Boston Scientific Corp (BSX) 2012 Q4 法說會逐字稿

Welcome to the Boston Scientific fourth-quarter 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).

As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host Michael Campbell.

Please go ahead.

Thank you, Greg.

Good morning, everyone, and thanks for joining us.

With me on today's call are Mike Mahoney, President and Chief Executive Officer, and Jeff Capello, Executive Vice President and Chief Financial Officer.

We issued a press release earlier this morning announcing our Q4 and full year results for 2012, which included reconciliations of the non-GAAP measures used in the release.

We have posted a copy of that release, as well as reconciliations of the non-GAAP measures used in today's call, along with other supporting schedules, to the Investor Relations section of our website under the heading Financial Information.

The duration of this morning's call will be approximately one hour.

Mike will begin our prepared remarks with an update on our business progress and his perspectives on the quarter and 2013.

Jeff will then review our Q4 financial results and business performance as well as Q1 and full year 2013 guidance.

We will then open the call to questions.

During today's Q&A session Mike and Jeff will be joined by our Chief Medical Officers, Dr. Dawkins and Dr. Stein.

Before we begin I'd like to remind everyone that this call contains forward-looking statements within the meaning of federal securities laws which may be identified by words like anticipate, expect, believe, estimate and other similar words.

These forward-looking statements include, among other things, statements about our growth in market share; our products including new product approvals, launches and performance; procedural volumes and pricing; clinical trials and results; cost savings and growth opportunities; our cash flow and expected uses; our expected financial performance, including sales, margins, earnings and other guidance for Q1 and full year 2013, as well as expected tax rates, R&D spend and other expenses.

Actual results may differ materially from those discussed in the forward-looking statements.

Factors that may cause such differences include those described in our risk factors section of our most recent 10-K and subsequent 10-Qs and 8-Ks filed with the SEC.

These statements speak only as of today's date and we disclaim any intention or obligation to update them.

At this point I will turn it over to Mike for his comments.

Mike.

Thank you, Michael, and good morning, everyone.

Thanks for joining us this morning.

I'll begin today with some comments for guiding our fourth-quarter performance which Jeff will cover in more detail in a few minutes.

Overall we demonstrated improved performance during the quarter; we delivered sales of $1,821,000,000, down 1% on both a reported and an operational basis, which excludes the impact of foreign exchange in the divested neurovascular business.

This was above our guidance range and Street consensus.

Meanwhile, our adjusted EPS of $0.18 was at the higher end of our guidance range and above Street consensus.

We also generated strong operating cash flow of $370 million and used a portion of our cash flow to buy back approximately 18 million shares of stock in the quarter.

We saw continued above market growth in several of our businesses and the growth figures that I will highlight are all on a constant currency basis.

So starting off, Neuromodulation grew at 14%; Endoscopy grew at 10%; and our Peripheral Interventions, or PI business, grew at 9%.

We also continue to see strong returns on our investments in the emerging markets with combined revenue in Brazil, Russia, India and China growing 35% in the quarter.

As we further build our capabilities in these countries we expect this growth trend to continue into 2013.

We continue to make progress on strengthening our CRM and EP business with the US launch of the S-ICD system and the completion of the acquisition of Rhythmia Medical.

Additionally, we continue to expand into high-growth adjacent markets such as hypertension by completing our acquisition of Vessex Vascular.

So let me now go into more detail regarding our business performance for the quarter.

In the interventional cardiology or IC market global PCIs continue to grow mid-single-digits with growth in the international markets offset by declines in the US, which, combined with global pricing dynamics, are yielding the global market that we believe is declining in low- to mid-single-digits.

During the quarter IC revenues declined 9%.

While we are disappointed in our lack of growth, we believe that our US DES share is stabilizing and we were able to grow international DES revenue mid-single-digits.

In the US our PROMUS Element plus (inaudible) stents have been well received and we expect them to provide access to more competitive accounts as those accounts come up for contract renewal.

We estimate our fourth-quarter US DES share to be in the mid 30s.

And in terms of our US -- I'm sorry, in terms of our DES pipeline, our next generation of SYNERGY stents continues to progress according to plan with CE Mark approval approved received in late October and a controlled limited launch currently underway in Europe.

The early feedback from customers has been very positive.

And further, we commenced our SYNERGY US IDE trial called EVOLVE II and enrollment is tracking on schedule.

Also our launch of PROMUS Element Plus long lesion and small vessel stents in Japan has delivered solid share gains in that market.

So with our PROMUS and SYNERGY platforms we believe that we have the most compelling DES portfolio and pipeline in the industry as backed by clinical evidence.

And with continued focus on commercial execution, our overall IT pipeline and the continued favorable clinical evidence of our DES platforms, we believe that we will stabilize our DES share in the first half of 2013 and grow our DES share in the second half of the year.

In our core IC business we improved our performance sequentially.

We continued the launch of the Emerge Balloon Catheter during the quarter and we continue to receive positive feedback from customers.

In addition, we commenced our commercial rollout of the BridgePoint Medical suite of coronary CTO devices that add to our unique and clinically differentiated portfolio of IC products, all of which enable us to be uniquely positioned to provide treatment for complex PCI procedures.

On the structural heart front we continue to make progress in TAVR with the Lotus Valve.

Lotus is a differentiated second-generation valve that is fully repositionable and recapturable post-deployment.

At TCT favorable three-month data from the REPRISE I trial were presented.

We expect to complete REPRISE II in the first half of 2013 with projected CE Mark approval and European launch of the Lotus Valve to occur in the second half of 2013.

So moving on to our PI business, Peripheral Interventions -- PI delivered strong growth of 9% resulting from the cadence of new product launches.

We continue to see growth around the world with the US and Asia Pac region showing double-digit growth during the quarter.

In addition, we are very excited to announce the acquisition of Vessex Vascular which closed in the fourth quarter.

This technology is a second generation renal denervation platform for the treatment of uncontrolled hypertension.

This platform is highly differentiated and it accelerates our entry into what we expect to be a multi-billion dollar market in the next five to 10 years.

We expect to launch this platform commercially in Europe and other international markets in the second half of 2013.

Overall we believe that the end markets in PI are healthy, they are growing mid-single-digits and we will continue to drive above market growth both in the US and globally in 2013.

In Endoscopy we had a strong quarter with 10% with worldwide.

During the quarter several of our key product franchises in endo experienced strong growth, namely our biliary, biopsy, metal stents and hemostasis franchises.

Also, effective January 1, 2013, Category One CPT codes are now in place for the Alair platform, which is our bronchial thermoplasty system.

This is a major reimbursement milestone for BT and we believe it also reflects the strength of the clinical evidence and the growing support for this procedure among pulmonary physicians.

