Boston Scientific Corporation (BSX) Q4 2024 Earnings Call

Boston Scientific Corporation (NYSE:BSX) Q4 2024 Earnings Conference Call February 5, 2025 8:00 AM ET

Company Participants

Jonathan Monson - SVP, IR
Michael Mahoney - Chairman and CEO
Daniel Brennan - EVP and CFO
Kenneth Stein - Chief Medical Officer

Conference Call Participants

Robbie Marcus - JPMorgan
Larry Biegelsen - Wells Fargo
Frederick Wise - Stifel
Joanne Wuensch - Citibank
David Roman - Goldman Sachs
Travis Steed - Bank of America
Patrick Wood - Morgan Stanley
Danielle Antalffy - UBS
Michael Polark - Wolfe Research
Vijay Kumar - Evercore ISI
Pito Chickering - Deutsche Bank
Joshua Jennings - TD Cowen
Chris Pasquale - Nephron Research

Operator

Good morning, and welcome to the Boston Scientific Fourth Quarter 2024 Earnings Call. All participants will be listen-only mode. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Jon Monson, Senior Vice President, Investor Relations. Please go ahead.

Jonathan Monson

Thank you, Drew, and thanks, everyone, for joining us. With me today are Mike Mahoney, Chairman and Chief Executive Officer; and Dan Brennan, Executive Vice President and Chief Financial Officer. During the Q&A session, Mike and Dan will be joined by our Chief Medical Officer, Dr. Ken Stein.

We issued a press release earlier this morning announcing our Q4 and full year 2024 results, which included reconciliations of the non-GAAP measures used in this release. The release as well as reconciliations of the 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 acquisitions and divestitures for which there are less than a full period of comparable net sales. Guidance excludes the previously announced agreements to acquire Bolt Medical and Intera Oncology, which are expected to close in the first half of 2025 subject to customary closing conditions. For more information, please refer to the Q4 financial and operational 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 the prior year, unless otherwise specified. This call contains forward-looking statements regarding, among other things, our financial performance, business plans 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 the 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.

At this point, I'll turn the call over to Mike.

Michael Mahoney

Great. Well then, Jon, and thank you, everyone, for joining us today.

In 2024, we had an excellent performance across the board, surpassing our financial goals that we set for the year. This outstanding and differentiated performance is fueled by innovation and great execution across our global business units and the earlier-than-expected approval in an adoption of FARAPULSE the US.

In fourth quarter 2024, company operational sales grew 23% and organic sales grew 20%, exceeding the high end of our guidance range 14% to 16%. Full year '24 operational sales grew 18.5%, while organic sales grew 16% for the year, exceeding our guidance of approximately 15%. We believe that most of our global business units grew in line or faster than their respective markets in 2024, which is a testament to our broad diversified product portfolio and the winning spirit of our global teams.

Fourth quarter adjusted EPS of $0.70 grew 26%, which exceeded the high end of guidance range of $0.64 to $0.66. Full year adjusted EPS of $2.51 grew 22%, also exceeding the high-end range of our guidance of $2.45 to $2.47.

For the year, we drove 70 basis points of adjusted operating margin to 27%, representing a balance of margin drop-through on the revenue upside we saw throughout the year, along with the reinvestment back into the business to drive long-term differentiated growth.

For our 2025 outlook, we expect our differentiated financial performance to continue, fueled by our innovative portfolio and strong global execution, and we're guiding to organic growth of 14% to 16% for the first quarter of 2025 and 10% to 12% for the full year.

Our first quarter 2025 adjusted EPS guide is $0.66 to $0.68 and we expect our full year adjusted EPS to be $2.80 to $2.87, representing growth of 12% to 14%. Dan will provide more details on the financials, and I'll now provide some additional highlights of 2024.

So, regionally, on operational basis, the U.S. grew 31% for the fourth quarter. Full year 2024 was 21% with double-digit growth in six of our eight business units. On an operational basis, Europe, Middle East, and Africa grew 12% in the fourth quarter and 14% on the full year.

In 2024, we saw above-market growth from all business units supported by strong commercial execution, talking about Europe here, and key franchises across the portfolio as well as price discipline.

We expect to outpace the market again in 2025 with further momentum in EP following the recent approval of FARAWAVE NAV and increasing contribution from our growth in emerging markets. In Asia-Pac, we grew 12% operationally in the fourth quarter and 16% for the full year, led by excellent performance and double-digit growth across Japan, China, Australia, and New Zealand.

