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Good morning, and welcome to the Boston Scientific Second Quarter 2026 Earnings Call. Please note this event is being recorded. I would now like to turn the conference over to Lauren Tengler, Vice President, Investor Relations. Please go ahead.
Thank you, Drew, and thanks to everyone for joining us. With me on today's call are Mike Mahoney, Chairman and Chief Executive Officer; and Jon Monson, Executive Vice President and Chief Financial Officer. During the Q&A session, Mike and Jon will be joined by our Chief Medical Officer, Dr. Ken Stein. We issued a press release earlier this morning announcing our Q2 2026 results, which included reconciliations of the non-GAAP measures used in this release. The release as well as the reconciliations of non-GAAP measures used in today's call can be found on the Investor Relations section of our website. Please note that on the call, operational revenue excludes the impact of foreign currency fluctuations, and organic revenue further excludes certain acquisitions and divestitures for which there is less than a full period of comparable net sales. Guidance excludes the previously announced agreement to acquire Penumbra, which is expected to close in the second half of 2026, subject to customary closing conditions. For more information, please refer to the Q2 financial and operating highlights deck, which may be found on the Investor Relations section of our website. On this call, all references to sales and revenue are organic and relative growth as compared to the same quarter of prior year, unless otherwise specified. This call contains forward-looking statements regarding, among other things, our financial performance, business plans, market expectations, and product performance and development. These statements are based on our current beliefs using information available to us as of today's date and are not intended to be guarantees of future events or performance. If our underlying assumptions turn out to be incorrect or certain risks or uncertainties materialize, actual results could vary materially from those projected by forward-looking statements. Factors that may cause such differences are discussed in our periodic reports and other filings with the SEC, including the Risk Factors section of our most recent annual report on Form 10-K. Boston Scientific disclaims any intention or obligation to update these forward-looking statements, except as required by law. In addition, this call does not constitute an offer to sell or the solicitation of any offer to buy any securities or solicitation of any vote or approval in connection with the proposed transaction with Penumbra. Boston Scientific has filed the SEC registration statement on Form S-4 containing a proxy statement of Penumbra and a prospectus of Boston Scientific that contains important information about Penumbra, Boston Scientific, the proposed transaction and related matters. At this point, I'll turn it over to Mike.
Thank you, Lauren. Thank you, everyone, for joining us today. Second quarter represented a solid quarter for Boston Scientific, while we continue to navigate a dynamic environment. Total company organic sales grew 7% versus our guide of 5% to 7%, driven by our Interventional Cardiology, Endoscopy, and Neuromodulation business. Q2 adjusted EPS of $0.86 grew 15% and exceeded the high end of guidance range of $0.82 to $0.84, driven primarily by some favorable tax results. Second quarter adjusted operating margin was 28.4%. Turning to our outlook. We now expect the second half to be more pressured than we originally anticipated. To that end, we are updating our full year 2026 guidance for organic revenue of 5% to 6% with our full year adjusted EPS of $3.28 to $3.32, representing growth of 7% to 8%. For the third quarter, we're guiding to organic revenue growth of 3% to 5% and adjusted EPS of $0.80 to $0.82. We updated our guidance in Q1 with a goal of establishing the right baseline for the year. This update today is not the outcome we planned or what you have come to expect from us. Boston Scientific has had a strong record of growing above our weighted average market growth rates while delivering double-digit adjusted EPS growth. However, market conditions have evolved quickly and have been challenging to forecast effectively. Our guidance reduction is concentrated in two areas: First, WATCHMAN, where the U.S. market has slowed sharply and unexpectedly, primarily driven by compounding clinical evidence, which has impacted referral patterns. And second, EP, where we did not anticipate the degree of competitive share movement we're now seeing in the U.S. market. While we are sharpening our forecasting processes and taking actions to address controllable headwinds, our underlying assumptions are that these dynamics continue in '27, resulting in revenue growth below our WAMGR and limited adjusted EPS growth. We expect our revenue and EPS growth profile to improve meaningfully in 2028, supported by key catalysts across Boston Scientific. In the meantime, we're focused on execution and delivering our 2026 guide, staying disciplined on spending and continuing to fund the areas of the portfolio where we see the strongest long-term opportunity. As part of that effort, we just announced a restructuring program aimed to deliver approximately $500 million in run-rate savings exiting '29. This program will enable us to drive sustainable cost efficiencies while strategically reinvesting in our business to support a return to strong adjusted EPS growth in '28 and beyond. So before I provide more information in regards to our second quarter performance and full year outlook, I want to reiterate my confidence in the future of Boston Scientific. While EP and WATCHMAN have been tremendous growth drivers for the company, our other business units, which represent roughly 75% of our revenue, are expected to