We expect those codes to provide greater access for treatment for patients with poorly controlled severe asthma that will facilitate easier claims processing and accelerate private payers' coverage of this important treatment option.

In the quarter we surpassed our year-end goal exiting 2012 with approximately 230 sites in 18 countries using our BT platform.

Overall we believe that the end markets in endo are healthy and we will continue to drive above market growth on a global basis in 2013.

In our Urology and Women's Health division we returned to growth with a 3% increase during the quarter.

The Urology business continues to perform very well with strong growth due to our commercial expansion and effective product launches.

Our Women's Health business continues to be pressured, particularly in the US, due to the market declines in the pelvic floor procedures.

In 2013 we have a strong pipeline in Women's Health and Urology with seven expected new product launches.

And in addition, we plan to continue expanding the global footprint of this business.

In Neuromodulation we delivered 14% growth during the quarter and we now have the clear number two position in spinal cord stimulation in the US driven by a leading technology and excellent consistent execution.

We recently launched the Precision Spectra spinal cord stimulation system in Europe.

Precision Spectra is the industry's first 32 contact spinal cord stimulation system offering several market differentiating features that are designed to provide clinicians with greater flexibility in treating the broadest spectrum of pain patients.

We are pleased with the physician enthusiasm that Spectra has received and we expect the launches in the US in the first half of 2013.

So now let's move to the CRM business.

Our worldwide CRM business declined 4% during the quarter and we believe that the worldwide CRM market continued to show signs of stabilization during the quarter, declining in the low- to mid-single-digits for the full year.

In the US we continue to see the easing of year-over-year comparisons as we sunset the significant 2011 market declines.

In the US we estimate the defib market [to decline] in the mid-single-digits in the fourth quarter.

And from a share perspective we estimate that overall US de novo defib share continued to increase sequentially thanks to the continued strong performance of our INCEPTA and ENERGEN family of ICDs and our highly reliable RELIANCE lead platform.

In addition, sales of our RELIANCE leads remained strong in the quarter driving continued increase of our defib lead to port ratio.

So now let's turn to our innovative S-ICD platform.

So during the fourth quarter we continued to manage a controlled launch of the S-ICD system.

We're continuing to enhance our supply chain to meet the very strong clinical demand for this technology that follows early FDA approval.

We believe that the growing demand for the S-ICD highlights the strategic importance of this innovative technology for patients and our CRM business.

We believe that the S-ICD technology provides us with the opportunity to both take share in the existing ICD market and to expand the market over time.

Also, the recently announced results of the 1,500 patient MADIT-RIT trial highlight the potential of the S-ICD.

This trial demonstrated that very simple ICD device programming with limited anti-tachycardia pacing at relatively long delays before giving therapy resulted in significantly better outcomes for participating patients.

And thus simple programming, limited pacing and longer delays before therapy are all design features of the S-ICD.

On the pacing side we believe we've taken modest share both in the US and internationally with our INGENIO family of peacemakers and CRTPs thanks to an upgraded platform that now includes wireless RF telemetry, RPM enabled devices and other significant new design features.

In terms of our pacer pricing, our pricing has remained relatively stable versus last year thanks in part to price uplifts we have realized on this new platform.

Now turning to left atrial appendage, the WATCHMAN productline continues to show strong growth in international markets both on a sequential and year-over-year comparison.

Specifically WATCHMAN implants in the fourth quarter grew by more than 65% year over year.

And finally, in our EP business, which grew 5% during the quarter, we are focused on making good progress on several new internal afib focused projects.

We have CE Mark for our Blazer Open-Irrigated catheter and we are currently enrolling two IDE trials for approval of the Open-Irrigated catheter in the US, BLOCk-CTI study for afib -- I'm sorry, for atrial flutter and ZERO AF for atrial fibrillation.

In addition, we are excited about the recent acquisition of Rhythmia Medical and its next-generation mapping and navigation solutions.

This acquisition is a decisive step by Boston Scientific and it shows our commitment to the Electrophysiology business and better positions the Company to participate in the fast-growing EP market.

So we expect CE Mark approval of Rhythmia platform in the first half of 2013 with FDA approval in the second half and the full EU and US launch in 2014.

So to wrap up the rhythm management section, we believe that the combination of the S-ICD, WATCHMAN and newly rejuvenated pacing and ICD platform, combined with a stronger EP and mapping portfolio, will provide BSC a truly differentiated offering for EP that we expect to improve our future growth profile.

So in summary on 2012, although we were encouraged by our performance in the fourth quarter we're clearly not satisfied.

Overall 2012 was a challenging year in terms of top-line performance.

However, we were successful in hitting our adjusted earnings for the year and continue to generate significant adjusted free cash flow.

So despite these challenges we believe that there is a lot to be positive about.

We continue to see above market growth in several of our businesses; we expanded our capabilities in emerging markets; and we begin to see some encouraging signs of stabilization in our core IC and CRM markets.

Were also encouraged by the recent progress we made on strengthening our largest core businesses with the early launch of the S-ICD system in the US, the acquisition of BridgePoint in the CTO device segment and CE Mark approval for our next-generation stent system called SYNERGY.

We've also seen a continued strategic push into higher growth adjacent markets by acquiring Vessex Vascular for the treatment of hypertension and Rhythmia Medical for mapping and navigation.

So finally, we continued our share repurchase program and now have bought back 12% of the outstanding shares of the Company in the last 18 months.

So taken together we believe that our progress in 2012 puts us in a stronger position going forward and will lead to improved shareholder returns, particularly given our current stock price valuation.

So before moving to 2013, I want to highlight our new strategic imperatives and provide an overview of the changes being made right now to strengthen our global execution.

These imperatives will be used to guide the Company going forward.

So first we plan to improve our execution to increase share in our core markets by adding new capabilities and innovation to drive clinical and economic value to our customers.

Secondly, we are entering new and faster growing adjacent markets, we are leveraging our current capabilities including our global manufacturing, clinical and sales organizations to grow in these markets.

Third, we are driving global expansion through a strong and continued focus on our international markets, including the BRIC countries and other emerging markets.

And fourth, we plan to fund our growth strategy and improve margins by focusing on continuous improvement and following a disciplined approach to restructuring, as evidenced by today's announcement which Jeff will discuss in more detail later.

Lastly, we continue to develop new capabilities and programs for our employees to compete and lead in the shifting global med tech environment.

Now I would also like to highlight the important leadership and operational changes that we are already making and will continue to work on as we strengthen our global execution.

Number one, we are moving a global operating structure across our business units.

We believe this structure will enable us to operate more efficiently and effectively by improving our speed and global resource allocation.

Two, we are streamlining our commercial sales model both in the US and Europe by reducing layers and complexity.

