Boston Scientific Corp (BSX) 2008 Q1 法說會逐字稿

Good morning, ladies and gentlemen.

Thank you for standing by.

Welcome to the Q1 Boston Scientific earnings conference call.

At this time all participants are in a listen only mode.

Later we will conduct a question and answer session.

Instructions will be given at that time.

(OPERATOR INSTRUCTIONS) And as a reminder, this conference is being recorded.

I would now like to turn the conference over to our host, Vice President of Investor Relations, Mr.

Larry Neumann.

Please go ahead.

Thank you, Rachel, and good morning everyone.

Thank you for joining us.

With me on the call today are Chief Executive Officer Jim Tobin; Chief Operating Officer, Paul LaViolette, and Chief Financial Officer, Sam Leno.

We issued a press release last evening regarding our Q1 2008 results.

Key financials are attached to the press release and we have also posted support schedules to our web site which you may find useful as well.

The agenda for this call will include a review of the Q1 results and Q2 guidance from Sam; an update on the CRM business from Jim; a review of the cardiovascular and other businesses from Paul; and a CEO perspective from Jim; followed by a question and answer session.

Before we begin we will be making forward-looking statements on the call today.

So I'd like to remind everyone of the Safe Harbor statements.

This call contains forward looking statements.

The Company wishes to caution the listener that actual results may differ from those discussed in forward-looking statements and may be affected by, among other things, risks associated with our financial performance, our restructuring plan, our programs to increase shareholder value, new product development, regulatory approvals, litigation and growth strategy, the Company's overall business strategy, and other factors described in the Company's filings with the Securities and Exchange Commission.

I will now turn it over to Sam for a review of the first quarter results.

Thanks, Larry.

Let me begin our first quarter results by first discussing revenue.

Consolidated revenue for the first quarter was $2.046 billion approaching the high end of our guidance range of $1.965 billon to $2.080 billion.

This represents a 2% decrease compared to the first quarter of last year and a 5% decline compared to the last quarter's revenue.

During the quarter we completed the divestitures of five non-strategic businesses previously announced.

Excluding the impact of these businesses in both years, consolidated revenue for the first quarter was $2.015 billion representing a 3% increase over the $1.951 billion in the first quarter and a slight increase over last quarter's revenue $2.007 billion.

Compared to the foreign currency contribution assumed our first quarter guidance range foreign exchange contributed a positive $7 million.

Without this incremental benefit revenue would have been $2.039 billion, exceeding the midpoint of the range and overall the contribution of foreign currency to sales growth for the first quarter of 2008 was approximately $100 million or a positive 5%.

Compared to the first of last year excluding divestitures, domestic revenue declined 4% while international revenue increased 15% reported or 2% in constant currency.

Paul will provide more detail on the drug-eluting stent dynamics for the quarter, but I'll share the revenue results for you at a high level.

World wide DES came in at $428 million, exceeding the midpoint of our guidance range of $395 million to $455 million and down 8% from the first quarter of 2007.

Geographically, U.S.

DES revenue was $218 million, at the low end of guidance range of $215 million to $235 million and 25% below the first quarter of last year.

International drug-eluting stent sales were $210 million approaching the high end of our guidance range of $180 million to $220 million and representing an increase of 20% over the first quarter of 2007.

Before Jim provides more detail on the CRM market I'll review some of the specifics for CRM sales here.

CRM once again had a strong quarter posting the highest quarterly revenue since the acquisition.

Reported revenue of $565 million represents a 5% increase over the $539 million in the first quarter of 2007.

In the U.S.

CRM revenues were $356 million representing a 2% increase over the prior year, while international CRM sales were $209 million, an increase of 10% over the prior year.

With respect to defibrillators, worldwide ICD, $411 million, we are at the midpoint of the guidance range of $395 million to $430 million and 3% over the first quarter of 2007.

ICD sales in the U.S.

were $274 million, and that was in line with last year and at the low end of our guidance range of $270 million to $290 million.

International ICD revenue of $137 million, was at the high end of our guidance range of $125 million to $140 million and represents a 9% increase over last year.

Paul will provide greater details on the rest of our business, but I will make a few comments on global revenues.

Worldwide revenue adjusted for divestitures and excluding drug-eluting stents and CRM continued its strong performance with $1.022 billion in revenue for quarter, represents an 8% growth over the first quarter 2007.

This includes continued strong performance by our Endosurgery business with a 9% increase over the prior year, including endoscopy sales of $229 million, representing an 11% increase over prior year.

In addition, our neuromodulation business continued its strong performance with 40% growth over prior year.

In summary, while recovery of our two largest markets remains slow, our diversified portfolio of other businesses allowed us to achieve 3% growth overall in the quarter.

Reported gross profit margin for the quarter was 71.7% which was 120 basis points higher than the fourth quarter 2007 and 110 basis points lower than the first quarter of 2007.

Our adjusted gross profit margin for the quarter, excluding acquisition and restructuring related charges was 71.8%, which was 120 basis points higher than last quarter and 110 basis points lower than the first quarter of 2007.

As was the case during all of 2007 revenue mix was a key contributor to the lower gross profit margin compared to prior year.

The lower mix of drug-eluting stents sales to total revenue resulting from both the decline in the U.S.

drug-eluting stent market versus prior year as well as our estimated market share in the quarter contributed to the reduction in gross profit margin versus prior year.

Additionally, the weakening of the U.S.

dollar and the resulting settlement of foreign currency hedge contracts with cautious sales eroded our gross profit margin by 45 basis points compared to prior year.

Our reported SG&A expense in the first quarter was $661 million, which was 10% lower than first quarter of 2007 and 6% lower than last quarter.

Adjusted SG&A expenses excluding restructuring related items were $652 million which was $74 million, and 10% lower than the first quarter of last year and $52 million or 7% lower than last quarter.

We continue to execute well in our restructuring plans and we are tracking favorably to our expectations at the end to have first quarter 2008 which will result in definitive cost improvements for the Company as we move forward.

Reported research and development remained 12% of sales, but spending of $244 million for the quarter which was down $45 million versus Q1 2007 and down $12 million, compared to Q4 2007.

We continue to see the benefits of swift execution of our restructuring plans which resulted in reduced R&D spending for quarter, and we believe that our reduced R&D spending, driven in a large part by selectively eliminating projects that have a lower likelihood of success will not negatively affect our ability to restore short and long term profitable sales growth.

I'm pleased to say that we continued to make significant progress in executing a number of the share holder value improvement programs that we have been discussing publicly for the last few quarters.

We reported GAAP operating profit of $580 million for the quarter and on an adjusted basis excluding acquisition and restructuring related charges as well as amortization expense and divestiture related gains, operating income was $530 million and 25.9% of sales, up 230 basis points from the fourth quarter 2007 and up 410 basis points from the first quarter of 2007.

I'd like to address the GAAP to adjusted operating profit reconciling items in a bit more detail here.

Our total amortization expense was $143 million pretax, which was $12 million lower than the first quarter 2007 and as a result of the divestitures we continue to anticipate a decrease in our annual amortization expense of approximately $50 million for the full year in 2008; lowering future quarterly amortization expense to approximately $135 million.

We recorded acquisition and related charges of $13 million pre-tax associated with our recently announced license agreement with Surgi-Vision to develop MRI safe cardiac device technology.

