Boston Scientific Corporation (NYSE:BSX) Q4 2024 Earnings Conference Call February 5, 2025 8:00 AM ET

Company Participants

Jonathan Monson - SVP, IR
Michael Mahoney - Chairman and CEO
Daniel Brennan - EVP and CFO
Kenneth Stein - Chief Medical Officer

Conference Call Participants

Robbie Marcus - JPMorgan
Larry Biegelsen - Wells Fargo
Frederick Wise - Stifel
Joanne Wuensch - Citibank
David Roman - Goldman Sachs
Travis Steed - Bank of America
Patrick Wood - Morgan Stanley
Danielle Antalffy - UBS
Michael Polark - Wolfe Research
Vijay Kumar - Evercore ISI
Pito Chickering - Deutsche Bank
Joshua Jennings - TD Cowen
Chris Pasquale - Nephron Research

Operator

Good morning, and welcome to the Boston Scientific Fourth Quarter 2024 Earnings Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Jon Monson, Senior Vice President, Investor Relations.

Please go ahead.

Robert Marcus

Thank you, Drew, and thanks, everyone, for joining us. With me today are Mike Mahoney, Chairman and Chief Executive Officer; and Dan Brennan, Executive Vice President and Chief Financial Officer. During the Q&A session, Mike and Dan will be joined by our Chief Medical Officer, Dr.

. Ken Stein. We issued a press release earlier this morning announcing our Q4 and full year 2024 results which included reconciliations of the non-GAAP measures used in this release. The release as well as reconciliations of the non-GAAP measures used in today's call can be found on the Investor Relations section of our website.

Please note that on the call, operational revenue excludes the impact of foreign currency fluctuations, and organic revenue further excludes acquisitions and divestitures for which there are less than a full period of comparable net sales. Guidance excludes the previously announced agreements to acquire Bolt Medical and Intera Oncology, which are expected to close in the first half of 2025 subject to customary closing conditions. For more information, please refer to the Q4 financial and operational highlights deck, which may be found on the Investor Relations section of our website.

On this call, all references to sales and revenue are organic and relative growth as compared to the same quarter of the prior year, unless otherwise specified. This call contains forward-looking statements regarding, among other things, our financial performance, business plans and product performance and development. These statements are based on our current beliefs using information available to us as of today's date and are not intended to be guarantees of future events or performance.

If our underlying assumptions turn out to be incorrect, where certain risks or uncertainties materialize, actual results could vary materially from those projected by the forward-looking statements. Factors that may cause such differences are discussed in our periodic reports and other filings with the SEC, including the Risk Factors section of our most recent annual report on Form 10-K. Boston Scientific Corporation disclaims any intention or obligation to update these forward-looking statements except as required by law.

At this point, I'll turn the call over to Michael Mahoney.

Michael Mahoney

Great. Well done, Jonathan. Thank you everyone for joining us today.

In 2024, we had an excellent performance across the board, surpassing our financial goals that we set for the year. This outstanding and differentiated performance is fueled by innovation, and great execution across our global business units, and the earlier than expected approval and adoption of FerraPulse in the U.S. In fourth quarter 2024, company operational sales grew 23% and organic sales grew 20%, exceeding the high end of our guidance range of 14% to 16%. Full year 2024 operational sales grew 18.5% while organic sales grew 16% for the year, exceeding our guidance of approximately 15%.

We believe that most of our global business units grew in line or faster than their respective markets in 2024, which is a testament to our broad diversified product portfolio and the winning spirit of our global teams. Fourth quarter adjusted EPS of $0.70% grew 26%, exceeding the high end of guidance range of $0.64% to $0.66%. Full year adjusted EPS of $2.51% grew 22%, also exceeding the high end range of our guidance of $2.40% to $2.47%.

For the year, we drove 70 basis points of adjusted operating margin to 27%, representing a balance of margin drop through and the revenue upside we saw throughout the year, along with the reinvestment back into the business to drive long-term differentiated growth. Our 2025 outlook, we expect our differentiated financial performance to continue, fueled by our innovative portfolio and strong global execution. And we're guiding to organic growth of 14% to 16% and 10% to 12% for the full year.

Our first quarter 2025 adjusted EPS guide is $0.66% to $0.68%. We expect our full year adjusted EPS to be $2.80% to $2.87%, representing growth of 12% to 14%. Daniel Brennan will provide more details on the financials, and then I'll provide some initial highlights in 2024.

Originally, on operational basis, the U.S. grew 31% for the fourth quarter, full year 2024 was 21%, with double-digit growth in six of our eight business units. On an operational basis, Middle East Europe, Middle East and Africa grew 12% in fourth quarter and 14% on the full year. In 2024, we saw above market growth from all business units supported by strong commercial execution, talking about Europe here, and key franchises across the portfolio as well as price discipline.

We expect to outpace the market again in 2025 with further momentum in EP, following the recent approval of Fairwave NAV, and increasing contribution from our growth in merchant markets. In Asia Pac, we grew 12% operationally in fourth quarter and 16% for the full year, led by excellent performance and double-digit growth across Japan, China, Australia, New Zealand. Japan really had a nice year growing double digits for the second year in a row.

Driven by agent DCB, Resume Watchful Flex Pro, and very early contribution from FerraPulse. On a full year basis, China grew strong double digits across $1 billion in revenue. This differentiated growth in China was fueled by a broad portfolio focus on innovation and excellent commercial execution.