We're also building a stronger corporate solutions organization to meet the demands of the large integrated health networks and emerging accountable care organizations.

We've strengthened our leadership team with a number of important organizational changes and experienced hires across the Company and we continue to strengthen our focus on the emerging markets, that is demonstrated by our plus 30% growth in 2012.

We are shifting more of our R&D dollars into higher growth markets and we are improving the leverage of our R&D capabilities across the Company to unlock more synergies and growth opportunities.

And lastly, we continue to be focused on continuous improvement in scaling back our corporate infrastructure to reduce cost and improve our overall speed.

We believe that these actions taken together demonstrate that we are thinking differently and acting decisively to improve our global execution and growth profile.

So with that I will now offer some comments regarding 2013 which Jeff will cover in more detail.

So as we look forward to 2013 we expect improved global execution and improved revenue and earnings performance.

So with respect to revenue growth we are projecting a range of negative 2% to positive 2% growth and we encourage you to model at the midpoint.

We expect a slower first quarter with sequential improvement throughout the year, ending with a return to growth in the second half of 2013.

Looking across the Company we expect to see continued above market growth in our PI and our Med/Surg businesses which consist of our Endoscopy, Urology and Women's Health and Neuromodulation divisions.

We expect to see continued growth in the emerging markets driven by accelerated top-line performance in the BRIC countries.

And lastly, we believe that our IC NCR businesses will deliver improved performance versus 2012 and we expect to grow our market share in the second half in those businesses in 2013.

We expect to continue to drive our continuous improvement and restructuring initiatives while we invest in our strategic growth initiatives.

We believe that the first half of 2013 and particularly the first quarter will be more challenging from a top-line perspective due to tougher 2012 comparisons primarily driven by competitive pressures in DES and the impact of fewer selling days in the first quarter.

We expect to continue delivering on our continuous improvement opportunities to reduce costs and boost our overall speed.

Unfortunately we'll also need to absorb the impact of the Medical Device Tax under the US Affordable Care Act that begins in 2013.

And with respect to operating margins and earnings, our 2013 EPS range is $0.64 to $0.70.

At the midpoint of our guidance range we are projecting low-single-digit adjusted EPS growth, but this includes the full impact of the Medical Device Tax.

Lastly, we expect to generate strong cash flow, which we believe would enable us to fund more share repurchases under our newly authorized $1 billion program and to continue to look at acquisitions to improve our future growth profile, which we expect will enhance shareholder returns.

So in summary, we believe the steps we are taking are what's needed to turn around our performance and return Boston scientific to growth.

We plan to go into greater detail during our upcoming investor conference which will be February 12 in New York City.

Let me now turn the call over to Jeff.

Thanks, Mike.

Let me begin by providing some overall perspective on the quarter before getting into the details.

Despite continued challenging global economic and market conditions we generated adjusted earnings per share of $0.18 which was at the higher end of our guidance range of $0.15 to $0.18 and above consensus.

This solid profitability was driven by better top-line performance, continued gross margin improvement and a favorable tax rate and fewer shares outstanding, partially offset by increased investments in our strategic growth initiatives.

In addition to our solid adjusted earnings performance, we also generated $376 million in adjusted free cash flow and repurchased approximately 18 million more in shares in this quarter.

Consolidated revenue for the fourth quarter $1,821,000,000 represents a decrease of 1% on both a reported and an operational basis, which excludes the impact of foreign exchange and the divested neurovascular business.

The actual headwind from foreign exchange on sales was $19 million and slightly higher than what we had assumed in our fourth-quarter guidance range.

Now I'll move to the detailed review of our business performance and operating results in the quarter.

Starting with interventional cardiology, worldwide revenue came in at $534 million in the fourth quarter, representing a constant currency decrease of 9% compared to the fourth quarter of 2011.

Worldwide DES revenues came in at $312 million in the fourth quarter representing a constant currency decrease of 11% compared to the fourth quarter 2011.

US DES revenues were $118 million in the quarter representing a decline of 29% compared to fourth quarter last year.

This decrease was primarily due to a strong comparison to the prior year quarter driven by the launch of PROMUS Element Plus in the fourth quarter of 2011, lower share due to competitive products, lower ASPs and continued softness in PCI volumes and the number of devices used per procedure.

We estimate that our US DES it sure was stable sequentially in the mid-30s for the fourth quarter.

International DES sales of $194 million represented an increase of 6% in constant currency compared to fourth quarter last year, primarily driven by over 25% growth in the emerging markets of Brazil, India and China.

Worldwide non-stent interventional cardiology was down 5% in constant currency.

However, with the upcoming launches of new products, along with the acquisition of BridgePoint Medical's suite of CTO devices, we expect to see continued improvement in this business over the course of 2013.

Now moving on to CRM, worldwide revenue was $457 million in the fourth quarter representing a constant currency decrease of 4% compared to the fourth quarter of last year.

In the US CRM revenue of $265 million represented a 5% decrease from the fourth quarter of 2011.

International CRM sales of $192 million were down 3% in constant currency compared to the prior year quarter.

On a worldwide basis defib sales were $330 million in Q4, which is down 5% in constant currency from the fourth quarter of last year.

In the US defib sales were $204 million; this was down 5% compared to the fourth quarter of last year due primarily to overall market declines.

International defib sales of $126 million represented a 4% decrease in constant currency from last year.

Finally, worldwide pacer sales declined 3% on a constant currency basis as we continued to gain share in the quarter.

In the US pacer revenue declined 5% while international revenues declined 2% in constant currency for the quarter.

Moving on to our Electrophysiology business, EP delivered a strong quarter with worldwide growth of 5% on a constant currency basis.

Our Peripheral Interventions business delivered the fourth quarter in a row of above market growth as worldwide revenue was up 9% in constant currency.

Global growth was driven by impressive 12% growth in the US and 8% internationally.

Our Endoscopy business had another solid quarter of significant growth with worldwide sales up 10% in constant currency led by 10% growth internationally and 9% growth in the US.

In constant currency our worldwide Urology/Women's Health business returned to growth this quarter with a 3% increase in sales.

Growth was particularly strong internationally at 11%.

The Urology business maintained its leadership position and delivered 6% worldwide constant currency growth driven by strong international growth of 10%.

Our Women's Health business declined 7% on a worldwide constant currency basis, versus a decline of 11% in the prior quarter.

We continue to see pressure on electric procedures and concerns around the use of surgical mesh for pelvic organ prolapse, specifically in the US market.

In Neuromodulation we ended 2012 on a strong note with 14% revenue growth on a worldwide basis driven by strong uptake of our 16-contact Infinion Lead and our focus on commercial execution.

We expect to sustain this momentum in 2013 as we work on bringing Precision Spectra to the spinal cord stimulation market.