We recorded $44 million of restructuring related charges in the quarter which are primarily related to severance, retention, and third party payments in conjunction with our previously announced expense and pigtail reduction initiatives.

These charges are in line with the guidance we provided to you during last quarter's earnings call.

We also reported a pre-tax gain of $250 million or $114 million after tax, primarily related to the sale of our fluid management business during the quarter.

The cumulative effect of these pre-tax items was $50 million in reduced adjusted operating profit compared to GAAP operating profit.

Interest expense was $131 million in the quarter, which was down $6 million from the fourth quarter as we prepaid $625 million of bank debt in the first quarter.

Interest expense was $10 million lower than the first quarter of last year, primarily as a result of our $1.375 billion debt prepayments during the past twelve months.

Our average annual interest expense rate of 6.3% for the quarter was unchanged from last quarter.

In other net income, it was $13 million, including net charges of $6 million primarily related and associated with write downs to our investment portfolio offset by gains of investment sales.

Interest income was $17 million in the quarter which was $1 million lower than last quarter and $5 million lower than the first quarter of 2007 primarily due to lower investment rates.

Reported GAAP tax rate for the quarter was 30% and the adjusted effective tax rate was 13%.

Our tax rates for the quarter not reflect any benefit for the U.S.

R&D tax credit which expired at the end of 2007.

In addition, our tax rates for quarter reflect discrete tax benefits of $43 million.

Our adjusted Q1 effective tax rate without this benefit was a little over 23% as expected and communicated during the first quarter guidance segment of our Q4 earnings call.

We anticipate that our annual operational effective tax rate for Q2 and Q3 will be approximately 23% and full year 2008 will be 21%, including our estimated Q4 operational rate of 15%, assuming that the R&D tax credit will be extended in the fourth quarter with a retroactive effective date back to January first of this year.

GAAP earnings per share for the first quarter was $0.21 compared to a loss of $0.31 per share for the fourth quarter and also compares to a positive EPS of $0.08 in the first quarter of last year.

GAAP results for the quarter include $0.05 for the acquisition, divestiture and restructuring related charges that I mentioned earlier.

Our adjusted earnings per share in the first quarter excluding amortization expense, restructuring, and acquisition related charges as well as the gain on the sale of non-core businesses was $0.24 for the quarter compared to $0.24 last quarter and $0.17 in the first quarter of 2007.

As a reminder, the first quarter 2007 also included negative $0.09 per share related to the Company's 2006 acquisition of Guidant Corporation and amortization.

The $0.24 achieved in this quarter is well above our guidance range of $0.15 to $0.20.

Included in this $0.24 is a $0.03 benefit for discrete tax items and a $0.01 benefit associated with divested businesses.

Excluding these items, adjusted earnings per share for the quarter would have been $0.20 for the quarter, at the high end of our range.

Stock compensation was $41 million and all per share calculations were computed using 1.5 billion shares outstanding.

Turning to working capital management, days sales outstanding were 67 at the end of the quarter which is an increase of one day compared to the last quarter and an increase of five days compared to the first quarter of 2007.

The one day increase was largely related to the FX impacts on accounts receivable.

Days inventory on hand were 123 days, up eight days compared to the fourth quarter of last year and down three days from the first quarter of last year.

Inventory for the quarter was higher due to inventory builds necessary to support upcoming new product launches as well as a transition time to new production facilities.

First quarter 2008 operating cash flow was $266 million, an increase of $325 million from the negative $59 million of operating cash flow in the first quarter of 2007.

The improvement was primarily due to the $386 million tax payment in the first quarter of last year related to the gain on the sale of the Guidant vascular business to Abbott, partially offset by higher restructuring payments of $67 million in the first quarter of this year.

Operating cash flow declined by $42 million compared to the fourth quarter of last year primarily due to the timings of annual employee incentive payments and additional restructuring payments that were partially offset by lower interest payments due to the timing of semi-annual interest payments on our senior notes, reduced working capital and higher operating income.

Capital expenditures were $57 million in the quarter, which is $33 million lower than the fourth quarter 2007 and $39 million lower than the $96 million reported in the first quarter of 2007.

Free cash flow was $290 million in the quarter representing a $364 million increase over the first quarter of last year, due to improved operating cash flow and lower capital expenditures.

Free cash flow is largely in line with our fourth quarter 2007 results which were $218 million.

We received net proceeds of $1.3 billion from the divestiture of cardiac surgery, vascular surgery, fluid management, venous access, the advanced bionics auditory and drug pump business and the former TriVascular business.

We used a portion of the proceeds to pay the $650 million of fixed payments due to former Advanced Bionics shareholders for the Neurostimulation business, and we nearly completed the monetization of the public investment portfolio, and are in the process of monetizing the majority of our private portfolio.

During the fourth quarter of 2008 we received $37 million, primarily from the sale of certain of our private portfolio investments, and the total remaining book value of our equity investment portfolio at the end of the quarter is $321 million.

We recorded gains of $15.5 million in the quarter primarily associated with investment sales and these gains were offset by write downs of $21.6 million in the quarter.

We closed the quarter with $7.568 billion of gross debt and $1.739 billion in cash resulting in net debt for the first time below $6 billion at $5.829 billion.

Net debt was $1.7 billion lower in the first quarter of 2007 as a result of prepaying approximately $1.3 billion of gross debt while increasing our cash on hand by $400 million.

In the first quarter we reduced net debt by $908 million by prepaying $625 million of bank debt and increasing cash on hand by $287 million.

Our bank debt prepayments in the first quarter 2008 included the remaining $300 million of debt due in 2009 as well as $325 million of our 2010 debt maturities.

We announced our initiatives to improve share holder value at the time of our third quarter earnings call in 2007 and we told you that we would provide updates each quarter.

I am pleased to say that we are on track with the processes and the activities that will drive the savings targets that we have previously disclosed.

We said we would exit 2008 with a run rate, annualized savings, and operating expenses of $475 million to $525 million and plan to achieve 90 plus percent of those savings in 2008.

We also announced we would be eliminating 4,300 positions with 2000 associated with the businesses identified for divestiture, as well as 2300 from ongoing business reductions.

Our savings initiatives are running slightly under schedule as evidenced by our first quarter 2008 operating expenses.

And with respect to head count, our divestitures were completed during first quarter 2008 and the associated 2000 positions have transitioned out of the Company as planned.

With respect to our restructuring reductions we are on track with our original time line through the first quarter 2008 with more than half of the positions eliminated.

Turning to sales guidance for the second quarter of 2008, consolidated revenues are expected to be in the range of $1.950 billion to $2.075 billion, up a range of 1% to 7% from the $1.932 billion recorded in the second quarter of last year excluding divestitures.

If current foreign current exchange rates hold constant through the second quarter, the contribution from foreign currency should be approximately $90 million and 4% of our growth.

For drug-eluting stents, we are targeting worldwide revenue to be in a range of $360 million to $405 million with U.S.

revenue of $160 to $185 million, while O-U.S.

revenue would be in the range of $200 million to $220 million.

Included in our U.S.drug-eluting stent total sales estimates for quarter is a sales returns reserve of approximately $40 million for taxes expressed related to the planned U.S.

launch of TAXUS Liberte in the third quarter.

