin now as well. Essentially, what it means, if we have a bunch of Urologists in a group here in this room, we're able to provide the most comprehensive portfolio for your urology group, from stone disease to treating BPH, to treating male incontinence or incontinence to implants, so a wide variety of what those physicians do. Within that portfolio, we offer some very unique differentiated products, one being this disposable Ureteroscope. Again, when hospitals and groups are challenged for productivity and speed, and they don't want to reduce the risk of infection, that's what this single-use scope does.
Then you pair that with a laser company that we acquired, called Lumenis, and this AI-enabled workflow that we have to modulate fluid management within the within the procedure, as well as pressure within the kidneys. The physicians now can really provide stone management in a more efficient way, in a safer way, incorporating all these technologies together. We build a pretty good moat around managing stone disease. Then we have other products which are very differentiated within the urology business. Now we're able to provide contracts, you know, with these customers to partner with them longer term, across the breadth of our portfolio. Leveraging the breadth of it, as well as the unique differentiation we have within it.
We really modeled that playbook quite well in Urology and Endoscopy. Also in Urology, we continue to expand that globally. Lumenis gives us good footprint in China, and we continue to expand that in Europe.
Yeah. It seems like the stone portfolio is kind of really coming together. Are there any holes left to plug there? You know, given that it is kind of coming together now, should we expect kind of better than normal growth in urology in the coming two, three years? It seems like a few years of launch back.
We've had really, Lauren will know the numbers, but it's been a high single digit, some oftentimes double-digit grower for us for many quarters in a row. We expect that to continue.
Great. All right, you brought up endoscopy. Maybe we can talk a little bit about the single-use scope launches there, your Duodenoscope and your Bronchoscope. You recently launched the third-gen EXALT D with improved ergonomic design. Maybe can you talk a little bit more about what you're seeing in terms of utilization there and what the upside looks like for single-use scopes?
Yeah. It's really the same concept in endoscopy as I just bored you with, probably with urology. It's a very wide portfolio for interventional GI procedures. We have the highest market share globally, and we have differentiated products within that suite of products to provide better contracts, to partner with our customers more closely. A few of those products that are very differentiated, one is these, the scopes that you just mentioned, this Duodenoscope, which is a single-use scope to reduce the risk of infection, to provide better workflow efficiency. We continue to enhance. That's a 510(k) product, there's no clinical trials for this product.
We continue to enhance that product about every six months to make it easier to use, and over time, we think there's an opportunity to have it more clinically differentiated than the scopes that you reuse, which are heavy capital equipments. The initial premise of the Duodenoscope is to reduce the risk of infection, which is great, but now, over time, we think we can provide clinical benefits in terms of its features of visualization that may enhance the workflow even more. The other one I want to mention that hasn't got as much press that we're really excited about is this company we just acquired called Apollo. So Apollo is a product that is called Endoluminal Surgery.
In many of the cases across Boston Scientific, you're taking what used to be a surgical procedure, a general surgery procedure, which is sometimes two weeks in the hospital, and how do you make that an interventional medicine procedure, where it's done in the same day? That's exactly what Apollo does. Now you're actually treating some general surgery procedures with an interventional tool, and Apollo provides the closure capabilities for this. We're building a suite of products to enhance our endoluminal surgery capabilities. You're going to see more general surgeons, just like in cardiology. Cardiologists went from cardiac surgery, many of them now have been trained more to interventional cardiology. Same thing with general surgery, moving more over time to endoluminal surgery.
This Apollo is a flagstone product that's very differentiated, that's a kind of a beachhead product for that capability. In addition, it provides yet another differentiator across that portfolio to help us with our contracting capabilities. That product will be very difficult to replicate in terms of future competitors, we believe.
Yeah. Great. When you talk about endoluminal surgery, you know, there are some new technologies out there, robotic technologies
Yeah
that are just getting off the ground, kind of on, you know, with the ability to do some endoluminal surgeries. Where do you see your portfolio starting to bump up against those kind of robotic approaches to endoluminal surgery?
Yeah. We provide all these tools and capabilities that the robots potentially could want to leverage. You know, we've never ruled out the business case to have a robot, but currently, we don't believe there's a need for it currently. Many of the robotic companies want to partner with us because we spend all of our time on the capabilities and the tools and the therapeutics, imaging capabilities, visualization, on where the robot, to actually deliver the solutions that the robot would actually hold on to. Many of the robot companies want to work with us in that regard, which we consider, and we'll always consider potentially the robot.
As of now, we really believe our best use of your investments is to focus on what we do really, really well, which is the differentiated ways to treat and potentially partner with the robot companies.
Yeah. Great. Just to cap off the single-use scope discussion, like you said, your capabilities are getting better and better with those single-use scopes. You know, how much of that reusable scope market do you think could move over, potentially, or will it be kind of, you know, more targeted for certain patients?