Looking ahead, we expect China to grow mid-teens with increasing contribution from Ferropolz and our diverse portfolio, despite the ongoing VBP pricing pressures in the region. I'll now provide some additional commentary on our businesses starting with urology, which grew 8% in the fourth quarter, and 9% for the full year, and on an operational basis grew 20% in fourth quarter and 13% for the full year, following the November close of Axonics. Full year organic growth was fueled by prosthetic urology and stone management, where we had key launches with the Tannacio pump, at AMS-700, and continued success with our expanding LithaView portfolio.

Prostate Health also performed well in 2024 with double-digit growth in Resume as well as strong performance and space work. We're pleased to have enrolled our first patient in the HydroSpace trial evaluating the safety and efficacy of our spacer hydrogel. In 2025, we expect to see continued strong above market growth for urology, and look forward to further integrating the highly complementary Axonics technologies into our portfolio.

Daniel Brennan

Endoscopy sales grew 8% operationally and 7% in the fourth quarter organically. On a full-year basis, grew 9% operationally and 8% organically. Full year growth was led by double digit growth in our endoluminal surgery and single use imaging franchises along with sustained growth of our Axios platform, where we're investing to drive expanded indications and most recently receiving approval in Japan for Axios for gallbladder drainage.

We Within endoluminal surgery, we continue to see positive reimbursement wins for our ESG weight loss Procedure. The recent category one CPT code announced, and now IFSO, an international bariatric committee endorsing ESG with guideline updates. Neuromodulation sales grew 12% operationally and 5% organic in Q4, and the full year basis grew 14% operationally and 3% organically. Brain franchise grew mid single digits in both the quarter and on a full year basis. And our pain franchise grew mid-single digits in the quarter and low single digits for the year.

Within deep brain stimulation, we expect improving growth in 2025, with the recent FDA and CE Mark approvals of our unique Cartigia X and HX leads. The first and only sixteen contact directional leads that deliver precise personalized therapy. We also expect higher growth in our pain franchise in 2025, driven by continued strong momentum at Intercept, and the recently released data supporting safety, effectiveness, and durability through five years now.

Cardiology delivered an exceptional quarter and year with sales growing 32% in fourth quarter and 25% for the full year. Within cardiology, interventional cardiology therapies sales grew 10% in fourth quarter and 11% for the full year. On a full year basis, the coronary therapies franchise growth driven by strong global performance, in our imaging and complex PCI franchises.

And earlier momentum with the U.S. Launch of Agent DCB, which now has additional reimbursement in the outpatient setting. In addition, we recently announced our agreements acquired Bolt Medical, an intravascular lithotripsy platform for treatment of coronary and peripheral artery disease. Bolt's IVL technology is highly synergistic with our existing suite of devices in complex PCI imaging and drug eluting portfolios in both ICTX and PI.

And we're excited to close the BOLD acquisition, which we expect to do so in the first half of this year. Our structural heart valves franchise grew double digits for the full year and low single digits fourth quarter. During fourth quarter, we launched our next generation Acura Prime Valve, in Europe, which features frame enhancements, simplified deployment mechanism, and includes a larger valve size.

Watchmen sales grew 20% in the fourth quarter and 19% on a full year basis. U.S. Fourth quarter growth of 20% was both bolstered by an increase in concomitant procedures enabled by the new DRG which became effective in October. And positive data from our option trial demonstrating a similar stroke risk reduction with superior bleed risk reduction.

Versus OACs in high risk patients following AF ablation. These positive outcomes from option were reaffirmed by data in the concomitant subset of Patience, which was recently presented at the AF Symposium. We're pleased with the performance of our Watchmen business in 2024 and expect this market to continue to grow approximately 20% driven by concomitant procedures ongoing clinical evidence and our initiatives to drive patient awareness, and physician training.

Cardiac Rhythm Management sales grew 3% in the quarter and on a full year basis. Our diagnostics franchise grew double digits on a full year basis in outpatient market growth. Driven by our implantable cardiac monitors with early contribution from our Luxe DXG In Europe, In core CRM, in both fourth quarter, and on a full-year basis, both our high-end and low voltage business grew low single digits.

As we look ahead, we're excited to bring our EMPowered Levios pacemaker and module the Centimeters system to market in 2025, likely in the second half of the year. Electrophysiology sales grew 172% in fourth quarter. And 139% on a full year basis.

FerraPulse has continued to lead the transformation of the AFib market, surpassing $1 billion in revenue in 2024 globally, with over 200,000 patients treated. We expect the AF market to continue to rapidly convert to PFA in 2025 and beyond driven by FerraPulse's exceptional fourth-quarter sales performance, which was driven by FerraPulse uptake in the U.S. and Europe, as a result of a very strong safety profile, ease of use, and procedural efficiency, as well as our launches in both Japan and China. Initial feedback on our integrated system of Fairwave NAV on our OPAL mapping system, which we launched during the fourth quarter in the U.

S, has been very positive. We expect to continue to enhance our capabilities in this segment of the market, including with our recently closed acquisition of Cortex, an advanced AF mapping solution. We continue to build the best-in-class compendium of clinical evidence, including the recent results of Phase one of the ADDvantage AF trial.

The data demonstrating positive outcomes using FerraPulse system in AF patients, meeting the primary endpoint for efficacy and safety. With zero instances of stroke, pulmonary vein stenosis, esophageal injury, or major access complications. We expect an updated label for persistent AF in the second half of the year. In the coming weeks, we expect to complete the enrollment of Avantgarde evaluating the safety net efficacy of FerraPulse as a first-line treatment for persistent AF compared to antiarrhythmic direct therapy.

