Boston Scientific Corp (BSX) 0 Q0 法說會逐字稿

Ladies and gentlemen, thank you very much for standing by.

We do appreciate your patience today, and good morning.

Welcome to the second-quarter Boston Scientific earnings results conference call.

At this point, we do have all of your phone lines muted or in a listen-only mode.

However, after the executive panel's presentation today, there will be opportunities for your questions, and those instructions will be given at that time. (OPERATOR INSTRUCTIONS).

As a reminder, this quarter's conference is being recorded for replay purposes, and that information will be announced at the conclusion of our conference.

So, with that being said, let's get right to this quarter's agenda.

Here with the opening remarks is Boston Scientific Corporation's Chief Financial Officer, Mr. Larry Best.

Please go ahead, sir.

Good morning, and thank you for joining us for our update on the second quarter of 2005.

With us today is our Chief Executive Officer, Jim Tobin; our Chief Operating Officer, Paul LaViolette; and Steve Moreci, Head of our Endosurgery Group.

And we will be covering the results of the quarter and then opening it up for any questions you may have.

Before we begin, let me turn it over to Paul Donovan, our Head of Corporate Communications at Boston Scientific, for the reading of the Safe Harbor clause.

Thank you, Larry.

This conference call contains forward-looking statements.

The Company wishes to caution the listener that actual results may differ from those discussed in the forward-looking statements and may be adversely affected by, among other things, risks associated with new product development and introduction, clinical trials, regulatory approvals, competitive offerings, intellectual property, litigation, the Company's overall business strategy and other factors described in the Company's filings with the Securities and Exchange Commission.

Thank you, Paul.

Let me begin with the results themselves, and then I will provide some additional detail regarding the second quarter.

Then I will turn it over to Paul LaViolette for his comments on the cardiovascular business, as well as the global business and ask Steve Moreci, then, to comment on the Endosurgery Group.

And then we will ask Jim Tobin to provide the CEO perspective.

Net sales for the second quarter came in at $1,617,000,000 as compared to 1,460,000,000 for the second quarter of 2004, an increase of 11%.

If you take out the favorable impact of $26 million of foreign currency fluctuations, the net sales increased 9%.

The worldwide coronary stent sales for the second quarter were $700 million, as compared to 652 million in the second quarter of 2004, an increase of 7%.

Worldwide sales of our TAXUS paclitaxel-eluting coronary stent systems were 663 million, an increase of 11%.

US sales of TAXUS Express stent systems were 467 million.

Net income for the quarter, excluding net special charges, increased 7% to 404 million or $0.48 per share, as compared to 377 million or $0.44 per share in the second quarter of 2004.

Reported net income for the quarter, including net special charges, was 205 million or $0.24 per share.

The net special charges for the quarter consisted principally of purchased in-process research and development costs related to the acquisitions of TriVascular, Inc., CryoVascular Systems, Inc. and Rubicon Medical Corporation in the quarter.

Let me provide some highlights or overview of the worldwide sales picture.

Overall, we saw good double-digit growth on a worldwide basis, coming in 11% topline growth, on a constant currency 9%.

That's broken down by geography as follows.

Our domestic business grew 5%, and of course this is the first quarter we had TAXUS for a full year, so it's truly apples-to-apples.

And Paul LaViolette will talk about our leadership in that particular market, but overall that weighted down and offset some of the double-digit growth of the other divisions at Boston Scientific.

However, international was a standout in the quarter.

Our international business -- and keep in mind this is clearly apples-to-apples, this is real growth -- came in at 21% growth overall on an as-reported basis or 16% on a constant currency basis.

So we were very pleased with the strength of international.

Europe -- the European business grew 26% as reported, 21% constant currency.

Our intercontinental business grew 44% as reported, 35% constant currency.

And of course, Japan was flattish, still waiting for TAXUS to be approved and launched in Japan.

But overall, very pleased with the international business; it is coming along at double digits and most of the divisions are growing double digits in the international markets.

Let me go to the divisional breakdown.

On a worldwide basis, our Cardiovascular business on a worldwide basis came in at 7% growth, 5% constant currency.

And if you include the group and you had add in Electrophysiology and our Neurovascular business, the growth rates did not change, even though Neurovascular did grow 13% in the quarter on a reported basis.

So our Cardiovascular group worldwide came in 7% reported, 5% constant currency.

Really great news on the Endosurgery Group.

We saw strong double-digit growth across all of our divisions, and we were pleased to see especially our Endoscopy Group come back and deliver up good, solid double-digit growth.

Overall, our Oncology Division grew 16% as reported, 12% constant currency.

Our G.I./Endoscopy business came in at 13% reported, 12% constant currency, so real solid double-digit growth.

And Urology really had wonderful growth, 27% topline growth on a reported basis and 27% on a constant currency basis.

Overall, our Endosurgery group grew 17% reported, 15% constant currency.

So the two standouts, if you will, on the sales line in the quarter was our international businesses and then, broken down by division, it was our Endosurgery Group that really delivered strong double-digit growth.

And we continued, obviously, to hold our leadership position in drug-eluting stents, and Paul will comment on that momentarily.

If we go and, just for a minute, focus on the strength of our international business, in international, both our Cardiovascular Group and our Endosurgery Group grew 20%-plus.

Cardiovascular grew 20% topline; our Neurovascular business grew 14%;

Oncology, 11% internationally;

Endoscopy, 22%;

Urology, 29%.

So both groups and the components of both groups grew handsomely in the international markets in the second quarter.

Moving on to our domestic business, it goes without saying the weight was in the domestic business with TAXUS in for the full year.

So we saw flattish results in our Cardiovascular group on a domestic basis.

On our Endosurgery group, we did see double digits, 14% growth in the United States coming from the Endosurgery group.

So we were pleased to see strong results from that group.

And our neuromodulation Advanced Bionics team came in at 25 million domestically, so they have a US-based business now at $100 million plus run rate, and we are pleased to see that progress.

I won't go into any more detail on the coronary stent market, because Paul will address that.

If we look at the financial results for the quarter, let me try to take you through how that rolls up.

We start with a Boston Scientific worldwide business prior to the inclusion of Advanced Bionics, which was a recent acquisition, was really not in the numbers last year.

So if you look at our base business, excluding Advanced Bionics and any new acquisitions, we came in with a $0.52 per share EPS, 1.584 sales and a 28% net margin.

If you add Advanced Bionics, which joined the Company just about a year ago, you have on the EPS line a 3% dilutive factor.

Top line was 33 million.

EPS was diluted by $0.03 a share.

So if you take that base business I just talked about, excluding Advanced Bionics a year ago, you come in at $0.52 a share minus the $0.03 dilution from Advanced Bionics, and it gives you an adjusted base of $0.49 a share.

And then, during the quarter, we made three acquisitions and took on that spend, and that was another $0.01 dilutive, and that gets you to the $0.48 per share and the $1.6 billion top line.