In our Defibrillator business, we expect revenue of $410 million to $440 million worldwide with $270 to $290 million in the U.S., and $140 million to $150 million outside the U.S.

We are also reaffirming our full year sales guidance of $8 billion to $8.2 billion as discussed during our fourth quarter 2007 earnings call.

For the second quarter, adjusted earnings per share excluding charges related to acquisitions, divestitures and restructuring, as well as the exclusion of amortization expense are expected to be in the range of $0.14 to $0.19.

This range includes the $0.03 negative impact of expected TAXUS Express returns as well as inventory obsolescence write offs resulting from the expected U.S.

launch of TAXUS Liberte as discussed above.

Given our Liberte launch assumptions we should get $0.02 of this $0.03 back in the third quarter when we replace return TAXUS Express products with Liberte.

This range also includes the potential of potential of XIENCE and PROMUS approval in the second quarter.

The Company expects earnings per share on a GAAP basis in the second quarter of 2008 of $0.04 to $0.09.

We expect to record restructuring related charges of $40 million to $50 million or $0.02 of earnings per share in the quarter.

We are increasing our full year adjusted earnings per share guidance by the $0.04 of favorable discrete income tax items and income from divested businesses that we experienced in the first quarter of this year.

Therefore our new full year 2008 adjusted earnings per share guidance is $0.83 to $0.84.

As a reminder, we will record a $250 million pretax gain due to us from Abbott when they receive U.S.

FDA approval of XIENCE, and this gain is not our guidance for the second quarter.

That's it for guidance.

Our second quarter earnings call will be at 6:30 a.m.

eastern daylight time on July 22, 2008.

Now let me turn it over to Jim to review of the CRM business.

Thank you, Sam.

Sam has taken you through the numbers, so I'm going to make more qualitative remarks on progress we're making at CRM.

Let me start by saying that the market remains somewhat growth challenged.

We see double digit growth outside the United States, but essentially flat inside.

5% overall with both defibrillators and pacers around that number.

We think that our share remains stable in Q1 but with Medtronic still to report, we don't have all the information.

Against that backdrop, yesterday marked the second anniversary of Boston Scientific's acquisition of Guidant.

For the past two years our over riding focus has been the rebuilding of our CRM foundation and I believe we have made remarkable progress in that.

We have re-engineered the way we design, build, and test our products.

We have refocused our R&D process and we have developed an impressive pipeline of products that are now beginning to roll out.

During the past quarter alone, we received regulatory approval for seven CRM products and we just received an eighth this week in Japan.

With a renewed commitment to clinical excellence we plan to add significantly to the body of evidence based medicine in the coming years.

As the CRM market continues to recover, we are well positioned to take advantage of the substantial opportunities before us.

Our attention is now directed toward growing revenue and the most recent sales numbers indicate we're moving in that direction.

In this past quarter we posted our best sales numbers since the acquisition despite the new product will not come until late in the quarter.

With the CRM warning letter now well behind us and our new quality systems in place, we moved engineering resources from remediation back into product development.

We have a full slate of planned product launches for 2008 which began in earnest this past quarter.

In January we announced the CE Mark approval COGNIS CRT-D, and TELIGEN ICD, entirely new platforms that are among the world's smallest and thinnest high energy devices and offer significant advances including extended battery life, cell correcting software and improved programming technology.

Both COGNIS and TELIGEN are currently pending FDA approval which we expect to receive in the second half of the year.

In the U.S., we announced the launch of the first Boston Scientific branded pulse generators, the CONFIENT ICD and the LIVIAN CRT-D.

We also continue to add to our industry portfolio of LV leads.

In March we received European approval the ACUITY Spiral LV lead and we anticipate FDA approval of that during Q2.

ACUITY Spiral features the smallest LV lead tip profile on the market.

Just last week we announced regulatory approval, reimbursement, and launch of the ACUITY Steerable LV lead in Japan and we expect Japanese approval of the RELIANCE G defibrillator lead in Q2.

We expect to launch sale through a pacemaker in the U.S.

and Europe next month.

This is our first Boston Scientific brand of pacemaker and another example of a new platform built on the foundation of our enhanced processes and standards.

To improve our device monitoring capabilities, we launched or LATITUDE 4.0 upgrade.

We plan an additional software release and the launch of new in home communicators later this year.

These will be followed by expansion into selected European countries in early '09, to support our COGNIS and TELIGEN patients.

We are approaching 100,000 enrolled on the LATITUDE system and we expect this strong adoption to continue as our next generation platforms are rolled out.

We are also refocusing attention on clinical excellence, building on more than a decade of landmark studies guided Boston Scientific.

We are in the final stages of completing enrollment in our MADIT CRT trial which is designed to determine whether CRT therapy slows the progression of heart failure in symptomatic patients.

It is an event driven trial, powered to support its primary end point, with an enrollment of 1,820 patients and long term patient follow-up.

We expect it to expand on the recently announced results of the 610 patient reverse trial which also studied patients with early stage heart failure.

We are hopeful MADIT CRT will confirm the potential of CRT therapy to slow the progression of heart failure through earlier intervention.

In addition to this trial we are initializing eight new clinical studies this year alone with both U.S.

and international patient enrollment.

We have taken advantage of the past two years to put our house in order.

We enter our third year with better quality systems, focused R&D spending, a stronger pipeline, no regulatory restrictions and perhaps most importantly, a talented, dedicated team that is proved what it can do and is ready to do more.

Our belief in our people, our products and the therapy is greater than ever.

I'll share additional perspective with you later in the call, but now I'm going to turn it over to Paul LaViolette.

Thank you, Jim and good morning to all.

I'll focus my comments on the DES market and our performance and the strength of the rest of our businesses.

Three general statements first.

The DES market is now exhibiting clear evidence of recovery, and we are performing well against new competition.

Second, our quality and warning letter status continues to progress.

As I stated a number of times earlier, I will not comment further on the details of that progress, but it is consistent with prior expectations.

Third, we are seeing transient softness in some of our leading businesses due to the lack of new product flow.

We are refilling pipelines, but this quarter and next we'll continue to exhibit core franchise pressure.

I will elaborate on this later in my comments.

The worldwide DES market was 1.027 billion in Q1, down 9% from Q1 of '07.

With more concentrated impacts on the [CRD] trial and DES penetration loss the U.S.

market was off by 21% to $422 million but began strengthening following the stability achieved in recent past quarters.

The U.S.

market in Q1 was larger than either Q4 or Q3 of 2007.

PCI volume in the quarter was 251,000 procedures, a 5% gain from Q3, '07, which represented the low point in volume post ACC 2007.

Q1 also exhibited sequential growth over Q4 but average daily volume was equivalent.

If these trends continue, Q2 of '08 would be the first quarter to show year-over-year volume growth.

This outlook is further reinforced by our Bellwether product index which showed sales of non-stent PCI products in Q1 returning to 98% of prior year levels.

That's the highest since last ACC.

While PCIs showed some improvement, penetration added that further market value.

Penetration in Q1 was 63%, up 1% sequentially.

Independent MRG data reported penetration rates of 63%, 64%, and 67% for the three months in the quarter.Although these rates seem a bit high to us, we believe they are directionally correct.

