Boston Scientific Corp (BSX) 2013 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the Boston Scientific third-quarter 2013 earnings call.

(Operator Instructions) As a reminder, today's conference is being recorded.

I would now like to turn the conference over to our host, Mr. Michael Campbell.

Please go ahead.

Thank you, Tricia.

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 Q3 results for 2013, which include a reconciliation of the non-GAAP measures used in the release.

We have posted a copy of that release as well as reconciliations of the non-GAAP measures used in today's call to the Investor Relations section of our website under the heading 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.

Jeff will then review our Q3 financial results, as well as Q4 and full-year 2013 guidance.

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 would 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.

They include, among other things, statements about our growth and our market share; new product approvals and launches; procedural volumes and pricing; clinical trials; cost savings from growth opportunities; our cash flow and expected use; our financial performance including sales, margins, earnings, and other Q4 and full-year 2013 guidance; as well as our tax rate, 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 the 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 intent and 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.

I will begin today with some comments regarding our third-quarter performance and then Jeff will then review the financials in more detail.

So overall it's a strong quarter for Boston Scientific.

Our team continued to build momentum and we are executing against our global strategy.

Some key highlights for the third quarter include the following.

We delivered sales slightly above the midpoint and adjusted EPS above our stated guidance range, which were both above consensus.

We delivered net sales of $1.735 billion, which was consistent with prior year on a reported basis, but we also grew our business 4% year over year on an operational basis, which excludes the impact of foreign exchange and the divested neurovascular business.

In terms of sales on an operational basis, Neuromodulation grew an impressive 32%, endoscopy grew 8%, urology and women's health grew 8%, and PI grew 7% versus the same period in the prior year.

In addition, we are really encouraged with the improved performance of our CRM business with a return to growth in the third quarter of 1% on an operational basis despite limited availability S-ICD device.

We continue to expand our business in emerging markets.

Our BRIC sales grew 29% in the quarter and we opened a new innovation and training center in Shanghai.

Turning to our earnings highlights, we delivered adjusted EPS of $0.17 which was above the high end of our guidance range and consensus.

On a year-over-year basis we delivered adjusted EPS growth of 6%, while absorbing a $0.01 impact in the quarter due to the medical device tax.

We also generated strong cash flow and used $75 million to buy back approximately 6.8 million shares of stock in the quarter.

I will now move into our business unit performance for the third quarter.

The revenue growth figures that I will highlight are all on a constant currency basis and on a year-over-year basis, so let's start with our medical surgical business.

Our MedSurg business executed extremely well during the quarter and delivered 12% growth on a combined basis.

In endoscopy, we had another strong quarter with 8% worldwide revenue growth.

We continue to grow faster than the market.

Our hemostasis franchise continued to lead the way.

Our biliary device franchise continued to grow faster than the market fueled by our endoscopic ultrasound platform and the recent launches within biliary access and retrieval devices.

Our metal stent franchise continues to be driven by our industry-leading WallFlex platform.

Also during the quarter we are pleased to announce that the five-year data from the AIR clinical trial was published online in the Journal of Allergy and Clinical Immunology.

Alair is shown to provide long-term asthma control demonstrated by a sustained reduction in the rate of severe exacerbations and emergency visits over a five-year period after treatment.

With the publication of this five-year data we remain positive about the potential for long-term growth for BT and are focused on as we continue to execute the coverage and payment strategy for this important technology.

Moving on to our Urology & Women's Health division, we achieved 8% worldwide revenue growth in the quarter with a solid 10% growth in urology, as well as return to growth for our Women's Health business which achieved 7% growth in the quarter.

This growth is driven from our international expansion and new product launches.

In Women's Health we are growing faster than the market via the benefit of our recent product launches and favorable year-over-year comparables.

In Neuromodulation, we maintained our consistent momentum from the previous quarters and delivered an impressive 32% growth on a worldwide basis.

Our spinal cord stimulation business continues to perform well above market, driven by our Precision Spectra spinal cord stimulator system.

We are also pleased with the enthusiastic physician response to our innovative Precision Spectra spinal cord stimulation platform, which really validates our commitment to meaningful innovation.

Now let's move on to our interventional cardiology business.

In third quarter our worldwide IC revenues declined 2% in a market that we have estimated to be declining in the low single digits.

While we expect the global market headwinds to persist, we also believe that the market will continue to moderate over time due to underlying patient demographics, particularly in faster growing regions such as Asia PAC and the proliferation of differentiated and premium priced technologies such as our SYNERGY stent platform.

In Europe, our IC performance is driven by PROMUS Premier and SYNERGY.

We anticipate US FDA approval for PROMUS Premier in the fourth quarter of 2013, which should provide a catalyst for our US business.

Also, our next-generation SYNERGY stent continues to perform well.

The limited launch in Europe has been positive and we are supporting this differentiated bioresorbable mobile platform with a comprehensive SYNERGY clinical trial portfolio.

Interest in the US remains high as enrollment in the randomized arm of SYNERGY US IDE trial called EVOLVE II was completed in September.

In our core IC business we are delivering improved performance with worldwide sales growth of 3%.

We recently launched our Emerge 1.2-millimeter balloon catheter, Guidezilla guided extension catheter, and OptiCross catheter around the globe.

We expect the performance in our core IC business to continue to improve as we expand our commercial rollout of these new platforms.

We continue to advance our structural heart programs in TAVR and atrial appendage.

In TAVR, we presented the favorable six-month results from the first 60 patients enrolled in the Lotus REPRISE II clinical trial.

The data which was presented recently at PCR London Valves received the honor of the best abstract, demonstrating excellent results with no new valve-related adverse events between 30 days and six months.

Additionally, there are no cases of moderate or severe paravalvular regurgitation in any patient at six months.

We believe the results affirm the clinical advantages of this second-generation platform.

We anticipate CE Mark of the Lotus valve in the fourth quarter of 2013 and we are in discussions with the FDA to finalize plans for our US IDE trial.

Now we will move on to our Peripheral Interventions division.

In the third quarter this division delivered 7% growth.

This above-market performance was led by our leading balloon stent and interventional oncology franchises.

Also, during the quarter we made significant progress in our PI product pipeline, including major milestones in drug-eluting technologies.

The drug-eluting version of the Innova stent reached a major milestone enrolling the first patients in the MAJESTIC trial this quarter, which is expected to serve as the foundation for global regulatory approvals.