grow approximately 6% in the second half of the year, consistent with our historical performance over many quarters. Turning to our regional performance. The U.S. grew 6% on an operational basis, driven by ICVT, Interventional Oncology, and Neuromodulation. Europe, Middle East, Africa grew 4% on an operational basis, driven by EP, Vascular and Neuromodulation. And Asia Pacific grew 11% operationally, led by double-digit growth in Japan, China and Korea. Across the region, performance was driven by our Interventional Cardiology, EP, and WATCHMAN businesses. Now some additional color on our business units. Neuromodulation sales grew 12% with double-digit growth in both pain and brain. Within pain, growth was strong across the portfolio, including a full quarter of contribution from Nalu, which performed well in the second quarter with the integration progressing nicely. In brain, we saw strong growth across the globe enabled by differentiated products, including our Cartesia Leads, Illumina programming, and DBS Patient controller. Urology grew 1% this quarter, falling short of our expectations, driven by sacral neuromodulation with the recovery in that business taking longer than we had anticipated. In stone management, we continue to see pressure in the market with key portfolio gaps that we aim to fill over the next three quarters. We now expect our full year Urology growth to be flat to low-single digits. Endoscopy sales grew 7% with strong results across our business, another quarter of better-than-anticipated performance from AXIOS. Within the quarter, we received FDA clearance for RIVOS, a first-of-its-kind single-device designed to consolidate multiple exchanges and enable physicians to streamline procedural steps while performing endoscopic ultrasound biliary drainage, with positive feedback received on initial cases. Turning to Cardiovascular. Cardiovascular sales grew 8% in the quarter. Interventional Cardiology and Vascular Therapies grew 12%. Our Interventional Cardiology business had another excellent quarter, growing 15%, driven by double-digit growth in our coronary therapies with continued strength in DCB, imaging, and complex PCI. In May, data from the FRACTURE trial was presented as a late-breaker at EuroPCR, achieving all endpoints with the SEISMIQ 4CE Coronary IVL Catheter, demonstrating high rates of freedom from major adverse cardiac events at 30 days as well as procedural success in patients with severely calcified coronary artery disease. We look forward to bringing SEISMIQ 4CE to market in the first half of '27. Earlier this quarter, we announced our intent to potentially reenter the TAVR market through an investment in MiRus and their differentiated SIEGEL TAVR valve. The SIEGEL valve is currently enrolling in the STAR clinical trial and upon achievement of certain clinical and regulatory milestones, Boston Scientific has the option to acquire 100% of the TAVR assets. This valve has been built on years of research and proprietary technology. We believe that the distinctive design and impressive early clinical results of the SIEGEL valve may set it apart from currently available technologies. We're making great progress in our THRIVE trial enrollment evaluating the TIVUS Ultrasound System for renal denervation in the treatment of hypertension and continue to anticipate bringing our technology to market in '28. As we look ahead, we believe that our Interventional Cardiology business and ICVT broadly will be our strongest growth driver for Boston Scientific as we enter a number of high-growth adjacent markets over the coming years. Our Vascular Therapies business grew 8%, driven by broader adoption of Varithena and our drug-eluting portfolio. We're pleased with the performance of our SEISMIQ IVL launch with strong reception for the clinical differentiation of the device, and we continue to ramp supply. We remain excited about the opportunity to add the Penumbra team and highly differentiated and complementary portfolio to Boston Scientific. We anticipate the deal will close in the second half of '26, subject to the receipt of the remaining regulatory clearances. Our Interventional Oncology and Embolization business grew 12%, driven by strong global growth with our broad offering of innovative technologies. Earlier this month, results from the PROACTIF, a large prospective real-world study evaluating TheraSphere in the treatment of liver malignancies, were published. The study demonstrated meaningful survival outcomes across all stages of disease, including patients with larger or more advanced tumors, further supporting the use of TheraSphere in these populations. Additionally, we received FDA clearance for TruSelect, which is a microcatheter that combines precise navigation and efficient embolic delivery. Cardiac Rhythm Management sales declined 2% in the quarter. In core CRM, our low-voltage business declined high-single digits and our high-voltage business declined mid-single digits. Across our CRM franchise, we are seeing competitive pressure with some portfolio gaps, and we expect to make progress against these portfolio gaps with PRECEDENT, which is a new defibrillator platform to be launched in second half 2027. In Q2, our Diagnostics franchise grew low-double digits with continued strength across our broad diagnostic portfolio. Overall, we anticipate that our CRM growth will be flat on a full year basis with slight improvement in the second half of the year with contribution from EluPro, which is now in full launch. Turning to WATCHMAN. Our goal here is to provide you with more details on the LAAC market dynamics, the impact and expectations going forward. In second quarter, WATCHMAN grew 4% with international growth of 18% and U.S. growth of 3%. The adoption of concomitant procedures has been swift, and we now estimate that one-third of WATCHMAN procedures in the U.S. are done concomitantly. In second quarter, concomitant