Boston Scientific Corp

NYSE:BSX

Earnings Call Transcript 2021-Q3

[Operator]

Good morning and welcome to the Boston Scientific 3rd Quarter 2021 earnings conference call. All participants will be in listen-only mode. Should you need assistance, [Operator's Instruction] After today's presentation, there will be an opportunity to ask questions. [Operator's Instruction]. Please note this event is being recorded. I would now like to turn the conference over to Lauren Tengler, Vice President, Investor Relations, please go ahead.

[Lauren Tengler, Vice President, Investor Relations]

Thank you, Andrew. Welcome everyone and thanks for joining us. With me on today's call are Mike Mahoney, Chairman and Chief Executive Officer, and Dan Brennan, Executive Vice President and Chief Financial Officer. We issued a press release earlier this morning announcing our Q3 2021 results, which included reconciliations of the non-GAAP measures used in the release. We have posted a copy of that release, as well as reconciliations of the non-GAAP measures used in today's call to the Investor Relations section of our website under the heading Financials and Filings.

The duration of this morning's call will be approximately 1 hour. Mike will focus his comments on Q3 performance, as well as future catalysts and the outlet for our business, including Q4, full-year 2021 guidance. Dan will review the financials for the quarter, provide more details regarding our Q4 and 2021 guidance and then we'll take your questions. During today's Q&A session, Mike and Dan will be joined by our Chief Medical Officers, Dr. Ian Meredith and Dr. Ken Stein. Before we begin, I would like to remind everyone that on the call, operational revenue growth excludes the impact of foreign currency fluctuation and organic revenue growth further excludes acquisitions and divestitures for which there are less than a period of -- full period of comparable net sales.

Relevant acquisitions for organic growth versus 2020 and 2019 include Preventice, Farapulse, and Lumenis Surgical, which closed in March, August, and September of 2021, respectively, as well as Vertiflex and BTG Interventional Medicines, which closed in May in mid-August of 2019, respectively. Divestitures include BTG Spec Pharma, which closed on March 1st, 2021, and the global embolic microspheres portfolio, and Intrauterine Health Franchise, which were divested in August 2019 and second quarter of 2020 respectively. Guidance excludes the recently announced Devoro Medical and Baylis Medical acquisitions, which are expected to close in Q4 -21 and Q1-22 respectively. For more information, please refer to Slide 9 of our financial and operating highlights deck, which may be found on our Investor Relations website.

On this call, all references to sales and revenue, unless otherwise specified, are organic. Finally, growth goals of 6% to 8% ex COVID represent comparisons between time periods in which results are not material impacted by the COVID-19 pandemic. And note this call contains forward-looking statements within the meaning of the federal securities laws, which may be identified by words like anticipate, expect, may, believe, estimate, and other similar words. They include, among other things, the impact of COVID-19 pandemic upon the Company's operations and financial results. Statements about our growth and market share, new product approvals and launches, acquisitions, clinical trials, cost savings and growth opportunities.

Our cash flow and expected use, our financial performance including sales margins and earnings. As well as our tax rates, R&D spend and other expenses. Factors that may cause such differences include those described in the Risk Factors section of our most recent 10-K and subsequent 10-K filed with the SEC. These statements speak only as of today's date and we disclaim any intention or obligation to update them. At this point, I will turn it over to Mike for comments.

[Michael Mahoney, Chairman and Chief Executive Officer]

Thanks Lauren. Thank you everyone for joining us today, I'm proud of our global team’s execution despite the various challenges presented by the COVID surge in third quarter. The third quarter was impacted by COVID more than we anticipated as the Delta variant surge globally, some electro procedures were deferred. While we aren't satisfied with this quarter's sales results, we delivered on our third quarter EPS and margin targets, and we're confident as global vaccination rates continue to increase and COVID wanes, we are well-positioned to achieve our long-term sales goals. We continue to be excited and confident about the opportunities we laid out at our recent Investor Day.

Further enabled by our strategy of category leadership, entry into higher adjacent growth markets and tuck in M&A. Total Company third quarter operational sales grew 10% versus 2020, while organic sales grew 11% versus 20, and 4% versus 2019. Just below our guidance of 12% to 14% versus 2020, as Delta impacted procedure volume globally. Despite the temporary impact of procedure volumes, we saw strength in new product launches, generated robust clinical evidence and executed broadly across the portfolio. Q3 adjusted EPS of $0.41 grew 10.5% versus 2020, and 4% versus 2019, reaching the high end of our Third Quarter guidance range of 39 to $0.41.

Adjusted operating margin at 25.6% continues to improve and was in line with our third quarter expectations. We continue to be pleased with our cash flow with third-quarter free cash flow generation of 360 million and adjusted free cash flow of 525 million. We're updating our fourth quarter and our full-year guidance ranges for both sales and EPS, which assumes some level of impact to procedures from COVID and staffing shortages. Compared to 2020, we target fourth-quarter of '21 organic revenue growth of 12% to 16% and full-year growth of 18% to 19%. Compared to 2019, we target Fourth Quarter 21 organic revenue growth of 4% to 8%. And for full-year organic revenue growth of 5% to 6% versus 2019. Our Fourth Quarter adjusted EPS estimate is $0.43 to $0.45.

And we're updating full-year adjusted EPS to a revised range of 160 to$62. Dan will provide more details on both sales and EPS performance and outlook, including the revenue contribution from our acquisitions this year. And I'll provide additional highlights in Q3 '21 results along with comments on our Fourth Quarter and '21 outlook. Within the regions on an operational basis Q3 2020, the U.S. grew 15%, Europe [Indiscernible] Africa grew 8%, Asia-Pac grew 8%, and the emerging market sales grew 18%. Operationally, despite the impact from Delta, EMEA delivered solid growth in third quarter across the majority of businesses and countries with notable strength in PI, EP and Endo, fueled by new and ongoing product launches like [Indiscernible] POLARx, and Axios.