We also had special charges in the quarter related to our three acquisitions -- again, TriVascular, Rubicon and CryoVascular.

And that was an over $200 million special charge for purchased R&D in the quarter, and that was $0.24 a share, and that gets you to the reported amount.

Just highlighting on the P&L, we grew 11% top line.

Our gross margins continued to be very strong at 78% relative to last year; it was 75%.

We did spend on the SG&A line and the R&D line;

SG&A grew 21%, R&D grew 26%.

And Paul and Jim will comment on our spending strategy at SG&A line and in the R&D line.

However, even with the increased SG&A and R&D in the quarter, our operating income came in at 34% of sales, so very strong operating income.

And our net margin came in at 25% of sales, again very strong results at the net margin line.

And then, just briefly, the results that I just outlined for the quarter were in line with the guidance we provided in May.

Our range in May was roughly 1 billion 570 to 1 billion 626.

We came in at 1 billion 617, at the high range of the guidance.

And on the EPS, we guided in May $0.45 to $0.50 a share; we came in at $0.48 a share.

Just briefly looking at the rest of the year and the outlook for the year, our guidance remains intact.

There is no change in guidance.

We still are suggesting that our topline will come in between what we guided in May, which is 6 billion 350 to 6 billion 570.

And right now, we feel we can come very close to 6.5 billion for the year.

And on the EPS line, our guidance was $1.85 to $2, and we hope to be in the high of that range, as it looks right now.

So for the second half, we expect to be within the range of the previously provided guidance.

And that goes also to our coronary stent projections.

Our drug-eluting stents for the year that we gave in May was 2.7 billion to 2.9 billion, and we expect to exceed 2.8 billion in overall coronary stent sales for 2005.

So that gives you a bit of an update on our guidance.

With regards to our balance sheet, we continue to have a very strong balance sheet.

We did spend a lot of money on buyback of shares during the second quarter.

I think, year to date, we are well over 600 million;

I think it's 660 million in dollars spent for buyback.

In the quarter we spent around 420 million, and we will re-enter the market next week, and we will be back in the market buying shares, assuming the valuation is in the range that it is today.

With that, let me turn it over to Paul LaViolette to give you his commentary on the quarter and the global outlook.

Thank you, Larry.

We are pleased to have completed what we consider to be a very solid second quarter overall including, obviously, TAXUS drug-eluting stent sales both in the US and internationally, and I will comment on that.

You have heard the numbers from Larry.

We are very pleased that TAXUS sales were within the range that we provided at our analyst meeting at the PCR in May -- total worldwide stents growing 7%, worldwide drug-eluting stents growing double digits at 11%, obviously absent our access to the Japan market.

And that's a $66 million increase over the prior year's second quarter.

In the US specifically, our market position concluded for the full second quarter in that 60% range, 59% to 60%, which was very much in line with, really, the exit rate after the first quarter and our entry into the second quarter.

Post ACC, we did dip down slightly, and it is really quite clear that from beginning to end of the second quarter, we actually had either very steady or slightly up share of physicians in the United States.

In the market overall for the US, the second quarter showed perhaps 1 to 2 points of increased penetration, actually approaching 89%.

We think, by the exit of the second quarter, probably 88% across the board, so that was a few percentage points higher than in the first quarter.

We also saw very much consistent pricing trends in the second quarter, staying steady on the 7, 8, 9% annual price erosion trend line.

So the penetration and pricing trends were essentially offsetting, and both extremely consistent with prior trends.

So shares very steady in a market is essentially extremely stable.

International was a slightly different story, bolstered by strong penetration with our intercontinental region up 38% and drug-eluting stent sales, primarily aided by penetration, increasing to 47% in the basket of markets that represents intercontinental for us.

Similarly, in Europe, penetration continuously increasing up to over 40% -- we peg it at 43% for the second quarter -- and our European sales very strong, up 48%.

Germany broke through the 20% barrier and actually reached 25% penetration.

We are holding steady market share leadership.

We would consider our share to be about 68% in Germany.

And all other major European markets are approaching or exceeding 50%.

So we expect strong growth internationally in the markets and our strong share position to be maintained.

We continue to do extremely well in all international markets where we have regulatory approval, and of course that excludes Japan, or where we compete based on local market and business practices.

A couple of important pipeline comments on TAXUS.

TAXUS Liberte -- which, as you are aware, is available in certain markets outside the United States -- continues to perform extremely well in that limited release.

We have expanded that release now to 19 countries, and those countries are fairly routinely establishing record DES sales, and we are seeing the business very rapidly convert to Liberte from the previous market later, TAXUS Express.

In those markets, we generally find -- in fact, in over half of those markets, TAXUS Liberte has now comprised 80% of our drug-eluting stent sales.

So clearly, it is the choice where available, and we expect to continue that trend as we expand the intercontinental market launch and the European launch, contingent upon CE Mark approval, which we continue to expect later this summer.

In the US, switching just briefly to a bare-metal stent commentary, we have received approval for the Liberte platform in April.

We did launch that product within the second quarter.

Its initial performance, I think, bodes very well for TAXUS Liberte.

Share in bare-metal stents jumped from 16% prelaunch to about 23% after six or seven weeks of essentially a limited market launch.

So it has performed both qualitatively very well and has surpassed Driver as a bare-metal stent player in the US market.

We think, again, that's a very good indicator for the competitiveness of the Liberte platform going forward.

On a few other related TAXUS program notes, the progress we continue to make in Japan is steady, and as we have projected.

We are enrolling patients in that local clinical trial, and we remain extremely excited about the opportunity Japan will represent for us in the future.

As you have seen, that market now has reached a $500 million annualized level, and our goal is to enter and then subsequently lead that market within the 2007 timeframe.

We have domestically expanded -- with an investment in SG&A, we have expanded our US selling organization.

In the past quarter, we have added more than 50 new territories.

That new sales team is on board and in training and will hit that field in the third quarter, so it's important to note that our expenses have risen slightly and our market shares have been maintained, despite the fact that that field organization has not hit the street.

So that will happen across the third quarter and is an important investment strategy in our long-term leadership position in the United States.

So we are very enthusiastic about what the domestic sales team is working on.

Another comment -- as you are aware, we have had a series of legal decisions this past month.

And that series has brought, I think, some clarity and balance to the drug-eluting stent IP outlook.

You are also aware that those proceedings are continuing; there are post-trial motions on both counts.

They have been filed as it relates to the Palmaz and the Gray matter, and as it relates to the post-trial motions on Ding and on Jang, those will be expected to be filed by the September timeframe.

And if you look at the normal process for rulings on post-trial motions, we would expect to hear something within a few months, and those rulings will then determine, of course, the appeals process.

And that can be expected to take another 12 to 15 months thereafter.

So we are very encouraged by the outcome of the recent round of litigation, and we will continue to update you as we make progress on that front.