Japan really had a nice year, growing double digits for the second year in a row, driven by AGENT DCB, Rezum, WATCHMAN FLEX Pro, and very early contribution from FARAPULSE.

On a full year basis, China grew strong double-digits across $1 million in revenue. This differentiated growth in China was fueled by our broad portfolio, focus on innovation, and excellent commercial execution.

Looking ahead, we expect China to grow mid-teens with increasing contribution from FARAPULSE in our diverse portfolio despite the ongoing DBP pricing pressures in the region.

I'll now provide some additional commentary on our businesses, starting with urology, which grew 8% in the fourth quarter and 9% for the full year and an operational basis grew 20% in the fourth quarter and 13% for the full year following the November close of Axonics.

Full year organic growth is fueled by prosthetic urology and stone management, where we had key launches with the TENACIO pump for the AMS 700 and continued success with our expanding LithoVue portfolio.

Prostate Health also performed well in 2024 with double-digit growth in Rezum as well as strong performance in SpaceOAR. We're pleased to have enrolled our first patient in the hydro space trial, evaluating the safety efficacy of our spacer hydrogel.

In 2025, we expect to see continued strong above-market growth for urology and look forward to further integrating the highly complementary Axonics Technologies into our portfolio. Endoscopy sales grew 8% operationally and 7% in the fourth quarter organically on a full year basis, grew 9% operationally and 8% organically. Full year growth was led by double-digit growth in our endoluminal surgery and single-use imaging franchises, along with sustained growth of our AXIOS platform, where we're investing to drive expanded indications and most recently received an approval in Japan for AXIOS for gall bladder drainage.

Within endoluminal surgery, we continue to see positive reimbursement wins for our ESG weight loss procedure with the recent Category 1 CPT code announced and now IFSO, an International Bariatric Committee endorsing ESG with guideline updates.

Neuromodulation sales grew 12% operationally and 5% organic in Q4, and a full year basis grew 14% operationally and 3% organically. Our brain franchise grew mid-single digits in both the quarter and on a full year basis, and our pain franchise grew mid-single digits in the quarter and low single digits for the year.

Within deep brain stimulation, we expect improving growth in 2025 with the recent FDA and CE Mark approvals of our unique Cartesia X and HX leads. The first and only 16 contact directional leads that deliver precise personalized therapy.

We also expect higher growth in our pain franchise in 2025, driven by continued strong momentum in Intercept and the recently released data supporting safety, effectiveness and durability through five years now. Cardiology delivered an exceptional quarter and year with sales growing 32% in the fourth quarter and 25% for the full year.

Within cardiology, interventional cardiology therapies, sales grew 10% in the fourth quarter and 11% for the full year. And on a full year basis, the coronary therapies franchise growth was driven by strong global performance and our imaging and complex PCI franchises and earlier momentum with the US launch of agent DCB, which now has additional reimbursement in the outpatient setting.

In addition, we recently announced our agreement to acquire Bolt Medical, an intravascular lithotripsy platform for treatment of coronary and peripheral artery disease. Bolt's IVL technology is highly synergistic with our existing suite of devices in complex PCI, imaging and drug eluting portfolios in both ICTX and PI. And we're excited to close the Bolt acquisition, which we expect to do so in the first half of this year.

Our structural heart valves franchise grew double digits for the full year and low single digits in fourth quarter. During the fourth quarter, we launched our next generation accurate Prime Valve in Europe, which features frame enhancements, a simplified deployment mechanism and includes a larger valve size.

WATCHMAN sales grew 20% in the fourth quarter and 19% on a full year basis. US fourth quarter growth of 20% was bolstered by an increase in concomitant procedures enabled by the new DRG, which became effective in October and positive data from our option trial demonstrating similar stroke risk reduction with superior bleed risk reduction versus OACs in high-risk patients following AF ablation. These positive outcomes from OPTION were reaffirmed by data in the concomitant subset of patients, which was recently presented at the AF symposium.

We're pleased with the performance of our WATCHMAN business in 2024 and expect this market to continue to grow approximately 20%, driven by concomitant procedures, ongoing clinical evidence and our initiatives to drive patient awareness and physician training.

Cardiac Rhythm Management sales grew 3% in the quarter and on a full year basis. Our Diagnostics franchise grew double digits on a full year base in outpatient market growth, driven by our implantable cardiac monitors with early contribution from our LUX-Dx II launch in Europe.