Additionally, we anticipate data to be presented in the first half of this year from phase two of the ADDvantage AF trial. Evaluating FerraPoint, which is our point-by-point PSA ablation catheter, which is expected to support US FDA approval by year-end 2025. Turning to Purple Interventions, fourth quarter sales grew 22% operationally and 12% organically, on a full year basis, grew 15% operationally and 11% organic.

Our interventional oncology and embolization franchise excelled again in 2024, with double-digit growth across the entire product portfolio, and growing mid-teens for the full year. Expanding clinical evidence for new indications continues to be a focus area. We're pleased to have completed enrollment in the first phase of the FRONTIER trial, which is an early feasibility study for the use of Therosphere to treat recurrent glioblastoma.

Additionally, we look forward to closing our acquisition of Entera, expecting the first half of 2025, which will broaden our interventional oncology offerings to patients with liver cancer. Within our vascular franchise, on a full year basis, we saw high single-digit arterial performance led by double-digit growth in our drug-leaving portfolio and mid single-digit venous growth led by Gerathena in our cloud management portfolio. On a standalone basis, the silica business grew double digits for the full year and we're pleased to recently share the 30-day results from the ROADSFR-three study demonstrating the safety and effectiveness of TCAR for patients with standard surgical risk.

So in closing, I'm very proud of our global team and what we're able to accomplish 2024 resulting in full-year organic growth of 16 adjusted EPS growth of 22%. We're very excited about the future of Boston Scientific Corporation and remain focused on our talents while enhancing our culture that is relentless in driving differentiated results. With that, I'll pass it off to Daniel Brennan to provide more details on the financials.

Daniel Brennan

Thanks, Michael. Fourth-quarter 2024 consolidated revenue of $4.561% billion represents 22.4% growth versus fourth quarter 2023, and includes a 70 basis point headwind from foreign exchange, which was unfavorable versus our expectations. Excluding this $26 million foreign exchange headwind, operational revenue growth was 23.1% in the quarter.

Sales impact from closed acquisitions contributed 360 basis points resulting in 19.5% organic revenue growth, exceeding our fourth quarter guidance range of 14% to 16%. Q4 2024 adjusted earnings per share of $0.70% grew 26% versus 2023, exceeding the high end of our guidance range of $0.64% to $0.66%, primarily driven by our strong sales performance and favorable tax results. Full-year 2024 consolidated revenue of $16.747% billion represents 17.6% reported growth versus full year 2023 and includes a 90 basis point headwind from foreign exchange.

Excluding this $127 million headwind from foreign exchange, operational revenue growth for the year was 18.5%. Sales from closed acquisitions contributed 210 basis points resulting in 16.4% organic revenue growth exceeding our guidance range of approximately 15%. Full-year 2024 adjusted earnings per share of $2.51% grew 22% versus 2023 exceeding the high end of our guidance range of $2.45% to $2.47%.

These results include a $0.05% headwind from FX which was slightly unfavorable to our expectation. Adjusted gross margin for the fourth quarter was 70.6%, which represents a 20 basis point sequential improvement versus the third quarter and results in full-year 2024 adjusted gross margin of 70.3%. In 2025, we anticipate our full-year adjusted gross margin improving from full-year 2024, and contribute to our adjusted operating margin expansion goal. Fourth-quarter adjusted operating margin was 27.4%, resulting in a full-year 2024 adjusted operating margin of 27.0%, improving 70 basis points versus the full year 2023.

We expect to expand adjusted operating margin in 2025 by another 50 to 75 basis points balancing differentiated operating margin expansion, while making targeted investments to fuel long-term top line. On a GAAP basis, fourth-quarter operating margin was 14.8%, resulting in a full-year reported operating margin of 15.5%. Moving to below the line, fourth-quarter adjusted interest and other expenses totaled $87 million resulting in full-year adjusted interest and other expenses of $301 million in line with our expectations.

On an adjusted basis, our tax rate for the fourth quarter was 11.9% for the full year 2024, including favorable discrete tax items and the benefit from stock compensation accounting. Our operational tax rate was 12.3% for the fourth quarter, and 13.2% for the full year, again, in line with expectations. Fully diluted weighted average shares outstanding ended at 1.149% billion shares in Q4, and 1.486% billion shares for the full year 2024.

Free cash flow for the quarter was $1.181% billion, with $1.456% billion from operating activities less $275 million in net capital expenditures which include payments of $177 million related to acquisitions, restructuring, litigation and other special items. Full-year 2024 free cash flow was $2.648% billion, exceeding our expectations and importantly achieving 71% free cash flow conversion for the year. For 2025, we expect free cash flow to be in excess of $3 billion.

As of December 31, 2024, we had cash on hand of $414 million and our gross debt leverage ratio was 2.2% times. Our top capital allocation priority remains strategic tuck-in M&A, followed by annual share repurchases. Our legal reserve was $326 million as of December 31, representing a $76 million increase versus Q3 2024, $50 million of this reserve is already funded through our qualified settlement funds.

I will now walk through guidance for Q1 and the full year 2025. We expect full-year 2025 reported revenue growth to be in a range of 12.5% to 14.5% versus 2024. Excluding an approximate 100 basis point headwind from foreign exchange, based on current rates, expect full-year 2025 operational growth to be in a range of 13.5% to 15.5%.

