Good afternoon. I think we'll get started a minute early, maybe. My name is Jason Bedford. I'm the medical device analyst here at Raymond James. It's really our privilege to have the senior management team of Teleflex with us today. We've been loyal participants at this conference for many years. We've got the company's Chairman and CEO, Liam Kelly, the company's CFO, almost CFO, a month away, I guess, John Deren. And we've got the company's Vice President of strategy and investor relations, Larry Keusch. So I think what we'll do is Liam is going to kick off with a presentation, and then we'll dip into some Q&A.
Thank you, Jason. And good afternoon, everybody. And thank you very much for joining me today. We are pleased to be attending the Raymond James Conference, and we appreciate your interest in Teleflex. Before I begin the presentation, I'd like to remind you that some of the matters discussed today will contain forward-looking statements regarding future events. I wish to caution you that such statements are, in fact, forward-looking in nature and are subject to risks and uncertainties, and that actual events or results may differ materially. Now, I will begin with a brief review of our 2024 financial results. For the full year, 2024, adjusted constant currency revenues increased 3.1% year over year, while adjusted earnings per share was $14.01. Our interventional and EMEA businesses both had strong performances in 2024, with adjusted constant currency of 14.8% and 7.3%, respectively.
Surgical also continued to execute well, with 6.1% adjusted constant currency growth, with continued contributions from the Titan stapler. Interventional urology revenue increased 3.7%, adjusted constant currency with growth in Palette largely offset by softness in the UroLift business. 2024 margin expansion was solid, with adjusted gross margin expanding 120 basis points and adjusted operating margin increasing 60 basis points year over year. The drivers of adjusted gross margin expansion included the termination of the MSA and the acquisition of Palette Life Sciences and favorable pricing, while adjusted operating margin expansion was primarily driven by the flow-through of adjusted gross margin. Cash flow from operations was strong, increasing 24.7% year over year to $638.3 million in 2024, compared to $511.7 million in the prior year period.
The year-over-year improvement in cash flow from operations benefited from improved operating performance and improvements in working capital stemming from a moderation in our inventory levels and a benefit of $37 million from the termination of a U.S. pension plan. Turning to our latest acquisition, which we announced last Thursday, we are excited to announce that Teleflex has entered into a definitive agreement to acquire substantially all of the vascular intervention business of privately held Biotronik SE & Co. KG for an estimated cash payment at closing of approximately €760 million, less certain adjustments, as provided for in the purchase agreement, including certain working capital, net transferring, and other customary adjustments. We expect to close the acquisition by the end of the third quarter of 2025, subject to customary closing conditions. The Teleflex interventional portfolio has long been a cornerstone of growth and innovation within our diversified product portfolio.
With the opportunity to drive sustainable revenue growth and improve margins, the vascular intervention acquisition is a key component of our value creation strategy that will allow us to further build upon this strong foundation. The Biotronik products acquired delivered a constant currency revenue CAGR of 5.4% from 2022 to 2024. We expect fourth quarter 2025 revenues of EUR 91 million, and beginning in 2026, we expect the acquisition to deliver constant currency revenue growth of 6% or better. We expect the acquisition to be approximately $0.10 accretive to adjusted earnings per share in the first year of ownership from the date of close and to be increasingly accretive thereafter. We expect to achieve a double-digit return on capital early in year four post-close. With the acquisition of the Biotronik products, we believe Teleflex will gain meaningful scale, expand its presence in the catalog, and be positioned for continued healthy growth.
The product portfolio expected to be acquired includes a broad suite of vascular intervention devices, such as drug-coated balloons, drug-eluting stents, covered stents, balloon and self-expanding bare-metal stents, and balloon catheters. Turning to the strategic rationale for the acquisition of the vascular intervention business, first, like the vascular solutions acquisition in 2017, the addition of the vascular intervention business will once again allow Teleflex to increase its scale in the catalog. In this case, we are acquiring a broad portfolio of interventional therapeutic devices that will complement the company's well-established complex percutaneous coronary intervention access products, while building upon and enhancing the legacy interventional sales force. The vascular intervention acquisition significantly expands Teleflex's market presence with a combined coronary and peripheral intervention business. Second, the peripheral intervention market is growing rapidly, with global growth estimated to be in the high single-digit range.