In Core CRM, in both fourth quarter and on a full year basis, both our high end and low voltage business grew low single digits, and as we look ahead, we're excited to bring our Empower leadless pacemaker and modular CM system to market in 2025, likely in the second half of the year.

Electrophysiology sales grew 172% in fourth quarter and 139% on a full year basis. FARAPULSE has continued to lead the transformation of the AFib market, surpassing $1 billion in revenue in 2024 globally, with over 200,000 patients treated. And we expect the AF market to continue to rapidly convert to PFA in 2025 and beyond, driven by FARAPULSE.

Exceptional fourth quarter sales performance was driven by FARAPULSE uptake in the US and Europe as a result of very strong safety profile, ease of use and procedural efficiency as well as our launches in both Japan and China. Initial feedback on our integrated system of FARAWAVE NAV on our OPAL mapping system, which we launched during the fourth quarter in the US has been very positive.

We expect to continue to enhance our capabilities in this segment of the market, including with our recently closed acquisition of Cortex an advanced AF mapping solution. We continue to build a best-in-class compendium clinical evidence, including the recent results of Phase 1 of the ADVANTAGE AF trial, with data demonstrating positive outcomes using FARAPULSE and persistent AF patients meeting the primary endpoint for efficacy and safety with zero instances of stroke, pulmonary vein stenosis, esophageal injury or major access complications.

We expect an updated label for persistent AF in the second half of the year. In the coming weeks, we expect to complete the enrollment of AVANT GUARD evaluating the safety and efficacy of FARAPULSE as a first-line treatment for persistent AF compared to anti-rhythmic drug therapy.

Additionally, we anticipate data to be presented in the first half of this year from Phase 2 of the ADVANTAGE AF trial, evaluating FARAPOINT, which is our point-by-point PFA ablation catheter, which is expected to support US FDA approval by year-end 2025.

Turning to Peripheral Interventions. Fourth quarter sales grew 22% operationally and 12% organically on a full year basis, grew 15% operationally and 11% organic. Our Interventional Oncology and embolisation franchise excelled again in Q4 with double-digit growth across the entire product portfolio and growing mid-teens for the full year.

Expanding clinical evidence for new indications continues to be a focus area are pleased to have completed enrollment in the first phase of the FRONTIER trial, which is an early feasibility study for the use of TheraSphere to treat recurrent glioblastoma.

Additionally, we look forward to closing our acquisition of Intera expected in the first half of 2025, which will broaden our interventional oncology offerings to patients with liver cancer. Within our vascular franchise on a full year basis, we saw high single-digit arterial performance led by double-digit growth in our drug-eluting portfolio in mid-single-digit venous growth, led by Varithena and our clot management portfolio.

On a standalone basis, the silicon business grew double-digits for the full year, and we're pleased to recently share the 30-day results from the ROADSTER 3 study, which demonstrate the safety and effectiveness of TCAR for patients with standard surgical risk.

So in closing, I'm very proud of our global team and what we were able to accomplish in 2024, resulting in full year organic growth of 16% adjusted EPS growth of 22%. We're very excited about the future of Boston Scientific and remain focused on our talent while enhancing our culture that is relentless in driving differentiated results.

With that, I'll pass it off to Dan to provide more details on the financials.

Daniel Brennan

Thanks, Mike.

Fourth quarter 2024 consolidated revenue of $4.561 billion, represents 22.4% reported growth versus fourth quarter 2023 and includes a 70 basis point headwind from foreign exchange, which was unfavorable versus our expectations. Excluding this $26 million foreign exchange headwind, operational revenue growth was 23.1% in the quarter. Sales impact from closed acquisitions contributed 360 basis points, resulting in 19.5% organic revenue growth, exceeding our fourth quarter guidance range of 14% to 16%.

Q4 2024 adjusted earnings per share of $0.70 grew 26% versus 2023, exceeding the high end of our guidance range of $0.64 to $0.66, primarily driven by our strong sales performance and favorable tax results in the quarter. Full year 2024 consolidated revenue of $16.747 billion represents 17.6% reported growth versus full year 2023 and includes a 90 basis point headwind from foreign exchange. Excluding this $127 million headwind from foreign exchange, operational revenue growth for the year was 18.5%.

Sales from closed acquisitions contributed 210 basis points, resulting in 16.4% organic revenue growth, exceeding our guidance range of approximately 15%. Full year 2024 adjusted earnings per share of $2.51 grew 22% versus 2023, exceeding the high end of our guidance range of $2.45 to $2.47. These results include a $0.05 headwind from FX, which was slightly unfavorable to our expectations.