procedures grew over 60% with sequential growth of 11% versus first quarter 2026. For the remaining two-thirds of the procedures that are stand-alone, we saw low-teens declines versus second quarter 2025. We believe the overall LAAC market slowdown is driven by two main factors. First, there has been a significant amount of clinical evidence regarding stroke risk in AF patients published over the last nine months and integrating this evidence into practice takes time, which is impacting patient identification and referral patterns. Second, the focus on the fast adoption of concomitant procedures has created inefficiencies in the system with regards to operationalizing both stand-alone and concomitant procedures and allowing for sustained growth. With these key challenges understood, we are executing against three priorities to reaccelerate growth. First, we are driving greater clinical understanding through expanded physician education and evidence dissemination, which we expect will help referrers and implanters more easily identify patients appropriate for WATCHMAN. Second, we're strategically investing in our commercial organization to increase account engagement and unlock growth across both concomitant and stand-alone segments. And finally, we're accelerating direct-to-patient investments to stimulate demand, increase patient activation and reach more patients in the start of care journey. Together, these actions are designed to increase the number of patients treated and improve the LAAC market over time. So given these market dynamics we are seeing, we are updating our full year outlook for global WATCHMAN growth to be flat to low-single digits with the second half of 2026 declining mid- to high-single digits on a year-over-year basis. In the U.S., we anticipate that Q3 sales will decline mid-single digits sequentially versus second quarter, resulting in flat full year growth. We anticipate that year-over-year concomitant growth will materially slow in the second half due to higher comps from 2025. Our outlook does not anticipate any improvement in stand-alone procedural growth trends in the second half. We absolutely believe in this therapy and that WATCHMAN is the best treatment for patients who can't, won't or shouldn't take oral anticoagulation for stroke prevention. We expect that the actions we are taking today will support the LAAC market over time. However, we are not assuming improved WATCHMAN growth in 2027 until we see these dynamics actually change. Electrophysiology sales grew 9% with 3% growth in the U.S. and 23% internationally. Growth was driven by our innovative portfolio, including our continued expansion of our OPAL Mapping footprint, strong catheter utilization and continued momentum with our FARAPOINT launch. We continue to be pleased with the progress of expanding our OPAL Mapping footprint, supported by the OPAL HDx 7.0 Software release, which improved map quality. Our software releases every six months continue to enhance capabilities and support the expanding FARAPULSE platform. We have seen significant growth in our EP business with our differentiated FARAPULSE technology, enabling the transition to PFA faster than we anticipated. We believe that the U.S. PFA revenue now makes up approximately 80% of the AFib market, which does limit our ability to offset some competitive pressures. Going forward, we have adjusted our market share assumptions to ensure a more realistic outlook given these developments, while our team continues to focus on bringing our leading PFA ecosystem to more physicians and their patients who may benefit from the therapy. In light of this, we now expect our second half '26 global growth for EP to be flat. In the U.S., we anticipate that our Q3 sales will sequentially decline mid-single digits versus second quarter, resulting in full year growth of flat to low-single digits. We expect continued strength internationally with full year growth of approximately 20%. As we look ahead, we anticipate that our U.S. EP performance will improve in the second half of 2027 after the introduction of FARAWAVE Ultra, which is a high-density mapping and ablation catheter as well as our entry into the ICE market. We expect further improvement in 2028 as FARAFLEX, our novel large focal high-density map and ablate catheter, becomes available. And importantly, earlier this month, we commenced enrollment in the pivotal FARADIGM trial, evaluating the safety and effectiveness of FARAFLEX mapping and PFA catheter for the treatment of patients with paroxysmal and persistent AF. So in closing, we're not satisfied with our near-term outlook. We believe we now have a clear picture of the dynamics in our business and our updated guidance reflects a realistic view of the second half of '26. I remain confident in our long-term outlook for a number of reasons. Our performance is strong across many business units with Interventional Cardiology, Neuromodulation, IO&E, and Vascular, all delivering double-digit growth through the first half of the year. We also have an impactful cadence of catalysts in '27 that we expect to drive a significant improvement to our growth profile in 2028 and beyond. And even as we work through near-term top line pressures, we continue to be disciplined with our spending while investing in future growth drivers to ensure a return to meaningful adjusted operating margin expansion and adjusted EPS growth in '28 and beyond. So while we continue to navigate current challenges, our foundation, values and purpose haven't changed. Boston Scientific focuses on improving patient lives through our relentless pursuit of innovation, and we are confident that the qualities that have defined this company over many years will continue to shape our future as we evolve and build on those strengths with a highly skilled global team and a winning spirit. So with that, I'll hand it over to Jon for more commentary.