Let me now briefly address full year 2012 revenue.

On a reported basis consolidated 2012 revenue was $7,249,000,000, which represents a 5% decrease from the prior year on a reported basis.

In constant currency, and excluding the impact of the neurovascular divestiture, sales decreased 3% compared to 2012.

For the full year foreign currency negatively impacted reported full-year sales growth by approximately 160 basis points or about $124 million.

Moving on from sales, adjusted gross profit margin for the fourth quarter was 68.1% or 330 basis points higher than the fourth quarter of last year.

The increase was largely attributable to the continued mix shift toward self manufactured products in DES as a result of the launches of PROMUS Element in the US and Japan, as well as benefits from our plant network optimization plan and value improvement programs, partially offset by price erosion and some product transition charges.

For the full year 2012 adjusted gross profit margin was 67.8%.

Adjusted SG&A expenses were $630 million, or 34.6% of sales, in the fourth quarter of 2012 compared to $620 million, or 33.6% of sales, in the fourth quarter of 2011.

During the fourth quarter 2012 benefits from cost saving programs were offset by continued investments in emerging markets and costs associated with our strategic growth initiatives, including our recent acquisition.

For the full year 2012 adjusted SG&A expenses were $2,511,000,000, or 34.6% of sales.

Adjusted research and development expenses were $241 million for the fourth quarter, or 13.2% of sales, primarily driven by continuing investments in our strategic growth initiatives, including costs associated with our SYNERGY US ID trial, EVOLVE II.

This compares to $230 million in the fourth quarter of 2011.

For the full year 2012 adjusted research and development expenses were $889 million, or 12.3% of sales.

Royalty expense was $28 million, or 1.6% of sales, compared to $33 million in the fourth quarter of last year.

For the full year 2012 royalty expense was $153 million, or 2.1% of sales.

On an adjusted basis pre-tax operating income was $341 million or 18.7% of sales, up 170 basis points from the fourth quarter of last year.

The increase in adjusted operating margins was primarily due to higher adjusted gross margins which were partially offset by the impact of lower sales.

GAAP operating income, which includes GAAP to adjusted items, that had a net negative effect of $226 million on a pre-tax basis, was $115 million in the fourth quarter.

The primary GAAP to adjusted items in the quarter were -- pre-tax restructuring costs of $52 million; pre-tax net litigation related charges of $73 million; and pre-tax amortization expense of $101 million.

Now I'll move on to other income expense.

Interest expense was $64 million in the fourth quarter, which was $8 million lower than the fourth quarter of last year, primarily due to the collection of Spanish government receivables and the refinancing of our revolving credit facility in mid-2012.

Our average interest expense rate in the fourth quarter of 2012 was 5.5% or about 40 basis points lower than the fourth quarter of last year.

2012 interest expense was $261 million or $21 million lower than 2011 primarily due to a lower average debt balance as a result of prepaying our term loan in 2011 and the refinancing of our $2 billion credit facility in mid-2012.

Our tax rate for the fourth quarter was a negative 19.3% on a reported GAAP basis and 8.5% on an adjusted basis.

The difference between our reported and adjusted tax rates for the quarter is attributable to the net benefit of restructuring, litigation and other net charges excluded in determining our non-GAAP results.

Our 2012 tax rates do not include any benefit to the US federal R&D credit due to timing of approval.

Our adjusted tax rate for the fourth quarter reflects an operational tax rate of approximately 12%, increased by discrete tax charges and reduced by a true up to the expense booked in previous quarters based upon our estimated full-year operational tax rate.

Our actual full-year operational rate was lower than expected due to a change in the geographic mix of earnings.

For the full year we reported adjusted earnings per share of $0.66 per share.

On a reported GAAP basis 2012 EPS was a loss of $2.89 per share.

The GAAP results for 2012 included goodwill and intangible asset impairment charges, acquisition and divestiture related net credits, litigation and restructuring related charges, discrete tax items and amortization expense after tax of $5 billion or $3.55 per share.

Now I'll move on to the balance sheet.

DSOs of 61 days improved one day compared to December of last year due to good performance in emerging markets and the US offsetting weakness in EMEA.

Despite lower inventory levels, days inventory on hand of 140 days was up 10 days compared to Q4 last year primarily due to lower cost of goods sold driven by the PROMUS Element transition.

Reported operating cash flow for the quarter was $370 million compared to $349 million last year.

Q4 2011 included the receipt of $76 million from Abbott to settle our outstanding PROMUS cost adjustments.

Excluding this receipt, reported operating cash flow for the fourth quarter of 2012 is $97 million higher than the fourth quarter 2011 primarily due to higher adjusted operating income and improved working capital management.

Q4 2012 reported operating cash flow included $61 million of restructuring payments compared to $25 million in the fourth quarter of last year.

For the full year restructuring payments in 2012 were $155 million compared to $121 million in 2011.

In addition, the fourth-quarter 2012 included $8 million of milestone earn up payments related to prior acquisitions.

Capital expenditures were $63 million in the fourth quarter of this year compared to $81 million in the fourth quarter of 2011.

For the full-year capital expenditures were $226 million in 2012 compared to $304 million in 2011.

The lower capital expenditure in 2012 compared to 2011 was primarily due to the timing of infrastructure investments.

Based on the above, full-year reported operating cash flow was $1,260,000,000 compared to $1 billion in 2011.

2011 included $296 million to settle a legacy Guidant legal claim.

Turning to share repurchases, we repurchased another 18 million shares for approximately $100 million in the fourth quarter of 2012.

In 2012 we repurchased 105 million shares for approximately $600 million.

Since July of 2011 we have now repurchased 187 million or approximately 12% of our outstanding shares.

In addition, we announced today that a new program was authorized for the repurchase of up to $1 billion of the Company's common stock bringing the total authorization up to approximately $1.1 billion.

We continue to believe that our stock price is undervalued and we currently expect to utilize approximately one half of our available adjusted free cash flow for the repurchases of shares in 2013 subject to business development opportunities, market conditions, our stock price, regulatory trading windows and other factors.

Today we also announced an expansion of our 2011 restructuring program intended to build on the progress made under that program to strengthen our operational effectiveness and efficiencies and support our new investments, which we expect will increase shareholder value.

The Company estimates that the expansion will reduce gross annual pre-tax operating expenses by approximately $100 million to $115 million exiting 2013.

From a cost perspective we expect that a substantial portion of the total program savings will be reinvested in targeted areas for future growth, including our strategic growth initiatives and emerging markets.

Key activities under the total program including the expansion (technical difficulty) we estimate that the implementation of expansion will result in total pre-tax charges of approximately $140 million to $160 million of which $40 million should be non-cash.

Let me now briefly provide some perspective on our outlook and walk you through our guidance for the first quarter and full year 2013.