Excluding a 350 basis point contribution from closed acquisitions, we expect full-year 2025 organic revenue growth to be in a range of 10% to 12% versus 2024. We expect first-quarter 2025 reported revenue growth to be in a range of 17% to 19% versus the first quarter of 2024, excluding an approximate 100 basis point headwind from foreign exchange, based on current rates, we expect first-quarter 2025 operational revenue growth to be in a range of 18% to 20%. Excluding a 400 basis point contribution from closed acquisitions, we expect first-quarter 2025 organic revenue growth to be in a range of 14% to 16% versus 2024.

As we indicated on our October call,.

Jonathan Monson

we had one more business day in the fourth quarter of 2024, which was worth approximately 200 basis points. In the first quarter of 2025, we have one less business day again worth approximately 200 basis points. When adjusting for the impact of business days,.

Daniel Brennan

the high end of our first-quarter 2025 guidance range is in line with fourth-quarter 2024 organic revenue growth.

Jonathan Monson

We expect full-year 2025 adjusted below-the-line expense to be approximately $425 million. Under current legislation, including enacted laws and issued guidance, we forecast a full-year 2025 operational tax rate of approximately 13.5%, and an adjusted tax rate of approximately 12.5%. This includes a benefit from the accounting for stock compensation which we expect will be largely recognized in the first quarter resulting in a forecasted Q1 2025 adjusted tax rate of approximately 11.5%.

Expect full-year adjusted earnings per share to be in a range of $2.80% to $2.87% representing growth of 12% to 14% versus 2024, including an approximate $0.05% to $0.06% headwind from foreign exchange which is in line with what we saw in 2024. We expect first-quarter adjusted earnings per share to be in a range of $0.66% to $0.68% as it relates to tariffs. We do not have significant levels of manufacturing in or sourcing from Mexico, Canada, or China.

As such, while the recent executive actions relative to these countries could present a minor headwind for the year, we view these headwinds as manageable, and they've been contemplated in our guidance ranges. In closing, I'm extremely proud of what our global team delivered for 2024 financial performance and look forward to executing on our full-year 2025 guidance of 10% to 12% organic revenue growth, 50 to 75 basis points of adjusted operating margin expansion, 12% to 14% adjusted EPS growth. For more information, please check our Investor Relations website for Q4 2024 financial and operational highlights which outline more details on Q4 results and 2025 guidance.

And with that, I'll turn it back to Jonathan Monson, who will moderate Q&A.

Jonathan Monson

Thanks, Daniel. Drew, let's open it up for questions for the next thirty-five minutes or so. In order for us to take as many questions as possible, please limit yourself to one question.

Drew, please go ahead.

Operator

We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key.

If at any time your question has been addressed, and you'd like to withdraw your question, please press star then two. Again, please limit yourself to one question. At this time, we will pause momentarily to assemble our roster.

The first question comes from Robert Marcus with JPMorgan. Please go ahead.

Robert Marcus

Oh, great. Good morning, and congratulations on a really good fourth quarter. Wanted to ask on PFA and Watchmen.

You had very good fourth quarters here. So, a slight tick-up in in U.S. growth in Watchmen. Would love to get your thoughts on sort of what you saw during the quarter after concomitant reimbursement kicked in October first and the option trial.

And how you're thinking specifically about those products throughout 2025 given they're two of your better margin products and the implications. Thanks a lot.

Daniel Brennan

Thanks, Robert. Yeah, we have excellent momentum in both FerraPulse and Watchmen, and increasing momentum, I would say. With Watchmen, we did see a bit of a benefit at the end of the fourth quarter with the concomitant news, which confirmed, based on the option trial data, safety and efficacy, with the reimbursement, we saw a little bit of uptick.

As we stated before, we think the concomitant reinforces the 20% market CAGR for 2025. We'll be excited about the option readout in the first half of 2026. So we're well positioned with Watchmen.

And we obviously continue to invest in our product portfolio, clinical evidence, our clinical teams around the world to fully maximize the concomitant opportunity. And obviously, with the momentum of FerraPulse, and our broader Rhythm Management Portfolio, ideally becoming the partner of choice for AFib and electrophysiologist. FerraPulse, I think the numbers are pretty stand out.

Tremendous growth is the biggest transformation that I've seen in MedTech over $1 billion globally in one year. We launched less than a year ago in the U.S., so the execution of our commercial teams has been strong. The execution of our supply chain operation manufacturing to stay ahead of demand has really been impressive.

We don't anticipate demand or I'm sorry, supply challenges given the investments that we made throughout the year. And so we're excited about our competitive position with FerraPulse in 2025. You've seen the clinical data.

It's a bit unclear as to the competitive landscape in 2025 but we put that aside and we push every day to invest in our commercial execution our R&D and we want to become the clear leader as we are now in PFA as PFA is really transforming this market.

Robert Marcus

Appreciate it. Thanks a lot.

Operator

The next question comes from Lawrence Biegelsen with Wells Fargo. Please go ahead.

Lawrence Biegelsen

Obviously, a stellar quarter and year. Mike and Dan, I was hoping to ask one kind of long-term question. At JPMorgan, you increased your weighted average market growth to 9% in 2026. And, you know, I know you expect to grow faster than your end mark so does this imply you see Boston Scientific Corporation as at least a 9% grower in 2026.

And can you grow EPS double-digits next year with the tax rate increasing by 200 to 300 basis points. Thanks a lot.

Michael Mahoney

Sure, and, obviously, we're not gonna give any specific guidance relative to anything beyond 2025. But I think safe to assume as we've done over the last decade very well as a team, we seek to outgrow our end markets. So as those grow at an increasing rate, we still look to outgrow those markets.