Thanks, Mike. Second quarter consolidated revenue of $5.442 billion represents 7.5% reported growth versus second quarter 2025 and includes a 50 basis point tailwind from foreign exchange, which was in line with our expectations. Excluding this $28 million foreign exchange tailwind, operational revenue growth was 7.0% in the quarter. Organic revenue growth was also 7.0% versus our second quarter guidance range of 5% to 7%. Second quarter 2026 adjusted earnings per share of $0.86 grew 15% versus 2025, exceeding the high end of our guidance range of $0.82 to $0.84, primarily driven by favorable discrete tax items. Adjusted gross margin for the second quarter was 70.3%, which represented an 80 basis point increase versus the second quarter of 2025. Second quarter adjusted operating margin was 28.4%, which was in line with expectations and represented 70 basis points of expansion versus the second quarter of 2025. On a GAAP basis, second quarter operating margin was 21.6%. These results include an approximate $75 million charge related to certain product liability cases as well as the recognition of approximately $80 million of refunds on previously paid IEEPA tariffs, representing substantially all of the refunds that we expect to receive. Moving to below the line. Second quarter adjusted interest and other expenses totaled $120 million, which was slightly unfavorable to expectations driven by FX volatility and certain unhedged currencies. On an adjusted basis, our tax rate for the second quarter was 10.4% which was better than expected and includes favorable discrete tax items. Fully diluted weighted average shares outstanding ended at $1.475 billion in the second quarter, reflecting the repurchase of approximately 40 million shares under our previously announced accelerated share repurchase agreement, which reduced our share count more than initially anticipated. As a result, we now expect full year 2026 weighted average shares outstanding to be approximately 1.475 billion. Free cash flow for the second quarter was $1.290 billion with $1.475 billion from operating activities, less $184 million in net capital expenditures. We now expect full year 2026 free cash flow to be approximately $3.8 billion. As of June 30, 2026, we had cash on hand of $539 million, and our gross debt leverage ratio was 2.0x. Our capital allocation approach is disciplined and growth-oriented. Our top priorities remain strategic tuck-in M&A and opportunistic share repurchases, while we continue to evaluate and fund the opportunities that we believe will create the greatest long-term value for our shareholders. Consistent with that framework, we announced a $1.5 billion investment in MiRus, which includes an exclusive option to acquire its TAVR business, and we completed our previously announced $2 billion accelerated share repurchase program. In addition, we look forward to the close of Penumbra in the second half, which we believe will strengthen our long-term growth profile through its innovative portfolio and strong strategic fit within our cardiovascular business. I'll now walk through guidance for the third quarter and full year 2026. We now expect full year 2026 reported revenue growth to be in a range of 5.5% to 6.5% versus 2025. Excluding an approximate 50 basis point tailwind from foreign exchange based on current rates, we expect full year 2026 operational and organic growth to be in the range of 5% to 6%. We believe this guidance reflects a comprehensive and realistic view of our end market dynamics. For the second half of 2026, this outlook contemplates approximately flat growth in our global Electrophysiology business, a mid- to high-single-digit decline in our global WATCHMAN business, and a steady base business growing approximately 6%, consistent with our historical performance over many quarters. We expect third quarter 2026 reported revenue growth to be in the range of 3% to 5% versus third quarter 2025. We anticipate no impact from foreign exchange based on current rates and therefore, expect third quarter 2026 operational and organic growth to also be in the range of 3% to 5%. We expect full year 2026 adjusted gross margin to be below full year 2025, reflecting a less favorable product mix than previously anticipated, primarily driven by our lower sales outlook for WATCHMAN and Electrophysiology. Additionally, we continue to make incremental investments in our global supply chain and quality systems. We now expect to expand full year 2026 adjusted operating margin by 0 to 25 basis points. Despite pressure on margins this year, we remain disciplined on spending while continuing to invest in our highest priority growth opportunities, supported by our recently announced restructuring program. We anticipate this comprehensive company-wide program will deliver run-rate savings of approximately $500 million exiting 2029 in the areas of supply chain optimization, targeted functional transformation, organizational structure evolution as well as focused reductions in indirect spending to drive sustained cost efficiencies. We expect to realize over half of our run-rate savings and incur over half of our program spend exiting 2027. This will position the company to return to meaningful operating margin expansion and strong adjusted EPS growth in 2028 and beyond. We now expect full year 2026 adjusted below-the-line expense to be approximately $485 million, reflecting the financing impact associated with our strategic investment in MiRus and our accelerated share repurchase agreement. Under current legislation, including