We could [Indiscernible] Neo2 performance was strong utilization, driving double-digit growth for both -- versus both '20 and 2019. Asia - Pac was impacted by a pandemic related lock-down and parts of the region, though growth in China remained very strong. We're encouraged heading into Fourth Quarter in 2022 as countries within Asia - Pac are reopening as vaccination rates increase and COVID cases decline. Although Japan was in the state of emergency throughout Third Quarter, we're able to advance new product launches, achieving number one share position with our Ranger Drug-Coated Balloon, as well as launching POLARx in October.

China continues to deliver excellent results and sales grew 14% versus 2020. We continue to see momentum across the portfolio driven by complex PCI and imaging, as well as new product launches like Eluvia and Axios. Digital tools are also playing a role enabling virtual physician training and allowing us to expand our reach with differentiated products like IVUS. We continue to expect double-digit full-year 2021 growth from China versus both 2020 and 2019. I'll now provide some additional commentary on the business units. Urology and pelvic health sales grew 7% organically versus 2020, and the LUMENIS acquisition closed in September, which expands the Urology portfolio and stone offering to include the MOSES laser, which is complementary to the LithoVue single-use flexible urethra scope and our broad portfolio of disposables that support kidney stone removal.

The Prostate Health franchise grew double-digits with continued strength in our resume and space or businesses. And we're excited to initiate two trials in this space within the quarter. The global Sabre clinical trial, which will examine the effective of this spacer view and reducing late toxicity in patients receiving stereotactic body, radiotherapy treatment for prostate cancer, and the vapor trial which compares resume to dual drug therapy for VPH. Our electric procedures within the pelvic health portfolio were impacted by the third quarter surge in Delta. But historical growth trends have shown a quicker recovery as COVID surges wane. In endoscopy, sales grew 11% organically versus 2020.

Our market-leading global endoscopy portfolio continues to benefit from differentiated innovative technology launches, including Axios, resolution ultra, hemostasis clip, and single-use scopes. During the quarter EXALT D received FDA clearance and is now available in both U.S. and Europe with physicians are pleased with this image quality and selection capabilities. We continue to make progress with EXALT D, and they're launching the 1.5 enhanced EXALT D design, which features improved physician ergonomics. Additionally, we're pleased to have -- now have approximately 40% of ERCP procedures qualify for additional reimbursement with NTAP approval as of October 1st. In cardiac rhythm management organic sales were flat versus 2020.

SIDC -- SICD sales grew mid-single digits versus Q3 -19, supported by the launch of enhanced electrode. While of course here -- of course here on Third Quarter trends improved over first-half, '21 across both defib and pacer. We believe that growth likely lagged the market. Looking ahead, we anticipate stabilization across year and growth exiting 2021 into early 2022 supported by SICD and our differentiated hard logic offering. Within our diagnostics franchise our Luxe DX, implantable cardiac monitor, continues to gain share as physicians are pleased with the implant experience, technology, and remote programming capability.

Our preventice business remains on track to deliver plus 20% growth for the full year versus 2020 on a pro forma basis, fueled by the broad and differentiated ambulatory ECG portfolio. Electrophysiology organic sales were up 10% versus 2020 driven by strong international sales in both Europe and Japan. International growth was well above market driven by the innovative portfolio including POLARx and STABLEPOINT. POLARx is recently approved in Japan with the first cases occurring in October. In addition, the FROZEN-AF trial completed enrollment, which represents an important step in bringing POLARx to the U.S. with an expected launch in 2023.

We also closed our Farapulse acquisition in third quarter, which is the only commercially available PFA technology, and we're seeing a strong early usage in a limited number of launched accounts in Europe. Finally, we announced our acquisition of Valence Medical, further enabling our strategy of category leadership with a novel approach to left heart access. Within the U.S. the Baylis platform is used in close to 40% of EP ablation procedures on the left side of the heart. [ indiscernible] is used in left atrial appendage closure and mitral valve intervention. We expect to close this acquisition in first-quarter 2022. In neuromodulation organic revenue grew 2% versus 2020 as underlying procedure volumes was impacted by the Delta surge throughout much of the quarter.

Within our pain management franchise, we continue to see excitement for WaveWriter Alpha SCS system and differentiated fast algorithm, as well as our [Indiscernible] digital solution. Within deep brain stimulation, the majority of our accounts have transitioned to precise Genus. And we continue to drive new account openings as physicians are pleased with the integrated platform and personalize therapy. And last week, we received the approval for our essential tremor indication and are excited to begin a limited launch in Fourth Quarter 2021, which expand our addressable market by $2 billion. In Interventional Cardiology, organic sales grew 26% versus 2020, which includes a 1200 basis point tailwind related to the WATCHMAN consignment sales return reserve taken in Third Quarter of '20.

Our WATCHMAN franchise had another strong quarter of double-digit growth as physicians continue to be pleased with a next-generation flex performance and differentiated clinical data. This positive sentiment has been further supported by ongoing real-world clinical evidence presented HRS. Demonstrating a high rate of effective LAA closure and low rates of complications post procedure. We continue to innovate and are launching our fixed curve sheet, offering greater deployment control and ability to reach an expanded range of anatomies. We also anticipate enabling our U.S. label to include DAP, to support physician and patient choice in patient implant care by year-end.