As we enter 2013 we continue to expect dynamic market conditions with the risks of macroeconomic weakness, particularly in Europe, and some softening procedure volumes in the US.

However, despite these uncertainties we believe there is reason to be positive.

We have recently acquired new technologies and launched key new products in most of our businesses and are seeing high-single-digit or better sales growth in several of them.

As a result we remain focused on returning to top-line growth in the near term.

We also believe, despite the medical device tax, that we have the opportunities to enhance profitability and expect to continue to generate strong cash flow.

In addition, we are leaving 2012 with encouraging signs of stabilization in both of our two largest end markets and related businesses.

Having considered those factors we estimate that our consolidated 2013 sales will be between $7,050,000,000 and $7,350,000,000.

Assuming that current foreign exchange rates hold constant we expect full-year tailwind from FX to approximately $15 million.

On an operational basis, which excludes the impact of foreign exchange and the divested neurovascular business, we estimate that consolidated 2013 sales will be in a range of up 2% to down 2% and we encourage you to model to the midpoint.

The range assumes that the IC and CRM markets continue to stabilize and our revenue performance improves sequentially throughout the year driven primarily by tougher year-over-year comparisons in the first half.

We expect our adjusted gross margin for the year as a percent of sales to be similar to 2012.

Although we expect to continue to see downward pricing pressure, we expect this headwind to be offset by improved price management and manufacturing value improvement programs.

We believe that the impact of these benefits will increase as we progress through the year.

As we forecast ongoing SG&A expense, please note that this includes the estimated impact of approximately 100 basis points from the Medical Device Tax under the US Affordable Care Act that begins in 2013.

In addition, we expect to make investments in our strategic growth initiatives and continue to build our capabilities in emerging markets.

However, the cost of these investments should be partially offset by restructuring savings.

For the full year we expect adjusted SG&A as a percent of sales to be between 35% and 36%.

We continue to transform our R&D organization and refocus our spending to drive innovation and growth.

In 2013 we expect R&D spending as a percentage of sales to be similar to 2012.

We expect R&D expense to be higher in the first half of the year and gradually decline as a percentage of sales in the second half as savings initiatives are expected to partially offset spending on several of our strategic growth initiatives.

We currently expect royalties and other income and expense to be relatively flat to last year.

We expect our adjusted tax rate for the full year 2013 to be between 11% and 13%.

This reflects an operational tax rate for 2013 between 13% and 15% reduced by 2% for the retroactive extension of the US R&D tax credit for 2012 which will be recorded in the first quarter of 2013.

This excludes any other discrete tax items that may arise during the year.

We are subject to tax authority examinations in many jurisdictions that are scheduled to conclude in 2013.

The final resolution of these exams may result in additional favorable or unfavorable discrete tax items during the year that are difficult to forecast but may impact our full-year adjusted tax rate.

As a result we expect adjusted earnings per share for the full year 2013 to be in a range of $0.64 to $0.70 and would encourage you to model to the midpoint of the range.

The range reflects the estimated impact of approximately $0.04 per share from the medical device tax.

Excluding any one-time items that may arise, we expect adjusted EPS to increase sequentially as we progress through the year with Q4 being the strongest quarter driven by improved revenue performance, the timing of certain investments and cost benefits we expect to realize.

On a reported basis we expect EPS to be in a range of $0.29 to $0.37.

Lastly, for 2013 we expect adjusted free cash flow to exceed $1.2 billion; CapEx of approximately $300 million; pre-tax amortization expense of roughly $100 million per quarter; and stock comp expense of approximately $110 million.

Now turning to the first quarter, we expect consolidated revenues to be in a range of $1,740,000,000 to $1,850,000,000.

If current foreign exchange rates hold constant, the headwind from FX should be approximately $10 million or 50 basis points relative to the first quarter of last year.

On an operational basis, we expect consolidated Q1 sales to be in a range of down 2% to down 6% and we encourage you to model the midpoint.

The forecasted decline in Q1 is primarily driven by tougher year-over-year comparisons and the impact of less selling days than in the prior period.

On an adjusted days basis Q1 operational revenues are expected to be more in the range of down zero or flat to down 4%.

One a worldwide basis we expect DES revenues to be in a range of $280 million to $310 million and CRM revenue to be in a range of $455 million to $475 million.

For the first quarter adjusted EPS is expected to be in a range of $0.14 to $0.17 per share and reported GAAP EPS is expected to be in a range of $0.04 to $0.07.

That is it for guidance.

So with that I will turn it back over to Michael who will moderate the Q&A.

Michael.

Thanks, Jeff.

Greg, let's open it up to questions for the next 20 minutes or so.

(Operator Instructions).

Glenn Novarro, RBC Capital Markets.

Two questions -- one, can you elaborate a little bit more on the restructuring that is new going forward?

In the press release you talked about headcount reduction and some of the savings.

But can you talk to us about which divisions are we coming from?

Is this coming from CRM, is it stents, is it US, OUS?

Any type of color would be helpful.

Thank you.

Good morning, Glenn, this is Jeff.

Let me respond to that one.

So as you will remember a couple of years ago we talked about the opportunity through the emerging markets initiative and zero-based budgeting to take out $100 million to $200 million out of the cost structure of the Company focused primarily on kind of the corporate infrastructure.

And we have been saying all along throughout this year that we felt that we could do in excess of that.

We came out with a restructuring plan midway through 2011 and said we would do somewhere between $225 million to $275 million in total savings by focusing primarily on those corporate infrastructure type departments.

So this program here is an extension of that, it is predominately centered around the corporate functions that currently are larger than they need to be relative to the size of the business.

There are some adjustments we are making to some of the businesses that are primarily outside of the commercial infrastructure.

And so, it is more or less right in line with what we anticipated doing relative to a couple years ago and then the step-up we had done a year ago.

Okay, and then just as a follow-up on the ICDs.

Your US number did come in line with our expectation.

So probably better execution; you talked about the new products gaining traction.

But I was also wondering, with the subcutaneous ICD in the marketplace today have you been able to pick up any new accounts that you were previously shut out of?

Sure, I will touch on that, Glenn.

We do have a controlled launch in 2012-2013 as we continue to ramp up the supply chain and meet the demand.

But the uniqueness of the product -- one is allowing us to open up new accounts in Europe and the US to sell S-ICD which we do sell at a premium and does enable some pull through as well.

So we think that combined with the broader portfolio that we touched on in the discussion points with our investments in EP and Rhythmia as well are also assisting with that.

Okay, thank you.

David Lewis, Morgan Stanley.

Jeff, just a couple quick questions here on 2013.

I guess, first off, you mentioned Vessex and Rhythmia and Mike did as well in his prepared remarks.