enacted laws and issued guidance, we now expect a full year 2026 adjusted tax rate of approximately 11.5%. We expect full year 2026 adjusted earnings per share to be in a range of $3.28 to $3.32, representing 7% to 8% growth versus 2025, including an approximate $0.05 headwind from foreign exchange. We expect third quarter adjusted earnings per share to be in a range of $0.80 to $0.82. In closing, I'm confident in the long-term outlook for the company and our team's ability to navigate the current environment. While the challenges we face today will weigh on near-term financial performance, we are taking decisive actions to sharpen our organizational focus, adjust our cost structure and position the business for the future. We remain focused on executing our full year 2026 guidance of 5% to 6% organic revenue growth, 0 to 25 basis points of adjusted operating margin expansion, and 7% to 8% adjusted earnings per share growth. Importantly, we remain confident that the actions we are taking today will position Boston Scientific to return to differentiated financial performance in 2028 and beyond. For more information, please check our Investor Relations website for second quarter 2026 financial and operational highlights, which outlines more details on second quarter results and 2026 guidance. And with that, I'll turn it back to Lauren, who will moderate the Q&A.
Thanks, Jon. Drew, let's open it up for questions for the next 30 minutes or so. In order for us to take as many questions as possible, please limit yourself to one question. Drew, please go ahead.
分析師問答
The first question comes from Robbie Marcus with JPMorgan.
I wanted to ask, we're coming off a beat in second quarter here. And I realize there have been a number of downward revisions over the past few quarters as some of the end markets have been moving. How do you frame this latest guidance update, particularly with respect to EP and WATCHMAN? Is this based on a level of conservatism where you can eliminate hopefully any future negative revisions? Or is this based more on trends you're seeing exiting second quarter and so far into third quarter? And any early commentary you could give on 2027. I believe buy side is settling out somewhere around 5% organic growth coming into today. How does that sound to you going into second half of this year?
Thanks, Robbie. Yes, we are pleased with our second quarter results. And we did mention in the script, basically, 75% of our business continues to grow 6%, consistent with 2025, and we anticipate that set of businesses that are 75% will improve over the coming years as we strengthen our Urology business and launch CRM and continued momentum there. So 75% of the business growing at 6%, we aim for that to improve in the future. The challenge, as you know, has been in the two areas, EP and WATCHMAN, that had hyper growth, unusually differentiated growth in '24 and '25, and now we expect more pressure in '26 and '27. Specific to EP, we see that rebounding in second half '27, and we expect to get back to market or above-market growth in EP in '28. So when you look at the second half, really it's EP and WATCHMAN that are driving the bulk of the guidance reduction. And we're clearly not pleased with this change. It's not the outcome that we plan for. It's not what you expect from us, and I do take responsibility for the guidance reduction, and it's primarily driven by EP and WATCHMAN. And as I mentioned in the script, on the WATCHMAN side itself, we do expect second half declines globally in the mid-single-digit to high-single-digit range. That is based on a trend that we've seen that we have not seen an uptick in the first half of the year. So we think that's the appropriate prudent guide for WATCHMAN based on the existing market that we're seeing. Now we're assuming in the WATCHMAN guide that despite the efforts we are making, which we aim to improve, those do not benefit the existing WATCHMAN market. So the three things that we laid out today could enhance performance and if labeling occurs in 2027, there obviously could be some upside to those numbers. But for guidance purposes, we're assuming the existing market that we're seeing today does not change. And that market change is very dramatic and pretty sudden over the past six months. So WATCHMAN is the biggest piece of it. And secondly, on EP, we're overall in EP, we're actually quite pleased with the performance in the quarter, and we're pleased with the portfolio roadmap that we have with Ultra being launched around this time next year, the entry into ICE and the Ultra platform now initiating this IDE. So that team is executing well. But with specific EP, we did undercall the competitive pressures in the U.S. in terms of share taking. We continue to be the PFA leader, but our share has come down. And the second attribute there is the PFA market has really accelerated to about 80% to 85% of the market share. We don't see that in Europe and Asia, where we continue to grow about 20% in our EP business. So the second half guide down is primarily driven by WATCHMAN and EP for the reasons stated. In 2027, to be appropriately conservative again, we would say that in 2027, we aim to do better than our guide for the second half of 2026. So assuming our 2027, we're being appropriately conservative with our WATCHMAN market call, and we aim to get back to stronger performance in EP, and we're confident that 75% of the business, which is growing at 6%, will improve over time with Urology and CRM specifically. I hope that answered some of your questions.