In addition, we continue to make meaningful progress on our drug-eluting balloon platform and expect to launch that product in international markets in the second half of 2014.

We are pleased with the progress we are making with our Vessix renal denervation system which was launched in Europe earlier this year.

Results presented recently from our REDUCE-HTN clinical program confirm the significant patient benefit of this differentiated system.

We recently submitted our US IDE trial design to the FDA and anticipate beginning enrollment in first half 2014, subject to FDA approval.

So now let me turn our attention to the Rhythm Management segment.

We are very encouraged by the improved performance of this business over the past few quarters.

In the third quarter, our worldwide CRM revenues grew by 1% exceeding the high end of our guidance range.

We also believe the worldwide CRM market declines have stabilized in the low-single digits versus prior year.

In our defib business, we estimate our worldwide third-quarter market share to be up slightly versus the prior year and these results were driven by improved core ICD de novo share and stability in the replacement business.

Also, regarding the S-ICD, we have recently resumed the controlled rollout of the S-ICD.

We will continue to build further supply capacity via our 1.5 launch throughout the fourth quarter.

In addition, we are really thrilled with the S-ICD platform that had just recently awarded the prestigious Prix Galien 2013 award for the Best Medical Technology.

This award is a great honor for our team and it recognizes the truly meaningful innovation that the S-ICD system delivers to patients and physicians.

Now turning to our pacer business.

Our pacer franchise delivered year-over-year growth of 1%.

This consisted of 3% growth in the US and a decline of 1% in the international markets.

We are pleased with the performance of this platform and believe that we have continued to drive pacer share gains in the quarter.

Now moving to left atrial appendage.

The WATCHMAN product line continues to show strong growth in international markets with international revenues and implants growing by more than 45% compared to the third quarter on a year-to-date basis.

As stated previously, be final TMA module was submitted to FDA in May and we still expect US approval in the first half of 2014.

So, finally, in EP, we look forward to welcoming a new C.R. Bard EP team to Boston Scientific.

We anticipate closing this transaction in the fourth quarter and we are really excited about expanding our portfolio of EP technologies.

And we remain positive about this robust pipeline of innovative technologies.

Now turning to some other important updates.

Earlier today we announced a transition plan for our Chief Financial Officer.

Jeff Capello has expressed a desire to take on a broader role and pursue opportunities external to the Company.

Jeff will remain in his current role as CFO through the end of the year.

In addition, Jeff has agreed to remain with the Company as a senior advisor through mid-May of 2014 to provide any other transitional support as needed.

I would really like to thank Jeff for his commitment and his leadership during his tenure and five years as Chief Financial Officer of Boston Scientific.

Jeff has made significant contributions to the Company and has built a deep bench of financial talent within the company.

Thank you, Jeff, for your collaboration and support, and we absolutely wish you well.

I am very pleased also to announce that Dan Brennan, Senior Vice President and Corporate Controller, will replace Jeff as the Executive Vice President and Chief Financial Officer effective January 1, 2014.

So we as a company are very fortunate to already have a very experienced and capable financial executive on our team.

Dan has served in a variety of senior finance positions with increasing responsibilities, making him ideally suited for this role.

He and Jeff will work together closely to ensure an effective and seamless transition.

I'm confident that by promoting Dan to this critical role there will be a seamless transition as we continue to execute against the strategic plan as outlined in the investor day conference.

So to wrap up the quarter, overall we are really pleased with the third-quarter results and the momentum we are building.

We accelerated our growth on an operational basis.

We delivered adjusted EPS above our guidance range and we continue to make progress on our strategic growth initiatives.

We continue to focus on margin improvement while prudently investing in strategic initiatives for future growth as evidenced by our previously outlined productivity initiatives, our recent debt refinancing, and the new restructuring program that was also detailed in today's press release.

We expect to continue generating strong cash flow which should help us to enable -- fund more share repurchases in the fourth quarter and to continue to evaluate appropriate acquisitions to improve our future growth profile.

Finally, I really want to thank our employees worldwide for their winning spirit and their commitment to our mission of advancing science for life.

Now let me turn the call over to Jeff for a more detailed review of our third-quarter financials and guidance going forward.

Thanks, Mike.

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

We generated adjusted earnings per share of $0.17, which was above our guidance range of $0.14 to $0.16 and above consensus.

This represents improved profitability from the prior year, which is primarily driven by continued gross margin expansion, a lower tax rate, fewer shares outstanding.

This was partially offset by increased investment in our strategic growth initiatives and a roughly $0.01 impact from the medical device tax.

In addition, we generated adjusted free cash flow of $289 million and used $75 million to repurchase approximately 6.8 million more shares in this quarter.

Now I will move to the detailed review of our business performance and operating results for the quarter.

In the third quarter 2013 consolidated revenue of $1.735 billion was consistent with the prior year on a reported basis, and excluding the impact of foreign exchange and the divestiture of the neurovascular business, we grew the business 4%.

The actual headwind from the foreign exchange on sales was approximately $40 million as compared to the prior year, and was $10 million higher than what we had assumed from the third-quarter guidance range.

In Interventional Cardiology worldwide revenue came in at $472 million in the third quarter, representing a constant currency decrease of 2% compared to the third quarter of 2012.

Total international Interventional Cardiology revenue grew 4% compared to the third quarter of 2012.

Worldwide DES revenue, which included the negative impact of the OrbusNeich injunction, precluding our sales of DES in Germany during the quarter came in at $262 million.

US DES revenue was $106 million in the quarter.

Excluding the impact of product transition reserves, worldwide and US DES revenue declined approximately 2% and 7%, respectively, compared with the third quarter of 2012 following constant currency terms.

We estimate that our US DES share was relatively stable, both sequentially and compared with the third quarter of 2012 in the mid-30%s.

International DES sales of $156 million grew 2% in constant currency compared to the third quarter of last year, driven by the growth in emerging markets and partially offset by the loss of sales in Germany.

Worldwide non-stent interventional cardiology delivered sales growth of 3% as compared to the third quarter of last year in constant currency terms.

Now moving on to CRM.

Worldwide revenue was $464 million in the third quarter, representing a constant currency increase of 1% compared to Q3 of last year.

In the US, CRM revenue of $282 million was up 4% compared to last year.

