Michael F. Mahoney, Director; Chairman of the Board; President and CEO
Daniel J. Brennan, Exec. VP and CFO
Keith D. Dawkins, M.D., Exec. VP and Global Chief Medical Officer
Professor Ian T. Meredith AM, Exec. VP
and Global Chief Medical Officer
Edward F. Mackey, Exec. VP, Operations
Kevin J. Ballinger, Exec. VP and President, Interventional Cardiology
Michael P. Phalen, Exec. VP and President, MedSurg
Joseph M. Fitzgerald, Exec. VP and President, Rhythm Management
Arthur C. Butcher, Sr. VP and President, Endoscopy
Jeffrey B. Mirviss, Sr. VP and President, Peripheral Interventions
Maulik Nanavaty, Sr. VP and President, Neuromodulation
David A. Pierce, Sr. VP and President, Urology and Pelvic Health
John B. Sorenson, Sr. VP, Manufacturing and Supply Chain
NUMBER OF EMPLOYEES: 27,000
GLOBAL HEADQUARTERS: Marlborough, Mass.
Fiscal 2016 was the very definition of an “up” year for Boston Scientific. The company enjoyed a net sales increase of almost a billion dollars, a 12 percent increase over the prior year. It reported total net sales for the company of almost $8.4 billion compared to the $7.5 billion figure posted in 2015. Similarly, every segment and business unit also reported an increase over the prior year. While some were more substantial than others, they all enjoyed a positive growth in sales.
The Cardiovascular segment saw a 12 percent increase over 2015’s sales figure ($3.3 billion versus $2.9 billion). Reflecting that exact percentage, both business units—Interventional Cardiology and Peripheral Interventions—had the same percentage growth in sales. Interventional Cardiology had an increase from $2 billion in 2015 to $2.3 billion in 2016, which was, according to the company, led primarily by strong sales of the Synergy Bioabsorbable Polymer Drug-Eluting Stent System. The Peripheral Interventions business was successful in gaining market share as it invested in both a drug-coated balloon and drug-eluting stent to treat peripheral artery disease, growing sales from $904 million to just over $1 billion.
Further, the company was able to secure Medicare coverage for its Watchman Left Atrial Appendage Closure Devices used to reduce the risk of stroke in eligible patients.
Within the Rhythm Management segment, sales increases were more modest, but still pointed in the right direction. Overall, an increase of 3 percent was enjoyed over the prior year, translating to more than $2 billion in 2015 to just under $2.1 billion in 2016. Approvals for the Emblem MRI S-ICD System and the OEM’s portfolio of MR conditional pacemakers and leads (see Expanded Offerings below for more information) were a couple of the positives coming from the Cardiac Rhythm Management business, which saw a 2 percent increase over the prior year ($1.8 billion to $1.85 billion). New products in the Electrophysiology business helped sales come in at $243 million, a 4 percent increase over 2015.
ANALYST INSIGHTS: Analyst Insights: Boston Scientific eschewed large scale M&A in recent years in favor of a refresh of its core product lines. The strategy is playing out well and the company’s execution in bringing product to market promptly is commendable.
—Tony Freeman, President, AS Freeman Advisors LLC
The most impressive gains were seen in Boston Scientific’s MedSurg segment, which boasted a 20 percent increase, going from $2.5 billion in 2015 to $3 billion in 2016. The company states that continued investments over the previous five years, along with several strategic acquisitions in 2016 were primarily responsible for the growth the segment saw. Endoscopy, which saw a 10 percent growth over the prior year and contributed more than $1.4 billion in sales to the company, was bolstered in part by the OEM’s SpyGlass DS Direct Visualization System—technology used for the diagnosis and treatment of the pancreas and bile ducts. The Urology and Pelvic Health business breached the $1 billion sales mark with a substantial 45 percent jump from 2015. Contributing to the gains was the synergies realized from the AMS Men’s Health business—a $1.65 billion buy in 2015—in addition to new product launches. Rounding out the segment, Neuromodulation saw an 11 percent increase over 2015, going from $501 million to $556 million. Again, new products in both the United States and Europe helped drive organic growth of the business.