Adjusted gross margin for the fourth quarter was 17.6%, which represents a 20 basis point sequential improvement versus the third quarter and results in full year 2024 adjusted gross margin of 70.3%.

In 2025, we anticipate our full year adjusted gross margin will improve versus the full year 2024 and contribute to our adjusted operating margin expansion goals. Fourth quarter adjusted operating margin was 27.4%, and resulting in a full year 2024 adjusted operating margin of 27.0%, improving 70 basis points versus the full year 2023.

We expect to expand adjusted operating margin in 2025 by another 50 basis points to 75 basis points, balancing differentiated operating margin expansion while making targeted investments to fuel long-term top line growth. On a GAAP basis, fourth quarter operating margin was 14.8%, resulting in a full year reported operating margin of 15.5%.

Moving to below the line. Fourth quarter adjusted interest and other expenses totaled $87 million, resulting in full year adjusted interest and other expenses of $301 million, in line with our expectations. On an adjusted basis, our tax rate for the fourth quarter was 10.5% and 11.9% for the full year 2024, including favorable discrete tax items and the benefit from stock compensation accounting.

Our operational tax rate was 12.3% for the fourth quarter and 13.2% for the full year, again, in line with expectations. Fully diluted weighted average shares outstanding ended at 1.409 billion shares in Q4 and 1.486 billion shares for the full year 2024. Free cash flow for the quarter was $1.181 billion with $1.456 billion from operating activities, less $275 million in net capital expenditures, which include payments of $177 million related to acquisitions, restructuring, litigation and other special items.

Full year 2024 free cash flow was $2.648 billion, exceeding our expectations, and importantly, achieving 71% free cash flow conversion for the year. For 2025, we expect full year free cash flow to be in excess of $3 billion. As of December 31, 2024, we had cash on hand of $414 million, and our gross debt leverage ratio was 2.2 times. Our top capital allocation priority remains strategic tuck-in M&A followed by annual share repurchases.

Our legal reserve was $326 million as of December 31, representing a $76 million increase versus Q3 2024, $50 million of this reserve is already funded through our qualified settlement funds.

I will now walk through guidance for Q1 and the full year 2025. We expect full year 2025 reported revenue growth to be in a range of 12.5% to 14.5% versus 2024. Excluding an approximate 100 basis point headwind from foreign exchange, based on current rates, we expect full year 2025 operational growth to be in a range of 13.5% to 15.5%.

Excluding a 350 basis point contribution from closed acquisitions, we expect full year 2025 organic revenue growth to be in a range of 10% to 12% versus 2024. We expect first quarter 2025 reported revenue growth to be in a range of 17% to 19% versus the first quarter of 2024, excluding an approximate 100 basis point headwind from foreign exchange.

Based on current rates, we expect first quarter 2025 operational revenue growth to be in a range of 18% to 20%. Excluding a 400 basis point contribution from closed acquisitions, we expect first quarter 2025 organic revenue growth to be in a range of 14% to 16% versus 2024.

As we indicated on our October call, we had one more business day in the fourth quarter of 2024, which was worth approximately 200 basis points. In the first quarter of 2025, we have one less business day, again, worth approximately 200 basis points.

When adjusting for the impact of business days, the high end of our first quarter 2025 guidance range is in line with fourth quarter 2024 organic revenue growth. We expect full year 2025 adjusted below the line expense to be approximately $425 million.

Under current legislation, including enacted laws and issued guidance, we forecast a full year 2025 operational tax rate of approximately 13.5% and an adjusted tax rate of approximately 12.5%. This includes a benefit from the accounting for stock compensation, which we expect will be largely recognized in the first quarter, resulting in a forecasted Q1 2025 adjusted tax rate of approximately 11.5%.

We expect full year adjusted earnings per share to be in a range of $2.80 to $2.87, representing growth of 12% to 14% versus 2024, and including an approximate $0.05 to $0.06 headwind from foreign exchange, which is in line with what we saw in 2024.

We expect first quarter adjusted earnings per share to be in a range of $0.66 to $0.68. As it relates to tariffs, we do not have significant levels of manufacturing in or sourcing from Mexico, Canada, or China, as such, while the recent executive actions relative to these countries could present a minor headwind for the year we view these headwinds as manageable and they have been contemplated in our guidance ranges.