On the clinical trial front, enrollment in SYNTAX, which is probably our most important trial right now, as well as a series of other either indication expansion or size matrix expansion clinical trials, is underway including the launch of a global OLYMPIA registry, which features TAXUS Liberte and which we would expect to enroll over 20,000 patients over the next year or so.

Those are all commencing, and those are all both contributing to our accumulation of clinical data and to our presence as a clinical leader in the worldwide marketplace.

On TAXUS Liberte, we have commenced the modular submission to the FDA, so continuous progress on that important platform upgrade.

And continuing on platform commentary, of course you're aware we acquired AST, the bifurcation stent system company.

That company is now completely integrated into our cardiovascular organization, and off and running on balloon stents and DES technology development programs.

So we remain extremely excited about that element of our pipeline; it will be one of the first opportunities to really create a clinical solution for an imperative need, a very large need.

And we think it is a strong step toward creating proprietary market segmentation in drug-eluting stents over time.

A few other comments outside of drug-eluting stents.

Our balloon catheter business, which is, as you are aware, the largest non-stent cardiovascular product, was up 10% in the US.

That is, I think, impressive considering guidance return following their Voyager recall.

We also had strong growth above the procedure levels and above market growth in our basket of products for vascular access and ultrasound.

Our peripheral business growth was strong, up 9%, clearly bolstered by the acceleration of the CryoVascular balloon system, as well as peripheral cutting balloon technology.

So two technologies that we have previously inquired, have invested in pipeline development and are leveraging for our overall peripheral interventional leadership position.

Our pipeline progress in neurovascular has helped restore that business, as Larry commented, to double-digit growth on a worldwide basis and in the United States.

We have seen nice product launch activity on the second-generation Matrix, the second-generation Neuroform stent and a new generation of GDC coils.

So it's good to see the neurovascular business restored to healthy double-digit growth, fundamentally based on pipeline investment and pipeline execution.

Also on the non-coronary side, you have previously seen the clinical data on our two carotid trials, featuring both the Boston Scientific and the EndoTex stents in high-risk clinical settings.

Each of these platforms has now lead to respective PMA filings with the FDA.

So we have two PMAs now pending and targeted for approval either by the end of this year or into Q1 of next year, so we're excited about adding the carotid market to our list of growth opportunities for Boston Scientific.

And that is manifest today with the launch of the EndoTex platform in Europe.

And with that, I will close just with a couple of comments on our overall spend activity.

You have seen increased spending in the past quarter, both clearly on the SG&A side and in R&D.

And there are some very important programs that we have invested in, and we are expecting -- not only have we seen already some growth, but we're expecting to see very important results from these.

I have already alluded to our investment in sales force on the US cardiology side.

We are very much in a position of optimizing our field structure in support of not only the leading drug-eluting stent position but overall leadership in the cath lab outside of stents.

That's an investment that has yet to pay back at all, because those sales representatives have not hit the street yet, but they are all on board, and they will be productive starting in Q3.

We are also seeing essentially the annualization of our investment in the Endoscopy sales force expansion, our acceleration of the Endovations program, which we remain extremely enthusiastic about, the acceleration of acquisition spending related primarily to TriVascular but also to Rubicon, to CryoVascular and AST, as I have already mentioned.

And, although not a recent acquisition, our investment in expansion primarily in field force capabilities but also pipeline for Advanced Bionics has been significant, and we are seeing accelerated growth in that marketplace, particularly for the spinal cord stimulator.

And we expect to see that continue going forward.

So we are pleased, frankly, to have made those investments, to have accelerated investments in pipeline and in field productivity and, most importantly, in defense of our drug-eluting stent leadership position, and as Larry has said, to produce 34% operating income while putting our money into our most important opportunities going forward.

And that, I will close my comments and ask Steve Moreci to make a few on Endosurgery.

Thank you very much, Paul.

Well, as you have heard from Larry and from Paul, the Endosurgery group had an excellent quarter; actually, it was a record quarter for us, hitting 213 million in sales, up 17%.

And most encouraging was the balance of that, US up 14 and international up 21.

The star of the show for this quarter was the Urology and Gynocology group.

And as Paul mentioned, we have made investments over the past 12 months in a number of areas including Endoscopy.

But this group, particularly Urology and Gynecology, benefited from investments growth in sales force, both in R&D pipeline and in new business activity.

And we had a 27% growth for the quarter, which was just outstanding.

And that was due to a number of things, primarily the strength of our mid-urethral sling business, our HTA growth and also in Prolieve.

US growth up 26%, international up 29 in Urology, Gynecology and Women's Health.

The female condoms business was up 25% over Q1, and 67% (ph) over prior year.

And the HTA/BEI product line the Company acquired a couple years back for treatment of abnormal uterine bleeding -- that franchise continued to have fantastic results, and it grew up 17% just on the disposable side of the business alone in Q1.

On the other side of the Urology and Gynecology business there was also tremendous success.

Revenue was driven by three main franchises, our Prolieve devise for treatment of BPH had a stronger quarter than we expected, up 67% over Q1.

And this product continues to exceed our expectations.

As you may recall, this is the partnership we have with Celsion Corporation.

This project is really outstanding and doing well in the marketplace.

Also on the Endourology side, our business supported by strong sales from our lithotripsy business, supported by strong sales from our Holmium laser franchise, was up 43% over prior.

And last but not least, thanks to several line extensions and the internal (ph) R&D development work, our stone management business, which we own quite a leadership (ph), continued to grow faster than the market, up 10% for the quarter.

So just an outstanding quarter from the Urology/Gynecology business in both sides of the house, both domestically and internationally.

And we expect this growth to continue for the remainder of the year and into 2006.

The Oncology group, as Larry mentioned, also had a strong double-digit quarter, up 16%.

US was actually up 19%, girded by strong growth in venous access, 28% growth in our (indiscernible) business and a 17% increase in tumor ablation (ph), so just strong across the franchise in that business.

International business in Oncology was also up 11%, driven primarily by the venous access business and (indiscernible) in Europe and in the United States market.

That business continued to gain some strength and momentum, and we expect its results to also continue at this rate for the rest of the year.

As Paul mentioned, Endoscopy had a very strong quarter, up 13%, reaching over $180 million.

US growth was up 7%, and that was due to a variety of franchises that were just hitting on all cylinders -- our hemostasis franchise, driven by a new product, was up 35%.

Our enteral feeding business was up 18, our biliary franchise, driven by the Wire (ph) and Synchrotone (ph) businesses, were up 11.

And our metal stent business was also up 11%.

Of the two mainstage franchises in Endoscopy, the biopsy and polypectomy businesses, continue to have torrid (ph) growth based on the unit shares of that marketplace.

Those units were up over 11% in that area, and that is important because that is related to the growth of colonoscopy procedures in the United States and around the world, which bodes well for our Endovations program.

I think, as Paul mentioned, the Endovations program remains on track.