Looking to the future and continuing the growth the company enjoyed in fiscal 2016, Boston Scientific made a number of strategic acquisitions during the course of the year. One of the more notable M&A announcements was the Cosman Medical buy. The privately held manufacturer of radiofrequency ablation (RFA) systems, based in Burlington, Mass., provided a technology portfolio that bolstered Boston Scientific’s Neuromodulation business. RFA works by applying heat to small areas of nerve tissue to interrupt pain signals.
“This acquisition is a natural extension of our current product portfolio and will help us provide physicians and patients more options to address chronic pain with non-opioid therapeutic treatments,” Maulik Nanavaty, senior vice president and president of the Neuromodulation business, said in a release that first announced the transaction. “The addition of the Cosman Medical product line, which is built on industry-leading technology and known for its high quality, expands our capability to provide innovative solutions for the treatment of chronic pain.”
The move marked an obvious attempt by the company to gain share within a device sector that addresses the very public opioid battle currently being waged within healthcare, as well as drawing attention from politicians and anti-opioid advocates. The Cosman technology provides a complement to Boston Scientific’s spinal cord stimulator system, giving doctors more opioid-free options from which to choose to address pain management.
“We are pleased to join the Boston Scientific team and help expand access to leading treatments for chronic pain,” Eric Cosman Jr., Ph.D., scientific director at Cosman Medical, said in the same press release. “This acquisition comes at a time when our society is recognizing the impact of relying extensively on opioids to treat pain and is looking for additional approaches. Our mutual commitment to innovation and quality will help us deliver solutions.”
ANALYST INSIGHTS: Boston Scientific, Direct Flow Medical, and St. Jude Medical are all running pivotal trials for their TAVR devices, and these companies are expected to enter the U.S. market as early as 2017 (Boston Sci’s trial has completed enrollment already). Each device has unique characteristics that could help it gain share in the U.S. market.
—Mark Bonifacio, Founder & President, Bonifacio Consulting Services
In a buy that seeks to supplement the products within the Endoscopy business, Boston Scientific announced in September that it would acquire EndoChoice. The firm developed products and services for specialists treating a wide range of gastrointestinal conditions. Its primary product portfolio included single-use devices, such as resection and retrieval devices, needles, graspers, and infection control kits. The deal, which closed in late November 2016, was valued at $210 million.
“The addition of EndoChoice products and services to our portfolio supports our strategy to provide comprehensive solutions to gastroenterology caregivers and the patients they serve,” Art Butcher, senior vice president and president of the Endoscopy business, said in a release issued to announce the deal. “We expect the acquisition to expand our leadership into new categories in the endoscopy market, and to drive strong, continued growth of our endoscopy business.”
Further bolstering the company’s product offerings for endoscopic procedures, Boston Scientific also purchased the LumenR Tissue Retractor System from LumenR LLC. While still in development at the time of the acquisition, the system was designed for use during endoscopic resection of lesions in the colon, esophagus, or stomach. Once completed, the technology was expected to improve endoscopic sub-mucosal dissection (ESD) and endoscopic mucosal resection (EMR) procedures.
“We have seen promising outcomes in reducing both procedure times and patient complications during our evaluation of the LumenR system,” Dr. Gregory Piskun, founder and CEO of LumenR LLC, said in the release announcing the purchase. “We are excited by this investment by Boston Scientific to acquire the LumenR system and bring it to market.”
Rounding out Boston Scientific’s 2016 transactions were the acquisition of the gynecology and urology portfolio of Distal Access LLC, and the $75 million buy of certain manufacturing assets and capabilities of Neovasc’s advanced biological tissue business. The purchase from Distal Access included the notable Resectr Tissue Resection Device, a single-use solution designed to effectively remove uterine polyps. The Neovasc advanced biological tissue business produces components used in transcatheter heart valves, including Boston Scientific’s Lotus Valve System. That deal also resulted in Boston Scientific gaining a 15 percent equity stake in Neovasc.