In closing, I'm extremely proud of what our global team delivered for 2024 financial performance and look forward to executing on our full year 2025 guidance of 10% to 12% organic revenue growth, 50 to 75 basis points of adjusted operating margin expansion, and 12% to 14% adjusted EPS growth.

For more information, please check our Investor Relations website for Q4 2024 financial and operational highlights, which outlines more details on Q4 results and 2025 guidance.

And with that, I'll turn it back to Jon, who'll moderate the Q&A.

Jonathan Monson

Thanks, Dan. Drew, let's open it up for questions for the next 35 minutes or so. In order for us to take as many questions as possible, please limit yourself to one question. Drew, please go ahead.

Question-and-Answer Session

Operator

[Operator Instructions] The first question comes from Robbie Marcus with JPMorgan. Please go ahead.

Robert Marcus

Oh great. Good morning and congratulations on a really, good fourth quarter. Wanted to ask on PFA and WATCHMAN. You had very good fourth quarters here. I saw a slight tick up in U.S. growth in WATCHMAN, would love to get your thoughts on sort of what you saw during the quarter, after concomitant reimbursement kicked in October 1 in the OPTION trial. And how you're thinking specifically about those products throughout 2025, given they're two of your better margin products and the implications? Thanks a lot.

Michael Mahoney

Thanks, Robbie. Yes, we have excellent momentum in both FARAPULSE and WATCHMAN and increasing momentum, I would say. With WATCHMAN, we did see a bit of a benefit at the end of the fourth quarter with the concomitant news, which reconfirmed based on the OPTION trial data, safety and efficacy with the reimbursement. We saw a little bit of uptick.

As we stated before, we think the concomitant reinforces the 20% market CAGR for 2025. We'll be excited about the OPTION readout in the first half of 2026. So we're well positioned with WATCHMAN. And we obviously continue to invest in our product portfolio, clinical evidence, our clinical teams around the world to fully maximize the concomitant opportunity.

And obviously, with the momentum of FARAPULSE, our broader Rhythm Management portfolio ideally becoming the partner of choice, for AFib and electrophysiologists. FARAPULSE, I think the numbers are pretty stand out. Tremendous growth is the biggest transformation, like I've seen in Medtech over $1 billion globally in one year. We launched less than a year ago in the U.S.

So that the execution of our commercial teams has been strong, the execution of our supply chain, operations, manufacturing to stay ahead of demand has really been impressive. And we don't anticipate demand - or I'm sorry, supply challenges given the investments that we made throughout the year. So we're excited about our competitive position with FARAPULSE in 2025.

You've seen the clinical data. It's a bit unclear as to the competitive landscape in 2025, but we put that aside and we push every day to invest in our commercial execution, our R&D, and we want to become the clear leader as we are now in PFA, as PFA is really transforming this market.

Robert Marcus

Appreciate it. Thanks a lot.

Operator

The next question comes from Larry Biegelsen with Wells Fargo. Please go ahead.

Larry Biegelsen

Good morning. Thanks for taking the question, and I'll echo my congratulations. Obviously, a stellar quarter and a year. Mike and Dan, I was hoping to ask one kind of long-term question, at JPMorgan, you increased your weighted average market growth to 9% in 2026. And I know you expect to grow faster than your end market. So does this imply you see Boston as at least a 9% grower in 2026? And can you grow EPS double-digits next year, with the tax rate increasing Dan - 200 to 300 basis points? Thanks a lot.

Daniel Brennan

Sure. Obviously, we're not going to give any specific guidance relative to anything beyond 2025. But I think safe to assume, as we've done over the last decade very well as a team, we seek to outgrow our end markets. So as those grow at an increasing rate, we still look to outgrow those markets. So I would stay tuned as we get through the year, potentially have a Investor Day at the end of this year.

And then reset those goals for the long-term, but we're excited. If you look over the last decade, to see the increase in that WAMGR very intentionally over that time frame, with both internal investments as well as smart tuck-in acquisitions, to get to that 9% by 2026. Relative to double-digit EPS, again, I point to the track-record, it's an extremely strong record of double-digit adjusted EPS growth.

That's always the goal. We'll see what happens to the tax rate that could be obviously a fluid environment in Washington. So if there's even an increase in that tax rate, our goal will still be to get double-digit EPS growth in 2026 and beyond.

Larry Biegelsen

All right. Thanks, Dan.

Operator

The next question comes from Rick Wise with Stifel. Please go ahead.