And TAVR ACURATE Neo2 continues to do well with physicians pleased with this clinical performance and ease-of-use spec by strong real-world clinical data, resulting in approximately 20% market share in open accounts. Momentum continues with [indiscernible] our [Indiscernible] embolic protection device, which is exceeding 20% share in the U.S. where it's utilized. Coronary therapies grew 8% versus 2020 as the China DES tender impact begins to annualize in our portfolio mix shift into higher-growth markets continues to strengthen. We continue to see excellent growth and complex PCI and imaging being driven by [Indiscernible] and [Indiscernible].

We also just received the FDA clearance VIGU 2 our next-generation guidance platform. Purple interventions consisting delivers with organic sales up 8% versus Q3 2020. TheraSphere was a standout once again, and grew double-digits in the quarter with continued momentum for the positive IPOC trial. A first of its kind of our TheraSphere was studied, a second-line therapy with a primary endpoint of progression-free survival in patients with mCRC was met. Additionally, we've begun patient enrollment in the Mandarin trial, an important first step for bringing HCC treatment to China patients. An arterial or [Indiscernible] portfolio continues to perform well growing double-digits versus 2020, with positive late-breaking clinical data presented at VIVA earlier this month.

Eluvia, our drug [Indiscernible] exhibited superiority in eminent trial compared to bare-metal stents and two-year data for the range of two trial demonstrated continued high rates. Primary patency, and significant reduction in reinterventions with our Ranger DCB. In venous, we continue to push forward with our first patient enrolled in the HIFU trial. We also had late-breaking clinical data from the knockout P registry, presented a Veeva confirming the safety and efficacy of ecos. Building on our strategy of category leadership, we announced our acquisition of Devoro Medical and the Wolf Thrombectomy platform, which is an innovative technology designed to rapidly capture and extract blood clots in arterial and venous systems. While minimizing blood loss. We look forward to closing this acquisition at fourth quarter of '21.

More broadly, we're further in our commitment to sustainability, and I'm proud to report that Boston Scientific is joining the United Nations race to zero campaign. And since 2017, we've reduced the BSC carbon footprint by 50% and are on track to meet our goal to be carbon neutral and all manufacturing and key distribution sites by 2030. We're building on this foundation to establish ambitious, science-based targets, to set us on a path to net 0 emissions across our entire value chain. We are bullish about the future outlook of Boston Scientific. At our recent Investor Day, we detailed our LRP plans for growth of 68% growth. Operating margin expansion of 50 basis points or more each year, and double-digit adjusted EPS growth. Like to extend a big thank you to our employees for their contributions and winning spirit. Sorry. And I will now turn things over to Dan.

[Daniel Brennan]

Thanks, Mike. Third Quarter consolidated revenue of $2 billion represents 10.3% reported revenue growth versus the Third Quarter of 2020 and reflects a $17 million tailwind from foreign exchange. On an operational basis, revenue growth was 9.7% in the quarter. Sales from the acquisitions of Preventice, Farapulse, and Lumenis contributed 220 basis points, more than offset by the divestiture of Specialty Pharmaceuticals, resulting in 10.6% organic revenue growth, slightly below our guidance range of 12% to 14% growth versus 2020. Compared to the third quarter 2019, organic growth was 4.1% below our guidance range of 5% to 7%.

This 4.1% growth excludes $35 million in 2019 sales of divested intrauterine health, embolic beads and BTG Specialty Pharmaceuticals businesses, as well as $117 million in 2021 sales of acquired businesses, which consists of half a quarter BTG Interventional Medicine, a full quarter of preventice, and post-closed revenue from Farapulse and Lumenis. Spend controls and a favorable tax rate drove Q3 adjusted earnings per share of $0.41, representing 10.5% growth versus 2020, 4% growth versus 2019, and achieving the high end of our guidance range of $0.39 to $0.41. Adjusted gross margin for the third quarter was 70.6%, in line with our expectations.

We expect slight sequential improvements to continue in Q4 as some headwinds remain. In particular, the transient costs of [inidscernible] implants with COVID specific measures, increased freight costs, and some price pressures on direct materials and wages. Third Quarter adjusted operating margin was 25.6% again, in line with our expectations, driven by spend controls and lower travel offsetting the revenue headwinds. We're pleased with our trajectory and continue to target adjusted operating margin to average 26% for the second half of this year, on a GAAP basis operating margin was 13.2% and includes $128 million intangible asset impairment primarily related to Veneto, as we've made the decision to retire the VICI venous [Indiscernible] following our voluntary recall earlier this year.

Moving to below the line, adjusted interest and other expense totaled $104 million, again, in line with expectations. Our tax rate for the Third Quarter was 7.8% on an adjusted basis, favorable to our expectations driven by the geographic mix of earnings. We ended Q3 with 1,436,000,000 fully diluted weighted average shares outstanding. Adjusted free cash flow for the quarter was $525 million and free cash flow was $359 million with $465 million from operating activities, less 106 million net capital expenditures. Our goal remains to deliver adjusted free cash flow in line with 2020, approximately $2 billion, as we continue to expect increased working capital investments in inventory and accounts receivable during the remainder of 2021.

As of September 30, 2021, we had cash on hand of $1.9 billion. We continue to expect to close the acquisition of Devoro Medical in Q4 of this year and Baylis Medical Company in Q1 of 2022. Our top priority for capital remains tuck-in M&A and we'll continue to assess additional opportunities in conjunction with our financial goals. I'll now walk-through guidance for Fourth Quarter and full-year 2021. For the full year, we expect 2021 operational revenue growth to be in a range of 18% to 19% versus 2020, which includes an approximate net 30 basis points headwind from the divestiture of our Intrauterine Health Franchise and Specialty Pharmaceuticals, partially offset by the acquisitions of Preventice, Farapulse and Luminous.