ANALYST INSIGHTS: Under Mahoney’s leadership, BSC is rapidly becoming an investor’s dream—a solid company with consistently increasing revenue and even better earnings growth. Its focus on category leadership in Cardiovascular, Rhythm Management and MedSurg will continue to pay dividends.
—Dave Sheppard, Co-Founder and Principal, MedWorld Advisors
Boston Scientific enjoyed a significant year in terms of the expansion of its product portfolio. In total, the OEM saw 450 regulatory approvals and clearances worldwide, while also launching 93 products. Following are the more notable successes throughout fiscal 2016.
January 12—U.S. and European launch of the LithoVue Single-Use Digital Flexible Ureteroscope for minimally invasive endoscopic procedures to diagnose and treat stones and other conditions of the kidney, ureter, and bladder. The system is designed to deliver high-quality digital visualization and seamless navigation for consistent clinical performance during each patient procedure.
February 22—CE mark for the Eluvia Drug-Eluting Vascular Stent System, designed to restore blood flow in the peripheral arteries above the knee (specifically the superficial femoral artery and proximal popliteal artery). The stent features a unique drug-polymer combination intended to facilitate sustained release of the drug (paclitaxel) that can prevent narrowing (restenosis) of the vessel.
February 23—FDA approval of the Acuity X4 Quadripolar Left Ventricular leads, the wires that connect cardiac resynchronization therapy (CRT) devices to the heart. The product represented the first time the company offered a full X4 CRT system—both the device and the leads—to the U.S. market.
March 10—FDA approval of the Blazer Open-Irrigated radiofrequency ablation catheter to treat Type I atrial flutter, an abnormal rhythm of the upper chambers of the heart. The catheter features Total Tip Cooling technology intended to cool the catheter tip consistently during the ablation procedure.
March 22—U.S. launch of the Axios Stent and Electrocautery Enhanced Delivery System to help physicians manage two serious complications from pancreatitis—pancreatic pseudocysts and certain types of walled-off pancreatic necrosis—using a minimally invasive endoscopic approach.
April 20—CE mark (and subsequent FDA approval/U.S. launch announced August 9) for Emblem MRI Subcutaneous Implantable Defibrillator Systems (S-ICD), as well as magnetic resonance conditional labeling for all previously implanted Emblem S-ICD Systems. The systems are treatment options for patients at risk of sudden cardiac arrest that leave the heart and vasculature untouched.
April 25—FDA approval of several products deemed safe for use in an MRI environment, such as the ImageReady MR-Conditional Pacing System (which includes Accolade MRI and Essentio MRI pacemakers) and the Ingevity MRI pacing leads.
May 3—FDA approval of two catheters that can be used with the company’s Rhythmia Mapping System. The IntellaNav XP and the IntellaNav MiFi XP navigation-enabled ablation catheters—designed to map and ablate—were approved to treat Type I atrial flutter.
May 19—FDA approval and launch of the Precision Montage MRI Spinal Cord Stimulator System. The system offers customized relief to patients with chronic pain while also enabling safe access to full body magnetic resonance imaging in a 1.5 Tesla environment.
September 19—CE mark for the Lotus Edge Valve System, the company’s next generation transcatheter aortic valve implantation (TAVI) technology. The system is indicated for aortic valve replacement in patients with severe aortic stenosis who are considered at high risk for surgical valve replacement.
October 17—Launch of the Resolution 360 Clip, a novel technology developed to improve hemostatic clipping by providing physicians controlled rotation designed for more accurate clip placement.
November 8—U.S. and European launch of the Dakota Nitinol Stone Retrieval Device with OpenSure Handle. This kidney stone retrieval device is designed to allow physicians to release and capture kidney stones of multiple sizes, from complex stones as large as 10 millimeters to fragments as small as one millimeter.