Can you just give us a sense of what contribution you could expect in 2013 from inorganic drivers, specifically Vessex and Rhythmia and others?

So, David, we're probably not going to get into as much depth as you would like right now on those contributions.

At our Investor Day on the 12th of February we're going to get into a little more detail in terms of what we expect the programs to generate.

I guess what I can help you with is we've said all along that we've got three or four programs we expect to contribute to earnings in 2013 and that will be accelerated in 2014 with another three or four programs.

And we will take you through that in more detail at Investor Day.

Okay, very helpful.

And then just one more quick one on margins.

The restructuring announcement -- and clearly your buyback sentiments are very positive and a little higher than what we would have expected for 2013.

But it still looks like, based on your guidance, Jeff, operating margins are expected to be down year on year.

And I guess the biggest disconnect there, if that's correct, is gross margin.

Maybe help us understand what are some of maybe the key headwinds in gross margin that were sort of not appreciating?

Because we expected obviously this year to be a little stronger given some of those headwinds in 2012 began to fade.

Yes, so if you look at gross margins, we exited 2012 with gross margins of 67.8%.

And as you look forward we continue to expect that price will be a headwind and I think we can do better on price and we have got a number of things that we are working on on the pricing side.

However, as a percentage basis we think our standard cost improvements can largely offset the margin erosion on price.

So that's good and we are stepping up more and the manufacturing team is doing a great job on that front.

So that is pretty much neutralizes those two impacts from a margin perspective.

And then we've got some benefits coming through for the last segment of the PROMUS Element transition.

The two factors that weigh a little bit on gross margins, one is the impact of acquisitions.

Some of these acquisitions are a little smaller in terms of revenue and as we ramp them up they are below our average gross margins, so that has an impact.

And the second impact is we did do for consistency purposes some reclasses between R&D and gross margins for next year which moved some costs out of R&D up into gross margins to be consistent across all the businesses.

The combination of the acquisitions and the movement of R&D is worth about 100 basis points on gross margins.

So margins would be up more.

I would tell you though that we expect to end the year at a higher rate gross margin wise.

So our margins will start off a little bit slower because some of these smaller acquisitions and they will end at a higher rate.

Okay, very helpful.

Thank you very much.

Rick Wise, Stifel Nicolaus.

It is great to see the strong finish to the year.

A couple questions, first on WATCHMAN -- pretty extraordinary performance.

We were at (inaudible) recently and frankly we were really impressed and surprised and excited by the physician reaction, it seems like they are very excited.

Can you talk to us about when is the data coming out?

What are we looking for?

Do you expect another panel?

And maybe talk about the launch and uptake; just end market potential -- just all that background with WATCHMAN.

Thanks.

This is Mike; I'll make a couple comments and turn it over to Ken Stein who is on the phone as well.

We are very encouraged about the size of the market, as you indicate.

We think it is about a -- could grow to $500 million to $750 million market.

We are seeing nice uptick in Europe as we continue to train more physicians and drive growth there.

Relating to the clinical data, the PREVAIL enrollment was completed say early third quarter 2012.

And we are currently analyzing the data and we will be looking to discuss with the FDA their submission strategy in the near future here.

So we will be able to provide a very detailed update on WATCHMAN at the upcoming Investor Day.

Okay, two last quick ones.

Can you talk about what it would take to get to the upper end of your 2013 sales guidance?

Is it markets?

Is it product timing, launches, execution?

And maybe on the asthmatic front, you've got your CPG 1 code, can you characterize at all the 2013 outlook there and the uptick potential?

Thanks.

A lot of components to that one, Rick, but I would say a couple things.

One, on the end markets, we see the end markets very consistent and stable versus 2012.

So across BSC portfolio we think of the end markets in the kind of 0% range.

With our -- we want to classify our DES and CRM markets in globally the negative 3% to 5% range and our other businesses' market is about 3%.

So we think neutralized for all that our markets are essentially flat.

So when you look at potential for the future, we see ourselves continuing to grow very effectively in our Med/Surg businesses and our PI where we'll grow faster than the market.

And our second focus area is to significantly improve our execution in IC and CRM.

So on a combined basis those businesses grew last year call it negative 9%.

And so, we are going to put a lot of focus on that and improve those results.

So you will see the -- 45% of our business, Med/Surg and PI, continue to grow faster than market and a lot of execution to improve our results and performance for 2012.

And then, as you mentioned, on top of our core business we will layer on the impact of Alair, WATCHMAN, the S-ICD as well as Vessex new adjacencies.

And the results of that combined with our focus on BRIC provide us upside.

I hope that is helpful for you.

Mike Weinstein, JPMorgan.

I had just a couple clarifications.

First, Jeff, you had mentioned the difference in selling days in the first quarter.

Were they the same in the fourth quarter year over year?

Yes.

Okay, and then you were talking about gross margins, Jeff, in 2013.

And one component that I thought was left out was the transition service agreements.

My math had the expiration of those TSAs, adding them up 60 basis points to the gross margin and that really kind of kicking in the second half of the year.

Did that change?

No, there is a benefit associated with the neurovascular transition and it is not far off.

There are some other various factors that kind of add up that neutralized that.

So I kind of gave you a more condensed version of (inaudible) I guess.

Okay, and then can you talk about sustainability of the tax rate?

Obviously the tax rate is coming in below what people were modeling in for 2013 and you had the lowest tax rate in the sector.

Can you talk to us a little bit about that over the next few years, in particularly as you go out to the period in which those Guidant transfers, intercompany transfers roll off and then what will your tax profile look like once that occurs?

Yes, so, tax rate was lower this year than we anticipated due to kind of geographic mix of earnings, I think I explained that in the prepared comments.

As we look forward, as we continue to migrate more manufacturing offshore that pulls down our tax rate.

And so, some of the activities we had commenced as part of the network optimization program and some other things we had done in our international locations were putting downward pressure on the rate.

So kind of the 13% to 15%, I think I said last quarter kind of at 16-percent-ish was what we thought for this year, we are now a little bit lower than that and we continue to kind of migrate more things offshore.

That looks fairly sustainable as far as we see today.

I think everyone knows we had the dispute with the IRS relative to the Guidant transfer pricing.

And we do reserve for that in our rates, that is built into the rate on a normal basis.

And so, our 13% to 15% reflects that.

And we think we are appropriately reserved and we are appropriately positioned, we will have to see how that plays out.

And as a reminder, that is probably a couple years out, two to three years out in terms of full resolution.

And then, what I was asking, Jeff, was when your intercompany debt transfers when you've basically played all those out going back to the Guidant acquisition, what will your tax rate look like once that is done?

Which I think is 2014-2015?

Yes, you are referring now to repatriation of cash --

Yes.

-- not the tax.

Yes.