We're still expecting our first human use experience with the Endovations project by sometime in the fourth quarter, actually shooting for October.

So that is going to be very exciting names when that product line hits the market next year.

It is going into the wind with all the strength of the (indiscernible) procedures.

The international market was up 22% for Endoscopy.

It was strong in all three regions, 22% in Europe, 13 in Japan.

And just fantastic results in intercontinental markets, which is really coming on strong for the Endoscopy business, up over 60% in the quarter.

Thank you.

That's the story for the Endosurgery group, a fantastic quarter.

And we are expecting strong (indiscernible) the rest of the year.

And then I'll turn it back to Jim.

Just very briefly, let me sort of try to highlight what I take away from all this.

Sales growth double digits, 11% -- we got there by just outstanding execution in international and in Endosurgery, high double-digit growth offsetting the fact that we were comparing a full quarter of TAXUS US to a full quarter of TAXUS US, which you would not expect to see much growth there.

So that is how we got to the 11%.

Margins held up, even though our spending is $57 million worth of R&D and SG&A, for the acquisitions we have made that are aimed at driving our growth in the future.

And so, although that looks like strong growth in total expenses, you, I think, have to keep in mind that you are comparing against the lowest quarter of expenses versus sales at like 40%.

Q2 last year is the toughest comparison we have had or will have.

I think it's fair to say that TAXUS is alive and well.

Liberte is out there.

The rest of the pipeline is coming along, and we've made these acquisitions in order to accelerate and improve the probability that we would be able to deliver some of the really important things that are in that pipeline.

And last but not least, we are doing okay on the legal front.

So, when you look at the picture overall, what is to not like?

Thank you Paul, Jim, Steve.

At this point, we would like turn it over to you for questions.

(OPERATOR INSTRUCTIONS).

Harris Nesbitt, Joanne Wuensch.

I have a brief question on what is the ASPs for TAXUS and outside the United States?

And I'm going to add my follow-up question now, which is could you please comment on Johnson & Johnson this morning talking about increasing CYPHER supply?

Well, first of all, my understanding of what Johnson & Johnson has reported is that they are continuing to make investments in incremental supply, and that they are in a position to serve 50% of the market right now.

And in the process of doing that, we are holding about 60% market share.

So that reinforces, I think, the notion that supply is not really affecting current US physicians, and that as they invest in other improvements, they will expect to get some additional capacity next year, which is fine.

We continue to have ample capacity, as well.

Prices, which we generally report in the US, is harder, of course, to make sense of the international basket of prices.

International prices -- I don't have the actual ASP in front of me, but it's down only, I think, 4% over prior year.

The US price was about 2385 (ph) for the quarter, which was about, as I said in my commentary, 2% off sequentially and completely in line with the annual 8% pricing trend that we've described previously.

John Calcagnini, CIBC.

Paul, I wondered if you could talk about the sales force expansion you mentioned.

How many people are we talking about?

What are they going to be doing?

And what kind of impact did this have on sales?

Well, we thought we would ask them to sell for a while, and see how that goes.

And I'm being cavalier, but there are about 50 to 60 new territories.

You can look at that as -- first of all, they are all in the coronary expansion, so it's not spread across cardiovascular; it's all in the focused interventional cardiology space.

And that would represent a solid 25% increase in our sort of feet on the street.

They are going to be very focused on taking advantage of the expanding marketplace.

We are still in a -- although shares are stable, there is some change at the edges.

There are some accounts that are still very open to being sold to and to switching, and it is a customer-by-customer, account-by-account market share engagement.

And we are investing in anticipation that as we continue to sell our story we can gain business.

So we felt that, based on the sizes of our territories, based on a number of metrics, we were somewhat under-clubbed (ph) in the US field, despite the fact that they have produced great results.

So they will hit the street in the next months.

We expect them to have a relatively immediate impact, and they are an important part of optimizing our sales and marketing programs in the second half.

And we think they will help us pick up market share to a solid 60 or back into the low 60's between now and the time that we start 2006.

Can you talk about where they came from?

And then my follow-up was can you give us an update on Therus?

I won't comment on where they came from as it relates to companies or anything like that.

I will say that as a team, they are very much representative of our historical mix, a lot of industry experience.

And these are starters; these are not folks that will require a lot of bench time.

So very good, great talent, I would have to say.

Therus continues to go very well.

If you look at our last quarter and what we asked that team to do, it was to get back in the clinic, which was done and done successfully.

And we are, as we have previously forecasted, would need to go back into the clinic one more time to finalize the design that we are working on now.

We expect that will take place in about six or seven weeks from now.

They have overcome some of the key technical hurdles that had been identified, I would say, over the last three to five months, primarily related to target targeting technology, how we actually target the ultrasound spot in three dimensions inside the tissue, and done so while really expanding and increasing the consistency of the therapeutic zone that we are trying to create.

So they've made excellent progress.

Our timelines continue to be commercial sales outside the United States next year in 2006, and US launch in 2007.

That is some slippage from the earliest dates we proposed for Therus, but it is consistent with our most recent timelines over the last quarter or two.

And the next step is to be back in the clinic in September.

And, presuming we have an update for the analyst community at the TCT, we will provide some experienced granularity on how Therus performed in the next clinical trial.

Bruce Nudell, Sanford Bernstein.

This is a question for Jim and Paul.

The Wall Street Journal reported higher-than-expected non-deflate rate, as well as maybe not a surprising high stickiness rate in Q4 and Q1.

And when we looked in Q2, basically that rate looks to have decreased very substantially, bringing the non-deflate greater than -- to a rate of 1 per 50,000-plus, which is kind of, certainly, approaching the range of acceptability in your targets.

Was anything done to achieve that?

And was there any, you know, kind of relate -- and stickiness, as well, seemed to have declined.

First of all, is that real?

Was there anything special done with regards to design that would have implicated -- would have changed non-deflate beyond the changes that you put in place in August?

And is there any relationship between a decline in non-deflates and stickiness, or are they totally unrelated?

And I guess, since everybody is doing it, the follow-up would be for Larry, on the Ding patent, how comfortable you are with the validity of it?

And does it have implications for Abbott, which looks to have a very well-run program?

Well, regarding -- first of all, overall quality for TAXUS remains extremely positive, and I think that is what is underlying our market share leadership position here.

The MOD (ph) database, as you are aware, is a lagging indicator in some regards and is a function of primarily company-reported complaints.

So I can't comment on comparative complaint rates.

But if you look at focal neckdown, which was the cause of our recalls last year, we are basically running at a 0% rate, as close to 0 as you can have, out of the last 900,000 TAXUS stents implanted since the recalls of last year.

Balloon deflation complaints are not rare; they happen on occasion.

Their incidence, I think, was related to heightened sensitivity around our recalls.

And no; we have not done anything to change the catheter.

And so you're observing declining complaint rates without a fundamental catheter change, which I think reinforces the fact that it is just heightened sensitivity post-recall, and really a normalization of performance in catheter expectations from the physician community.