Frederick Wise

Good morning, everybody and thanks for the great question. Maybe it's a one and a quarter of a question. You typically start the year in what I like to call a prudently conservative fashion in recent years. Maybe you can help us better understand where the upsides, and where the risks are? And should we view this as another attempt to start the year in a thoughtfully, prudently conservative fashion? And related to that, I mean how are you thinking about competition on the PFA side coming in? What's dialed into your guidance as of this point? Thank you.

Michael Mahoney

Hi, Rick. You certainly want us to be thoughtful and prudent, which we always are in our guidance, and we have a nice track-record of delivering on our commitments. So I would say that's the same strategy, as we provided the guide in 2025. Clearly, the company has a lot of momentum. I would say we do have more tailwinds than headwinds.

When we think about the tailwinds, there's a lot of momentum across every region. You obviously know about the FARAPULSE momentum in the U.S., and we're early days of our launch in Japan and in China concomitant, really a big shout out to our coronary team, ICTx with the AGENT launch, and other businesses like IO growing mid-teens, and our Endo-Uro PI Neuromod business.

All very solid growth and we expect Neuromod to be above market in 2025. So strong momentum there on the tailwind side, there could be stronger PFA competition in 2025. A lot of that is out of our hands. But we - as I said before, we're focused on driving forward relentlessly every day. China VBP is more extensive this year in 2025 than it has been in the past.

But despite that, we expect to grow kind of mid-teens in China in 2025, but that will be a little more difficult for us this year. And there are also some continuing strengthening lower-cost competitors, I would say, for some of our MedSurg businesses in Asia, and in Europe, and the team focused on our portfolio and innovation to counteract that.

But that is a bit of a headwind for us in our Endo-Uro business. But overall, we feel overall that we - do have more tailwinds and headwinds and we're looking forward to the year.

Frederick Wise

Thank you.

Operator

The next question comes from Joanne Wuensch with Citibank. Please go ahead.

Joanne Wuensch

Good morning. Nice end to the year. I want to spend just a little bit of time talking about margins. Interesting commentary on gross margins, being additive to the operating margin expansion sort of curious, how do you think about managing that? And I'm going to sneak in a cash flow question, you're taking out a lot of cash. How do you think about investing in? Thank you.

Daniel Brennan

Sure, Joanna. I can take that. I'll tell you what I really like about 2025, is the equation for the operating margin expansion. We've done it very well, I think, over the last decade, each year with a variety of different scenarios. But I think one of the optimal scenarios is where gross margin goes north, SG&A, you get leverage. And then I think in 2025, you might actually see a little bit of an uptick in R&D spend as a percentage of sales.

I think that's a winning hand for how to increase operating margin overall. And so in our 50 to 75 basis points outlook for gross margin, to get better versus the 70.3% that we put up in 2024. I'd look for SG&A on the 10% to 12% sales growth, to improve its leverage there and deliver margin expansion. And then again, on R&D, not a significant increase, but maybe 20, 30 basis points of an uptick in R&D.

To continue to help to fuel, the top line growth for the long-term. I think that's a great equation for 2025 for margin expansion. Cash flow, you saw in – you, heard in the commentary we got the 71% free cash flow conversion. That wasn't by accident. That's a tremendous effort by the entire global team on reducing DIOH, reducing DSO, strong working capital management.

And of course, obviously, significant growth in operating income. In terms of our capital allocation strategy, no change. It's worked well for us, again, over the last decade to have the number one priority for use of our cash to be high-quality tuck-in innovative M&A. That will continue and then annual share repurchase after that.

We ended the year at 2.2 times debt after the Axonics, and Silk Road acquisitions. So we're in a real great spot to continue to do that strategy, and execute that strategy in '25 and beyond.

Joanne Wuensch

Terrific. Thank you.

Operator

The next question comes from David Roman with Goldman Sachs. Please go ahead.

David Roman

Thank you. Good morning, everybody. I wanted just to dive into some of the different drivers here around the EP business. Clearly, on the FARAPULSE, you've seen huge conversion on that de novo paroxysmal segment of the market. But as you gain a persistent indication, and then also launch FARAPOINT exiting 2026, can you maybe help us think about the segment of the market that you're not able to address today? And how much market becomes available to you with FARAPOINT, and the persistent indication? And then maybe as a corollary to that, help us think through kind of the mapping strategy, given your installed base relative to the other two participants in the market, and how you're thinking about remaining an open platform versus potentially, looking to become more closed as some of your peers are.