Excluding the impact of closed acquisitions and divestitures, we expect full year organic revenue growth to be in a range of 18% to 19% versus 2020, and 5% to 6% versus 2019. For the organic comparison to 2019, full-year 2019 sales exclude $50 million in sales of our embolic bead’s portfolio and Intrauterine Health Franchise, as well as $81 million in Specialty Pharmaceutical sales, and at the midpoint of guidance, 2021 sales exclude approximately $530 million in sales from recent acquisitions, including. [Indiscernible] BTG Interventional Medicine through mid-August Preventice, Farapulse, and LUMENIS, as well as $13 million of specialty pharmaceutical sales prior to divestiture.

For the fourth quarter of 2021, we expect operational revenue growth to be in a range of 14 to 18% versus 2020, which includes an approximate net 180 basis point tailwind from the acquisitions of Preventice, Farapulse, and Lumenis, partially offset by the divestiture of Specialty Pharmaceutical. Excluding the impact of acquisitions and divestitures, we expect Q4 organic revenue growth to be in a range of 12% to 16% versus 2020, and 4% to 8% growth versus 2019. For the Q4 organic comparison to 2019, 2019 sales exclude $67 million in sales of our divested intrauterine health and Specialty Pharmaceuticals businesses. And at the mid-point of guidance, 2021 sales exclude approximately 90 million in sales from the acquisition of Preventice, Farapulse and Luminous.

We continue to expect adjusted below the line expansion, which include interest payments, dilution from our VC portfolio, and costs associated with our hedging program to be approximately 400 to $425 million for the year. Based on year-to-date favorability, we now forecast our full year 2021 operational tax rate to be approximately 10% and our adjusted tax rate to be approximately 9%. We expect fully diluted weighted average share count of approximately 1.439 million, shares for Q4 2021, and 1.434 billion shares for the full-year 2021. We are narrowing the range for full-year 2021 adjusted earnings per share guidance to $1.60 to $1.62, which includes our update to sales guidance and considers Q3 performing at the high end of our guidance range.

For the fourth quarter, adjusted earnings per share is expected to be in a range of $0.43 to $0.45. Please check our Investor Relations website for Q3 2021 financial and operational highlights, which outlines more detailed Q3 results. With that, I'll turn it back to Lauren and we'll moderate the Q&A.

[Lauren Tengler, Vice President, Investor Relations]

Thanks, Dan. Andrew, let's open it up to questions for the next 35 minutes or so. In order to enable us to take as many questions as possible, please limit yourself to one question and one related follow-up. Andrew, please go ahead.

[Operator]

Thank you. We will now begin the question-and-answer session. Operator Instructions] Operator instructions] The first question comes from Bob Hopkins of Bank of America. Please go ahead.

[Bob Hopkins, Bank of America]

Hi, thank you. And can you hear me okay?

[Michael Mahoney, Chairman and Chief Executive Officer]

Good morning, Bob. Very fine, Bob.

[Bob Hopkins, Bank of America]

Greg, good morning. Thank you. So first question is pretty straightforward. I'm just curious how your thoughts on Q4 have evolved since the Analyst Day and what you're seeing today in terms of procedure volumes, especially in the U.S.

[Michael Mahoney, Chairman and Chief Executive Officer]

Sure. Good morning, Bob.

[Bob Hopkins, Bank of America]

Morning.

[Michael Mahoney, Chairman and Chief Executive Officer]

As you saw, with some other peers in the third quarter, July was pretty good and then we saw a slowdown, but a largest slowdown anticipated August and September. And I would say the last few weeks of September, you have certainly improved verus that August, early September trend. And we provided our Fourth Quarter sales guidance here. Overall, clearly, when you travel outside of the U.S., the vaccination rates are improving in the western countries, Japan, South Korea, Australia. Vaccination rates are improving in Europe. And with the vaccination status this year.

So overall we are more optimistic about the improved growth in fourth quarter versus third quarter based on the improved vaccination rates. Although we do expect COVID still to be a bit spotty, we also, we also highlighted some of the staffing challenges. So overall, based on the guidance, we do anticipate an improved fourth quarter versus third quarter but we're still guarded given the staffing challenges to some locations and COVID.

[Bob Hopkins, Bank of America]

Makes sense. And then just one quick follow-up on that, and I guess taking a step back, one of the things that's giving a lot of med tech investors pause right is now is just a sheer number of macro issues to think through from staffing, the COVID ways, to supply chain, to inflation, and that's before we even start to look at Company fundamentals. I guess one big picture question I'll ask you, Mike is -- all that's making it hard for investors to know how to think about modeling for the next 12 months. And so just would love your top down thoughts on the ability of Boston to deliver over the next 12 months given all these headwinds, not asking for specific quantification of things, but just your ability to manage through all these headwinds.

[Michael Mahoney, Chairman and Chief Executive Officer]

If you think about that, you take a step back and look at third quarter and that's why I started that my script on that I'm really proud of the team's global execution. Because you think about it, we went through a Delta surge in the third quarter, which was bigger than most anybody anticipated. And we grew 11% versus 20, and 4% versus 19, 4% is not a great number, but it's not a bad number. Growing 4% given the Delta surge.

And during that time, we had nice improvement in and income margin, despite some of the supply chain headwinds that everyone is familiar with. And we delivered our EPS growth. So in a quarter where Delta surged, we grew top line fairly well. Clearly not where we want it to be in normal situations, but we improved margins and we hit EPS. And in the third quarter we have all those macro issues you talked about. But we do anticipate moving forward that -- the impact on COVID on the Company, as -- when the surges, has decreased upon each surge. So every time there's been a Delta surge, the performance, although not where we want it to be, has been better each time. and so that shows the hospital's ability to manage COVID.