We have seen, on the contrary, a continuous steady decline in complaints on withdrawal resistance, which I think is both a comfort level with the catheter, a since of how to handle it, how to follow the refined instructions that we provided months and months ago and, again, a normalization.

So the overall performance is extremely favorable, and I think the commentary in the media is, frankly, not necessarily representative of what we hear in the marketplace.

With regards to Ding, the Ding patent, the strength of the Ding patent has not surprised us.

We have felt for a couple years now that we have a very strong case regarding anyone who uses or attempts to use a topcoat (ph) in a drug delivery system.

So our win with Ding may have surprised some.

It was not a surprise to us.

Our team was pretty locked and loaded, believing that Ding was real.

And we have full confidence it is going to survive appeal.

And it does have a 10-plus year life, so anyone who is using a topcoat or attempts to use a topcoat will have to deal with the Ding patent.

So we are feeling very good.

So far, we are three for three in our suits against J&J.

I know everybody seems to count the J&J against Boston Scientific, but we have had three suits so far.

We have won on balloons in the Netherlands, we have won on stents in the US with the Jang, and we have won on the topcoat polymer approach with Ding.

So we are three for three, and we like where we are headed.

The non-deflate rate is probably better than the 1 in 50,000;

I think you were targeting 1 in 100,000?

You just have to bear in mind those are complaints; those are not confirmed catheter malfunctions.

And so, it's actually more often than not that we will have a customer who says, Jeez, my balloon didn't come down.

And then you get on the phone with them and you get the product back after the complaint has been filed, and you inflate and deflate the balloon and it comes up and down normally.

And they will say, well, yes, it was extremely torturous and I banged the catheter around a lot.

And it did deflate, but I just thought I would let you know that it came down slower than I expected.

So there is absolutely not a persistent no-deflation problem.

The catheter are working very favorably, and that is essentially all I have to say on that.

Rick Wise, Bear Stearns.

Paul, first, maybe talk a little more about the Liberte uptake in Europe.

You talked about the 18 countries.

Do you expect similar dynamics as you roll out on an ongoing basis?

Can you remind us are the pricing margins similar to TAXUS?

And I would be curious to know, is it helping you gain share or maintain share?

And what do you expect to be share gaining or maintaining as you continue to roll out?

And I will have a follow-up question afterwards.

Yes, we have expanded the launch in terms of countries, so we've added five or six countries over the past quarter.

Pricing is comparable to TAXUS Express, and we are gaining share.

I made a comment that we are basically experiencing record stent sales in the majority of those countries, and that in our view is -- we're trying to separate out market expansion from market share.

It is hard to measure market share sometimes in Tunisia; we don't get MRG data for that.

But we are capable of looking at this country by country and essentially confirming share gains.

It is obviously an improved platform, which implies both that we're selling all the basics of TAXUS, all the paclitaxel clinical data, et cetera, and improved acute performance.

And there clearly is a significant step forward in Liberte's performance relative to Express, and therefore, one can conclude sort of incrementally in comparison to CYPHER, which is a great product in many, many ways but simply does not deliver as well acutely.

So we do expect that this will convert to sustained market share in the intercontinental markets, and as we roll it forward post CE Mark approval and into full launch.

So figure the August and September timeframe in Europe, based on our current regulatory assumptions.

We do expect that this will lead to market share gains in Europe, as well.

And following up, maybe you will remind us of the timing -- any updates on the timing in the US?

And then a question for Larry, perhaps.

Maybe you could expand a little bit on your comments about margins.

Operating margins are obviously excellent.

Can you explain why they were slightly less sequentially?

But have they bottomed here, given the sales force build?

And do we expect operating margins in general to stay here over the next two, four, six quarters?

Do they trend a little higher?

Any color there would be helpful, Larry.

Just on timing, we remain completely on track for our US timeline, which is around about this time next year.

It's contingent upon the overall regulatory submission, which, as I indicated, is modular and has commenced.

And, of course, the last component of that modular submission will be the clinical data which is dependent upon the completion of the longer-term follow-up in the patient population that has already been enrolled.Larry Best: On the operating margin side, it really is up to two things -- one, the amount of discretionary spin that we decide upon in the quarters ahead, but also it would depend on, obviously, the drug-eluting stent market and TAXUS.

And what I mean by that is it really depends on the pricing environment and the competitive environment around the world.

We think it is going to be pretty firm and healthy, but if that would change, we would then have to take a look at our margins and take a look at our spend.

But right now, I think strategically we are comfortable with the range of 33 to 35% operating margins.

That's not an insignificant range, but we're going to try to stay within 33 to 35%.

And some quarters we could slip a little bit below that; other quarters we might actually do better than that.

We do have a lot of discretion over our spend, and therefore we do have some flexibility in future quarters to rein in spend a little bit or let it go, depending on what we think strategically makes sense.

But it's safe to say that anywhere in the 33 to 35% operating margin, we think that that is a healthy place to be, and obviously impressive profitability.

Matthew Dodds, Citigroup.

A couple questions.

First, Paul, for timing in Japan for TAXUS, is it still late '06, or is it now early '07?

And then, just for housekeeping, Larry, can you give me the split for Advanced Bionics of cochlear and stim?

For Japan, we can get to '06 if we use an aggressive regulatory timeline assumption.

That probably is imprudent, given the speed with which submissions, especially new technology submissions, move through the MHLW.

So I think it's most realistic -- although the execution of our program has not changed, the timeline that we are working against does now include a longer approval cycle.

And that brings us into '07, not '06.

On the neurostim side, the breakdown in the quarter was auditory at 17.5 and spinal cord stimulation at 15.3, for a total of 32.8.

Glenn Reicin, Morgan Stanley.

Just along the same lines on Advanced Bionics, just one -- two questions sort of rolled into one.

Number one, what was the total contribution of acquisitions in the quarter?

Was there anything more than Advanced Bionics?

And then, as a follow-up to that, if you look at Advanced Bionics, it did not grow sequentially.

Can you give us a little bit of flavor what happened there and what should be the trends going forward, given the expectations that you have for that business long term?

First, the Advanced Bionics business is very robust.

In terms of sequential growth I think I wouldn't read too much into that.

They were up substantially over the prior year, and I think we are very pleased with the spinal cord stimulation business.

Auditory was a little short of their plan in the quarter, but not significantly.

So if we add the -- you are getting down to pretty small numbers, but I would say auditory was a little under plan and really brought down the growth rate a little bit sequentially.

But spinal cord is doing extremely well, and we are not concerned about auditory.

The business is doing very well.

We're spending more money than we had planned to spend, I will say that, and that has to do with what we suspected.

We needed to really build an infrastructure around quality, quality manufacturing.

And we have got really the right people with the leadership of Dave Morley (ph) on the manufacturing side.

So we are very comfortable with the direction of Advanced Bionics, and I think it's going to be a real good story for Boston Scientific.