The next question comes from Larry Biegelsen with Wells Fargo.
Mike, regarding WATCHMAN, I think you said mid- to high single-digit decline in the second half of '26. So when you say no improvement in '27, are you referring to the full year guide of flat to low-single-digit growth or second half guidance? And how are you thinking about new competition next year, the 20% cut to the physician fee? And just lastly, do you still expect the first-line label based on the 3-year CHAMPION data?
Yes. Again, on EP, we undercalled the share. For WATCHMAN, we're not looking for a pass, but it has changed dramatically over the past six months. When we look at the second half, our assumption for the market here—because we're about 91% share of the market—is that the market declines in that mid- to high-single-digit range. It's primarily based on high comps with concomitants. And as I mentioned, declining stand-alone procedures of approximately mid-teens negative is the call for second half. In terms of the market in 2027, we obviously aim for that to get better based on educating the referral community, the clinical messaging, expanded commercial coverage and increase in direct-to-patient initiatives. But for now, we think it's prudent to assume that the '27 market is consistent with the trends that we're seeing now. We'll be happy to change that call once we see improvement in the WATCHMAN market if that occurs. As you mentioned, we do anticipate a competitor at some point in 2027. We have high confidence that WATCHMAN will continue to be clearly the market leader, but likely we'll have some share erosion in 2027 with the introduction of a new competitor. So WATCHMAN will be difficult in 2027 absent a change in the market, which we have not assumed in this guidance despite the efforts that we are taking. We expect WATCHMAN will be challenging in 2027.
The next question comes from Joanne Wuensch with Citibank.
If I heard you correctly, 2026 revenue growth of 5% to 6% organic is probably a good starting place to think about 2027 and then reaccelerating in 2028. Could you sort of confirm that's the right parameters to think about? And then if you could comment on what the new products are that you think will be the main drivers as we think about going into 2028?
Yes. So we've given our guide for '26. It's difficult to give a precise guide for '27 until January. But for now, we want to provide a framework that we aim to improve in 2027 versus our second half 2026 guidance. Again, that's assuming that the WATCHMAN markets don't change, which we obviously aim for them to improve. When you look to 2028 and beyond, I would say we are taking actions. The company has delivered very high performance over many years, including the last several. We had a decent first half of this year growing 8% top line and 10% EPS growth for the first half, and we've given our guide for 2026. We do expect a challenging 2027. But why we're confident in improvement in 2028 is: one, the weighted average market growth rates (WAMGRs) that we compete in are 7% to 8%. We have a number of businesses now that are growing double digits. We expect that 75% of our business that's growing 6% will improve over the coming two years. In addition to that, based on investments that we've made over the past two to three years, we'll be entering seven new meaningful launches that exceed about a $25 billion total addressable market in 2028. Those launches highlighted in our materials include IVL, hypertension, the closing of Penumbra, entry into ICE imaging, FARAWAVE Ultra, and if the MiRus clinical trial continues to go as planned, the future acquisition of MiRus as well as additional circulatory support. We believe the Interventional Cardiology and ICVT sector will be a significant growth driver for the company in '28, '29, and '30. We expect the core 75% of our business to strengthen over that time period. On top of that, you layer in seven meaningful platforms and we expect the EP business to get back to at-market or beyond growth in 2028 and improve in second half 2027. The WATCHMAN market is tougher to call. We'll keep you updated as we can. But we feel like the combination of all those elements will drive us to strong performance again in '28 and beyond.
The next question comes from Rick Wise with Stifel.