We believe the addition of the vascular intervention business will allow Teleflex to establish a footprint in the adjacent peripheral market and complement our growing position in coronary intervention. We have a range of products in our current portfolio which have peripheral indications, and the acquisition will provide a sales channel to sell these products. Third, the acquisition of the vascular interventions business is highly complementary to Teleflex. Our existing complex PCI portfolio has products that are utilized in difficult coronary interventions, and by adding the portfolio of innovative products that we expect to acquire, we will be able to advance our technology offering with relevant coronary and peripheral interventions. The ability to participate in combined coronary strategies with drug-coated balloons, drug-eluting stents, and the emerging potential for absorbable scaffold technologies will expand our currently available procedure base.
In addition, the expansion of our product portfolio will enable our sales force to leverage their clinical knowledge and increase clinician interactions. Fourth, we see opportunities to expand the presence of the products anticipated to be acquired in the U.S. through our commercial initiatives and investment in new product registrations. Likewise, we see the ability to expand our complex PCI franchise in Europe, given the strong market presence of the vascular intervention business in this geography. And finally, fifth, robust research and development, clinical expertise, and global manufacturing capabilities are key elements of the vascular intervention business that we expect to acquire, all of which are expected to further strengthen Teleflex's innovation pipeline and enable the company to bring new products to market that improve the care of patients. We will continue to invest in developing highly competitive interventional products, including differentiated new technologies, including the resorbable metallic scaffold.
Coupled with our existing global reach, we aim to deliver innovative technologies to interventionalists, advanced clinical benefits, and safety for both physicians and patients. The acquisition of the vascular intervention business will also allow Teleflex the opportunity to invest in and expand the clinical trial program for Biotronik's Freesolve, a sirolimus-eluting resorbable metallic scaffold technology, including possible pursuit of the U.S. market. Freesolve has the potential to advance the trend in interventional coronary and endovascular procedures to leave less permanent hardware behind. We believe Freesolve shows early potential to address the limitations of previous polymeric resorbable scaffolds, achieving more rapid absorption, thinner struts, and metallic mechanical performance. Freesolve has already demonstrated compelling early clinical data in the BIOMAG I study, a first-in-human study at 14 European centers.
Freesolve received CE mark for treatment of de novo coronary stenosis in February of 2024, based substantially on the safety and efficacy of its predecessor, Magmaris. The European pivotal BIOMAG II study is now enrolling, with initial results expected in 2027. In parallel with the process to acquire the Biotronik vascular intervention business, we have conducted a comprehensive business portfolio evaluation. Following our review, we announced last Thursday that the Teleflex board of directors has authorized management to pursue a plan to separate the company into two independent publicly traded companies, Remainco and Newco. The separation of the company is consistent with our stated corporate strategy to optimize our product portfolio and drive adjusted margins and adjusted earnings per share expansion. Teleflex will create a new independent publicly traded company with urology, acute care, and OEM businesses.
The transaction is intended to be a distribution of newly issued shares of Newco to shareholders that is tax-free for U.S. tax purposes. The separation will position each company to accelerate growth with a simplified operating model, a streamlined manufacturing footprint, and increased management focus. Each of Remainco and Newco are expected to be appropriately capitalized with distinct and disciplined capital allocation priorities. At the time of separation, Remainco is expected to deliver 6% plus revenue growth on a constant currency basis to be accretive to Teleflex's adjusted gross margin, initially neutral to Teleflex's adjusted operating margin, partially as a result of higher anticipated investment in research and development. In the first full year post-separation, we expect to drive double-digit adjusted earnings per share growth. I will continue to lead Remainco.