What are you expecting for the business this year?

I think the total business, at around 155.

And then the total contribution from the acquisitions, the three companies you brought?

Did they contribute anything?

None.

This is all apples-to-apples, except for -- yes, it is apples-to-apples.

Advanced Bionics were not in our numbers to any great extent, and I think we had part of a month last year.

So it's pretty much wn apples-to-apples result this quarter.

Neither Rubicon nor TriVascular have revenues, and Rubicon is slated for a European launch in the second half.

And of course, CryoVascular has been growing, is hitting essentially $3 million a month now.

But that was in our base last year through a distribution relationship.

So that's apples-to-apples.

To clarify, we have had a distribution alliance for -- I think we had an 18-month try on it.

So we have had the CryoVascular line for some time.

Tim Lee, Merrill Lynch.

I just want to follow up on the J&J legal front here.

With both parties having won their respective suits, is there any appetite from management to come to some settlement?

Or should we assume that this is going to play its course through the legal channels?

Well, right now it looks like it is going to play its course.

Boston Scientific on numerous occasions has requested a meeting or discussions, and actually Boston Scientific has been the only one to propose any settlement.

As you can imagine -- and I think it's because of our patents being viewed as not being tested.

Well, we are starting to test them.

Like I say, we are three for three, so the tests have begun.

And we like the result.

But we have made sincere attempts; we have put terms on the table.

They were rejected, and there has been no productive discussion.

And I would suspect at this point we're going to take it one by one.

And so far, so good.

We're happy with that at this point.

And just one quick follow-up, if I may, on the share buyback.

Any target for a full-year buyback plan, in terms of the level of the buyback from this current 660 million?

Well, we have to decide that.

To put it in perspective, in the last nine months we have acquired around 32, 33 million shares and we have spent 1.1 billion.

And as I said before, our strategy is really to get a good return on our investment.

And what I mean by that is we fully expect to use a lot of the stock that we are buying back for acquisitions as we move forward, both in emerging technology and small and medium-sized acquisitions.

Hopefully, if our business continues to hum along here and our pipeline -- we deliver on it, we will be able to use this currency we bought back for substantially higher valuations.

So it's part of our, frankly, our strategic build-acquisition strategy.

And then, of course, there is some of it that has to do with just funding employee benefit plans.

But we are now in excess of fully funding our employee benefit plans.

So in terms of the next couple quarters, we're just going to play it by ear.

But we are buyers; under 30, we are comfortable to say we are buyers of the stock.

Tao Levy, Deutsche Bank.

Just two quick questions, one for Steve.

On the endoscope, how confident are you that in the fourth quarter we will go into human?

Do there have to be a lot of changes to that system between now and then, or have you already finalized that system right now?

I would say we are about 95% there on the final design.

We have finished up our last set of wet labs versus on the (ph) benchtop design work.

We're doing some fine-tuning on the optical systems, and everything is in front of us.

And we expect to be in humans in October.

And, Paul, in Europe it seems like J&J took the leadership market share position there this quarter.

I'm sure there are efforts to reclaim that, but is there anything specific that you saw in the field that J&J was doing?

And, again, anything that you are going to do to combat that?

I think if you look at international overall, you see two dynamics -- first of all, very rapid growth by Boston Scientific, so north of 35% growth in Europe and in intercontinental.

We are very pleased by that.

There are clearly markets around the world where the two companies do not compete head-to-head, which is to say markets based on distribution structure, based on local market practices where we have chosen not to participate.

And that is based on our interpretation, our commitment to our internal policies and our business practice requirements.

So I think it's important when you look at markets, and this is not necessarily clean, because we're not looking at all of intercontinental or all of Europe but rather, market by market, which segments of those markets -- it might be in the private sector, it might be in certain regions of a market like a China or what have you -- where we just are not going to sell, because we cannot be assured that the distribution practices will ultimately be clean.

And I am not in any way implying anything about the business practices of other companies, but there are markets where we know we cannot assure ourselves of clean business practices, and in those cases we do not participate.

And that is clearly not only a significant part of the worldwide market; it is a part where, in some cases, growth is fast.

And so I think it's important that we look at head-to-head share, head-to-head competition.

And of course, this is where you get into a "he said/she said" comparison of market shares.

But we are quite confident in those cases, in that marketplace where we compete head-to-head, we're not losing market share.

And just one quick one.

Can we get an update on the Netherlands injunction on J&J?

The quick update is without the injunction from the court.

J&J went in and attempted to get a stay.

We said we would not enforce the injunction until that got through.

They did get the stay of the injunction.

We have now appealed it.

The appeal most likely won't get addressed by the courts in the Netherlands until August/September.

And we will go from there, but we did -- J&J said it wasn't a material event to them, and we did call them up suggesting ways to perhaps discuss this.

So we will just wait for -- we plan to see the injunction through and the appeals process through sometime in August/September.

Dhulsini De Zoysa, SG Cowen.

Paul, we noticed that for the first time since the CYPHER launch, the US DES market declined sequentially in dollar terms, backing off from about the 810 million we have seen in the past few quarters.

With 88% penetration and your comment that pricing was roughly stable, maybe, at (technical difficulty) about 8%, can you give us some insights into total procedure growth, stents for procedure, maybe what dynamics are going on in the quarter?

And also, should we be thinking in terms of 790 to 800 million a quarter in the second half of the year?

What will accelerate that?

Is it more sizes of stents, more feet on the street?

Good question.

As we track the market, procedures in the second quarter were up about 3,000 from the first quarter, so from 271.5 to about 275.

So slight growth in overall procedures.

Stents -- in terms of number of procedures or percent of those 275 procedures that used stents, that was fairly stable around 93%.

So that creates around 256,000 stenting procedures, which was up from around 251,000 in the first quarter.

Stent for procedure, essentially flat -- 1.55, 1.56, which takes penetration up from Q1 to Q2 from 86 to 88%.

That created an uptick in DES unit market to 350,000 units for the first time, up from the high 330,000 quantity in the first quarter, and created a market in that upper 818.

We expect the market to stay in that teens -- 810 to $820 million scale for the third and fourth quarters.

It is sizes; sizes will make a difference.

That's the next step function that we see in the market.

I think feet on the street can alter the stents per case.

Penetration won't change that dramatically.

I think DES is clearly the treatment gold standard, but a little bit of stents per case, a little bit of sizing availability, and you will see the marketplace growth in, I think, the first half of 2006, when we expect to have our Matrix expansion for TAXUS Express.

Glenn Novarro, Banc of America.

A couple questions.

One, can you give us an update on the TriVascular program and the Cameron program, in terms of US and international launches there?

And then, are there going to be any more head-to-head trials that you are aware of that would be presented either at the European Society of Cardiology or TCT conferences?

Let me take the Cameron first, and then Paul will take TriVascular.

On the Cameron side, it is still a work in process.