International CRM sales of $182 million were down 2% in constant currency compared to the prior-year quarter.

On a worldwide basis, defib sales were $330 million in the third quarter, which was up 2% in constant currency from the third quarter of last year.

In the US, defib sales were $212 million.

This was up 4% compared to the third quarter of last year.

International defib sales of $118 million represented a 2% decrease in constant currency from the third quarter of last year.

Worldwide pacer sales increased 1% on a constant currency basis as compared to Q3 2012, driven by continued strong performance from our INGENIO family of pacemakers and CRTPs.

In the US, pace revenue of $70 million was up 3% compared to Q3 last year, while international revenue declined 1% in constant currency for the quarter.

Additionally, our worldwide Electrophysiology business remained relatively flat on a constant currency basis compared to the third quarter of last year.

Our Peripheral Interventions business continues to deliver growth above the market with worldwide revenue up 7% in constant currency compared to Q3 2012.

Our Endoscopy business continued to grow faster than the market and had another solid quarter with worldwide sales up 8% in constant currency led by 10% revenue growth internationally.

In constant currency, our worldwide Urology & Women's Health business had growth of 8% during the quarter.

Sales growth was particularly strong internationally at 16% compared to the third quarter of last year.

Our Urology business maintained a leadership position with 10% worldwide constant currency growth in the quarter, driven by strong international revenue growth of 16%.

Our Neuromodulation business had a very impressive quarter with 32% sales growth worldwide, including 31% growth in the domestic market and 47% internationally -- all on a constant currency basis.

Now moving on from sales, adjusted gross profit margin in the third quarter was 70.7%, or 270 basis points higher than the third quarter of last year.

The increase was largely attributable to benefits from our value improvement programs and favorable product mix, partially offset by price erosion.

Looking forward to Q4, we expect adjusted gross margins to be between 70% and 71%.

Adjusted SG&A expenses were $646 million, or 37.2% of sales, in the third quarter of 2013 compared to $586 million, or 33.8% of sales, in the third quarter of 2012.

During the third quarter of 2013 the impact from our cost savings programs were offset by continued investments in our strategic growth initiatives and costs associated with expanding the emerging markets.

In addition, SG&A expenses in Q3 2013 include the impact of approximately 100 basis points from the medical device tax under the US Affordable Care Act.

Looking ahead to Q4, we expect adjusted SG&A as a percentage of sales to be between 36% and 37% in the fourth quarter of this year.

Adjusted research and development expenses were $217 million for the third quarter, or 12.5% of sales.

This compares to $220 million in the third quarter of 2012.

We expect R&D spending to be in the range of 12% to 13% of sales in the fourth quarter of this year.

Royalty expense was $28 million, or 1.6% of sales, compared to $29 million in Q3 last year.

We expect Q4 royalty expense, as a percentage of sales, to be relatively flat as compared to the third quarter.

On an adjusted basis, pretax operating income was $336 million, or 19.3% of sales, down 50 basis points from the third quarter of last year.

The decrease in adjusted operating margins was primarily due to a negative 100 basis point impact of the medical device tax and investments in our strategic growth initiatives, partially offset by targeted cost reduction initiatives and higher gross margins.

GAAP operating income, which includes GAAP to adjusted items, was $103 million in Q3 2013.

The primary GAAP to adjusted items included in the operating income for the quarter were pretax restructuring charges of $26 million, pretax litigation charges of $76 million, pretax acquisition and divestiture-related charges of $30 million, and pretax amortization expenses of $101 million.

Now I will move on to other income and expense.

During the quarter we completed a public offering of $1.050 billion of senior notes and $400 million of a new bank term loan facility.

This public offering was highly successful with a strong investor demand, resulting in us being 9 times oversubscribed.

At the end of the day, we issued $600 million of 5-year bonds at 2.65% and $450 million of 10-year bond at 4.125%.

We used the net proceeds from the bond offering, together with borrowings under our term loan facility, to redeem all of our 5.45% notes which were due in June of 2014 and all of the 4.5% notes which were due in January 2015.

Based on current rates, we would expect to reduce annual interest expense by approximately $28 million as a result of this refinancing.

Interest expense for the quarter was $137 million, which includes a pretax, one-time charge of approximately $70 million associated with the refinancing.

Our next debt maturity of $400 million is now due in November 2015.

Our tax rate for the third quarter was 87.6% on a reported basis and 12.4% on an adjusted basis.

The difference between our reported and adjusted tax rate for the quarter is attributable to charges excluding in determining our non-GAAP results.

We estimate our full-year adjusted tax rate to be approximately 12% to 13%.

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

Please keep in mind that our full-year adjusted tax rate includes a benefit of approximately 200 basis points for the retroactive extension of the US R&D tax credit for 2012 which was reported in the first quarter of 2013.

Now moving on to the balance sheet.

DSO of 66 days increased two days compared to September 2012, primarily due to lower collections in Europe.

Despite lower inventory levels, days inventory on hand was 161 days, up 11 days compared to September of last year, due to lower cost of goods sold primarily driven by standard cost improvements and favorable product mix.

Adjusted free cash flow for the quarter was $291 million compared to $250 million in the third quarter of last year.

Capital expenditures were $56 million in the third quarter this year compared to $46 million in the third quarter of last year.

We continue to expect our full-year 2013 adjusted free cash flow to be approximately $1.2 billion for the year.

Turning to share repurchases, we repurchased 6.8 million shares for approximately $75 million in the third quarter of this year.

Since July 2011 we have now repurchased 219 million, or approximately 14%, of our outstanding shares.

We currently have $885 million of capacity remaining under our share repurchase authorization.

We continue to believe that our stock price is undervalued and we expect to continue our share repurchases in the fourth quarter this year, subject to business development opportunities, market conditions, our stock price, regulatory trading windows, and other factors.

We recently announced a 2014 restructuring program that is intended to build on the progress the Company has made to address changing global marketplace dynamics, further strengthen our operational effectiveness and efficiency, and to support new growth investments.

The Company estimates that the program will reduce gross annual pretax operating expenses by approximately $150 million to $200 million exiting 2015.

The Company expects a substantial portion of the program savings to be reinvested in strategic growth initiatives.

Program implementation is expected to result in total pretax charges of approximately $175 million to $225 million, of which approximately $20 million should be all non-cash.