Michael Mahoney

I would turn it over to Dr. Stein here.

Kenneth Stein

Yes. Thanks, David. I'm going to start with the mapping strategy. First, I think as you point out, right, we intend to maintain an open platform. We don't need to force people to use our OPAL mapping system. And I think it's actually really important as we look both at how the business evolves globally, as well as we look at potential future moves into an ASC type environment to be able to support doing cases without mapping.

To be able to support doing cases with competitive mapping systems, but also to provide differentiated features within OPAL and our FARAVIEW software package that I think really provide the best possible solution for people who want to map their cases. And even though it's early into the launch of FARAWAVE Nav and FARAVIEW in the U.S., we've really been very pleased with the feedback that we've gotten thus far.

In terms of drivers, I think important to acknowledge, right, that the persistent atrial fibrillation population, just in prevalence terms is at least as large and probably larger than the population with paroxysmal atrial fibrillation. I'd also acknowledge that we are already seeing off-label use of FARAPULSE in treating patients with persistent atrial fibrillation.

It's why it was important for us to run trials like ADVANTAGE and AVANT GUARD. I think everyone's seen the data from the ADVANTAGE trial. It met all of our endpoints in terms of safety, and efficacy in treating persistent atrial fibrillation. And so, we do anticipate getting that label by the end of this year. Beyond that, right, then the next drivers in terms of at least expanding our labeling.

As you say, getting FARAPOINT to be used as an adjunct for treating atrial flutter in patients, who are undergoing ablation for atrial fibrillation, AVANT GUARD moving to first-line therapy and also our REMATCH trial, which will qualify labeling beyond de novo use, but use in patients who are undergoing repeat AF ablation procedures.

David Roman

Very helpful. Thanks so much.

Operator

The next question comes from Travis Steed with Bank of America. Please go ahead.

Travis Steed

Hi, congrats on the quarter and also thanks for posting the slide deck early on. That was really helpful. I wanted to ask about M&A strategy now that you're kind of annualizing kind of $17 billion in revenue and that revenue base is growing - so much faster. Like how do you balance that it's going to take a larger deal to kind of move the needle in such a larger revenue base. But also finding growth accretive deals that now that your baseline growth is so much faster already. Just kind of thinking about like, how your M&A strategy changes now that you're a bigger company and growing so much faster?

Michael Mahoney

It doesn't change that much. We're always investing for the long-term of Boston Scientific. We obviously gave 2025 guide. But as we've said before at another conference in January, we're investing for products that won't be launched until '29, '30 through internal organic M&A through our VC portfolio, which is very extensive. We did nine new investments in our VC portfolio in 2025.

And you're aware of the tuck-in acquisitions that, we've done in '25 at four or five of those. And so the formula remains. We really are focused on increasing our WAMGR, which was Dan talked about earlier, which we anticipate 9% in 2026, growing faster than that WAMGR and consistently quarter-by-quarter, year-over-year, doing everything we can to enhance that WAMGR through those tools of internal R&D.

Our VC portfolio and tuck-in M&A. So as the company gets larger, it's become larger every year, and we continue to find ways to improve our WAMGR, and exceed the growth of our WAMGR. So we place a lot of focus and time internally, on ensuring that we'll be a differentiated company in 2030, beyond 2025.

Travis Steed

Great. Thank you.

Operator

The next question comes from Patrick Wood with Morgan Stanley. Please go ahead.

Patrick Wood

Beautiful. I'd love to just broaden out a little bit. I appreciate the endoscopy business as kind of singles and doubles. But obviously, you guys have been flagging Apollo ESG, quite a unique approach endoluminal. I'm super curious, even though they're down a bit, there's a chunk of sleeves that are still done in the U.S., and it seems like a way better approach. I'm super curious how you think mid-term, how big that business could be, how are you feeling about the initial launch there? Anything you've got to give us on ESG, I'd love to hear it? Thanks.

Michael Mahoney

I would say that ties to the previous question. We're investing in ESG now. We have a dedicated team that our group has organized on the ESG product around Apollo. We have dedicated clinical trials to broaden that indication out, and prove the clinical science behind it. We have some recent momentum with CPT codes, so it's a - it's going to be a nice driver over the long-term for Endo business.

It's not going to reshape Boston Scientific or Endo in 2025. But we definitely see a positive support by the physicians, by the industry groups, by the reimbursements were unique, and we're likely the only one who can offer the Apollo procedure, wrapped around with our other Endo tools. So we think this will be a significant growth driver for Endo, as you look towards the kind of longer term and the strap plan.