If everything would go well, maybe there would be a CE Mark next year, and there would be a launch in the international markets.

But it's a little too early to call that one.

And keep in mind that we are not an active manager of Cameron; we're just an investor at this point.

But we like what Jade and his team is doing, and we are being fully supportive of Cameron.

On the TriVascular side, Paul?

Yes.

First of all, we are very pleased with what we see in the TriVascular.

We have obviously been owners for a couple of months now.

It's very clear that the technology prowess within the building is extraordinary.

We're investing to improve the conversion of technology into manufacturability, and that manufacturability is critical for not only future commercialization goals but also for nearer-term clinical trial goals.

We are doing all of that right now, including working in parallel on final clinical trial design for the US.

And it's really more a question of what our control is, because you have a variety of strategic possibilities in clinical trial design.

Do you compare to objective performance criteria?

Do you compare to a historical surgical control?

Do you actually enroll surgical patients?

Do you do so head to head?

Do you do so sequentially?

So we are working through that now, while concurrently working on the improved manufacturability for the actual product.

That will lead us to cases in the second half of this year and into early next year, between international enrollment and US enrollment.

So we do expect to be up and running in the clinical trial in the next four to six months, and just moving along through the trial execution from that point forward, doing everything we can to optimize enrollment, doing everything we can to assure tight follow-up and then a regulatory timeframe.

We have yet to construct a definitive PMA timeline based on our revised plans, but I think it's safe to say we're investing aggressively to do it right the first time.

And we are more convinced than ever that we have a winner in the TriVascular stent graft technology.

Just as a follow-up, I asked about head-to-head trials, TAXUS versus CYPHER.

Anything that we should expect at the European Society of Cardiology September or at TCT in October?

It sounds like you guys are going to have an analyst meeting at TCT; is that correct?

Yes, we are.

And the answer is there are modest, modest head-to-head trials going on.

I don't expect anything significant in quantity.

I think the emphasis will probably be on taking existing data from the trials that we have seen in the past -- REALITY, et cetera -- and essentially scrubbing them further.

But in terms of the focus of the fall season of meetings, I don't think, as was the case with last year or with this year's ACC, that you'll see any significant new data.

Eli Kammerman, Cathay Financial.

First question is do you expect the construction of the Liberte to make that drug-eluting stent more likely to be used in direct stenting rather than with pre-dilation?

And second, what is your current expectation for the soonest implementation -- not decision, but implementation -- reimbursement for multiple drug-eluting stents from CMS?

Well, first of all, we are working on a label expansion trial for direct stenting in the United States, and so that is required before direct stenting can really be claimed and practiced on-labels.

And I think the extra tractability of Liberte would make it slightly more amenable to direct stenting, but not dramatically so.

So there are many reasons to pre-dilate in advance of DES selection and placement, and I don't think that that will change dramatically with Liberte.

It clearly will be a much more deliverable device, but I don't think it will dramatically alter direct stenting versus pre-dilatation mix (ph).

So that is that on that.

In terms of CMS, they have obviously taken comments from Boston and from Johnson & Johnson.

They have considered a new structure for data gathering, primarily on multiple stent procedures.

They have not committed yet to really fund those differently, and the earliest that we would see that would be 2006, although they clearly could take longer than that.

Alex Arrow, Lazard Capital Markets. (OPERATOR INSTRUCTIONS).

Robert Goldman, KeyBanc.

A couple things on the Endosurgery business, which, as you mentioned, did have an excellent quarter.

And you did provide a lot of good detail, but I was hoping we could take a slightly higher-level view of the business.

It does look like you have stepped up the growth in this particular quarter from what we have seen in the last perhaps even year and a half.

Are you seeing any changes in market growth, or did price play a role, or is it share gains, or perhaps changing sales force compensation or the number of salespeople?

Can you give us some sense of why perhaps things seem to be really kicking in now?

And to manage that, as Paul mentioned, we actually doubled the selling organization on the Women's Health side starting late last year.

And so the team is executing very well against a very practical (ph) strategy for investments and for expansion.

On that urology side, we're going to take a very smart investment and partnership with a company called Celsion for our Prolieve product.

The minimally invasive BPH market has been one with great potential for many years.

All of us in the industry have hoped that the expansion would happen bigger and faster than it has.

The good news for us is that that is starting to happen.

The technology in general is being adopted by physicians.

And other good news is (indiscernible) the Prolieve technology because of this patient comfort profile and t really starting to get some traction.

So we think we have a really good win there.

And that's one reason why that group is growing dramatically.

The Endoscopy business is always strong worldwide.

It particularly is picking up momentum now because of new product launches.

I think I have to give a lot of credit to our international organization, who is putting a tremendous amount of focus on that franchise.

It is one of our more global businesses, and because of that we're seeing strong double-digit growth.

We also have, in Endoscopy, a tremendous amount of momentum from procedure rates.

As I mentioned earlier, two or three of the top procedure growth rates in the Endoscopy area in the double-digit range and have been for a long time, and these are procedures that are in the millions of patients.

So that is driving that franchise.

The other group, the Oncology group, has found (ph) itself in the marketplace which is relatively large but yet we have small share.

And they have been building franchise strength through some small acquisitions and some R&D development.

They have also focused on a niche that has really not been scratched by a lot of other folks, and that's focus on treatment for liver cancer.

And because of that they've been able to really accelerate.

There's also a lot of momentum in international markets in the Oncology franchise.

So I guess you can say that (indiscernible) is starting to happen for us.

Things are coming together.

There's a lot of momentum in our marketplace.

There is a lot of smaller franchises which add up to a pretty good story.

And we expect that to continue.

I think the other overall comment is that Steve's Endosurgery group are focused on markets that are highly underpenetrated.

And I know that a lot of folks look at drug-eluting stents, and they say, well, the US is highly penetrated, which it is.

But it has got a long way to go outside the United States.

But when you look at these other divisions, these are highly underpenetrated markets.

And in 2005, the Endosurgery group in total will be somewhere in the neighborhood of $1.2 billion, focused on underpenetrated markets growing double digits.

So it's a nice business to be in.

Goldman Sachs, Larry Keusch.

Just a couple of just quick questions.

Larry, I know that you said that you felt good about where Advanced Bionics was.

I'm wondering if you can just come back to the stim side and just give us a little more color how the launch is really going.

Do you have sufficient quantities of precision?

How is the demand building?

Obviously, it's a competitive market with Medtronic and ANSI out there, so I was really just looking for a little bit more flavor of how you really feel the business is picking up there.

I would say that, since marrying Advanced Bionics, we have consistently been surprised at the strength of the Precision platform.

And our surveys and focus groups and every indication is we have got a winner with Precision in the spinal core stimulation market.

And they are significantly above what the plan was a year ago.

Supply and the quality of manufacturing is there at this point, and I think it's really a matter of -- keep in mind, we're entering the market against the big guy, Medtronic.