One great thing about our portfolio which was for primarily Interventional Medicine Company, and I was that a couple of sites just yesterday and they are doing 80% of their Watchman volume outpatient now. So you've seen a dramatic shift in Watchman, for example, outpatient procedure. I think our portfolio has tailwinds that support productivity for hospitals. Hospitals have shown the ability to execute despite surges. And in the quarter where about every macro issue was thrown on top of the Company, I think the performance is quite good.

[Bob Hopkins, Bank of America]

Great. Appreciate the thoughts. Thank you.

[Operator]

The next question comes from Robbie Marcus with JPMorgan. Please go ahead.

[Robbie Marcus, JPMorgan]

Yes. Great. Thanks for taking the questions. Maybe shifting over to some of the businesses. Love to get a sense of what you're seeing out in the field. I know it's early, but you have some competition coming from WATCHMAN. I would love to hear what you are seeing there and just how you feel about your positioning and how we should be thinking about trialing of competitive products in the near term.

[Michael Mahoney, Chairman and Chief Executive Officer]

Hey, Robbie, Good morning. Clearly, the competition will have some trialing benefit, but I would say I've been in the field extensively in Europe last week and as well as US this week and probably never been more enthusiastic about the future of WATCHMAN. Based -- I made a comment earlier about the procedural trends, how efficient that procedures being done with the WATCHMAN FLX. Every doctor that we speak -- that I've spoken with, which is quite a few in our field, doctors that have transitioned, which 99.9% of them have, from Mainland 2.-- from 2.5 to

Watchman FLX, have increased utilization significantly and they've done that because of the safety profile of the device and the outcomes that they're getting. And then you see, right now we have some additional product enhancements being launched with the delivery catheter, and we have a cadence of additional platforms being developed for the next two years as well as expanding clinical outcomes. So the growth in Watchman was excellent in the third quarter. And we think it will be a critical growth driver moving forward, and we have a lot of confidence in our ability to maintain a clear leadership position here.

[Robbie Marcus, JPMorgan]

Great. And maybe just on the other side of the house, yourself have several new disposable scopes launching. I know it was a tough environment over the past 12 plus months. Again, to hospitals instead of accounts, but maybe just the latest update on where you were in third quarter and where you think you'll be in fourth quarter with those launches, and the environment, and receptivity so far. Thanks.

[Michael Mahoney, Chairman and Chief Executive Officer]

Yeah, I would say an EXALT D, it's commentary somewhere to previous calls where we continue to chip away at it, I would say. We're making progress primarily in the U.S. with capital placements utilization continues to improve, and importantly we had an additional launch this quarter, the 1.5 EXALT D, which will address some ease-of-use enhancements in the platform which doctors are anxious for us. I think that'll help and it will be a nice growth driver for Endo in 2022, I would say coming out of the quarter we're more bullish on EXALT B, I would say. The performance of that platform is quite good in terms of its section capability, and our team is ramping up supply chain manufacturing capabilities to enhance supply for EXALT B in 2022. So the combination will continue to, along with Axios and a lot of other products in Endo, continue to drive Endo to be nicely creative to the Company going forward here.

[Robbie Marcus, JPMorgan]

Great, thanks for taking the questions.

[Operator]

The next question comes from Joanne Wuensch of Citi. Please go ahead.

[Joanne Wuensch, Citi]

Good morning and thank you for taking the question. For the fourth-quarter there's somewhat larger range than usual of 12% to 16%. I'm a little bit curious what takes you to the bottom end versus the top end, and I'd like to confirm that the FLX exceeded $1.62 for the year, assumes the higher-end, that's a full-year guidance.

[Daniel Brennan]

Just that second question is the EPS range is $1.60 to $1.62. What's the question on that one, Joanne?

[Joanne Wuensch, Citi]

Does that assume the higher or the end of the guidance, the midrange of the guidance, I thought I had heard higher.

[Daniel Brennan]

I don't think it assumes that we're within the 4 to 8% range versus 2019 and the 12 to 16% range versus 2020 in the fourth quarter for sale.

[Joanne Wuensch, Citi]

Thank you for that clarity. And for the fourth quarter? What takes you the top end versus the bottom end?

[Daniel Brennan]

As we saw in the third quarter, it's a little bit larger range than we're used to. But just as Mike detailed, the uncertainties around COVID and staffing shortages and where we are, I think just provides for a larger range in the quarter. Again, 4 to 8, we think at any point in that range is a good, is good growth versus 2019 and 12 to 16 versus 2020. But just given the uncertainty feels appropriate to have a little bit larger range for the fourth quarter.

[Joanne Wuensch, Citi]

Okay, thanks. And then follow-up question on products. Can you just give us an idea of what you're seeing in neuromod from a competitive landscape point of view? Thank you.

[Michael Mahoney, Chairman and Chief Executive Officer]

Yes, it's a market where there's a lot of innovation and there's number of competitors that I think we haven't all -- we haven't had all the competitor's report, but based on what we've seen so far, we think we gained share so far based on the competition that's reported. Based on the -- really the platform that we recently launched with a fast algorithm. And the Cognito Practice Management software application that we also use as part of our system. So I think it's a dynamic market where there's a lot of new product enhancements. But I think our team in Valencia neuromod businesses.

We think best-in-breed in terms of innovation. Almost all of their innovations come internally, whether it'd be DBS or SCS and they always have a pretty strong impressive cadence of new launches every 18 months. So I'd put our team against anybody in SCS and at least so far in the third quarter, we gained share in this fast algorithm has just in its early days of launching. Truly the business has, you know, Joanne has been impacted by COVID. Urology and neuromod businesses are the two businesses that are the most sensitive surges and the most responsive when COVID wanes.