Combining procedure volume and penetration, the U.S.

DES unit market was 333,000 or 4% higher than the average level produced for last three quarters of 2007.

Based on our projections for Q1, BSE held 52% DES share in the U.S.

market, the first quarter with a third competitor.

Although difficult to predict until all three competitors report sales, we believe the ENDEAVOR stent held 8% in the quarter.

We believe ENDEAVOR uptake will be based on favorable deliverability and lower price and it has been limited by efficacy data and the launch may plateau in the low to mid-teens market share.

This result highlights the resilience of the TAXUS brands and bodes very well for our performance upon approval of the PROMUS stent with differentiated elements, efficacy and superb deliverability.

TAXUS average daily revenues increased in March over February at the height of the ENDEAVOR launch, further demonstrating its staying power.

TAXUS pricing was done 1% sequentially and 6% versus prior year consistent with stated expectations for DES and at a similar rate of change to bare metal stents and balloon catheters.

Although risk of a more rapid price decline has increased with a lower priced competitor, TAXUS has thus retained its price premium over CYPHER and is well above ENDEAVOR, commensurate we believe with the clinical value proposition.

Overall, with healthy procedure volume and a penetration reversal, even in the presence of a third entrant, TAXUS revenues of $218 million in the U.S.

were down sequentially, a comparatively low 3%.

We believe this is a good sign for our cardiovascular business.

The international DES market showed signs of health.

Europe's 286,000 PCI procedures was higher than in the prior four quarters and the rest of the world markets were stable.

Penetration remained 46% for Europe and approximately 60% elsewhere.

Boston Scientific's market shares remain strong in the upper 30% range in Europe and share the also stable in Japan in the mid-40s.

When combined with the U.S., this created once again the number one overall market position with 42% global share.

This is comprised of the globally leading TAXUS brand and continued fast growth of PROMUS, bolstered by the international launch of PROMUS 2.25 and late Q1 reimburse in France.

Our stent pipeline continues to make very solid progress.

We are confirming expectations of launching the TAXUS Liberte and the PROMUS 2 platforms in mid-2008.

The global strength of TAXUS Liberte and the promising performance of our deliverable Everolimus alternative fortified our DES leadership expectations.

TAXUS ADAM, the first 2.25-millimeter U.S.

DES product and our in-stent restenosis indiction expansion are also pending approval and expected midyear.

An acute MI indication may also follow pending outcomes of the Horizons trial to be announced at TCT.

The TAXUS Element clinical trial will likely complete enrollment and PROMUS Element, having now completed design review, will be in its IDE trial next year.

These two next generation platforms will set a new standard for DES portfolio performance with early commercial activity targeted before the end of next year.

Looking briefly at other CV lines.

Our U.S.

bare metals stent business grew 5% year-over-year and gained share in the quarter on the strength of the Liberte product performance.

Our leadership in balloon dilatation strengthened with 64% share and 4% year-over-year growth, and this will be bolstered by the APEX balloon launch in Q3.

Our IVIS platform continued excellent performance based on utilization and the iLab technology benefits yielding 11% U.S.

capita growth and 22% global growth in imaging systems.

Our cardiovascular leadership was also aided by growth despite PCI softness in both the cutting balloon and atherectomy product lines.

Overall, we believe we are extremely well positioned with the number one DES, sole position of a two drug offering, a long list of franchise strength and improving fundamentals in the PCI and DTS markets.

Our relative strength as the overall lab leader will increase over the next two years.

We have areas of strength and weakness across our remaining portfolio of businesses.

Growth has slowed in some areas due to new product resource diversion to warning letter resolution.

This focus is making us a better company now and we believe this growth pressure will also moderate in the coming quarters as new product cycles accelerate just as we have seen with the CRM business now one year removed from its warning letter status.

Two areas of softness were peripheral interventions and neurovascular.

We like our ability to lead in these markets over time and our new product schedule over the nine to 18 months will be increasingly productive.

Neurovascular experienced negative growth due to Cordis' reentry in coils and our first ever competition in stent.

despite this short term pressure we retained 48% coil share, 55% in micro-catheters, 68% in guide wires, 71% in stents and 50% overall for neurovascular.

This position combined with our 10% procedure growth and upcoming coil and stent product launches creates reason for optimism.

Similarly in peripherals, we are number two overall in a growth market, number one in multiple categories.

We have pending carotid, renal and biliary stent approvals and expect gains in balloons and wires from new products improvements.

We have a similar outlook in urology and gynecology.

As the historic leader in endo-urology we hold 65% in stone management today and have gained the number one position in BPH therapy, aided by 28% Prolieve System growth in the quarter, positioning us well for continuing urology growth.

We have a similar status with gynecology continuing to performance well with 7% pelvic floor and 10% uterine therapy growth in the quarter.

Endoscopy remains very strong, growing 5% year-over-year with accelerating performance in our largest franchises including U.S., biliary, and hemostasis growth rates of 17% and 15% respectively.

Overall we have exceedingly strong platforms, large growth markets and leading positions but clear short term growth challenges as we shift engineering teams back toward the focus of filling our pipelines.

This is happening now and will gain momentum in 2008 and will increasingly yield beneficial results in the second half and throughout next year.

I want to close my comments by highlighting neuromodulation which continued impressive growth in the U.S.

at 38% due to competitive and clinical advantages of our Precision System, market share gains, and increasing success in patient therapy evaluations using our ONG device.

This strong showing in the spinal cord stimulation market is a positive leading indicator for our future in neuromodulation.

That concludes my remarks and I'll turn it over to Jim to provide his CEO perspective.

Thank you, Paul.

I'm going to provide some brief perspective on the quarter and then we'll open it up for questions.

You've heard the numbers and we came in the middle of guidance range on sales and the adjusted EPS was $0.24.

Sam walked you through the $0.24 but let say that our earnings benefited from ongoing expense management as well as some favorable tax items.

Overall we continue to make good progress during the quarter.

In drug-eluting stents, we maintained our leadership positions in both the U.S.

and world wide markets, despite the arrival of a third competitor in the U.S.

In last month's meeting of the ACC, we saw further evidence that the data tide continues to turn in the direction of drug-eluting stents.

Once again new data showed that in addition to being more effective, drug-eluting stents are as safe or safer than the bare metal counterparts and we expect to receive FDA approval in the not too distant future for two new drug-eluting stents TAXUS Liberte and PROMUS.

CRM, a number of points bear reiterating.

We received eight approvals in less than four months.

As I said earlier, yesterday was the second anniversary of our acquisition of Guidant, and over the last two years, we have transformed our CRM organization across a range of metrics from quality to R&D to pipeline, to clinical pipeline, we have built, or actually rebuilt a world class organization.

We have confidence in the market and we believe it will recover.

And we are well placed and have hard earned confidence in ourselves and as an organization.

Elsewhere, neuromodulation put in a very impressive performance with year-over-year growth about 40%.

And Endosurgery turned in another solid quarter with 9% growth.

We continue to reduce our net debt and increase our financial flexibility.

Over the last twelve months we've reduced net debt to $5.8 billion.

That number starts with a five now.

With the completion of the sale of five non strategic businesses we have further streamlined and streamline the organization.