Okay, sorry, I misunderstood.

So we have at least a couple years left with those intercompany notes to kind of bring cash back, assuming we don't do something different from a tax structure perspective which is always possible.

So it is probably a couple years and thereafter we will be in a position similar to other companies that are kind of building more cash outside the US and less cash within the US.

One of the things though that is helpful for that is as we continue to migrate more activity offshore, which we are doing as part of this restructuring, that rebalances our expense base and our cash flow mix.

So we are naturally readjusting where we generate and consume cash by moving more activities outside the US, so that helps as well.

Okay, I will let some others jump in.

Thanks, Jeff.

Bruce Nudell, Credit Suisse.

Can you hear me all right?

Perfect, thank you.

Jeff, clearly you are reinvesting next year, but you have kind of set the table with savings.

And just looking at your operating cash margins, around 19% in 2012, could you just give us a flavor of where that margin might go kind of in the mid-term?

So we are going to -- as we did a couple years ago, we are going to step the investment committee investors through kind of our margin expansion opportunity at the upcoming Investor Day in February.

But we are confident we can continue to improve our operating margins.

As you look at kind of the $650 million to $750 million of short-term cost saving opportunities and just kind of tick down kind of what is left, as you look at the PROMUS Element transition, there's a piece of that that is left for 2013.

The value improvement programs we had said historically 5% cost savings consistently every year; we are going to be able to do better than that.

We have got a line of sight for increased ability to kind of taking out cost over the next five years.

So that will continue to expand gross margins and offset price.

Our project transformation on the R&D side we think will continue to offer opportunities.

We've done our plant network optimization programs; we still have 12 plants in the network, so we will continue to look at whether that makes sense.

And then we've got the expanded restructuring program we talked about today that will throw off more savings in 2013 and 2014.

So those are -- we've got pieces left of the $650 million to $750 million and on top of that you've got a pretty high level of spend associated with these new programs, which we expect to grow out of as the revenue comes and as the programs finish their development cycle, so that will be helpful.

We think we can do better on price.

We are going to talk a lot about continuous improvement at Investor Day in terms of getting our costs down even further.

So there is certainly no shortage of opportunities to drive our cost base down and as the revenue comes it will be on a lower base of cost which will naturally help with the margin expansion.

Okay, and I guess my follow-up is, you guys have repeatedly said that you are doing reasonably well in the de novo part of the ICD business and that your replacements are a headwind and certainly the data on Factset confirms that.

Do you feel that -- first of all, when is that replacement headwind going to begin to abate?

And are the new products, including the S-ICD, enough to stabilize share and actually move forward on a share basis?

Thanks so much.

Yes, it's Mike here.

So you nailed it, we continue to see some improved sequential share gain in de novo implants, both in ICDs and also core pacer.

And the headwind on the replacement back from the Guidant recall back in 2005, we believe that that headwind will begin to soften up more the second half of 2013.

So we think the replacement performance will improve in the second half of 2013.

In the prepared to comment we discussed stabilizing our share in CRM in the first half and improving our share position in the second half.

It would be based on the softening of the replacement headwind, continued impact of S-ICD and also the continued impact of the new pacer and ICD launches we had in 2012.

Thank you.

Matthew Dodds, Citigroup.

Good morning.

On Neuromodulation, that business saw a nice uptick.

How much of that do you think was due to a competitor's restructuring of the business versus the new product cycle you are just underway with?

And then also, what is your expectation for DBS in Europe?

Is that going to do much at all, do you think, in 2013?

Matt, good morning.

Difficult to determine how much of it was our execution or maybe disruption with some competitors.

So it is tough for us to gauge that.

I guess just the good news is you saw the results for the fourth quarter very strong.

We had a very early launch of Spectra in Europe and we see a full launch of Spectra in the US, which we think will be very innovative in the next breakthrough for pain in patients.

And you will see the full launch of that -- the results of that in the second half of 2013.

So, we are very bullish on our guidance for Neuromodulation for 2013.

In DBS we will just initiate our clinical trial in the US in 2013 and get the information.

I'm sure we completed enrollment in Europe at this point.

So we have completed enrollment in Europe so we will see some improvements obviously to our DBS sales in Europe and we are launching our clinical trial in the US.

And then, Jeff, just a quick one for you.

I just want to make sure I had this right for the model in 2013 -- share repurchase, half the operating cash flow that was in the guidance?

It will be half the available cash flow.

We have, if you look at kind of our legacy acquisitions, we have approximately a couple hundred million dollars of earn out payments that we expect to have to make here in 2013.

So if you look at the $1.2 billion adjusted free cash flow, after we make those payments approximately half of that cash we look to kind of use for share repurchases -- subject to the business development environment, the price of stock and regulatory issues.

Okay, but that's what you have in the guidance?

More or less, yes.

All right, perfect.

Thanks, Jeff; thanks, Mike.

Matt Taylor, Barclays.

I just wanted to ask about the stent performance sequentially better and get your view on expectations for SYNERGY and pricing in stents in the coming year.

You should be lapping a bit of a Medtronic headwind.

So just curious to get your thoughts there.

Yes, so, in the DES market, similar to CRM, we believe we will stabilize our share position, clearly stabilize that in the first half and we will drive share gains in the second half of 2013.

We do anniversary the Medtronic launch in second quarter.

And similar to the prepared remarks, we believe we'll have more of a challenge in first quarter based on less days selling and also very difficult competitive comps in first quarter.

And we'll lap the Medtronic launch in second quarter and the combination of new launches with SYNERGY, trialing increasing and long lengths will drive share gains in the second half.

Thanks.

And you talked about your share repurchase plans for the year and stock being undervalued.

I'm just curious as the stock continues to perform here, when do you start to think about potentially initiating a dividend or changing that kind of a program?

This is Jeff.

I think we have been fairly consistent with that, that we think from an investor perspective and a shareholder value perspective there is a lot bigger return to driving the growth rate of the Company into the low-single-digits and up north of that versus kind of putting in a dividend program.

So we are very focused on getting back to growth in the second half of this year and 2013 and then moving that growth rate up.

I think once we do that and accomplish that then we can re-look at that capital allocation and whether we make a dividend more of priority.

But it's not -- for the next short while it is not as much of a priority as is bringing in new technology to drive the growth rate of the Company up.

Okay.

Thanks, Jeff, thanks, guys.

Bob Hopkins, Bank of America.

So, Jeff, just to clarify, your SG&A guidance for 2013 excluding the med tech tax is roughly in the 34% to 35% range, is that right?

That is correct.

And that's roughly the same as what you did in 2012.

And just kind of going back, I assume your comments on the Q3 call where you're talking about SG&A and hopefully seeing a good sized benefit from some of your ongoing programs in 2013.