It's the duodenoscope that is referring is growing every quarter, and it helps pull through that other broader portfolio that I mentioned. It's not as if it's a kind of a rocket ship, but it's growing every quarter. Wherever we sell our Duodenoscope platform, our core pull-through business is stronger. It's good. The key there is, as I mentioned before, is making this product better and better every six months. It goes well beyond just a infection prevention tool. It becomes a ease of use, productivity, and infection prevention. When we get to that phase, which we have line of sight to, I think you'll see the growth ramp quicker versus the initial indication, which was reduce the risk of infections.
Got it. Okay, maybe zooming out a little bit, let's talk about M&A. There's been some M&A speculation recently in Medtech. You know, you've been really effective with tuck-in M&A, with most of your deals falling under $500 million. You know, BTG was your largest at $4.2 billion. How do you think about kind of ideal target deal size from here, going forward as part of the M&A?
We've done the BTG one, as you mentioned. Baylis was about $2 billion. AMS a few years ago was in that range as well. We've done, I'd say about 80% to 85% of our dollars that we've spent over the years have been, call it, for more mature companies with, you know, revenue scale and nice cost synergies. About, say, 20% of our dollars have been on really early-stage companies, like FARAPULSE and a few others. We like that mix. We have a venture portfolio that has about 40 companies in it. We've been quite active in buying companies from that venture portfolio. We've had a nice track record there. We'll continue with that play.
I would expect to see similar, you know, at times, scaled M&A, similar to what we did with BTG and also tuck-ins, and we continue to focus on that.
Yeah. Great. You've worked really hard to get your leverage down and, you know, get back to BBB+. What's the right kind of long-term leverage ratio for Boston?
Yeah. We're kind of in that, you know, 2.25 to 2.5 range where we like to be. At times, like similar to BTG, we've levered up more and then brought it back down. It's important for us to stay in that range over time.
Yeah. Got it. Some of your peers appear to be kind of ramping up tuck-in M&A activity. I wonder, are you starting to see any more competition for deals as you're out there?
I know, it's funny, I hear that, I don't think the landscape's changed. It's, many companies wanna try to find great products, and I think it's similar to what it's always been in that area.
Yeah. Got it. Over time, what's the right mix of kind of internal versus external innovation, for you, for Boston?
We do I think we do a pretty good job with an ongoing process recognizing what our internal capabilities are and recognizing what they aren't. You'll learn that more over time. Facing that and then realizing what we can do organically really, really well, and then what then what M&A might continue to increase the breadth and increase the innovation of the company, and then our VC portfolio, our higher risk bets, that some have worked terrific, some have worked less so. We think that balance works out really well. We map that across our business units quite well, and then we roll that up corporately, and we help make strategic prioritization decisions based on that.
We think we'll continue to focus on tuck-in M&A as our number one use of capital. We'll keep our organic spend in that 9% to 10% range.
Great. Okay. As you think about the growth outlook, you know, maybe can you reflect a little bit on the medium-term growth outlook? Your last long-range plan called for 6% to 8% organic growth, but with all the growth drivers that you have kicking in over the next couple of years, you know, what are the chances that organic growth could be 8% to 10% or even, you know, 10%+ over the next sort of two, five, two to five?
Well, we'll see. We did nine last year. We're guided 8 to 10 this year. Lauren's organized an amazing investor day in September, so we'll talk more about that. Our goal is to finish this year strong, and we're set up for the next few years to really have a we think what would be an excellent chapter for the company, given the product launches that we have in Europe that we're bringing to the U.S., the mix profile overall, the company. We continue to improve the weighted average market growth rate of the businesses that we're in. The pricing dynamics are better. There's always some surprises in the environment, but our company has really shown strong, durable growth for many years, and we're not relying on one product.
We have a couple of products that could be blockbusters for the company, and our focus now is really bringing those to the U.S. and try to make sure we maximize that potential.
Yeah. Like you said, you've been really thoughtful about improving the weighted average market growth footprint of the company over your tenure. You know, as you reflect on the businesses that you're exposed to at the moment, you know, how do you like that footprint, and are there, is there potential to add another pillar at some stage, or do you kind of, do you like where you are now in terms of businesses?
Well, we always, we're kind of, y ou know, you pay us to do this. We love what we do, and it's a fantastic company, and the innovation we have really is amazing. I think that's a key part, this interventional capability, and to disrupt general surgery, to disrupt cardiac surgery, in some cases, disrupting pharma is what we're doing with WATCHMAN. There's so many, our challenge is just the prioritization within the company. Knowing we want to grow really, really well in the near term, but also invest to make this a terrific company 10 years from now. That's what we focus on while we improve margins. You know, the business is doing quite well. I think I missed the question.
No, that's good. No, you got it. another pillar, another?
Another pillar. I don't know. We've created a lot of pillar. We didn't have interventional oncology a while ago. We didn't have deep brain stimulation a few years ago. We're number one in Europe and number one de novo, and we're looking at expanded indications in oncology. We're always looking at new things. We want to ideally buy companies or grow into markets that we have some leverage point in, either with our commercial team, operations, R&D capabilities. You know, you haven't seen us go off and buy. Orthopedics is great, we don't really offer much in orthopedics. We stay in adjacencies that we have some leverage points in, with R&D or commercial. Those adjacencies, like in structural heart, WATCHMAN could be, you know, potentially the largest TAVR market.