We have also significantly enhanced our ability to focus on our remaining strategic business and has to invest for profitable growth in those businesses.

So another quarter of progress and one in which we continue to move in the right direction.

There's a lot of look forward to in the rest of the year as we anticipate the corporate letter warning letter restrictions being lifted, TAXUS Liberte and PROMUS being approved, U.S.

approval of COGNIS, TELIGEN, the carotid wall stent being approved; the results of a number of clinical studies and the impact of our continuing expense reduction and restructuring programs on the bottom line.

So with that let me turn it back to Larry, and he will moderate the Q&A.

Thank you, Jim.

Rachel, let's open it up to questions, and in an effort to field as many questions as possible in the remaining time, I wold request that you ask no more than two questions at a time.

Thank you.

(OPERATOR INSTRUCTIONS) And the first question is from the line of Bob Hopkins Lehman Brothers.

Please go ahead.

Hi, thank you.

I have a question for Paul and a question for Sam.

I'll start with Paul.

Paul, could your just give us a sense as to where Medtronic exited the quarter in terms of their ENDEAVOR market share, and could you elaborate on how much you think they're discounting on triluding stent pricing?

And then I have one for Sam.

I would say that with 8% in the quarter and having fully launched for two of the three months, that's reflective of the weighted average.

I would peg the exit rate around 12 or 13 and that's what we are using based on the status of their launch and their current position as I indicated, to project their plateau share in the low teens position.

I won't comment specifically on pricing other than to say we see quite aggressive pricing.

It's generally tied to nonperformance requirements.

So there's a fair amount of entry level pricing if you will, and as I said, I believes that reflective of the market's perception of the clinical utility of the device.

And I'm sorry, did you say it was roughly 10 or 20%?

Or are you not commenting on what the discount is?

I won't comment specifically on our perceptions of the pricing differential.

I believe MRG has reported that the discount is around seven plus percent, and we'll use that as a starting point.

Okay.

Thank you.

And then for Sam--Sam, just to clarify on the $0.

83 to $0.84 guidance.

Does that include the $0.20 number or the $0.24 number for Q1 and for Q2 does it assume the midpoint of your range or the extra -- or do you add back the $0.03 issue that you talked about related to Liberte?

Yes.

First of all it includes the $0.24 from Q1 which is why I added the $0.04 to the full year previous range that was $0.79 to $0.80.

So it includes that.

In Q2 it includes an assumption that Liberte will launch in the third quarter.

But once we know a launch date, then we're obligated to provide for the return of previously sold that was taxed as Express.

And it also includes the $0.03 in the second quarter and the get back of the $0.02 to the $0.03 in the third quarter, assuming that the cadence of all that happens as we're expecting.

Okay, and then just to be clear on cost cutting, are you sticking to the original guidance that you gave, because it seems you are already ahead of schedule on cost cutting.

Is there something that's going to be added back throughout the rest of the year or just wondering how it wouldn't be that you'd exceed your original targets.

Thank you.

Nothing will be added back from the portion of expense reduction associated with restructuring.

We have a little bit more expense reduction that is not part of restructuring, open requisitions and things like that, nothing material.

But, we should see continued improvement in the ratcheting down of expenses because we are not through with all the programs yet.

As we mentioned comes out of the back part of 2007, we had more than half of the 2300 individuals and related expenses that would be reduced already in this system as we enter the year.

Throughout the course of this year, we have a number of business processes and improvement programs that will help us get out the rest.

Thank you very much.

And the next question is from the line of Glenn Reicin With Morgan Stanley.

Please go ahead.

Good morning, folks, can you hear me?

Okay great.

Just a couple questions but one house keeping issue related to the restatement of sales.

It looks like you took oncology sales and put them in cardiovascular and then you took is it embolic protection only and put that in neuro?

Yes.

The oncology business got distributed to cardiovascular, endo, and neurovascular.

And the divestment of the venous access business came out of oncology all together.

So it is spread among those three businesses.

So it is not a clean break of product lines?

It is not a clean break.

No.

All right.

So can you talk a little bit about some of the businesses here?

You said that peripheral was weak.

You used to provide that detail in terms of how that business would do as a discrete business.

Talk a little bit about what the performance of that business was, with and without.

The oncology piece of it.

And then, Jim if you could talk a little bit about CRM O-U.S.

I would think there has to be very different performances between Europe and Japan.

And maybe talk a little bit about the transition to direct sales to Japan.

Before Paul answers your first question, let me go back to your question on the historics.

On our website, at the end of this call, you'll see all of our sales for each of our businesses restated.

We haven't the -- the restatement of all the numbers for the four quarters of 2007 to make the remodeling easier.

That's good.

Yes.

And Glen, just on the peripheral businesses.

I think this business is one of our legacy businesses, is caught in the conversion of resources back to pipeline focus.

So we have several -- we had some weakness in our stent business that is related to the anticipated availability of our EPIC and carotid wall stent franchises.Core balloons, PK balloons actually performed well and we expect that to expand based on the launch of additional Sterling sizes.

Sterling you may know is the APEX technology so we think that's going to be a leading franchise going forward.

We did have weakness related to a back order on our Cryo balloon system.

That is resolved and should pick up steam in the rest of the year.

And basically, the rest of the franchises were growing with market, including some enhanced performance by our zip wire product which we launched last year to replace the (inaudible) live wire.

Just to clarify.

You said balloons was up 4%.

Was that units or total?

I didn't say 4%.

Balloons were up with the market.

But I don't have the number.

We can get you that off line.

I thought you said four, up 4%.

In my commentary earlier I said that coronary balloons were up 4%.

And that's dollars or units?

That was up dollars.

Great, and then what about like PTA and some of the accessories associated with peripheral.

We can provide you a detailed offline.

But I don't have that information in front of me.

CRM?

We grew with the market in international, so we were up 11, along with what we think is -- we only got half the market as far as numbers at this point, but we believe overall it was up 11.

That's basically 9% in defib and 11% in pacers.

We're -- what we're seeing in Japan -- I was just over there I guess two weeks ago.

We're doing okay, I would say.

What's really not happening that I wish were happening is the CRT market doesn't seem to be gaining the penetration at the rate that we expected it would.

So the mix between CRT and defib is not moving as quickly as we expected it would.

Pacers are what they are.

So overall, I would say that we're a little light on the Japan side.

Europe has a flow of new products.

They have a lot of arrows in their quiver.

And I think are starting to get traction that we haven't seen in a while.

CRT penetration was your -- or market penetration?

Market.

At least as far as we can tell.

Okay.

Thank you.

And the next question comes from the line of Rick Wise Bear Stearns.

Please go ahead.

Good morning, everybody.

Jim, back to CRM a bit.

You are describing the U.S.

market as basically flat.

When we were at ACC, we spoke to a couple of docs who had larger centers and I was hearing encouraging reports of possibly rebounding referrals.

Are you seeing that?

And maybe as part of that, you came in the U.S.

at the lower end of a narrow range, but just a little perspective versus the upper end.

We didn't see the growth in U.S.

market in Q1 that we had expected to see.

Overall, it's probably 2%, which is better than a couple of the quarters we've seen recently.

But it's not even mid-single incidentals really, let alone the 8% we would expect to see eventually.

There are signs of life , but it's spotty.