I'm just wondering kind of what has changed between Q3 and Q4 as it relates to SG&A expense and the outlook for some real fall through as a result of some of the programs you have going on?

Yes, it's a fair question, Bob, and I think as we considered kind of the best potential return from a shareholder perspective, we are getting more than we anticipated relative to the cost savings.

So I think we are doing really well on the cost savings.

I think what we are finding is we found a great asset in Vessex, we found a great asset in Rhythmia, both that can be significant revenue growth drivers for us in the next couple years.

So we have put more of an onus on investing for growth in the short-term versus letting an incremental amount drop through the SG&A side.

So there is a little bit more of a lean towards investing for growth given the very attractive assets and the great position that leaves us in from a growth perspective.

Yes, I'll just add on to that.

In the emerging markets we are seeing very good growth in 2012 and we plan for that to continue to accelerate in 2013.

And so, we are adding quite a significant amount of commercial capabilities in BRIC and other emerging markets.

Okay, so it's incremental investments in SG&A.

And then, I just wanted to follow up just quickly on S-ICD.

I know it is early in the year, but can you give us a sense as to what sort of contribution you expect from that business line in 2013?

Is that roughly $40 million to $50 million or is it less than that?

Bob, as -- David Lewis had asked the same question about the broader contributions.

We are going to hold those questions to Investor Day on the 12th and then we are going to walk you through by growth driver what we think they can contribute in 2013 and thereafter.

Okay, fair enough.

Thanks a lot.

Kristen Stewart, Deutsche Bank.

I just wanted to make sure I heard it correctly.

On the tax examination with the Guidant I guess back tax years, did you say that would be another two to three years that you expect that to be finalized?

And is the liability still in that $1.2 billion range?

Yes, yes, both are correct.

We expect that will take at least a couple years to use play out through tax court and we currently have reserved about $1 billion on the balance sheet.

Okay, and then the commentary I guess that you made with respect to the S-ICDs talking about, I believe it was the MADIT trial where you were talking about how there was a benefit of a more simplified ICD.

What do you guys see as the risks moving forward just overall for the CRM market to the extent that physicians look at that and not only move to an S-ICD but more to a basic single chamber defibrillator?

Could that be something that puts pressure on the ICD market incrementally in 2013?

I think we will have Ken Stein provide some color on that question.

Yes, thanks, Kristen.

In answer to the question I think first thing to recognize, so MADIT-RIT was a dual chamber ICD study.

And I think the lessons from it bear less on the issue of single versus dual chamber and more on the issue of what is the importance of giving rapid therapy versus a delay to giving therapy.

What is the importance of a lot of sophisticated anti-tachycardia pacing?

And so, I think I agree with the commentary Mike provided, which is MADIT-RIT, although it is a transvenous ICD trial, supports the design features of the S-ICD.

I don't think it says anything at all within transvenous S-ICDs about single versus dual.

Perfect.

That is it for me.

Greg, we're running a little past the hour, so we have time for about two more questions.

Larry Biegelsen, Wells Fargo.

Jeff or Mike, could you talk a little bit about the drug-eluting stent performance in the quarter?

Outside the US it was a very strong.

Where was the strength?

Was it Japan, Europe, emerging markets?

And given that, I was a little bit surprised with the guidance for the first quarter, it was a little bit weaker the growth rate than what you saw in Q4 and I think RESOLUTE anniversaries I think in January of 2013.

Yes, in terms of our OUS performance in DES, you hit the major regions.

Starting -- I will start with Japan first where we had a very strong fourth quarter and a second half and share gains in Japan.

So good strength there in the fourth quarter, similarly remaining pieces of Asia Pac, you saw the growth numbers for BRIC; we don't break out China and India specifically, but they are big contributors of that plus 35% and those markets that are heavy DES revenue drivers for us.

Europe had some improved performance as well in the fourth quarter.

In terms of first-quarter guidance, we mentioned the impact on days.

And also we see a larger impact on that days challenge in Japan, which is part of the drivers of the first-quarter guidance.

We also have a difficult comparable in first quarter 2012 as well.

So we are, similar to the comments, we are optimistic; we are going to stabilize share performance in first half and gain share for the full year.

It's just that you see the timing of the quarters consistent with what Jeff outlined.

Larry, just to provide some clarification.

Our US DES share was 45% in the fourth quarter 2011 then it went to 47% in the first quarter of 2012.

So when Mike says comparisons, actually the first quarter of 2013 versus the first quarter of 2012 is a more difficult comp than the fourth quarter of 2012 versus the fourth quarter of 2011.

I got it, that's helpful.

Jeff, how many extra days are there or less days, I'm sorry, in Q1 2013 if you could just give us those numbers?

And just lastly, on asthmatics at the Investor Day you guys did last year, if you look at the slides it was about a -- your expectation was about $20 million in 2012 and it was clearly $40 million to $50 million in 2013.

Could you just give us a little bit of an update if those goals are on track?

Thank you.

So in terms of the number of days, it is approximately -- it rounds to kind of two days, so it is not insignificant relative to the first quarter 2013 versus the first quarter of 2012.

And then the second part of your question, Larry, you were -- I didn't quite follow kind of what you were referring to.

So, asthmatics, when you did the analyst meeting in 2012 you did give some sales expectations and you had about -- when I looked at the slides that $20 million was the expectation in 2012 and $40 million to $50 million in 2013.

And I was just wondering if you were on track to meet those goals?

So, as I responded to David Lewis and Bob Hopkins, we are going to go through each of the major growth drivers and kind of tell you what we did in revenue 2012 and our expectation for 2013.

So we are going to reserve those questions and that discussion for the Investor Day.

All right.

Thanks for taking the questions.

Jose Haresco, JMP Securities.

Just wrapping up, could you first just refresh us on what the expectation is for the overall market growth for both CRM and DES?

And then on S-ICD can you just give us an update on how -- what you are thinking about the -- both inventory build out and the training schedule for the rest of the CRM team?

This is Jeff.

We've got the DES market pegged to be kind of low -- but to be down low-single-digit to mid-single-digit next year and very similar for the CRM market.

Both markets to be slightly unchanged from this year.

The CRM market will be a little bit better because we have now the -- we have the lapsing of kind of the difficult comps from 2011.

And then relative to the S-ICD, I am going to hold that response -- we are going to have a separate section on the whole CRM business and our President will talk about kind of the S-ICD plan.

And that would be a probably more appropriate time to kind of get into any more details on the S-ICD.

Okay great, thank you very much.

With that we will conclude the call.

Thanks for joining us today.

We appreciate your interest in Boston Scientific and we are looking forward to our Investor Day on February 12.

Before you disconnect Greg will give you all the pertinent details for the replay.

Have a good day.

Thank you.

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