So I would stay tuned as we get through the year, potentially have an Investor Day at the end of this year and reset those goals for the long term. But we're excited if you look over the last decade to see the increase in that WAMGR very intentionally over that timeframe with both internal investments as well as smart tuck in acquisitions to get to that 9% by 2026. Relative to double-digit EPS, again, I I point to the track record, extremely strong record of double-digit adjusted EPS growth.

That's always the goal. We'll see what happens to the tax rate. That could be obviously a fluid environment.

In Washington, so if there's even an increase in that tax rate, our goal will still be to get double the GDP growth in 2026 and beyond.

Lawrence Biegelsen

Alright. Thanks, Daniel.

Operator

The next question comes from Frederick Wise with Stifel. Please go ahead.

Frederick Wise

Good morning, everybody, and thanks for the great quarter. Maybe it's a one and a quarter of a question. You typically start the year in what I like to call prudently conservative fashion in recent years.

Maybe you can help us better understand where the upside and where the risks are. And should we view this as another attempt to start the year in a thoughtfully, prudently conservative fashion. And related to that, Daniel, how are you thinking about competition on the PFA side coming in.

What is dialed into your guidance at this point. Thank you.

Michael Mahoney

Hey, Frederick. You certainly want us to be thoughtful and prudent which we always are. Our guidance, and we have a nice track record of delivering on our commitments.

So I would say that's the same strategy as we provided the guide in 2025. Clearly, the company has a lot of momentum. I would say we do have more tailwinds.

You know, when you think about the tailwinds, there's a lot of momentum across every region. You obviously know about the FairPulse momentum in the U.S., and we're early days of our launch in Japan and China, a dominant really a big shout out to our coronary team, ICTX, with the agent launch. Other businesses like IO growing mid-teens, and our Endo Euro, PI, and Neuromod business, all very solid growth and we expect Neuromod to be above market in 2025.

So strong momentum there on the tailwind side. There could be stronger PFA competition in 2025. A lot of that is, you know, out of our hands, but we, as I said before, we're focused on driving forward when we'll see every day, China VBP is more extensive this year in 2025 than it has been in the past.

But despite that, we expect to grow mid-teens in China in 2025, but that'll be a little more difficult for us this year. And, you know, there are also some continuing strengthening lower cost competitors, I would say, for some of our med surg businesses in Asia. And in Europe.

And the team is focused on our portfolio and innovation to counteract that, but that is a bit of a headwind for us in our endo and euro business. But overall, we feel that we certainly do have more tailwinds than headwinds and we are looking forward to it here.

Frederick Wise

Thank you.

Operator

The next question comes from Joanne Wuensch with Citibank. Please go ahead.

Joanne Wuensch

Good morning and nice end to the year. I want to spend just a little bit of time talking about margins, interest expansion. Sort of curious how do you think about managing that and I'm gonna sneak in a cash flow question. You're kicking out a lot of cash, how do you think about investing it.

Thank you.

Daniel Brennan

Sure, Joanne. I I can take that. I'll tell you what I really like about 2025 is the equation the operating margin expansion.

Done it very well over the last decade each year with a variety of different scenarios. But I think one of the optimal scenarios is where gross margin goes north, SG and A, you get leverage. And then I think in 2025, you might actually see a little bit of an uptick in R and D spend as a percentage of sales.

I think that's a winning hand for how to increase operating margin overall. And so in our 50 to 75 basis points, I'd look for gross margin to get better versus the 70.3% that we put up in 2024. I'd look for SG and A on the 10% to 12% sales growth to improve its leverage there and deliver margin expansion.

And then, again, on R and D, not a significant increase. But, you know, maybe 20, 30 basis points of an uptick in R and D. To continue to help to fuel the top-line growth for the long term.

I think that's a great equation for 25% for margin expansion. Cash flow, Oh, I could. You saw in if you heard in the commentary, we got to 71% free cash flow conversion.

That wasn't by accident. That's a tremendous effort by the entire global team. On reducing DIOH, reducing DSO strong working capital management and of course, obviously significant growth in operating income.

In terms of our capital allocation strategy, no change. It's worked well for us again over the last decade to have the number one priority for our for use of our cash to be high-quality tuck in innovative M&A. That will continue and then annual share repurchase after that.

We ended the year at 2.2% times debt after the Axonics and Silk Road acquisitions. We're in a real great spot to continue to do that strategy and execute that strategy in 2025 and beyond.

Joanne Wuensch

Terrific. Thank you.

Operator

The next question comes from David Roman with Goldman Sachs. Please go ahead.

David Roman

Thank you. Good morning, everybody. I wanted just to dive into some of the different drivers here around the EP business.

Clearly, on the FerraPulse side, you've seen huge conversion on that de novo paroxysmal segment of the market. But as you gain a persistent indication and then also launch FerraPoint exiting 2026, can you maybe help us think about the segment of the market that you're not able to address today and how much market becomes available to you with FerraPoint and the persistent indication. And then maybe as a corollary to that, help us think through kind of the the mapping strategy given your installed base relative to the other two participants in the market.

And how you're thinking about remaining an open platform versus potentially looking to become more closed on as as some of your peers are.

Michael Mahoney

I'll turn over to Dr. . Stein here.

Kenneth Stein

Thanks, David. I'm going to start with the mapping strategy first. I guess as you point out, right, we intend to maintain an open platform.