It is some places and not others.

It's larger centers and not smaller centers.

It's really hard to gauge whether there's -- it's just sort of normal noise or whether anything really is there.

But overall, at 2% revenue growth, that's

All right.

Related to that, you all acquired -- or announced your intention to acquire CryoCor.

Maybe talk a little about your AF strategy and what kind of acquisitions might we see more bodily for the corporation?

Well, there's a lot of interest in AF as you know.

There are lots of attempts at doing something about AF.

And most of those are marginal utility.

There hasn't been anything that works all the time that takes less than four to six hours to do.

Our focus is we believe that the CryoCor energy source is safe and is likely to be efficacious somewhere between 70% and 85% of the time.

We also believe that once we get the tools down that we can expect to see those kinds of results in kind of an hour and a half instead of the four and a half to six.

So the pool of patients is there.

There is absolutely no doubt about that.

They are cued up.

It takes forever to get lab time.

If we could do hour and a half procedures, we could start working our way through that pool very quickly.

And if reimbursement is there to support that, that becomes a very, very interesting market.

We think with CryoCor and their patent position and the technology that we and they together have been able to develop, we got something here.

And we expect to be a player going forward.

Okay.

One last one for Sam.

Sam, gross margins at 71.7%.

Can you give us a little more perspective on where they trend from here?

Can they hold?

You talked about mixed cost and the hedge contract issues.

Help us think through a little bit how the three elements are going to play out through the rest of the year.

Obviously you have a lot of new products coming, and costs continue to come down I assume.

It's actually 71.8%.

Sorry about that.

Gross profits is an interesting topic because much of it depends on how well we do in the drug-eluting stent market, so we try not to give line item detail, because it could move up one quarter, down the next based on product mix, based on geographic mix.

I think looking in the area of the low 70s in gross profit for the foreseeable future is probably the right way to think about it.

In any given quarter given things that might happen with inventory reserves or product mix, it may bounce around a bit.

We're not going to see in the short term a spike up in gross profit until we get through this year, see where we stand with drug-eluting stents in our market share, how much of that is PROMUS versus TAXUS.

Then we get the full effect later this year, in going into next year with a lot more focus on value improvement programs and in process improvements in general.

Thanks a lot.

Before we go on to the next question, let me go back and correct something I said as part of my opening comments.

For those of you who heard me say 6:30 a.m.

was going to be our future earnings call.

In case you'd like to sleep in, we are actually going to start at 8:30 like I always do.

That was a mistake by me.

Operator?

And the next question comes from the line of Mike Weinstein, with JP Morgan.

Please go ahead.

Good morning and thank you for taking the questions.

Maybe spread the wealth a little bit on to each of you.

First for Sam to clarify.

Your '08 adjusted EPS guidance, does that include benefit from the $200 million milestone payment from Abbott on XIENCE approval.

It does not.

It would be an upside.

Perfect.

Okay.

And then for Jim, the O-U.S.

ICD business was up 9% reported.

I assume that is flat to down constant currency.

What do you think the O-U.S.

ICD market is growing right now?

9% is what Q1 looks like for us.

I think it's probably a little more than that overall, probably 13, something like that.

What do you think it is constant currency?

Well, it's probably minus five from that so eight, nine.

Well minus that.

I would assume the currency would be more than that.

Yes.

That's our number.

The five is our number overall.

I haven't looked at it in consequence and I don't have the number.

But the 5% is what our uplift was as a result of currency.

Let me turn to Paul then.

Two quick questions.

One, the TAXUS performance in Japan, you really didn't comment on it.

The share dropped to mid-40s.

Maybe you could just talk about it.

And then you highlighted other businesses that didn't do as well as you guys would like them to do.

In one business you wouldn't highlight is like, endoscopy grew like 5% and you call that very good and Paul, I can remember Boston Scientific 10 to 15 years ago, which, and anything that didn't grow double digits was frowned upon.

In light of the cuts the Company has made to R&D and pipeline projects over the last couple of quarters, how do you get some of these businesses growing again?

Can you give us availability on the pipeline products, particularly in endosurgery that would accelerate growth.

First of all on TAXUS Japan.

In the second half of last year after the initial launch, where we did peak over 50%, we gave back some of the market share as a result of something that I think is unique to Japan which was of course based on a three and a half years of exclusive experience with the CYPHER product, and what we saw was, primarily as a function of nearly complete angiographic follow-up on all patients; we saw that the loss associated with TAXUS which has been higher than CYPHER and has never manifested in any clinical distinction.

That in the presentation of nearly complete angiograpic follow-up drove some positions to perform repeat procedures on TAXUS stents probably would never have resulted in any clinical symptoms.

So that ultimate -- what I would consider unnecessary re-intervention cost us in market share as some physicians were concerned that reinvention rates were going to be higher than CYPHER.

We've seen across the five million to date that's generally not the case.

We have a unique situation in Japan that led to a shift back in share.

That shift occurred at the end of last year.

And actually, our shares in Japan sequent subsequent to the beginning of this year have been stable.

And obviously we are working to grow that back.

We think the clinical performance is well established and although artifact of angiographic follow-up in Japan is unique and represents a difference in performance, we don't think it should yield a lower market share over time than we've expected in all markets around the globe between TAXUS and CYPHER.

So that is the story there.

Endoscopy I think you are right.

Ten or 15 years ago growth might have been a little bit higher.

We've grown though, through those years, the business from 100 or 200 million worldwide to 800 million.

I think the performance is consistent.

We are in broader market categories across endo than we ever have been.

Our view on a market like this is to continue to execute line extensions and upgrades in the core businesses that we compete in today whether that's single use biopsy, hemostasis, and biliary interventions were two I commented on in my prepared remarks.

The same could be said for dilatation.

The same could be said for pulmonary intervention.

So, we have a lot of core businesses.

They look like they're going to grow in the mid-to high single digits.

We've seen global expansion.The endo business as an example today is nearly 50/50, U.S.

and international.

We expect international to continue to be a growth driver.

We expect long term growth continue to be fueled by the trends in colonoscopy and to diversify into a broader procedural base.

There's a lot being described about natural orifice intervention.

We're obviously exploring that.

We have a lot of sort of derivative therapies to offer through endo.

So we expect the endo business to be a solid grower.

We expect our overall share position to be maintained.

More than 50% of all of the world wide endoscopic accessories come from Boston Scientific.

We think this is just going to be a very strong business for long term.

Great.

Thank you for taking the question.

And the next question comes from the line of Lawrence Keusch with Goldman Sachs.

Hi everybody.

This is Charlie on for Larry.

How are you?

Good thanks.

Just two questions.

First of all, can you speak to whether there's been any mix shift between defibs and CRTDs and if so, what has been driving that?

In particular, has there been any meaningful change following the reverse results and what can we expect from those results and their potential applications for the market?

I think reverse is sort of a good news, bad news scenario.

Yes, they missed their end point.

But there were signs that the therapy really did work.

It was more a trial construction issue than the outcome.

I think that MADIT CRT is going to fill in that blank, we use different end points in that study.

I expect based on what I saw in reverse for the MADIT CRT trial to be positive, with 3x the patients and with that sort of thing.

There has not been any negative market of reverse on the market.

But it's been three weeks.