And so hopefully as the COVID trends will continue globally, and you'll see improvement in both urology and neuromod in fourth quarter as COVID continues to stabilize. So that's been a business that's been challenged during COVID, as have our competitors, but we expect that business to improve quite a bit as COVID improves.

[Joanne Wuensch, Citi]

Excellent. Thank you so much.

[Operator]

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

[Frederick Wise, Stifel]

Good morning, Mike. Hi, Dan. Was hoping to get just a big picture question. We're talking about the pressures of COVID. But on the other hand, I continue to read reports about patient backlogs. I read a report yesterday, a large hospital center in Maine has a backlog of 1,500 procedures is waiting to be addressed. How are you all seeing the backlog situation for your broader procedures? How are you dialing that in, not just for the fourth-quarter, but how do we think about it impacting -- how are you thinking about it impacting next year that idea that there's growing backlogs everywhere in the world probably?

[Michael Mahoney, Chairman and Chief Executive Officer]

Yes. So good morning, Rick. So we're obviously we haven't -- we're not going to give our guidance for 2022 yet. We'll hold off a few more months, but our LRP goals are 6% to 8% organic. We'll likely have an organic comp of 5-6 going into it versus '19 and a figure conference in 2020. But anyway, so I mean, overall, you'd like to be optimistic because you think COVID impact will be less in '22 than it is in '21 based on the vaccination rates and the improvement in Asia, Europe, and hopefully the US as well, so we'd like to see 2022 at better COVID environment.

The staffing shortages are a bit of a challenge, but the hospitals do hustle and they figure out ways to get things done, but it does create a bit of a headwind but after COVID should be better. And the backlog, you do see a backlog at some of our procedures, you see a WATCHMAN backlog, and then other areas. So overall, I hope I think the macro trends should point to better in '22 versus what we've seen in '21, given the vaccination rates broadly.

[Frederick Wise, Stifel]

Got you. And just maybe one product question. You highlighted that on the DBS side, you're opening new accounts and obviously the essential tremor indication opens up a new opportunity. Can you give us a little more color on both those just, where do you think you are in terms of opening new accounts? What do we expect? Is that going to accelerate? And how are you going to get after, maybe you can give us a little more color on how you're going to get after that essential tremor indication?

[Michael Mahoney, Chairman and Chief Executive Officer]

Sure. It's a nice new indication for us as DBS is a nice growing market, it's still very under-penetrated. It's a market that does well when COVID wanes and market that does not do well when COVID surges. So hopefully you will see a improvement in fourth quarter across-the-board in the market and particularly with us. And at '22 as COVID improves, but it doesn't do well when COVID surges because of the duration of the procedure time, and the fact that it typically can be deferred a few months, back to your backlog question. On the business itself, they've done an amazing job.

We weren't a player at all six, seven years ago, and now we're the number on Denovo market share leader in Europe. I would say we're probably likely tied for number one on Denovo market share in the U.S. And the team continues to add sales and commercial resources. And the new indication obviously will help that business in 2022, now that we have -- now [indiscernible]It's a similar call point, similar physician, the same commercial team that we have. It's almost like adjacency for us with the same physician and the same sales rep. So it should help the business in 2022. And again, I might -- I don't think I'm too optimistic, but I'm assuming COVID is broadly better in '22 versus '21, so it'll help the neuromod DBS business.

[Frederick Wise, Stifel]

Thanks Mike.

[Operator]

The next question comes from Larry Biegelsen with Wells Fargo, please go ahead.

[Larry Biegelsen, Wells Fargo]

Good morning. Thanks for taking the question. One on Watchman, one for Dan on the P and L. So on Watchman, I'd love to hear from Dr. Steiner, Dr. Meredith, kind of what the counter strategy and counter messages are for Amulet, if there's a doctor who is considerably using it. What data are you pointing to? We have our doctors are very satisfied with Flex, but I'm just curious what you would say to a doctor who's considering using Amulet and then one follow-up.

[Ian Meredith]

We can start and then Ken can follow. First of all, as Mike alluded to earlier, one of the important features of Watchman FLX is the ease-of-use, the rounded-bowl design, the proven safety of the device. So of course, physicians will trial new devices. But the support we have in terms of education and training, the ease-of-use of the device, the safety profile, and the excellent outcomes with Savi. Saying is really driving the continued use and loyalty to Watchman FLX. I think it's also important Larry, as you know it to highlight that what we like about the Amulet IDE trial is it's just another large trial.

It's provided evidence for Left Atrial Appendage Closure in the context of increased ischemic risk patients in the setting of atrial fibrillation. So that's going to grow the entire market. This is a big piece of evidence that basically says if you're in increased risk of stroke in the setting of atrial fibrillation, we've got two devices that were equally efficacious. Of course, it was very, very focused on the first-generation device, Ken.

[Kenneth Stein]

Yes, no, thanks. We are very -- again, reiterate what Ian said. First off, the annual IDE shows everyone again more data that just as a therapy left atrial appendage inclusion is safe and effective and it's a fantastic alternative for patients who need that kind of therapy. And then that trial left against our last generation device, a generation that's no longer sold in the U.S. and showed non-inferiority for safety and efficacy but a higher rate of procedural complications. If it were me, I know which device I don't want to have.

[Larry Biegelsen, Wells Fargo]

That's very helpful. And Dan, looking at 2022, the streets at about 16% EPS growth, anything you'd call out that the street's missing. And how should we think about the tax rate next year, excluding a potential increase in corporate tax rate? Thanks for taking the question.