We don't need to force people to use our OPAL mapping system. And I think it's actually really important as we look o six. How the business evolves globally, as well as we look at potential future moves into, like, an ASC type environment.

To be able to support doing cases without mapping. To be able to support doing cases with competitive mapping systems but also to provide differentiated features within OPAL and our Fairview software package. Yes.

I think it provides the best possible solution for people who want to map their cases. And even though it's early into the launch of Fairwave Nav and Fairview in the US, we've really been very pleased with the feedback that we've gotten. Thus far.

In terms of drivers, an important technology, right, that. The persistent atrial fibrillation population just in prevalence terms, is at least as large and probably larger than the population with paroxysmal atrial fibrillation. I'd also acknowledge that we are already seeing off-label use of FerraPulse in treating patients with atrial with persistent atrial fibrillation.

It's why it was important for us to run trials like VANTAGE and Avant Garde, I think everyone's seen the data from the ADVANTAGE trial. And that all of our endpoints in terms of safety and efficacy in treating persistent atrial fibrillation. And so we do anticipate getting that label by the end of this year.

Beyond that, right, then the next drivers in terms of at least expanding our labeling, as you say, getting FerraPoint to be used as an adjunct for treating atrial flutter in patients who are undergoing ablation for atrial fibrillation. Avant Garde moving to first-line therapy and also our REMATCH trial, which will qualify labeling beyond de novo use, but use in patients where they're going through repeat anti-ablations procedures.

David Roman

Very helpful. Thanks so much.

Operator

The next question comes from Travis Steed with Bank of America. Please go ahead.

Travis Steed

Hey, congrats on the quarter and also thanks for posting the slide deck early on. That was really helpful. I wanted to ask about M&A strategy.

Now that you're kind of analyzing kind of seventeen billion in revenue and that revenue base is growing so fast. So much faster. Like, how do you balance that it's gonna take a larger deal to kinda move the needle on such a larger revenue base, but also, you know, finding growth accretive deals that, now that your baseline growth is so much faster already, just kind of thinking about like, your M&A strategy changes now that you're a bigger company and growing so much faster.

Michael Mahoney

It doesn't change that much. We're always investing for the long term at Boston Scientific Corporation. We obviously gave 2025 guide, but as we've said before, another conference in January, we're investing for products that won't be launched until 2030.

Through internal organic M&A, through our VC portfolio, which is very extensive. We did nine new investments in our VC portfolio in 2025. And you're aware of the tuck-in acquisitions that we've done in 2025 for four or five of those.

And so the formula remains. We really are focused on increasing our WAMGR, which was Dan talked about earlier, which just by 9% in 2026. Growing fashion that WAMGR consistently quarter by quarter, year over year, doing everything we can to enhance that WAMGR through those tools of internal R and D, VC portfolio and tuck-in M&A.

So as the company gets larger, become larger every year, and we continue to find ways to improve our WAMGR and exceed the growth of our WAMR. So we placed a lot of focus and time internally on ensuring that we'll be a differentiated company in 2030 beyond 2025.

Travis Steed

Great. Thank you.

Operator

The next question comes from Patrick Wood with Morgan Stanley. Please go ahead.

Patrick Wood

Beautiful. I'd love to just broaden out a little bit. I appreciate the endoscopy business is kind of singles and doubles.

But, you know, obviously, you guys have been flagging Apollo ESG. Quite a unique approach and illuminal. I'm super curious even though they're down a bit, there's a chunk of sleeves that are still done in the US, and it seems like a way better approach. I'm super curious how you think midterm, you know, how big that business could be, how you're feeling about the initial launch there, and just anything you gotta give us on ESG, I'd love to hear it.

Thanks.

Michael Mahoney

I would say that ties to the previous question. Investing in ESG now. We have a dedicated team that our group has organized on the ESG product around Apollo.

We have dedicated clinical trials to broaden that indication out, improve the clinical science behind it. We have some recent momentum with CPG codes. So it's gonna be a nice driver over the long term for Endo.

Yeah, it's not gonna reshape Boston Scientific Corporation or Endo in 2025. But we definitely see positive support by the physicians, by the industry groups, the reimbursements. We're unique and we're likely the only one who can offer the Apollo Procedure wrapped around with our other endo tools.

So we think this will be a significant growth driver for Endo as you look towards the longer term of this wrap plant.

Patrick Wood

Love it. Thanks for the question.

Operator

The next question comes from Danielle Antalffy with UBS. Please go ahead.

Danielle Antalffy

Hey. Good morning, everyone. Thanks so much for taking the question.

Congrats on a really strong year. Just a quick question at a high level. You know, we talk we focus so much on the major growth drivers like FerraPulse and Watchmen.

I'm just curious, Mike or Dan, where you think Boston Scientific Corporation's either underperforming or under-indexed, but see an opportunity or line of sight into improving performance over the next year or two. That maybe the street's under modeling or not appreciating. Thanks so much.

Michael Mahoney

Yes. So most of our businesses did well against peers in the market and growing faster than the CAGR. Even if you take out Watchmen and FerraPulse results, the rest of businesses grew faster than WAMCORE.

A couple of areas that we want to improve on in 2025, one is the overall NERMOT performance, which we anticipate will have a nicer improvement in 2025. With the launch in our DBS platform, we expect that to gain momentum in 2025. In the combination of our refocused commercial team in pain, and the benefit of relieving.

So we do anticipate a better year for Neuromod. We want to strengthen US CRM. We continue to maintain share, I would say, in terms of the unit volume perspective and high voltage.