We're not -- we don't have that good of intelligence.

Okay.

Thanks.

And can your just speak to if you've been detecting any kind of mix shift between defibs and CRTDs.

No.

Okay.

And they be my follow-up question is other earnings results have raised a question softens in terms of procedural volumes.

Now I am talking about non-cardiology.

Now I am wondering if Boston has been detecting any of these trends?

I would say no.

When you look across and I would say that we're not dealing with core surgery businesses.

So we can't measure our volumes by the number of sutures that we sell.

When you look across the diversity of our businesses, across all of endo-urology, gynecology, endoscopy, peripheral interventions, we do not see softness.

We see our historic procedure trends pretty much intact.

Great.

Thank you very much.

Rachel, before we move to the next question, if I could just remind everybody to limit the questions to two to get as many questions in as possible with the time remaining.

Thank you.

Thank you, Mr.

Neumann.

And the next question is from the line of Joanne Wuensch BMO Capital Markets.

Please go ahead.

Thank you for taking the question.

My first question has to do with some qualitative information you may be able to give us on some of the new product launches which you've had so far.

Given that it's limited time, in the CRM division.

And the second question has to do with, we have two major medical meetings coming up with HRS and with PCR.

Give you give us some comments on what we may be able to see there regarding Boston Scientific.

Thank you.

With regard to new products in CRM, in the U.S.

CONFIENT and LIVIAN seem to have been well received.

Certainly the field force has been excited about them and it extends our capabilities in some areas and that's a real positive.

The buzz though is COGNIS and TELIGEN in Europe.

There's all kinds of capabilities in those camps.

They are truly elegant and truly advanced.

What people seem to really be reacting to is that they're thin.

In little old ladies, you don't get the bump that you get, knowingly.

Cosmetically they're easier.

And we have an IS 4 version of that coming out later this year, early next year, and, which reduces the header size by half.

And these things really are being very, very well received.

And just for PCR, I don't think there's anything earth shattering at PCR.

We will have TAXUS 6, five year results which will just add further to our overall clinical array of long term data.

We have some Arrive data; two year clinical outcomes on patients with diabetes.

Of course, in Europe we have the CE Mark for a diabetic indication.

We expect longer term outcome will only fuel our strength for that indication in those markets where it's approved.

I think we will see some longer term registry data out of western Denmark which will add to our overall -- you know, the bubble charts, if you will, for all the patient that is we're following, now more than 150,000 patients.

We'll see some results from the stent registry which may be foretelling.

We've seen some AMI data already at ACC.

If we see some additional AMI data that's positive, that may be a favorable leading indicator for the Horizons trial.

And of course Horizons which studies the TAXUS stents in acute MI could lead to an indication for TAXUS in AMI.

That ultimately would both expand the market and do so exclusively for TAXUS-eluting stents Those would be things to look for along with two year follow-up from Spirit Three.

And the next question comes from the line of Christine Stuart of Credit Suisse.

Please go ahead.

Thanks for taking my call.

Paul, I just wanted to go back to your comments on PROMUS Element.

You had said that there was going to be an IDE that started next year and you had completed design review.

Can you just remind us of the relationship with Abbott in terms of to what degree you continue to have supply of the private label PROMUS stent and if there's any risks that there may be a little bit of a gap in the U.S.

because of delayed entry into the trials.

Yes, the -- so we obviously have our supply relationship with the PROMUS device intact and there's no change to our status in the relationship with Abbott.

Represents the first fully integrated Boston Scientific developed program using the Everolimus from the PROMUS platform on our own element technology and our own stent delivery system capabilities.

That program -- as has been the case --for the most part with all our stent eluting programs, has been impacted somewhat by the revised FDA time lines.

However, we don't see any gaps in our plans today either for international launches or U.S.

launches.

PROMUS is about one year behind its TAXUS brother on the Element pathway.

So the TAXUS Element trial underway today.

PROMUS Element trial underway next year.

But the first commercial activity that we see for PROMUS Element would be sometime around the end of next year in Europe.

And so between our currently anticipated European launch time frame and our current development and clinical trials time frame for the United States, we see no gaps in our supply of PROMUS and conversion and conversion to PROMUS Element.

What is it that's taking so long between design review being completed and the ID?

Why couldn't you start earlier?

Primarily the completion of preclinical data.

So, the animals take realtime.

Okay and then I guess, just more on a big picture basis.

We've heard of several companies looking at R&D process.

I know you have talked a little bit about going through and looking at your R&D spending as well, and making appropriate cuts.

Can you talk about how you have changed how you look at spending levels for drug-eluting stents giving the higher requirements from the FDA or even on the ICD side given the slower market outlook.

Well we did look at our portfolio and we've been fairly public about that.

Perhaps the number one change we implemented was the back burnering not based on long term clinical enthusiasm but overall cost and challenge of our bifurcation program.

So that was one that certainly has-- call it been victimized by the overall regression for DES and the final calculation of how many programs can be afforded.

But, I think we are in a very unique position.

We have the number one position in the marketplace today.

We have the benefits of participating [Paxil], [Taxol] and Everolimus markets and offering customers a choice.

We have a leading platform in Liberte.

We have a leading platform with [Chronus] The ability to leverage the Element stent and the APEX stent and resystem technology, under those two established drug platforms.

So it really gives us a pretty good ability to drive official product development.

We also have, I would say, the best clinical organization, the longest and most well designed clinical trial program.

I think we do this more efficiently than any other company.

And I don't think any other companies that carry ten or 15 market share points could possibly afford to do what we do.

R&D overall is 12% of sales, so we still invest quite impressively in R&D.

And our DES is clearly broader and I think more powerful than any other competitor.

On the CRM side, we cut back on Rand are investing the dollars that we reduced back into D primarily in the process controlled areas.

We're putting more in process development than we used to.

The other opportunity then is to -- we now have the EP catheter division reporting in to Bill McConnell in the CRM space and with the Cryo project coming along very well.

I think you'll see us spend more dollars on that project.

Probably those dollars will come out of the can and lead side of the business to a certain extent.

But the overall total will remain more or less what it was the day we bought the Company.

And the next question is from the line of Bruce Nudell with UBS.

Good morning.

I have a question for Jim and one for Paul.

Jim, just a clarify, St.

Jude reported 15% boost to their O-U.S.

ICD number, due to currency.

It looks like CRM for you guys as a whole, the O-U.S.

sales were boosted 13%.

If the O-U.S.

ICD market was around 13% it really looks like constant currency was in low single digits.

Is that a cause for concern?

Is that a temporary aberration?

Or are the numbers just wrong?

I don't have the full impact in the data before me.

But clearly there is a significant impact of currency.

And that should be deducted from, call it the unit growth of the marketplace.

And those numbers overtime have come down as they have in the U.S.

And so, that's not that surprising.

We will see currency continue to benefit us though for probably the remainder of this year and possibly into next year.

So while this is something to worry about long term, short term meaning the next year or so, I don't see much change.

And my follow-up for Paul is I was sitting in the audience at the ACC and I was surprised at how XIENCE and TAXUS over time, converged in terms of late loss and IVUS metrics of biological potency.

If we look out to Spirit Four which I think is a non-angiographic follow up trial.

Could you possibly -- how the TLR rates might stack up next to one another.