As its chairman, president, and CEO, Newco leadership will be announced in the coming months, and we expect to complete the transaction in mid-2026, subject to market, regulatory, and certain other conditions. Moving to a deeper dive into the benefits of establishing two leading focused independent companies. For Remainco, the separation will create a streamlined portfolio focused on highly complementary business units: vascular access, interventional, and surgical. Of note, the acquisition of substantially all of the Biotronik vascular intervention business is an important element of the strategy to build a business with meaningful global presence in the cath lab, with enhanced investment to drive the new technology pipeline. This focused portfolio will better position Remainco.
To capitalize on high growth, high acuity, hospital-focused end markets, we believe this more nimble operating model and simplified manufacturing footprint will unlock margin expansion opportunities over time and create capacity for increased and highly focused R&D investment. Finally, Remainco will be able to fully align its capital allocation philosophy with its growth strategy, increasing its ability to pursue business development opportunities to more effectively compete in high innovation end markets. Now, moving to Newco, the operational structure will allow management to have an undivided focus on unlocking Newco's potential through a simplified operating model. Newco will participate in attractive end markets in urology, acute care, and OEM, and will be positioned to leverage its established market positions in its respective markets.
The company will be able to identify, invest in, and capitalize on opportunities that are unique to the urology, acute care, and OEM end markets through its tailored capital allocation and investment strategy to drive innovation and growth. There remain significant growth opportunities in the urology markets, while OEM will have flexibility to further expand its customer base and enhance its capabilities that were not available while part of Teleflex. The separation will position both Remainco and Newco for greater corporate clarity and enhanced strategic focus. Remainco, with approximately $2.1 billion in revenue in 2024 pro forma for the acquisition of the vascular intervention products from Biotronik, will be better positioned to capitalize on attractive high growth end markets, addressing emergent procedures performed primarily in the hospital setting across the intensive care, emergency department, cath lab, and operating room. The Remainco.
Product portfolio will be highly complementary with significant breadth across the hospital, with leading market positions and opportunities for growth across three distinctive business units: vascular, interventional, and surgical. Vascular access will include products primarily consisting of the Arrow branded catheters, catheter navigation and tip positioning systems, and our intraosseous access systems. Post-separation, vascular access will also include our emergency medicine portfolio, including our hemostatic products branded under the QuikClot trade name. Interventional will primarily consist of a variety of coronary catheters, structural heart support devices used by interventional cardiologists, interventional radiologists, and vascular surgeons. The interventional product category will also include the Biotronik vascular intervention business, significantly expanding our portfolio in both coronary and peripheral catalog procedures.
Surgical will include single-use and reusable devices designed for use in a variety of surgical procedures, primarily consisting of metal and polymer ligation clips, fascial closure surgical systems used in laparoscopic surgical procedures, percutaneous surgical systems, a powered bariatric stapler, and other surgical instruments used in ear, nose, and throat in cardiovascular and thoracic procedures. Newco, with approximately $1.4 billion in 2024 revenue, will have enhanced ability to identify, invest in, and capitalize on opportunities unique to the company's business units and end markets. Newco will be a diversified acute and extended care company with a focus on urology, acute care, and OEM markets. Urology will include the company's interventional urology and bladder management portfolios. Key products and brands will include the UroLift system for the treatment of BPH, Barrigel rectal spacer for use in radiation therapy for prostate cancer, and the Rüsch brands of catheter and bladder management products.
Acute care will include the majority of Teleflex's anesthesia product category, as well as our respiratory product category, portfolio of intra-aortic balloon pumps, and select other products. OEM will remain focused on the design, manufacture, and supply of devices and instruments for other medical device manufacturers. The OEM business specializes in custom extrusions, micro catheters, and specialized sutures. Moving to additional information on Remainco. Remainco will be focused on highly complementary business product categories within hospital-focused end markets. The markets served, including vascular access, interventional, and surgical, approximate $32 billion in size and are growing in the mid-single digit plus range. Following the separation, Remainco.