We don't have the portfolio yet in Leadless Pacemaker. Which has a strong higher ASP which is driving on a dollar basis share loss in PACER. So we'd like to see improvement in our overall U.S. CRM business.

We're launching SICU with a Leadless pacemaker in the back half of 2025. And we'll have increased focus on that business in 2025. So we'd like to see some improvements there.

And as I mentioned before, we do see some increasing competition in some of our businesses from the lower cost competitors. So we're challenging our team to continue to drive a lower cost portfolio so we can serve our global customers more efficiently.

Danielle Antalffy

Thank you for that.

Operator

The next question comes from Michael Polark with Wolfe Research. Please go ahead.

Michael Polark

Good morning. Thank you. I want to ask on the TAVR or the structural part update in the deck.

Low single-digit growth in the fourth quarter, you just comment on kinda post-account IDE, that the influence that's driving the d cell there, or are there other things you'd call out. And then maybe pester for an update on the path in the US for your TAVR franchise. Thank you.

Michael Mahoney

Sure. On the U.S., we haven't provided any updates. We're still in discussions internally and with the appropriate authorities there.

So again, in some of the other calls, you'll receive an update once we can give you clear direction on that. In Europe, we did see some impact in EU based on the U.S. trial. But nonetheless, the team did have a strong year in TAVR in Europe.

And we're launching Prime to centers primarily who are current users of Accurate today.

Operator

The next question comes from Vijay Kumar with Evercore ISI. Please go ahead.

Vijay Kumar

Hey, guys. Thanks for taking my question and congrats on the nice win here. Maybe my one question is around mapping.

What percentage of PFA procedures do you think are associated with mapping. And once you launch your mapping technology, when you look at the medium term, what percentage of those mapping procedures do you think we'll be using a Boston Scientific Corporation solution versus a competition.

Michael Mahoney

Yes. So I would just reinforce and Kenneth can comment further. Ken's overall strategy is an open platform.

We do see mapping as a predominant modality, if you will, in the U.S. EU, you see more centers using without mapping. We do see some very high volume centers in the U.S. for PBI also not mapping. But predominantly, it's a heavy mapping region in the U.S. Little bit less so, still quite a bit in Europe.

And heavy mapping in Japan and China. So as Kenneth said, we do believe that the OPAL platform is the best platform to optimize the use of variables. And we'll continue to enhance the OPAL platform as we continue to enhance FerraPulse catheter category and widen that out more. So we think that's the most cost-effective and the most efficient way to use FerraPulses is with OPAL.

That being said, many physicians are used to competitive mapping systems, so excellent. We'll continue to ensure that they can use competitive mapping systems. On the share percent, we wouldn't speculate there.

It's a big investment area for us in terms of technology and physical clinical mappers around the world to continue to enhance that group. A lot of investment behind that. And hopefully, we'll make good progress in that area in 2025.

Kenneth Stein

I don't have too much to add to what Mike just said. I just reiterate, Europe predominant cases are done without mapping today. U.S., vast majority of procedures are done with mapping today.

Intend to support all different workflows. Goal is to make things easier for physicians, not harder. And I think what you're gonna see over the long run is, right, the simpler the case is, the easier it is to do and more efficient it is to do without any mapping, the more complex the case is, the greater the need for mapping.

We believe that we've got some really important differentiated advantages with FerraVu on OPAL, it's also behind our acquisition of Cortex, which is an AS mapping specifically AF mapping, platform for for very complex types of atrial fibrillation. And I mean, our goal overall, not just with MATIC, as we look at just EP strategy overall, right, is to provide physicians with the widest possible toolbox so they have exactly what they need to treat the particular patient who's in front of them.

Vijay Kumar

Alright. Thank you guys.

Operator

The next question comes from Peter Chickering with Deutsche Bank. Please go ahead.

Peter Chickering

Hey, good morning. Look, as you comp out the China VBP and Japanese reimbursement cuts in the back half of the year, how should those markets be growing in the back half of this year without those cuts. And can you refresh us on the key drivers in both those markets.

Thanks.

Michael Mahoney

Those cuts are happening, so we baked that into our guide. China really impressive performance given the VBP which really is like taking a daily vitamin. It is. It happens every year.

But the team continues to grow nicely above market and in line or faster than Boston Scientific Corporation in China. So we'll have more VBP, you know, tailwinds or headwinds, I guess, this year but they're overcome by product launches, FerraPulse, diversification of our portfolio, and greater access to more customers. It really speaks to the category leadership portfolio strategy we have across the company.

So the team there continues to do well.

Kenneth Stein

Japan, again, there's typically every other year price cuts in Japan. That we would know about them. They're built into our guidance.

Japan is going to have a really nice year this year with the launch of FerraPulse.

Daniel Brennan

And just an operating margin comment on that. So even with despite the price cuts in those countries, we still ask for and get operating margin improvement in those countries. So it's like we ask of every business unit that we have.

So despite absorbing those price cuts, the operating margin for both those countries you mentioned goes north each year as well.

Operator

The next question comes from Joshua Jennings with TD Cowen.

Joshua Jennings

Hi, good morning. Thanks for taking the question. And congrats on the year.

I wanted to just, Mike, get your views and maybe weigh too early with the new administration issuing some policy decisions, getting some nominees through the congressional process. Can you just talk about from a high level, any risk you see to the medical devices sector in general or to Boston Scientific Corporation specifically with this new leadership in place. Thanks for taking the question.