I have two questions. First, I was hoping you could expand on your restructuring comments. We all read the release, the Form 8-K earlier this week. You spoke about the benefits and the efficiencies in the time frame. Could you talk a little bit more about the impact as we think about the next several years on the P&L? Where will we see it? To what extent are you going to reinvest some of those savings, which I think was some of the language in the 8-K, and where are you going to reinvest them in your growth initiatives? How do we think about that?
Yes. Thanks, Rick. It's Jon. This is a comprehensive enterprise-wide program that we're initiating to drive better speed and cost efficiency, targeting $500 million of savings within the next three years. Based off the phasing of that program, we'd expect to realize over half of those savings exiting 2027. So we'll start to see those savings come in during 2027. That will position us to drive more meaningful operating margin expansion and strong EPS growth in 2028 and beyond, as Mike indicated, while continuing to fully fund high-growth opportunities across the businesses. As far as where we'll see those savings, I'd expect to see them materialize in SG&A first and then COGS later over time. We feel like it's the right program for Boston Scientific, given where we are, and it will help position us to return to strong growth and meaningful EPS expansion in '28 and beyond.
The next question comes from Michael Polark with Wolfe Research.
Follow-up on WATCHMAN and the topic of compounding clinical evidence impacting referral patterns. I think we've all seen these studies, obviously CLOSURE, CHAMPION, OCEAN, ALONE. The question is, what can you do to change that? Is it a new round of clinical evidence generation? Is it form factor innovation? Just talk to me about the playbook for those shifting referral patterns for WATCHMAN.
Dr. Stein, if you want to take that one?
Yes. I think it's pretty clear that there was a much bigger impact than we anticipated dating back to last November, the release of OCEAN closure. And then some of the confusion around CHAMPION certainly hasn't helped. We have seen, for instance, much greater use of the so-called wait-and-see strategy in patients with a CHA2DS2-VASc score of 3 following ablation. And while concomitant procedures are continuing to grow, that has affected the growth trajectory of concomitant. When we look at stand-alone WATCHMAN procedures, we're really seeing, more than anything else, a drop-off in referrals for the so-called soft indications for the device—patients who prefer not to be on an oral anticoagulant without having a clearly defined reason to seek an alternative. I think the solution is everything that Mike listed and everything we are doing: continuing to educate on the totality of the clinical data, additional evidence generation, device iteration, and commercial efforts. To come back to Mike's prepared remarks, this is still the only proven and the best option for patients who can't or who won't or who shouldn't be on long-term blood thinners. I'd remind you that somewhere between 30% and 40% of patients who need stroke prevention in atrial fibrillation currently don't get anything. There is a sizable unmet medical need that the WATCHMAN device serves. In addition to continuing our education on the current data, there's more data to come. I'd highlight our SIMPLAAFY trial, which we expect to be released second half of this year; if it meets its endpoints, it could help simplify the drug regimen post-implant and deal with some of the concern around immediate post-procedure bleeding. We've talked about continuing to iterate our device platform with the upcoming clinical trial evaluating the WATCHMAN Elite device. We continue to believe that the data from CHAMPION and the overall totality of the clinical data merit an update to our labeling from FDA and merit a reconsideration of the CMS national coverage decision.
The next question comes from Travis Steed with Bank of America.
I wanted to ask about the limited EPS growth comment in 2027. Is that flat EPS? Is that EPS growth in line with a 3% revenue growth in '27? Or is there some leverage still? And then for 2028, do we get back to double-digit growth? Maybe also address why the lack of EPS growth in '27 is just a lack of higher-margin revenue growth or needing to invest more in growth drivers?
Thanks, Travis. We'll provide more detail on 2027 expectations in our Q4 earnings call, as we typically do. Based on what we're assuming today, and given Mike's outline of WATCHMAN and EP dynamics, we expect those to extend into 2027. We expect limited EPS growth in 2027 and improving operating margins will be a challenge. That is due to gross margin pressure from continued softness in WATCHMAN and EP as well as the initial impacts of Penumbra, which we anticipate will close in the second half of this year. We're excited to add Penumbra, but as we've previously disclosed, we expect Penumbra to be slightly dilutive to our operating margins and EPS in 2026. Again, we are taking action to ensure a return to meaningful operating margin expansion and strong EPS growth. We'll maintain a disciplined approach to spending across Boston Scientific and continue to fully fund the areas of the portfolio that drive long-term growth. We initiated a company-wide restructuring program, which along with the growth catalysts Mike described, will start to hit in '27 and '28 and position us to return to strong revenue growth and strong adjusted EPS growth in 2028 and beyond.
The next question comes from Matt Taylor with Jefferies.