Is expected to generate constant currency revenue growth of 6% plus, be immediately accretive to Teleflex's adjusted gross margin with a mid-60% profile, and is initially expected to be neutral to Teleflex's adjusted operating margin, partially as a result of higher anticipated investment in research and development. The simplified operating model will provide opportunities for margin improvement over time and will create capacity for additional focused R&D investment. The transaction is also expected to deliver double-digit adjusted earnings per share growth in the first full year post-separation. Newco will have a strong portfolio in established end markets that are expected to grow in the low to mid-single digit range and total over $40 billion in size. The company will have strong call points in the hospital ASC and office site of service.
Additionally, through Newco's OEM business, the company is anticipated to have strong relationships with other medical device manufacturers that use its strong design and manufacturing competencies. Following the separation, Newco is expected to generate low single-digit constant currency revenue growth and a mid-50s gross margin profile. Over the medium term, Newco will have a potential to accelerate growth to low to mid-single digits as the UroLift business recovers. Barrigel momentum remains strong and opportunities to expand the addressable market through new FDA cleared indications and the OEM business seeking to return to historical growth empowered by greater flexibility to further expand the customer base and enhance capabilities. The company will benefit from a simplified operating model that will enable targeted investment for growth drivers and capital allocation for its investors.
Thank you all very much for your time and attention today, and now I'll turn it back for a Q&A session.
Thanks, Liam. You covered a lot there. So I guess maybe just to start, Teleflex has always been active portfolio managers. What led to the decision to split up the business? And just specifically, where do you see the value creation coming from?
Yes, we have been active portfolio managers over the years. If you go back pre-2007, we were an industrial conglomerate. We positioned ourselves as a pure play medical device, and I see this as a natural evolution for Teleflex at this current time. We review our portfolio on a fairly consistent basis, and that portfolio review began a year ago tomorrow when I had a group of Teleflex executives in for a strategic session following this very conference.
As a result of that, and the whole goal of that meeting was to unlock shareholder value. We felt that we had put out goals, three-year goals, and we had executed against those goals, and one product, the UroLift product, had had a detrimental impact on our revenue, top line growth, and our operating margin and earnings horsepower. So we started looking at that element of the portfolio, and it expanded into a bigger conversation following that, then in the summer, we started pulling different models together to look at the proposed actions we would take. We took in external consultants to help us get an outside in view as to what we thought we should do with the whole goal of unlocking shareholder value. We believe this is the logical next step for Teleflex.
We think that there are two businesses within Teleflex that could benefit from separate capital deployment strategies, separate investment theses, and the Newco and Remainco, as I outlined in my prepared remarks, are going to be two very separate businesses, one with a growth profile of north of 6%, mid-60s gross margin, and operating margins equivalent to Teleflex. It will invest in R&D. It'll be in some call points that allows for that long-term investment in R&D to generate shareholder returns. Newco, on the other hand, will be in the OEM, acute care, and urology call points, and that business will be growing in that low single digits. It'll have a mid-50s gross margin, and it will have focus on those specific areas to unlock value within OEM and urology in particular. Liam, if you had decided not to go through with the separation, what would be the reason?
So I think that as we looked at this, we thought that the separation was the best option to unlock shareholder value. We looked at a lot of options before we landed on this separation option. The only thing that would have stopped us from doing something would have been an external seismic event of some sort. Now, we've had a few with tariffs and everything like that, but it would have been something external that would have prevented this from occurring. And having put so much thought into it, for having spent the time of our portfolio review and with the acquisition of Biotronik coming in, this makes perfect sense to us internally as the best vehicle to unlock shareholder value.
Okay. Just on the Biotronik deal, a little over two times sales for an asset that you think can grow 6% plus. What are the risks there?
Is it primarily on the top line? Is it a spending dynamic that would pinch margins when you look at the Biotronik deal?
You know, I look at that 6% plus as very de-risked right out of the gate. If you look at that portfolio, it's grown at 5.4% for the last number of years. It's had volume-based procurement late in 2024. If you exclude that, it's grown in excess of 6% CAGR over that period of time. I also think it's de-risked from the point of view of a call point. Teleflex, as I said in the prepared remarks, has a really strong call point in the United States. Biotronik has a very strong call point in Europe.