Q3 was another strong quarter at Boston Scientific as we continued to make solid progress on our global strategy.

We accelerated our growth on an operational basis in the quarter and we remained focused on driving top-line growth.

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

Let me now walk you through our guidance for the fourth quarter as well as updated guidance for the full year.

We expect Q4 consolidated revenues to be in a range of $1.780 billion to $1.830 billion.

If current foreign exchange rates hold constant, the headwind from FX should be approximately $40 million, or around 220 basis points, relative to the fourth quarter of last year.

On an operational basis, we expect consolidated Q4 sales to be in a range of up 2% to up 4% compared to the fourth quarter of last year.

As an important reminder, Q4 will be a little bit more challenging relative to Q3 from a year-over-year comparison perspective.

On a worldwide basis, we expect DS revenue to be in a range of $285 million to $300 million and CRM to be in a range of $450 million to $465 million.

We expect Q4 adjusted EPS to be in a range of $0.18 to $0.20 per share and we encourage you to model to the midpoint.

We expect reported GAAP EPS to be a range of $0.04 to $0.08 per share, which includes an estimated $0.07 impact from amortization expense.

Now moving to the full year, we now estimate that consolidated 2013 sales will be between $7.085 billion and $7.135 billion.

Assuming that current foreign exchange rates hold constant, we expect the full-year headwind from FX to be approximately $150 million.

On an operational basis, we expect consolidated 2013 sales to be in the range of up 0.8% to up 1.5% growth for the year.

This assumes that the IC and CRM markets continue to stabilize and we realize the benefits of new or expanded product launches across our divisions and regions.

From an earnings standpoint, we are moving up our guidance again for the third time and expect adjusted earnings per share for the year 2013 to be in a range of $0.69 to $0.71.

I would encourage you again to model the midpoint of the range.

This range reflects the estimated negative impact of approximately $0.04 per share for the medical device tax.

On a reported GAAP basis, we expect EPS for the year to be a net loss in the range of $0.13 to $0.09 per share, primarily driven by the goodwill impairment charge recorded in the first quarter of this year.

Please note that all of today's guidance does not include any impact of the announced agreement to acquire the electrophysiology business of C.R. Bard.

As we look forward to 2014 we believe we are on track towards meeting or exceeding our EPS goals as outlined in our investor day.

We are currently in the process of rolling up our annual marketing plan and expect to provide 2014 guidance in late January.

Finally, let me close on a personal perspective.

My desire to seek a broader and more expansive role external to the Company is not a reflection of my view of the prospects for the Company.

I feel very proud about the progress we have made as a senior leadership team over the past five years, turning around the Company and putting it in a much better position.

Dan Brennan and I have worked closely and very effectively together over the past several years, and I believe he is the right person to help lead the Company as it enters the next chapter.

The team continues to build momentum and execute against our global strategy, and I continue to believe Boston Scientific is well positioned to drive top-line growth, enhance profitability, and meet, if not exceed, the goals we laid out at the investor day.

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

Michael?

Thanks, Jeff.

Tricia, let's open it up for questions for the next 30 minutes or so.

In order to enable us to take as many questions as possible, please limit yourself to one question and one related follow-up.

Tricia, please go ahead.

(Operator Instructions) Rick Wise, Stifel.

Good morning, everybody.

Thanks for taking the question.

Jeff, you were kind enough to give us your personal perspective there at the end, but it is surprising news.

You have made a significant contribution to the turnaround here; clearly the financial turnaround is significant.

We welcome Dan Brennan, but why now just as the turnaround is accelerating?

Should we have any concerns about the outlook or Boston's commitment to further cost reduction and pipeline building, etc.?

Well, Rick, in terms of the timing as to why now, I mean I am entering pretty much the 10th year of being a public company CFO and my aspirations are to have a broader role.

Mike and I talked about it over the past little while, so the opportunity to do that in the next phase of my career is something I was focused on.

I think as you look at why now, I think the Company has made a lot of progress over the last five years.

The natural point would be within a year right before a new year starts, so I think it is a good time to transition with Dan coming on and owning the plan for next year.

So I feel good about that.

If I felt that the Company was not in a good position, I wouldn't be leaving.

I wouldn't do that.

So I remain very confident that the Company has a lot of momentum.

We are having a terrific year.

I think we're going to finish up the year strong.

And I feel very confident of the trajectory of the Company and will work with Dan to make sure that we set up an appropriate plan for next year to meet, if not exceed, the guidance we gave people at the investor day.

I'm quite confident of that.

Rick, this is Mike Mahoney; I will just add to that.

One credit to Jeff on this, we have a very deep financial bench at Boston Scientific.

Dan has been with the Company for a long time and will do an excellent job as CFO.

It is also a very well-planned-out transition through 2013, as well as on an as-needed basis for an extended period of time in 2014.

So this will be done very well.

In terms of the commitment to the strategic plan, we absolutely have it.

We laid it out in investor day in early 2013.

We have been exceeding targets of that plan that has been laid out.

We have got a number of important clinical programs that are in place that we have talked about and we are highly committed, not only to drive top-line growth but to deliver significant margin improvement.

As you know that is a big focus area for us.

I think it is further evidenced by the restructuring program that we highlighted today as good hygiene for the Company as we deliver operating income margin improvement.

Excellent.

Just a follow-up, second question.

Following on your comment about restructuring, Mike, if you could give us a little more detail on the targets.

Is this significantly reducing the number of plans?

My calculation, rough calculation, is that you could -- in 2016, when you are fully implemented, it might add $0.10-$0.15 or so to EPS.

You are going to reinvest all of it?

Just again more detail and perspective on the restructuring.

Thanks so much.

I will make a comment and Jeff can fill in.

This restructuring plan is very consistent within the plans of the strategic plan and investor guidance we already provided, so this is embedded within that strategy.

We have talked about a key component of our strategy called Funding the Journey.

We have a current operating margin of, call it, 19%-ish that we are striving to improve to 25%.

Part of that productivity -- there is has many facets to that, but one is plant network optimization.

Our operations team continues to look at how we lean out operations and reduce overhead.

This is something that we have done before.

We will continue to look at our plant network optimization in our efforts to improve operating income margin, but this action is consistent and not additive to the investor day presentation and projections we laid out.

The only thing I would add to that, Rick, is I think we continue to have opportunities to continue to work on the cost structure of the Company and this is just right in line with that.

