Boston Scientific Corporation Announces Board Changes
Mar 3 15
Boston Scientific Corporation announced the election of Charles J. Dockendorff and Stephen P. MacMillan to its board of directors, effective April 1, 2015. Two
current members of the board, Uwe E. Reinhardt and Bruce L. Byrnes, will not stand for re-election at the company's annual meeting of stockholders in May 2015. Charles J. Dockendorff was formerly the executive vice president and chief financial officer of Covidien plc. Mr. Dockendorff currently serves on the board of directors of Haemonetics Corporation and Keysight Technologies. Stephen P. MacMillan is currently the president and chief executive officer of Hologic. Previously, Mr. MacMillan served as president and chief executive officer of Stryker Corporation. He currently serves on the board of directors of Alere Inc.
Boston Scientific Corporation Eyes Acquisitions
Mar 2 15
FD (Fair Disclosure) Wire
March 2, 2015 Monday
Boston Scientific Corp Announces Definitive Agreement To Acquire American Medical Systems' Urology Portfolio For
Up To $1.65 Billion Corporate Call - Final
LENGTH:Â 4999 words
* Susan Lisa
Boston Scientific Corporation - IR
* Mike Mahoney
Boston Scientific Corporation - President & CEO
* Dan Brennan
Boston Scientific Corporation - EVP & CFO
* Karen Prange
Boston Scientific Corporation - SVP and Pres, Urology & Women's Health
Conference Call Participants
* David Lewis
Morgan Stanley - Analyst
* Mike Weinstein
JPMorgan - Analyst
* Bob Hopkins
BofA Merrill Lynch - Analyst
* Bruce Nudell
Credit Suisse - Analyst
* Larry Biegelsen
Wells Fargo Securities - Analyst
* Brooks West
Piper Jaffray & Co. - Analyst
* David Roman
Goldman Sachs - Analyst
* Matt Taylor
Barclays Capital - Analyst
* Kristen Stewart
Deutsche Bank - Analyst
OPERATOR: Ladies and gentlemen, thank you for standing by. Welcome to the Boston Scientific investor update
call. (Operator Instructions) As a reminder, this conference is being recorded.
I will now turn the conference over to our host, Susan Lisa. Please go ahead.
SUSAN LISA, IR, BOSTON SCIENTIFIC CORPORATION: Thank you, Karen. Good morning, everyone, and thanks for joining
us on short notice. With me on today's call are Mike Mahoney, President and Chief Executive Officer; Dan
Brennan, Executive Vice President and Chief Financial Officer; and Karen Prange, Senior Vice President and
President, Urology and Women's Health.
We issued a press release earlier this morning announcing that we have entered into a definitive agreement with
Endo Health Solutions to acquire the AMS urology portfolio, which includes the men's health and prostate health
businesses, for up to $1.6 billion in upfront cash and a potential additional $50 million milestone based on
2016 sales. We have posted a copy of that release, reconciliations of the non-GAAP measures used in today's
call, and additional financial and operational highlights under the Investor Relations section of our website
under the heading financial information, quarterly results, and non-GAAP reconciliations.
The duration of this morning's call will be approximately 30 minutes. Mike and Dan will give brief summary
remarks and will host a Q&A session, during which Mike and Dan will be joined by Karen.
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, statement about the proposed acquisition including
the closing and integration of the acquisition; expected accretion and dilution; expected synergies, growth, and
market share; cost savings and growth opportunities; our cash flow and expected use; our financial performance
including sales, margins, earnings, and other full-year 2015 guidance as well as our tax rates and other
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 to be filed with the SEC. These statements speak only as of today's date and we
disclaim any intention or obligation to update them.
At this point, I will turn over to Mike for his comments. Mike?
MIKE MAHONEY, PRESIDENT & CEO, BOSTON SCIENTIFIC CORPORATION: Thank you, Susie. Good morning. Thanks to all of
you for joining the phone on such short notice.
I will give brief remarks on the strategic rationale for the transaction and the market opportunity. Dan will
then give the financial highlights and then we will leave about 15 minutes for your questions. We will plan on
ending the call by 9 AM this morning.
We have consistently stated that our preferred M&A targets are those with a strong strategic fit and compelling
financials. More specifically, we are pursuing transactions that strategically help us to forge category
leadership that are in attractive global markets and that deliver meaningful innovation.
Financially, our M&A strategy seeks to generate strong risk-adjusted returns on invested capital, while enabling
near-term revenue and cost synergies as well as strong EPS accretion. The acquisition of AMS Men's Health and
Prostate Health business checks all the boxes that we look for in a transaction.
Number one, men's health is an attractive global market. The urology device market is a multibillion-dollar
global market, growing low to mid single digits. In fact, in 2014 the Boston Scientific Urology and Women's
Health business delivered strong results, growing operational revenue 7%, while expanding our business
In the urology market there a large unmet patient needs and solid demographic factors that drive the underlying
global growth rate. These factors include an aging population with the desire to maintain a high quality of
life; expanded access, particularly internationally; more minimally invasive solutions; and increased patient
and physician awareness of these treatments. As usual, our goal is to grow revenue in these segments faster
than the market growth rate.
Number two, this deal establishes a clear leadership position for BSC. By combining the BSC Urology and Women's
Health portfolio with the AMS Men's Health and Prostate Health business, we are creating a nearly $1 billion
global market leader.
The combined business will offer a comprehensive portfolio with market-leading positions across the five major
segments including stone management, erectile restoration, BPH treatment, male urinary incontinence, and pelvic
floor repair. This broad portfolio, combined with the largest global footprint, provides unique opportunities
for BSC to partner with urologists and hospital customers while driving meaningful innovation for patients.
Number three, this transaction offers strong financial returns with an ROIC that is expected to exceed our cost
of capital by 2017, with positive accretion to adjusted earnings in 2016 and increasingly accretive thereafter.
The adjusted operating margin profile of the AMS Men's Health and Prostate Health business is attractive, in the
low 30% range, and projected to be immediately accretive to BSC corporate operating margins. We also expect to
achieve in excess of $15 million in deal-related synergies by the end of 2018.
Since 2011, the AMS Men's Health and Prostate Health business has grown operational revenue 2% to 3% annually.
We believe that BSC will improve that historical growth profile to align with our overall BSC revenue guidance
at 3% to 6% operational growth. We project improved growth rate due to the power of the combined urology
portfolio, international expansion opportunities, our combined commercial footprint, and the focus of a leading
medical device company.
Fourth, this transaction is strategically compelling for BSE overall as it further strengthens our portfolio
diversification into attractive global markets. In addition, it furthers our goal of category leadership in
each of our businesses. Rather than breadth, our strategy is depth, depth within specific service lines of the
hospital, providing a comprehensive portfolio of solutions to our hospital and physician customers.
Finally, we look forward to welcoming the AMS Urology team to Boston Scientific. Boston Scientific's culture,
our values, and the winning spirit of our employees continues to be a key factor in