There is distinct opportunity for Teleflex to take the Biotronik products, get more traction for them in the United States with our clinical channel and our sales channel, and accelerate the growth of those products. There's also the opportunity to take the current Teleflex interventional portfolio, leverage the Biotronik strong call point in Europe, and develop out our product portfolio there. Teleflex also has, within our interventional portfolio, a focus on PCI. We, as a company, are an access company, so we are delivering catheters that allow you to get access into tortuous coronary arteries. Bringing this portfolio together, then there is the opportunity to place these products, the therapeutic products of Biotronik, after you've done the work with Teleflex, and we have access to the cath lab in the United States that Biotronik would not have today, and then there's the obvious opportunity for Go Directs.
This reminds me, as I said in my prepared remarks, very similar to the vascular solutions acquisition in 2017, which took two portfolios that were in mid-single-digit growth. And since we put the two of them together, they've actually seldom not grown in the high-single-digit, low-double-digit over that period of time.
Okay. Remainco, 6% top line, high-20s% operating margin. Interventional cardiology is a much more competitive sandbox to play in. So I'm just wondering, is there concern around pressure on margins as you reinvest in this business? You alluded to higher R&D. What will that R&D look like?
So that higher R&D is contemplated in the operating margin that we presented. That's already contemplated in that outlook. I think that it is a competitive market. The company Biotronik has some really innovative technologies that are symbiotic with the Teleflex portfolio.
I'll give you an example. They've got this product, PK Papyrus, which is a covered stent that is used specifically for perforations. Teleflex has just launched our Ringer catheter. Those two working together will be able to carve out a space around perforations that do occur during complex procedures in the cath lab. I think that investing more in R&D in this area is a prerequisite. Teleflex, in our entirety today, spends approximately 5% of revenue in R&D, but we spend more than that in our interventional business. Our interventional business is in the upper single digits in that regard. The Biotronik is spending double digits of revenue in R&D. Part of that R&D is giving us the optionality of Freesolve. A Freesolve is a scaffold, a bioresorbable covered scaffold that will allow us to position it in that leave nothing behind strategy.
It's already being de-risked in our mind with the first clinical study that was done in 16 sites in Europe. And we're in the second clinical trial now to get full approval within Europe. If we are able to prove just equivalency, that opens up a significant market for this product. And in the first clinical trial, at year one, the Freesolve was almost 100% absorbed into the body, obviously making it available for further on procedures for that patient without having another technology in the way, something that's absorbed into the body. So we think that will make it particularly attractive. And I think that level of R&D to bring those exciting technologies is something we will want to continue within Teleflex.
Okay. We only have a couple of minutes left here. Newco, we have it down, let's call it 6% in 2025.
I think you're calling for some stabilization here going forward post 2025. What needs to happen for that business to stabilize?
So we have Newco at low single digits growth in the first year of 2026 and getting to low to mid-single digits over time. And what needs to happen? Well, 2025 is the last year of reimbursement for UroLift. Obviously, Barrigel is within the portfolio growing rapidly. The OEM business, we do business with what we call frenemies. We compete with them on the branded side, and they are customers of ours on the OEM side. This will give OEM more access to a broader customer base. By definition, some of these customers, once they see the name Teleflex, they see a competitor. And OEM business will stabilize as you go into 2026, following 2025, where we're seeing some inventory management.
So that will help that Newco to stabilize through that process.
Okay. Maybe in the last two minutes here, can you frame the tariff risk?
So like other medical device manufacturers, we've got significant exposure in Mexico. Annually, we think it's approximately $60-$80 million a year after tax. For 2025, though, we've moved a number of things north of the border in anticipation of a potential tariff. In addition, a lot of this will get capitalized in inventory. So we think it's approximately $30-$40 million impact on 2025, assuming it continues. Yeah, this doesn't include any exemptions that might be possible. The maquiladora structure is in place if they're recognized or not. So there's a lot that's unknown. This 25% would be worst case across the board.
John, that was great detail there, and we're bumping up against our time. So thank you.
We'll carry the discussion downstairs in Amarante One. Thank you.
Thank you.