The lion's share of the benefit will be coming through the gross margin line in the form of rationalizing the number of plants.

We currently still have a heavy number of plants and this allows us to take some plants out of the network.

I think, as people have seen, we've done that very successfully over the years, so very confident of the operations team's ability to do that.

Then it is all around the functions, making the functions more appropriate for the size of the Company that we are at.

So I think it is a good, solid program and the benefit will come over a two-year period.

I would remind you and the other analysts that we did announce today that we expect to start enrolling for our US IDEs for both the TAVR program and for the Vessix program.

These programs are large programs that require costs, so as you think about your models going forward a good portion of the benefit of these restructuring programs -- some will go to the bottom line, some will go to fund those programs to drive the growth of the Company going forward.

Thank you.

Larry Biegelsen, Wells Fargo.

Good morning.

Thank you for taking the question and congratulations on a good quarter.

Jeff, a couple of financial questions for you.

The gross margin very strong in the quarter, 70.7% I think I heard you say, and then 70% to 71% in Q4.

Could you help us think about the gross margin beyond 2013, some of the puts and takes?

And, secondly, the Q4 guidance implies a bit of a step down from Q3, the Q3 growth rate.

I think you had said in the past you expected growth to accelerate in the second half of the year, especially in the fourth quarter with some of the new product launches.

So why the conservatism on the Q4 guidance?

Thanks.

Let me start with the gross margin and then I will go to your sales question.

Two good questions.

Thank you, Larry.

So as you look at the gross margin, maybe I will bridge you kind of from a year-over-year basis.

Our gross margins were roughly 68% a year ago.

We've taken them up 270 basis points to 70.7%.

It is kind of the same story that has been playing out throughout the year in the sense that some of our efforts around price management segmentation are really starting to bear fruit and we are seeing less price erosion than we anticipated.

So that is very good news; that is what we thought would happen and we are getting a little bit more traction.

There is also a mix benefit.

Some of our new products are carrying a better gross margin than their predecessors and that is also very good news.

The third factor from a gross margin perspective that was helpful is the efforts of our manufacturing team to further take costs out of the manufacturing facilities and run them more efficiently.

We call it our value improvement programs are really getting some strong traction and that team feels very bullish going forward.

They have got more opportunity.

So it is really kind of those three factors that position us really well from a gross margin perspective.

As we look at the fourth quarter, fourth quarter tends to be higher from a revenue perspective than the third quarter because of seasonality in Europe.

That will allow us to drive a little bit more margin improvement based on more volume.

So we feel good about the gross margins.

We did talk about a plan at the investor day of being able to drive the gross margins up to 72%.

Frankly, we are ahead of our plan based on the strong progress, a credit to the team.

I think we also said that 72% wasn't a limit.

It is certainly not a ceiling; some of our competitors are at 75%.

So it is the intent of this organization to drive back to more margins that are more indicative of the sector.

And this would indicate there is some opportunity do that, maybe quicker than we thought.

So that is on the margin side.

On the sales side, I guess the couple comments I would make relative to the sales for the fourth quarter are -- if you go back and look at the fourth quarter of last year, we had a very strong quarter for the MedSurg businesses.

We were up 10% in endoscopy, 14% in Neuromod, and 9% in PI, so the fourth quarter was our best quarter of last year.

So we are up against our most difficult comparable from a sales perspective.

Having said that, if you look at our guidance -- and our guidance is 2% to 4% -- if you pick the midpoint, 3%, it is not far off what we grew this quarter, the third quarter.

And there could be some potential upside to that.

I think we are waiting to see how things play out.

A lot of that has to do with timing.

We do expect the TAVR program to get CE Mark approval in the very, very near future, so stay tuned to that.

So a lot of it just has to do with timing of getting programs approved and market reception in the early rollout.

I would say that there is a good likelihood from a sales perspective that we could do better than the midpoint.

Thanks, that is very helpful.

I will drop and let some other jump in.

Thank you.

David Lewis, Morgan Stanley.

Good morning.

Jeff, I wonder if we could talk about, or Mike, subcutaneous ICD capacity coming back in line.

It sounds to me from your commentary that first quarter 2014 sounds like the first quarter of full commercial launch.

So I wondered if you could just help us understand the pacing of that business in terms of the ability to service a broader number of accounts in the US over the next several quarters.

We have talked about gross margins.

You are obviously guiding for gross margin improvement into the fourth quarter.

Is there any impact from subcutaneous on from a negative margin mix perspective over the next several quarters?

Then I had a follow-up.

Sure, it is Mike here.

In terms of the S-ICD supply question, so the good news is in the third quarter here we resumed selling S-ICD, primarily to our IDE locations.

Later in the third quarter just recently we have expanded that beyond our IDE facilities.

So the good news is we are back in the market in our IDE facilities and we are expanding beyond that.

In terms of supply for 2014, we anticipate by first quarter 2014 we will not be supply constrained with S-ICD.

The team has made tremendous progress relocating our manufacturing facilities, reducing the variance in the supply chain, and we expect that we will not have supply constraints as we enter 2014.

In terms of the margins, we have discussed this in previous calls, really no change here.

As we continue to drive volume it will improve the margins of S-ICD and we will provide additional guidance in the first-quarter earnings call.

Okay, very helpful.

Then, Jeff, one theme that seemed to pop up this call; clearly have taken earnings numbers up for the better part of the year.

We talked about the cost restructuring announcement; it sounds like it is part of the prior P&O and you are reinvesting those.

We also heard about some increased emerging markets spending into the fourth quarter.

Just from a tone perspective, it sounds to me maybe there is incremental reinvestment to grow.

Would you say that you are finding opportunities to incrementally reinvest as the top line continues to improve, or is the way to think about this the spending you are making is in line with the prior plan?

I would say that the spending is more or less in line with the prior plan.

I think if you look at kind of the midpoint, third quarter is a tough one to judge it off from an SG&A perspective because it is our lowest quarter typically from a revenue perspective.

And timing of costs can kind of move around.

We do expect the SG&A rate to drop down in the fourth quarter.

So I think it is not dissimilar from kind of the plan that we laid out to the Street, and I think as we said, clearly, with operating margins in the mid-19% we think we have at least 100 basis point opportunity to expand margins every year.

That is the focus and I think that is something that is very achievable for the organization.