And Medtronic has great customer service and a decent product, so we are the ones that have to take the business away, and you don't do that overnight.

But you do that by, first off, getting the most difficult cases, cases where they won't use a Medtronic device or an ANSI device.

And so they will try it because, otherwise, they would not treat the patient.

And what they are finding is that the Advanced Bionics Precision technology works very well in these patients that they did not think they could provide the therapy.

So we are opening their eyes on the most difficult cases and that, I think, is going to open the door wider and wider for us to, frankly, take share.

And there is nothing not to like about where Advanced Bionics is in spinal cord, and we expect to see strong growth for quite some time.

The support infrastructure for that marketplace is fairly intense, especially on the clinical side, field clinical support as well as marketing reimbursement, et cetera.

And all of that has been established for the existing competitors and still is being built by the Advanced Bionics team, so that is an investment, again, that is being made now.

It is a competency that we're building that will only help our sales growth in the future.

And it is being spent on now, but has not produced yet because of its early stage of build.

So I think the overall sales and marketing productivity of Advanced Bionics is going to increase dramatically over the next year.

And so the results that we're seeing right now are based on great technology and, really, stage one selling capabilities.

Put in perspective, this is a startup.

And going against the king of the hill, Medtronic, and a strong competitor, ANSI.

And for a startup, within 12 months, to have -- we think we're going to have a $75 million business this year in spinal cord stimulation -- that is impressive.

And so this is a startup, and it is not mature yet, the infrastructure is not mature.

But to have that kind of a ramp in 12 months against Medtronic and ANSI in a market that has been around for a little bit is great news for us.

And the other side of it is, keep in mind, in the category of underpenetrated markets this is a very, very underpenetrated market with a lot of growth behind it for a decade plus.

So we're attempting to add underpenetrated markets to the model here, and Endosurgery is showing what they can do, and Advanced Bionics is showing what they can do.

So we are pleased with it.

And then just one quick questions for Paul.

Any thoughts on when you guys are expecting timing for Endeavor in Europe and, again, how that factors into your current planning?

I don't know more than what Medtronic is saying, which is obviously it was pushed back several times in the early part of the year and now is focused on a September timeframe.

And we understand the vagaries of the initial regulatory approval; it is made, clearly, more complex by the presence or dependence upon an unapproved drug and the clinical data.

So when that is approved, it's our best guess is to listen to Bill and the team.

And my sense is they are targeting September, so we're going to assume that is the case.

And we are ready for it.

Bob Hopkins, Lehman Brothers.

First, Larry, I was wondering if you could just provide a little more color on the outlook for M&A for Boston Scientific.

You highlighted it earlier in the call.

And specifically on Aspect Medical and Cyberonics, because I think, as of this week, I saw some press releases -- you might be up to 30% ownership there.

Just where do we go, going forward?

Are you waiting for certain milestones before adding more?

Or just an update there would be helpful.

And then I have one follow-up.

We continue to do the small entrepreneurial investments and strategic rights deals, and that is just an ongoing process.

The companies that we brought in this quarter, we have a whole portfolio of companies that we will buy in next year at this time.

Now, on the bigger investments we do have, I want to say, close to 28%.

We're going to move it up to 29% ownership in Aspect Medical.

Our hunch two years ago has paid off handsomely, and when we were investing at $3 and $5 and $6 a share and they are now in 30's, and they are just starting to hit their gate in the conscious sedation market, and they have, I think, an excellent opportunity to take invention of this whole neuroscience area with ASPs that are 10 plus.

So we're very high on Aspect.

It is a strong management team, and we don't own 28% because we are not interested.

Down the road, we will make that call.

Our position right now is to be supportive of Aspect Medical.

We just created an R&D alliance and a strategic alliance in the neuroscience area.

A year from now, some early data on that will come in, and we will know how real the neuroscience opportunity is.

So we are just big-time supporters, and I think we're the biggest shareholders, at this time, of Aspect.

On Cyberonics so far so good we deal 15% of the company.

Stent delivered on his promised FDA approval and Stent is a definitely put together the asset based to take advantage this very very large market opportunity.

So, we’re happy share holders awaiting to see how Stent dose on initial launch and so far he is delivered so we continue to launch.

And then a question for Steve Moreci on Endovations.

Can you just give us the latest update on when you expect to launch that product in the United States?

And do we have any economic data available for clinicians to show them that this can be a moneymaking project for them in addition to the obvious clinical data that they will need?

We're still targeting commercial launch, as we have talked about in January -- or, I guess, February 1st, actually -- for Q3 2006.

And there is no deviation from that.

If I understand your question, will we have financial data (ph) to help support the marketing of the product.

We will have a variety of information data points, much of which will be clinically based around equivalents to current standards, improvement of efficiency in the labs and a variety of other end points that we will have for launch.

And all of that, of course, is depending on our successful push in the news (ph) which is coming up here in Q4.

We will have a lot of information for the customers in order for them to make the right decision around adopting this new technology.

I don't think so.

This is still an internal R&D project, and we really want to keep our data and information around how we do it in those various trials to ourselves until we're ready to market (ph).

Jason Wittes, Leerink Swann.

First off, on Advanced Bionics, what type of run rate do we need to see before that business becomes profitable?

Well, when we acquired it, they projected they needed to invest -- meaning net losses -- of about $30, $33 million a year for three years.

And we signed up for accepting that, and so the only change is that we have spent a lot more than that already.

So we're hoping to get Advanced Bionics closer to a breakeven sometime in '06.

But that is a goal; that is not a prediction.

And also, in terms of payouts for various acquisitions for the rest of the year, what type of amount are we talking about at this when?

Somewhere in the neighborhood of about 600 million.

Is it possible to break that out between Advanced Bionics and whatever else?

No.

But when we pay out, that amount is paid out based on sales.

So it's a good story.

I only wish it was 1 billion 6, because they would mean that our sales have ramped handsomely.

So when we pay out earnouts, we rejoice.

And right now it is 600 million.

That is spread over multiple, multiple companies; that is just not Advanced Bionics.

But we have got a lot of earnouts, and if you look at our 10-Q/10-K, we give you the macro of that and what the sales related to that are, and the math works.

Okay.

Thank you very much for your attention today.

Thank you for everyone who participated, and we will keep you up to date on Boston Scientific.

Good afternoon.

And thank you, Mr. Tobin and our host panel.

And, ladies and gentlemen, your host is making today's conference available for digitized replay.

It is for two weeks starting at 4:15 PM Eastern Daylight Time July the 19th, all the way through 11:59 PM August the 2nd.

To access AT&T's executive replay service, please dial 800-475-6701.

At the voice prompt, enter today's conference ID of 788933.

Internationally, you may access the replay as well by dialing 320-365-3844, again with the conference ID of 788933.

And that does conclude our conference for this second quarter.

Thank you very much for your participation, as well as for using AT&T's executive teleconference service.

You may now disconnect.