And the other piece of that question is the one lingering problem with TAXUS pertains to para procedural MI and then the question is will Liberte fix that?

And if that's the case, then you have convergence of TLR and you have gotten rid of the MI problem.

Isn't the next generation of TAXUS a very potent competitor?

Good questions.

It's hard for me to postulate on future outcomes.

But I don't think there is any question the angiographic follow up in all trials drives a lot of presumptions about performance that have not necessarily manifest, certainly as it relates to TAXUS in the clinical setting.

So the thing that we see in Spirit Two, the thing that we've seen in every other comparative trial is how solid TAXUS performs.

It simply performs consistently time after time no matter what it is compared to.

Other devices can move up or down based on how the trial is structured, and other companies are shrewd precisely how to design trials in an effort to tease out those distinctions; but generally TAXUS performs the same.

Hard for me to know what longer term, outcomes will be comparing PROMUS and TAXUS.

What I think we will use as a predicate is CYPHER with comparable late loss to PROMUS and year after year comparable clinical outcomes to TAXUS in the real world setting.

That's what we expect to see.

And I think generally speaking when you take away the angiographic driven influence in the Spirit trials that's effectively what you see there as well.

I think Liberte clearly has demonstrated in its clinical data, a reduction in non qa MIs.

We have only speculated on the fact that's a function of thinner stent struts and less peri procedural disruption in the vessel.

We think that bodes very, very well for TAXUS Liberte.

And frankly even perhaps even better, although the clinical trials will show this to be determined basis for Element over time.

I think it simply sets us up to have two devices, PROMUS and then subsequently PROMUS Element, TAXUS Liberte and then subsequently TAXUS Element; each with outstanding short and long term clinical performance and that's why we think our leadership position in drug-eluting stents is going to be quite strong for the long term.

The next question comes from the line of Sara Michelmore with Cowen.

Yes.

Thanks, good morning.

First a question for Sam and then a follow-up for Paul.

Sam, you reiterated the revenue guidance for the full year of $8 to $8.2 billion.

But I just wanted to clarify.

I assume that you did raise sort of FX benefit for the year and if you could just comment on that, how much it's going to be and-- Not to split hairs but I want to clarify that you're not making a change to your underlying organic revenue growth assumption.

As we set the guidance for the full year at the end of the fourth quarter for the first quarter as well as for the full year as you saw in the first quarter, the difference between the FX rates that were in effect then which was like February fourth or something like that and how we finished the quarter only changed our -- only added about $7 million to Q1 revenue.

So FX bounced around enough that, that's not a material movement to consider.

So our reiteration of our guidance is our underlying performance that we continue to expect we will achieve.

And Paul you talked about the pricing dynamics in the U.S.

Can your just comment on what you're seeing in Europe and if you could talk about France and what the share dynamics have been there since the launch of XIENCE and PROMUS.

France is really too soon.

Reimbursement just came at the end of the quarter and both Abbott and Boston really are rolling out.

So very preliminary and we expect France will follow the rest of Europe except that it's a sizable market where Boston Scientific has a leadership position already.

And of course with simultaneous launch of PROMUS and XIENCE we expect that we will do a little bit better than historical Europe where we of course started several quarters late.

Pricing in Europe, we don't disclose our specific prices and because there are so many prices from country to country, that probably doesn't make that much sense anyway.

The thing that we see, the thing that I find noteworthy is TAXUS has emerged as a premium prized player.

So it seems to be a little bit less by the more active pricing dynamics within the category.

So that is observation number one, and I guess observation number two would be some of the lower share players seem to be using price a little bit more commonly as a means to try to hold on to some residual share.

And I think it's clear that the aggregate performance of Everolimus on the XIENCE and PROMUS platforms, they seem to be the grower in business and we expect in the U.S.

that they will be associated with the premium price.

And the next question comes from the line of Larry Biegelsen Wachovia Securities.

Please go ahead.

Can you hear me okay?

Thanks for taking the question.

Just two quick ones.

One for Paul.

On PROMUS Element, what is your best guess at the U.S.

launch timing on that and then the second question is, over time where could we see R&D as a percentage of sales go.

It's 12% now.

Could you get to 10% like Medtronic?

Thanks.

I think the answer to the second question is yes.

We will feather that percentage of sales down to the 10% range over the next couple of years.

And PROMUS element in the U.S.

is likely to be 2012.

Thank you.

And the next question comes from the line of Matthew Dodds Citigroup.

Please go ahead.

Just a couple questions on neuro-stims, since we haven't hit that.

For Paul.

On the competitive landscape.

You have the Restore Ultra now on the market, and I guess St.

Jude's launching the ION mini pretty soon.

How competitive are those products because they're now a little smaller.

And then a bigger picture question on neuro for Sam.

With cochlear now gone, how profitable roughly is that division versus the corporate average.

Is it adding much to the corporate average?

And so, Matt, we are very aware of obviously the offerings from Medtronic and St.

Jude, respectively.

Size in this space there are some significant differences in overall implant size.

And I would say size and feature both technologies that you've in the catch up mode.

The precision technology has always been very small, has had leading battery technology.

There's some catch up going on what I would call the more fundamental features, but the real I liability technology that translates to therapeutic differences with our independent current delivery, it is not matched and so I would say that the existing technology platforms being used by the two competitors are being improved as much as they can yield in an effort to close the clinical gap that they face.

In each case -- and this is true of the ION mini as well -- they fall short of closing that gap.

So it's catch up and it's definitely not surpassed.

So I think our clinical leadership position is sustained from my perspective on the generation of products that are coming out now.

And on neuromod, we don't possibility of any of our distinct businesses, but clearly it is an investment area for us.

As you know we have recently gained full control of that.

We're going to invest in that business and grow it.

It represents one of the most significant opportunities long term for expanding markets.

So you can expect us to see -- look for ways to continue to invest in R&D across a broad front in that business.

Thanks Paul.

Thanks.

Sam.

And Rachel, we are approaching the top of the hours, and so I think we have time for one more question.

Thank you, sir.

And final question comes from the line of Philip Legendy with Thomas Weisel Partners.

I'm slipping under the wire.

A couple of housekeeping questions outstanding still.

I just wanted to check.

Did you -- do you think you saw any residual benefit from Medtronic issues in the quarter?

Not really.

We haven't seen that much across the last couple of quarters.

And it's lost in arriving.

Okay.

And then just kind of a general market question.

What are you seeing in 7 French leads in terms of how the market is developing now?

And how do you see yourselves participating going forward?

7 French leads if they could be made to work consistently would be great.

But the fact is that's not the case.

We could have a 7 French lead.

We developed 7 French leads, they didn't work well enough.

We chose not to introduce them.

If someone can crack this case, I think they would have an advantage in the marketplace.

But this game isn't over.

They continue to fail.

And the marketplace, the docs are going to be stuck with that for the foreseeable future.

And it's not a happy thing.

It's really more than just a minor irritation to the docs that do this.

And so -- we're -- people would love to have 7 French leads, but they want whatever they have to work.

That's they way more important than the French side.

Rachel, with that we're going to conclude the call.

And I want to thank everybody for joining us today.

We appreciate your continued interest in Boston Scientific.

We'll give you the pertinent details.

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