Okay, very clear.

Thank you very much.

Mike Weinstein, JPMorgan.

Thank you, Jeff, I apologize; because of the multiple calls going I may have missed some of this, but I heard you walking through the gross margin step-up.

Obviously a very strong performance this quarter.

How much did the neurovascular TSAs -- with Stryker running off how much did that contribute to the quarter?

And then what impact did FX have?

Thanks.

Thanks, Mike.

So the impact of the divestiture was roughly 100 basis points on a year-over-year basis.

We now pretty much are done with kind of the divestiture revenue, which had very low margin.

Then from an FX perspective it had negligible impact.

So an organic basis then looked at it as if about 160 basis point positive year over year?

Yes.

Ex the neurovascular TSAs?

Yes, that is about right.

Okay.

Then help us think about the restructuring.

I was going through it last night and I think that however you want to classify it with the plant network optimization programs and the restructurings going back to the early part of 2009 this is either the fourth or fifth restructuring for the Company.

I was going back and looking at the math on the expected savings from all those restructurings, and as you know, it gets to be pretty significant.

I think the EPS math was like $0.40 to $0.50 in potential EPS contribution.

Now obviously there were headwinds over the last several years from declining end markets, as well as the need to reinvest in the business, so we didn't really see the benefit of that restructuring.

How do we think about this one?

Now you are at a point where revenues hopefully are growing over the next few years.

You are in a better position to manage through some of the end market pressures that won't go away, but you also still need to reinvest in the business, whether it is a funding clinical trials or products that need to come to the US market, or even just launching some of those products or continuing to build out the emerging markets.

How do you think about the savings you outlined in the press release last night relative to reinvestment versus seeing it on the bottom line?

Thanks.

I think it is a very good question, and actually when we reviewed this restructuring program with the Board I went back and looked at our whole sector over the last six or seven years.

Our restructuring actions, if you go back and look at it, are pretty much right in line with all of our competitors in terms of number of new charges, dollars of charges, and roughly the benefits will vary a little bit.

So I think it is indicative of an industry in transition is what it really is.

I mean there is so much change going on and organizations have to adapt and change.

We are doing that and our competitors are doing that right in lockstep.

Having said that, so from a relative perspective we are more or less right in line with what the competition has been doing.

And from a savings perspective and where the savings go or where will they go going forward, I think one of the things to keep in mind is our P&L is burdened very heavily with a number of acquisitions that are in the critical stages from investment perspectives.

And that is why you are not seeing as much kind of drop through.

For some of those programs that are coming out of the investment stage and start to accelerate from an earnings return heading into 2014 and 2015.

For others, such as renal denervation and the TAVR program, we still have quite a bit of investment.

So as I said to Rick on the first call, I would look at this restructuring program as providing investors with comfort that we can continue to drive the acquisitions that are at the doorstep of starting to return to the Company and also carry the new larger programs.

And still allow ourselves to kind of expand our margins.

So that is the way to think about the restructuring and kind of where the benefit goes.

When you guys laid out your, call it, your LRP earlier this year, this restructuring was contemplated in that?

Yes, I think what we said at the investor day is that we expect it to continue to kind of deliver on cost savings to drive the earnings of the Company.

So, yes, we continue to restructure the business.

It wouldn't be unusual to do restructurings going forward and I don't think any of our competitors would say anything any different.

Okay.

Thank you, Jeff, and congratulations to Dan.

Thanks, Mike.

Bruce Nudell, Credit Suisse.

Good afternoon.

Thanks so much.

Just some commentary on the ex-US DES performance.

I think we are coming up with about $148 million reported revenues; I am not sure if that is correct.

That was about $10 million below us and about $20 million below the Street.

Were there any special considerations in there?

First of all, did we get the number right?

And, secondly, were there any special considerations there?

And anything about the market dynamics in the ex-US markets.

Bruce, your number is a little light relative to -- from a DES perspective outside the US.

We did about $156 million in revenues.

Is that reported?

Yes, that is reported.

Okay, great.

So, okay; so can you just talk about the ex-US market dynamics?

Sure, so let's start in Europe and we will move east.

In Europe, from a market perspective, we continue to see very strong unit growth offset by pretty strong pricing pressure.

To the point where that market, we think that market is about flat.

We, of course, were off the market for almost a whole quarter in Germany because of the OrbusNeich injunction.

So that cost us -- if you look at the performance, that probably cost us 400 basis points of revenue growth.

So the revenue would have been 400 basis points higher and now that we are back on the market we expect to regain our share, so that is important to understand.

The other important thing to understand is Asia-Pacific.

We have been talking for the last four or five years about the fact that the Asia-Pacific market we expect it kind of outside Japan really to be a growth engine for us.

This quarter we grew Asia-Pacific drug-eluting stent 16%, 1-6.

So the benefits of that strategy is starting to get some traction and that market is growing.

As a whole, we think the overall DS market was down roughly 2% for the quarter and we think that dynamic, as it continues to improve, bodes well for us with our leading-edge technology platform and our hyper investment we have been making in the emerging markets.

Fair enough.

That is great.

Just to clarify, my second question is simple.

The revenue guidance for the fourth quarter is not inclusive of Bard.

Is Bard like -- it is roughly $25 million to $27 million a quarter run rate for the base business.

Is there a potential upside if, in fact, it closes mid-quarter, or are you pretty certain that it won't contribute in the fourth quarter?

The game plan would be that that transaction would close ideally early November.

If that happens, I would assume that it adds roughly 100 basis points of growth to the fourth quarter.

Thank you so much.

I'm sorry to see you go and, Dan, congratulations.

Thanks, Bruce.

Glenn Novarro, RBC Capital Markets.

Good morning, guys.

I had some revenue questions.

So another very good revenue quarter and ICDs, particularly in the US, came in ahead of our expectations, ahead of the Street.

I'm wondering if you can provide a little bit more commentary.

It feels like, from a unit point of view, the market is getting better and I am just wondering what is driving this improved volume.

And I am also guessing that perhaps pricing is becoming less of a headwind, so I wonder if you can comment on the US ICD market from a volume and a pricing point of view?

Then I have a follow-up on stents.

Thank you.

Sure, it is Mike here.

In terms of the US CRM market, overall we agree with you.

We think the market has stabilized.

It is not a growth market yet.

We still see the market in the low-single digits, and as you indicated, price probably in the mid-single digits.