We're not in, the TAVR market now. We've investments in mitral and tricuspid, through our venture portfolio, that are exciting. Every business has new adjacencies that we like, but they're somehow connected. They're not kind of off on their own tangent.
Yeah. Gotcha. You mentioned, you know, the, the hardest part of your job, really thinking about, prioritizing investment across all those businesses. It's a, it's a complex puzzle, to put together. Boston's kind of a perfect size right now. It seems that around, you know, $13 billion of revenue, sometimes when companies get too big, that prioritization challenge gets too hard, or companies get a little bit too difficult to manage. How do you think about the right size for the company? Is there sort of a Goldilocks zone of where you'd like to be? You know, would you consider pruning at some stage if, you know, if you get too big?
We would prune if there was a business that didn't make sense for us, that didn't have leverage across other businesses and was really distracting from our growth rate or margin profile. We don't have one of those in our business right now. I think we're blessed to have really strong depth of leaders across the company that are very engaged and motivated to win, and are not satisfied with where we are. That's, to me, the most important thing, is the engagement of your employee base, the winning spirit, that we call it, and the ability to see what's coming and to take appropriate risk. Because not everything's gonna work out perfect. To take appropriate risk to continue to have high performance is really important.
Our innovation focus is pretty strong, and we continue to globalize the company as well. I don't think bigger needs to be slower. You just have to fight against. I think the biggest competitor is typically bureaucracy and comfort level, and you have to continue to fight against that.
Yeah. Yeah. you know, on the topic of engagement, I think the pandemic made it really difficult to keep employees engaged. At the same time, you're always acquiring new companies and bringing new teams on board. You know, how do you manage engagement, and, you know, how are you feeling about the level of engagement at the moment?
Well, every company likes to say they have highly engaged employees, and we can do lots of surveys that show we have 90% engagement, but I'm not sure what that really means. What's, I think, most important is our turnover is quite low versus peers, I would say. Our ability to attract talent is quite good, and it's always about the engagement locally. It's the manufacturing manager in Malaysia, what's he or she's engagement in that manufacturing plant? That's what's most important to those employees. It's not what we say in Boston Scientific headquarters. We really try to push the importance of that locally. Because we can say, I have all the cool charts we want about mission and vision, but it's what happens with your supervisor that matters, and that's what drives engagement.
We really try to keep a pulse on that and try to hire leaders who have the right values and are driving the business the right way and promoting and developing our employees. Employees want to be proud of where they work, and they want to grow in their career. Sure, they like the stock price, but they really want the first two things. We put a lot of energy in those things and try to push it local as much as possible.
Got it. Over your tenure, as CEO, you know, you really have transformed the company over, I guess, 11-plus years now. You know, just curious, how you're feeling about this now. Like, are you still having fun? What's, you know, what's
Yeah, I love it.
what's it like?
I love it.
How did that?
I'm very blessed to work with our team. I feel very fortunate to work at the company. Would never want to go anywhere else. I feel like the next chapter of Boston Scientific, the next five years, are going to be very special, given the product portfolio that we have and the momentum we have. I love what we do.
How about, you know, number one lesson over the last decade, you know, about sort of what it takes to win in Med tech?
What it takes to win in Med tech? I think it's the two things I mentioned before, and it's hard to put a Excel spreadsheet on it, but you know it in your own companies. It's the culture of the company. Are you proud to work there? Is the engagement level high? That people, culture, to me, is number one, and then it's always followed quickly by innovation. Because if you don't have innovation in med tech, you're not gonna grow. We're very obsessed with, n ot obsessed, that's probably the wrong word. We're very purposeful about our innovation focus. I think if you get engaged employees and you wrap innovation around that, then the operations, works its way through.
We have great systems and processes in place to run our business, but if the employees are engaged, and you have talented leaders and a depth of leaders, and you focus on innovation, then, the bumps seem to you work through the issues.
Yeah. Great. As maybe as you look forward to the next chapter, you know, the next 10 years, what are the most important kind of one or two things that you have to get right, you know, for Boston Scientific to continue to win?
Well, the first one is to stay forever anxious to do more and to grow. That's number one. I don't think the business is as complicated as some say. It's an interventional medicine business. We solve patient needs less invasively, quicker, and more efficient for hospitals, which is what the healthcare system globally needs. They're dying for product. They're dying. They're aching for products like that make them more efficient to manage patients. There's so many unmet patient needs with this technology. We didn't talk about AI and digital, all those capabilities that can be wrapped around it. The innovation opportunities are quite significant, and this is not a mature business.
That being said, you know, we have many business that continue to grow, kind of upper single digit very consistently, that don't have these large PMA clinical trials, but we continue to feed those with innovation. We have three or four areas in the company that, if we execute well, could be really, really fascinating. We talked about TAVI, we talked about pulsed field ablation, we talked about interventional oncology, and there's a few others. The company's in a strong position. We'll continue to improve margins, and I think as importantly, we'll continue to think about this for the longer term, not just 2023.
Great. All right, we're out of time. We'll have to leave it there. Thanks so much for joining.
Okay. Thank you.
Really appreciate it.