[Daniel Brennan]

Sure. I think as per usual, I think you're going to have to wait for our guidance until our Q4 call, so I wouldn't necessarily point to anything in 2022. You heard our long-term goals at Investor Day, but we'll hold off on guidance until we have our Q4 call in February.

[Larry Biegelsen, Wells Fargo]

Fair enough. Thanks.

[Operator]

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

[Vijay Kumar, Evercore ISI]

Hey guys, thanks for taking my question. I had 2, 1 in Watchman and 1 in the tax rate, and I'll ask them both upfront. Mike, on Watchman, we understand the market is under-penetrated and should expand massively given the amount of clinical data. But in the context of staffing challenges, code, and my understanding that there are limited number of centers who can do these kinds of structural heart procedures. How should we think about market expansion versus -- is that going to accelerate in this current environment, given the challenges? And you have a second player coming in. I would love your thoughts on market expansion versus competition. In untaxed, Dan, is the corporate tax reform, what kind of impact should we assume? Thank you.

[Daniel Brennan]

Hi, Vijay. Yeah. To be honest, we're extremely confident about WATCHMAN going into Fourth Quarter and full-year 22 that I made a few comments before that. First of all, WATCHMAN, the clinical results for WATCHMAN FLX are extraordinarily good and doctors have tremendous confidence in the platform and they've been using it for about a year. And your average doctor is increasing their utilization of WATCHMAN every quarter because of the confidence that they have and the referring physician community is seeing their patients recover and get off of blood thinners, and reduce the risk of stroke.

So it's expanding the awareness when you're referring physician community, the GI community, the neuro community. So there's a lot of momentum there. And the other important thing I mentioned that productivity, even in COVID. You have hospitals dramatically moving Watchman, limiting anesthesia. Using ICE imaging, and doing procedures that are very, very efficient. In many cases, less than an hour. And economics of Watchman now are quite good across the U.S. So there's always headwinds and tailwinds across a diversified portfolio. But the tailwinds from reimbursement, procedural efficiency, clinical outcomes, new clinical data, product cadence are very, very positive with Watchman.

[Daniel Brennan]

And then on the tax rate, Vijay, as you'd expect, we're following the development of the legislation closely. I would say all of it is still a work in progress. As you see, there's a lot of negotiating of outcomes still going on. And as usual, we'll provide guidance on our Q4 call in February.

[Vijay Kumar, Evercore ISI]

Thanks, guys.

[Operator]

The next question comes from Danielle Antalffy of SVB Leerink. Please go ahead.

[Danielle Antalffy, SVB Leerink]

Good morning, everyone. Thank you so much for taking the question. Mike, I appreciate all the commentary on COVID and improving and we're all in the same boat we hope it's better heading into next year. But just the new dynamic here is the hospital labor shortage. And I'm just curious sort of how you as a Company are helping hospitals manage through that? What you're seeing hospitals do to adapt, to be able to continue to get patients through the system and treated. Given the labor shortages which, that to me, seems like a tougher nut to crack as far as when that will resolve -- it feels like that's not something that can fix itself over overnight. So would just love some commentary there.

[Michael Mahoney, Chairman and Chief Executive Officer]

Sure. I've been in the field a lot recently and it is an issue for hospital CEOs has no doubt about it. They've had to increase their wages and labor force expenses to accommodate increasing wages for nurses and staff and so forth. So they're doing a -- they're working through that process. But it's not going to be a short-term issue, but hospitals are pretty resilient. And as you know, a couple of things I would say that point specific to BSC and how that's changing is, just the use of telehealth, and telemedicine, and pre -screening for patients has become very widespread and very efficient [indiscernible] That reduces down significantly the number of patient visits to the hospital, drives more efficiency and staff productivity.

So I think you're going to continue to see that trend continue to increase. Another one more specific to Boston is what I mentioned before is we're not a surgery Company, so we're not driving multi-day length of stays in a hospital. The portfolio shift, the shift to Interventional Medicine is helpful for hospitals and it gets patients in and out of the clinic or outpatient setting typically in the same day. And you see more of our complex procedures because of the capabilities and the technology we have augmented by imaging moved to more outpatient settings.

And I made the comment on Watchman, how that mix shift has moved more and more to same-day procedures. So I think a combination of telehealth, combination of outpatient orientation, and same-day procedures is very helpful for our product mix. And hospitals, just like anybody else, they innovate and they find a way. So it is a headwind, but it's in the quarter here where we had staffing shortages and at surge. We grew okay. And I think the surges will calm and the staffing shorter will likely linger a bit. But hospitals are pretty resilient in figuring out ways to drive volume.

[Danielle Antalffy, SVB Leerink]

That's it for me. That was very helpful. Thank you.

[Operator]

The next question comes from Matthew O'Brien with Piper Sandler. Please go ahead.

[Matthew O’brien]

Good morning. Thanks for taking the questions. Mike, as I look across the portfolio, I think a lot of things held up better than I might have expected going into Q3 with all these COVID headwinds. With TheraSphere doing better and peripheral and prevent assuming to hold up CRM and WATCHMAN obviously doing well even when netting out the reserve tailwind. So what I'm curious about is what you're seeing in non COVID geographies as far as the momentum in those businesses? Are you taking share with some of these new products? Are you seeing accelerating momentum with some of these new categories? And why wouldn't that accelerate coming out of COVID just given some of the underlying strength that I think it's there?

[Michael Mahoney, Chairman and Chief Executive Officer]

Yeah, I think it should accelerate in the less COVID impacted year for sure. You hit a number of the highlights. Our PI business has been very resilient it drives, consistent high-performance. We're the number one DCB player now in Japan, that team's done a great job with that launch. And the TheraSphere platform continues to do extremely well. And you saw that clinical data, so that division continues to do very well. Endo I would put them despite COVID, grew 8% versus 19% in the quarter. And the number of new product launches, Uro has been impacted by COVID, but that typically bounces back when COVID improves.