I wanted to see if you could be a little bit more specific on 2027 assumptions for EP growth. You talked a little bit about the WATCHMAN outlook. Could you discuss EP as well? And when do you expect some of these pipeline contributions to help the EP growth outlook?
Sure. I'm pleased with the momentum and execution of our EP R&D and innovation team. We have FARAPOINT that we launched this year. The bigger meaningful launches that will widen our ecosystem and enable a more comprehensive solution really start in 2027, where we plan to launch our next-generation FARAPULSE Ultra device at scale around this time next year. Entry into the intracardiac echocardiography (ICE) market, a market greater than $1 billion and growing quickly, will also occur in 2027 where we're not currently playing. Those two launches will help considerably as we look at the second half of '27. We basically see the first half of '27 looking like similar dynamics to those we see today in the second half of '26, but we expect improvement in 2027, and then a stronger improvement in 2028 with Ultra and ICE as well as FARAFLEX contributing. We're confident in 2028 getting to at or above market growth again in EP based on that portfolio.
The next question comes from Marie Thibault with BTIG.
I wanted to ask a question on one of the bright spots for your business, which has been the ICVTx segment. What are the products that are doing best? What are the catalysts to look for in that business? And how can we have confidence in the sustainability of some of the above WAMGR growth that you've been showing there?
We think this will be our largest set of businesses in the company in the future. If you look at Interventional Cardiology, Vascular, and the planned closing of Penumbra by the end of this year, the adjacencies we may enter, and the MiRus TAVR valve, there are numerous opportunities. The business has excellent momentum now, driven by our complex PCI portfolio, our imaging capabilities and our drug-coated balloon (DCB). We are continuing to widen indications and are expanding trials for our DCBs. That business is performing at a very high level. Looking forward, we're excited to enter the IVL coronary market, which is a multibillion-dollar market in 2027. We're making progress on our hypertension (renal denervation) enrollment in our THRIVE trial and expect to complete enrollment by the end of this year or first quarter of 2028, and we expect to launch that product in 2028. We also expect the closing of Penumbra to add to the portfolio. There are a number of large adjacencies we're moving into in that sector, which are supporting continued momentum. As Jon said, with the restructuring we initiated, we are protecting these high-growth markets and will continue to invest to enable growth into '28 and beyond.
The next question comes from Jayson Bedford with Raymond James.
I may have missed this earlier, but what do you think your WAMGR is today given the slowdown in the LAAC market? And just a quick one: what can be done in Sacral Neuromodulation? Is it more market or share related?
We would estimate our weighted average market growth rate is probably 7% to 8%, perhaps ticked down about one point. Keep in mind, WATCHMAN is a great product for us, but it's less than 10% of our revenue. On Urology, we're frustrated with our year-to-date results. We anticipate flat growth, maybe up 1% for the full year. We're confident that will improve in 2027. We have three key launches in our core stone portfolio over the coming two to three quarters, and we expect to get closer to at-market growth in 2027. Regarding Sacral Neuromodulation, we've had a significant disruption of commercial capabilities, but those gaps have been filled. We have trained and hired and are now in the field activating a number of new clinical and sales representatives. We anticipate that business should get better as the quarters progress in '26 and with a more mature team in 2027. We aim for our Urology business to get closer to its market growth rate in 2027.
I understand there is time for one last question. That will come from Josh Jennings with TD Cowen.
I wanted to follow up on Jayson's WAMGR question. Does that hold for 2027? And also an updated outlook on the U.S. EP market growth? Does Boston expect FARAWAVE to maintain leadership in the AFib ablation catheter segment in front of the FARAWAVE Ultra launch? And an update on how Boston is doing in the non-ablation catheter segments of the U.S. EP market.
I think the 7% to 8% WAMGR call is appropriate. Regarding PFA leadership, we have it now, although we have lost some share in the U.S. We continue to do extremely well in Europe and Asia Pacific where PFA penetration is not as high. We've seen competitive launches there. We do expect some competitive launches will impact performance in second half '26, which informed our guide. We expect that trend to continue through first half '27, and that's when we launch our next-generation Ultra and eventually our ICE device. We expect the business to strengthen in second half '27 and in '28.
This concludes our question-and-answer session. I would like to turn the conference back over to Lauren Tengler for any closing remarks.
Thanks for joining us today. We appreciate your interest in Boston Scientific. If we were unable to get to your question or you have any additional follow-ups, please don't hesitate to reach out to the Investor Relations team. Before you disconnect, Drew will give you all of the pertinent details for the replay. Thank you, everyone.
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