Low to mid-single digits offset by volume gets us to low single-digit overall market for the US.

But it has stabilized.

The good news, Scott Olson and our US sales team are doing an excellent job in representing the portfolio.

We believe we are picking up some share in the de novo ICD market as well as the de novo patient market.

So I think a lot of it is the pull through of the portfolio that has been invested in as well as the EP investment that you are seeing.

So with the S-ICD coming online, more so in fourth quarter and in 2014, we anticipate that trend to continue.

And so we are supportive and pleased that the market is stabilizing and we have a nice portfolio to fit into that.

Just one quick follow up on ICDs, we model the replacement, which a headwind in the US has been a headwind, that turning to a little bit of a tailwind for you guys starting in 2014.

Is that a reasonable assumption?

We probably wouldn't classify it as a tailwind.

We would probably classify it as neutral for us in 2014 in terms of the replacement market.

Okay.

Then just quickly, on PROMUS Premier just so -- following up on Bruce's question on the international stents.

Can you give us a sense of how PROMUS Premier is doing in the European market?

The reason I'm asking is obviously that could give us a read-through on how the US uptake of PROMUS Premier will occur.

So give us a sense of PROMUS Premier in Europe and I think you are still anticipating very shortly the PROMUS Premier in the US launch, too.

Yes, we are anticipating an announcement hopefully in the fourth quarter here on approval in the US for PROMUS Premier.

In Europe, our strategy is pretty well-known.

We have a -- we believe we have the two strongest stent platforms offered in Europe right now with SYNERGY, which is really our premium priced bioresorbable stent that we are backing by significant new clinical trials that Keith ca outline in the call, followed by PROMUS Premier, which has been recently launched in most countries in Europe as our true workhorse stent.

It is difficult to gauge the overall European market share given the context that we were out of the German market for a number of months and now beginning to get back into that market in the fourth quarter.

So we will be able to flesh out the true share numbers in Europe once this German issue has been neutralized.

But in general, we are seeing very strong uptick for PROMUS Premier.

Physicians clearly like the chromium platinum platform and the deliverability of the stent.

We are seeing, we believe, once our supply has been added to Germany we will see nice share gains in Europe across our DES platforms.

And should we assume, from a modeling point of view, some share gains in 4Q and starting next year with the PROMUS Premier launch in the US?

That is our plan.

We have been waiting for PROMUS Premier for two years now in the US.

And we believe with PROMUS Premier and the combination of our complex CTO devices from BridgePoint, as well as our non-DES product line within Interventional Cardiology, we will be able to gain share in 2014 in the US.

Okay, great.

Thanks, guys.

Matt Taylor, Barclays.

Wanted to just I guess follow up on the prior question on S-ICDs.

So could you give us just a sense of how quickly you can ramp?

And what is the main gating factor now that you have a 1.5 version and have really transitioned some of the production capabilities?

Is it demand?

Is it you are rolling out more slowly because you want to keep the results high, or is it still production?

It is really continuing to mature our operations and supply chain.

So we are comfortable in expanding the usage beyond our IDE sites, and like any operation and supply chain, it is building that capacity up.

We anticipate that, as previously mentioned, that will be at full capacity in the first quarter 2014.

So that is really just ramping up.

The developmental work of 1.5 has been completed.

Many of the components have already been approved by FDA, so we anticipate that the bulk of the 1.5 release will be approved by the end of this year.

And we will continue to ramp up and be in full capacity in first quarter 2014.

Thanks.

Then maybe just one on Portico -- I am sorry, on Lotus.

Just curious on how you view your opportunity for commercial sales in Europe this year considering that there is an injunction versus Portico in Germany.

Also, if you could help us with what you think is going to be most important for the Company at TCT, if there is any data that we should be really looking for, either from a BSX standpoint or a competitive standpoint?

Thanks.

Dr. Dawkins, you still on the phone?

Yes, sure.

Maybe you could answer that in terms of the highlights of the upcoming TCT meeting next week.

Yes, from our point of you, Matt, we are going to present for the first time the full 120 patients of the REPRISE II CE Mark trial for Lotus.

We have obviously presented previously the first 60 patients at PCI London Valve, so that is the full data set for the first time.

There is also going to be some exciting new Vessix data; increased number of patients followed out to 12 months with Vessix.

And obviously there is a lot of upcoming updates of many of our trials.

But I think we would highlight on the Interventional Cardiology side and the PI side the Vessix data and the Lotus data, the REPRISE II data.

Great.

Then any thoughts on the commercial sales of TAVR next year in Europe?

Yes, we will provide more guidance on our 2014 estimate, specifically with TAVR sales, at our earnings call in January.

Okay, great.

Thank you.

Bob Hopkins, Bank of America.

Good morning and congrats on a good revenue quarter.

I just wanted to ask two questions.

One, I just wanted to make sure that I have got the restructuring comment clear in my head, because I apologize; I have been popping around calls here.

I guess what I've been hearing on this call is the way to think about the restructuring is it is what is needed to get to where you already planned on being in your previous commentary from a long-term margin and EPS growth perspective.

That is correct.

Okay.

Then on the new product front in left atrial appendage, and I appreciate your comments in the prepared remarks, but I was just wondering if you can talk about how we should be thinking about expectations sort of year one post-launch.

Are there structural challenges that we need to be thinking about in terms of manufacturing capacity or training or things like that?

Or should this be a pretty smooth initial rollout once you get approval?

Maybe if I could, could this be a $50 million product in year one post-launch?

In the United States I mean.

Thank you.

Great question and Dr. Stein you could add some additional comments.

We will provide guidance with respect to Atritech, similar to Sadra, in January in terms of 2014 at our earnings call.

The great news is we know how to manufacture and train physicians for Atritech today, and so this business is growing close to 50% in Europe.

We are anxious for the FDA approval, which we anticipate in the first half of 2014, so we do not anticipate ramp-up issues in terms of the operations and supply chain with Atritech.

This is a nice, high gross margin product.

One key factor that will be critical for us in the US is physician training and proctoring, so we do have a dedicated team focused on that to ensure that we have a high-quality rollout.

We are comfortable with our capabilities to manufacture the product and to train based on our experiences in Europe, and we will bring those capabilities to the US once it is approved, hopefully, in the first half.

Dr. Stein, did you have any follow-up comments?