And we've a lot of commentary in WATCHMAN today. We saw strong EP growth in Europe. It continues to lag in the U.S. but the EP momentum we see in Europe and Japan is very encouraging based on the - on our CRYO capabilities as well as the early insights into the Farapulse. I don't know if I answered your question, but I actually, as I said in the call, I'm really pleased with the quarter, given the macro headwinds that the Company faced.

[Matthew O’brien]

That's helpful. And as the follow-up on the acquisition side, can you just talk a little bit about the plans for Devoro maybe over the next couple of years and then Baylis, I think you said 40% of all your cases with interventional cardiologists, of those cases are EP crossings, what can you do from the Atrial Appendage Closure mitral valve perspective as we look out over the next couple of years.

[Kenneth Stein]

And maybe -- this is Ken, I'll start first with the Baylis. So you're right, we do see that the Baylis technologies in the U.S. is used, in around 40%, as EP ablation procedures on that side of the heart. And at least that in structural heart left atrial procedures like WATCHMAN or mitral valve interventions. It's one of the great things to us for that potential acquisition because of the synergies it provides across our entire portfolio of left atrial procedures. And just getting back to maybe some of the earlier questions. I mean, one of the advantages of it right? Anything that makes our procedures safer, more predictable and more efficient. It's just increasingly important in this pandemic and hopefully eventually a post-pandemic environment.

[Matthew O’brien]

Just real quick on Devoro, thanks.

[Michael Mahoney, Chairman and Chief Executive Officer]

Devoro hasn't closed yet, it'll close hopefully fourth-quarter, I guess, right --pretty soon here. So we're -- we think it's a perfect fit for the PI portfolio. We have a lot of strength in our arterial business with our Eluvia and DCB. Our Interventional Oncology business has been a very strong grower for many quarters in a row and you saw the data coming out of our TheraSphere business. And we're doing a lot of work in the venous area with ecos with clinical trial, but there are a few product segments where we have gaps and Devoro does fill those.

So that we made an early investment in Devoro a number of years ago, because we'd like their technology, we liked their leadership team. And sure enough, they delivered quite well. And so we acquired them, but it's still early stage product, still an early-stage Company. So we aimed to have, Lauren, I'm not exactly sure what we've communicated in '22 in terms of product economies.

[Lauren Tengler, Vice President, Investor Relations]

Second-half launch.

[Michael Mahoney, Chairman and Chief Executive Officer]

Second-half launch.

[Lauren Tengler, Vice President, Investor Relations]

Yeah.

[Michael Mahoney, Chairman and Chief Executive Officer]

Okay. So you'll see second half '22 impact with product approvals and product launched, and we're excited about bringing that in.

[Matthew O’brien]

Got it. Thank you.

[Operator]

The next question comes from Anthony Petrone with Jefferies. Please go ahead.

[Anthony Petronep]

Thanks, I have a two-part question. One's high level and one's on Watchman. High level, I guess, can you recap in the Company did a good job in the midst of the pandemic, what percent of the overall portfolio is linked to non-urgent elective procedures versus critical? And so maybe another way of asking, when we look into '22, what percent of the business could potentially see a tailwind, would potentially can face a headwind? And then on watchman, maybe just high level on how we see shares trending over time.

Is this potentially a 70% Boston market, 30% Abbott. And that takes into consideration the different designs out of the gate. Just curious to hear comments on the differences in targeting different size anatomies? And potentially the limitation from competition? And having a complete left appendage closure, immediately post-surgery, is that limiting for any follow-up surgeries? Thanks.

[Daniel Brennan]

Anthony, I can take the one on the relative level of acuity of the procedures and the short answer is it varies by business. If you look at cardiology and you look at peripheral, you look at cardiac rhythm management, those have held on and we're actually getting pretty good at this now, at the number of waves we've had relative to COVID, those are much more emergent and hold up better. Mike mentioned this earlier that businesses like neuromodulation and neurology, they come down very quickly in a COVID wave. The good news is they come back very quickly. So it's kind of a V-shaped curve for those businesses.

They obviously don't perform as well in a COVID setting, but they come back very nicely on the other side. So it's really -- there's not really one number you can point to for the whole Company and pinpoint it, it varies by business, but I think we've proven and have a good track record in a non - COVID environment that the business performs very well. And as Mike 's comments preclude that's a real looking forward to in '22 and beyond.

[Kenneth Stein]

And Anthony on Watchman. Again, I'd just have to come back to the Amulet IDE trial, compared that device to our last-generation Watchman device. And the Watchman FLX device, which is now the device that we commercialize in the United States is really set the standard for safety and for efficacy. And just remind everyone our clinical flex trial results with Watchman FLX show

[Kenneth Stein]

less than 1% procedural safety events, no pericardial infusions in that trial through 7 days, no device embolization, and 100% effective Left Atrial Appendage Closure. I don't think there's anything else out there that approaches those numbers. So as Mike said, as Ian said, we remain highly bullish and highly confident in the continued success of Watchman.

[Lauren Tengler, Vice President, Investor Relations]

Thank you, Dr. Stein. With that, we'd like to conclude this call. Thanks for joining us today. We appreciate your interest in Boston Scientific. Before you disconnect, Andrew will give you the pertinent details for the replay.

[Operator]

Thank you. Again, this concludes today's conference call. The replay for this call may be accessed in one hour until November 3rd, 2021 by [ Operator Instructions]. Again, 101-602-03. Thank you. You may disconnect your line.