Michael Mahoney

It's really a dynamic environment. We think our guide, as best we can, encompasses macro challenges around the world, including tariffs. FX is really not a policy name, but tariffs are probably the biggest one, which think is very manageable.

We aim to hope that the FTC environment is appropriate. And so maybe that could be positive for the industry. We'll see on tax reform where that goes.

Daniel made comments on that. But other than that, Med Tech typically hasn't been the tip of the spear for major policy changes over many, many different types of presidents that we've had. So we feel overall very comfortable with our guidance and how we can manage through that.

Joshua Jennings

Thank you.

Operator

The next question comes from Christopher Pasquale with Cefran Research. Please go ahead.

Christopher Pasquale

Thanks. You talked about the move to concomitant procedures being a growth sustainer rather than a catalyst for faster LA market growth. Our own conversations with High Line Center suggests many of them are expecting a meaningful uptick in their own procedures as a result of that change.

So is there something else that you think really offsets that tailwind then maybe for Dr. . Stein, can you just remind us how you think about the portion of the AF population that is really appropriate for both of these procedures.

Michael Mahoney

Yeah. On the volume side, we'll see over time. Right now, we're kind of calling it 20% market CAGR.

As the market gets bigger and larger, it's that along with EP is the best market you can be in MedTech. We have a unique position in both of them. So I think we're comfortable with the 20% CAGR now.

We'll see as the year progresses if that upticks or not. Want to continue to work with customers on productivity and workflow. They have tremendous demands that they have on their cath labs.

There's other technologies and structural heart coming out and so forth. They're very, very comfortable with Watchmen FerraPulse, and the concomitant procedures. So we want to continue to work to make sure we can drive operational effectiveness and productivity for our customers who are still have a strong backlog and demand of patients and other technologies coming out. So besides safety effectiveness, we want to make sure Watchmen and FerraPulse really is the solution in terms of ease of use and procedural efficiency for hospitals.

Kenneth Stein

And Christopher, just in terms of who are appropriate candidates for these procedures, again, we're very pleased with the results of Option. I think it shows really incontrovertibly that the WATCHMAN device, yes, at least as effective as oral anticoagulants and treating high-risk patients after AF ablation that it is certainly safer in terms of long-term leading risk. It also showed that you can do a concomitant procedures, in a randomized trial that there was no added risk by heading WATCHMAN to an AF ablation at the same time as the procedure.

Particularly with FerraPulse, given its safety advantages, and isn't its efficiency and really facilitates people doing concomitant procedures. And as you said, we've certainly seen an uptick in concomitant procedures still do need to get our label expanded for WATCHMAN to allow for use as first-line therapy in people who don't otherwise already have a reason to avoid the long-term use of our ointment coagulants. We will be presenting the CHAMPION data in the first half of next year as a first line even in patients who aren't candidates for AF ablation. Today in the United States, between a half and two-thirds of patients undergoing ablation are considered to be at high risk of stroke.

If you look at the CHAS VAST score, right, which is the scoring system we use, if you use transfusion s three or higher as your cutoff, that would be about a half of patients undergoing AF ablation. I think it's also important to point out when you think about concomitant procedures, there are patients who are undergoing AF ablation who may get their WATCHMAN Thanks. A kind of Watchmen that they might have otherwise gotten.

We're also patients who were referred in for a WATCHMAN procedure who are now being considered for ablation, might never been considered previously for ablation, again, just given the safety and efficacy advantages of the FerraPulse system.

Christopher Pasquale

So, great for patients. Right. Saves them having to undergo two consecutive procedures.

It's also great for hospitals and practitioners. That's helpful. Thanks.

Operator

I understand there's time for one last question. That comes from SURE Marie Thibault with BTIG. Please go ahead.

Marie Thibault

Thanks so much for squeezing me in. I want to ask a question about a recent acquisition. I saw that interventional oncology and embolization killed it again this quarter.

I wanted to understand what's going on in that product segment and understand how the Entera Oncology acquisition fits into that product segment, how it can help accelerate growth. So much for taking the questions.

Michael Mahoney

Yes. So that division of interventional oncology doesn't get talked about enough, mid-teens for the full year. Again, it's in line with our category leadership strategy that we have across most of our business units.

The team had a really excellent launch of organic R and D program in our robotics portfolio, which is a big growth driver for us. Obviously, Y90 does extremely well for us. So the combination of those two products and the rest of the remaining portfolio that we have gives us the widest portfolio and unique differentiation within there with our to capture high share at a partner with customers much like we do with other businesses in the acquisition, is again another extension for us to widen out to other adjacencies in interventional oncology with the pump.

Portfolio. This gets us closer to the oncologist. Yeah.

We also have additional software enhancements coming to improve the efficiency and workflow of our Y90 coming in 2025. So we want to continue much like we do with our other business units to expand into smart adjacencies, to accelerate our growth, and enable us to partner more closely with the enrichoradiologists and oncologists team.

Jonathan Monson

Great. Thanks, everyone for joining us today. We appreciate your interest in Boston Scientific Corporation.

If we are unable to get to your question, or if you have any follow-ups, please don't hesitate to reach out to the Investor Relations team. Before you disconnect, Drew will give you all the pertinent details for the replay. Thanks, everyone.

Operator

Please note, a recording will be available in one hour by dialing either 1-877-344-7529 or 1-412-317-0088 using replay code 3976753 until February twelfth, 2025, at 11:59 PM eastern time. The conference has now concluded. Thank you for attending today's presentation.

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