Yes, thanks, Mike.

I just want to iterate what you said about the training program.

We are very pleased by the data from PREVAIL that were presented around the time of ACC this year, as well as the totality of the data from all of the clinical trials we have in this device.

But what those trials have shown is that with the rigorous comprehensive training program the device can be implanted very safely and very effectively by new operators.

But we do need to ensure that they go through that training program.

And so once we get approval this is going to be launched with a very controlled rollout, ensuring adequacy of training with new operators.

Great, thanks.

And congrats to Jeff and Dan.

Tricia, it is coming past the hour here.

We probably have time for about two more questions.

Kristen Stewart, Deutsche Bank.

Thanks for taking the question.

Just wanted to follow up, Jeff, I think you had talked about on -- and this came up at the investor meeting earlier this year -- getting to about 100 basis points of operating margin improvement.

If we just kind of look at your gross margin for the fourth quarter, is that something that we should look at as kind of a good run rate off of which to now kind of model going forward?

Just balancing your commentary about the restructuring programs and reinvesting in R&D, it sounds like R&D is expected to kind of increase as we look ahead to 2014.

So just how do we think about gross margins?

And maybe will be eventually see SG&A kind of come down as a percentage of sales going ahead?

I am not going to be able to give you guidance by P&L line item, because we haven't really finish that yet for 2014, but what I can help you with is, if you look at kind of our operating margins for 2012, they are 18.8%.

And if you take the midpoint of our guidance, you get about 19.5% for 2013.

So we will be up about 60 basis points year over year.

It is very, very important for people to understand that we have a full-year impact of the medical device tax in our numbers.

So without the medical device tax we would have been up 160 basis points.

Some of our competitors have elected to put it in cost of goods sold, which means they really -- because they caught it in inventory.

They have a half-year's impact.

The good news is we get the whole medical device tax behind us in 2013, setting up for an easier comparable relative to some of our competitors from a margin perspective.

Having said that, I have said it a couple times and continue to say it, I'm sure Dan will as well, the opportunity for us to expand the margins is real.

There is a lot of pressure in the P&L from the growth programs we have, and the organization and the management team is comfortable being able to commit to increasing its operating margins 100 basis points per year.

Perfect.

Then just regarding the tax rate, I know that you had highlighted that there was 200 basis points of an impact just from the R&D tax credit.

How should we just think about the sustainability of that tax rate going forward?

Because it is obviously much lower than a lot of your peers and much lower given just kind of the US and O-US mix of business that you have.

So you have to kind of take our rate for this year, which is close to -- we expect to be close to 13% and add a couple hundred basis points to it, if you neutralize for the extra R&D tax credit.

So let's say it is 15%.

I think that is a pretty good rate for us for the foreseeable future, subject to what may happen or not with the US Tax Court tax reform.

But I think a 15% tax rate for the next couple of years is probably a reasonable assumption.

Perfect.

Then just real quickly, I guess the last question.

Looking at the operating margins, just kind of by division, CRM saw pretty significant increases as did cardiovascular.

Can you maybe just walk through what the main drivers were there?

Yes, so we continue to remain rather focused on the margins.

The cardiovascular margins were up about 110 basis points.

As a reminder, that includes the IC business and the PI business.

Anytime you can drive 7% revenue growth in PI we are going to see margin expansion, so that is one of the key drivers there.

Rhythm Management, we went from 11.6% to 13.4%, so up about 170 basis points.

You will recall that we said we think we can basically double our CRM operating margins the next five years.

I said it a couple of times, this includes the negative dilution associated with Atritech, Cameron, and a number of the arrhythmia development program.

So as we continue to do better from a CRM perspective, just like it was a little painful on the way down, when we grow 1%, 2% and we start to get more revenue growth it is very accretive on the way up.

So part of that is revenue growth coming back to Rhythm Management.

Then the MedSurg business was down about 30 basis points.

I don't lose any sleep about that at all.

That group is growing like crazy and they can still improve their operating margin, so that is just a one quarter -- some costs being in one quarter versus the next.

Their margins are healthy and I expect them to continue to go up.

Just Rhythm Management you said double over the next five years?

Yes, yes.

Perfect.

All right, thanks, guys.

Matthew Dodds, Citigroup.

Just a couple quick product questions.

On SYNERGY are you waiting for the EVOLVE II data to move off to limited launch in Europe, or do you expect to open it up more as we move through this year and 2014?

Good morning, it is Mike.

We do anticipate expanding the launch of SYNERGY in Europe in the first half of 2014.

We are also very mindful of maintaining discipline in our pricing strategy.

We do the see this as a premium-price product with that tier platform that we have and so we want to be disciplined with our pricing strategy with it, but we do see expanding that to a broader release in the first half of 2014.

And does that product have brought reimbursement across Europe in the countries, or is there something special there you need to get additional reimbursement for it?

We do have reimbursement for SYNERGY, but we are -- Dr. Dawkins, maybe you could outline some of the clinical efforts we have to try to further differentiate the capabilities.

We thought it was important to support this unique product with the polymer and the drug going away at three months with a good amount of data.

So we have a number of investigator-sponsored trials which will start during late 2013 and 2014.

We will investigate formally more than 14,000 patients with SYNERGY against a number of other products, particularly looking at complex patient subgroups where acute delivery and acute performance is probably key.

Then, as I think you know, we are going to investigate a formal short [DAPT] proposition, which will be adequately powered, unlike some of the data gathering efforts that have been previously.

And so we are very excited that the commercial, the full commercial launch, as Mike said, at the premium price point will be supported by strong clinical data.

Obviously we completed early the EVOLVE II IDE trial.

We've also completed the QCA trial, and so we now have -- on the back of the first human-use study we had a good amount of randomized data to support SYNERGY.

And just one quick question on Vessix.

Can you say for the US trial, since the IDE has filed, are you going to go after 160 millimeters of blood pressure or can you started a lower level like 140?

We are not publicizing the details of the IDE right now.

We have completed discussions with the Agency.

Suffice it to say that it is an interesting protocol and it will involve US and O-US sites.

Great.

Thanks, Dr. Dawkins.

Thanks, Mike.

With that we would like to conclude the call.

Thanks for joining us today.

We appreciate your interest in Boston Scientific.

Before you disconnect, Tricia will give you all of the pertinent details for the replay.

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