Patrick Wood

Love it. Thanks for the question.

Operator

The next question comes from Danielle Antalffy with UBS. Please go ahead.

Danielle Antalffy

Hi. Good morning, everyone. Thanks so much for taking the question. Congrats on a really strong year. Just a quick question at a high level. We talked - we focused so much on the major growth drivers like FARAPULSE and WATCHMAN. I'm just curious, Mike or Dan, where you think Boston Scientific is either underperforming, or underindexed but see an opportunity or line of sight into improving performance over the next year, or two that maybe the Street is under modeling, or not appreciating? Thanks so much.

Michael Mahoney

Yes. So, most of our businesses did well against the peer group in the market, growing faster than the CAGR. Even if you take out WATCHMAN and FARAPULSE results, the rest of the business has grown faster than WAMGR. A couple of areas that we want to improve on 2025. One is the overall Neuromod performance, which we anticipate will have a nice improvement in 2025.

With the launch in our DBS platform, we expect that to gain momentum in 2025 in the combination of our refocused commercial team in pain, and the benefit of relievance. So we do anticipate a better year for Neuromod. We want to strengthen our U.S. CRM. We continue to maintain share, I would say, in terms of the unit volume perspective and high voltage.

We don't have the portfolio yet in leadless pacemaker, which has a strong higher ASP, which is driving on a dollar basis, share loss in Pacer. So we'd like to see improvement in our overall U.S. CRM business. We're launching SICD with Legal's pacemaker in the tail half of 2025. And we'll have increased focus on that business in 2025. So we'd like to see some improvements there.

And as I mentioned before, we do see some increasing competition in some of our businesses from the lower-cost competitors. So we're challenging our team, to continue to drive a lower-cost portfolio, so we can serve our global customers more efficiently.

Danielle Antalffy

Thank you for that.

Operator

The next question comes from Michael Polark with Wolfe Research. Please go ahead.

Michael Polark

Good morning. Thank you. I want to ask on the TAVR or the structural heart update in the deck, low single-digit growth in the fourth quarter. Can you just comment on kind of post accurate IDE? Is that the influence that's driving the decel there? Or are there other things you'd call out? And then maybe pester for an update on the path in the U.S. for your TAVR franchise? Thank you.

Michael Mahoney

Sure. On the U.S., we haven't provided any updates. We're still in discussions internally and with the appropriate authorities there. So, again, some of the other calls, you'll receive an update once we can give you a clear direction on that.

In Europe, we did see some impact in the EU based on the U.S. trial. But nonetheless, the team did have a strong year in TAVR in Europe, and we're launching Prime to centers, primarily who are current users of ACURATE today.

Operator

The next question comes from Vijay Kumar with Evercore ISI. Please go ahead.

Vijay Kumar

Hi guys. Thanks for taking my question, and congrats on the nice win here. Maybe my one question is around mapping. The - what percentage of PFA procedures do you think are associated with mapping? And once you launch your mapping technology, when you look at the medium term, what percentage of your - of those mapping procedures do you think we'll be using the Boston solution versus competition?

Michael Mahoney

Yes. So, I would just reinforce and Ken can comment further. Ken's overall strategy, it is an open platform. We do see mapping is a predominant modality, if you will, in the U.S. EU, you'll see more centers using without mapping. We do see some very high volume centers in the U.S. for PVI also not mapping. But predominantly, it's a heavy mapping region in the U.S., a little bit less so.

But still quite a bit in Europe and heavy mapping in Japan and China. So as Ken said, we do believe that the OPAL platform is the best platform to optimize the use of FARAPULSE, and we'll continue to enhance the OPAL platform as we continue to enhance the FARAPULSE catheter category, and widen that out more. So, we think that's the most cost-effective and the most efficient way to use FARAPULSE with OPAL. That being said, many physicians are used to competitive mapping systems.

So, excellent. We'll continue to ensure that they can use competitive mapping systems. On the share percent, we wouldn't speculate there. It's a big investment area for us in terms of technology and physical clinical mappers around the world to continue to enhance that group, put a lot of investment behind that. And hopefully, we'll make good progress on that early in 2025.

Vijay Kumar

Thank you.

Kenneth Stein

I don't have too much to add to what Mike just said. I'd just reiterate, Europe predominant cases are done without mapping today. U.S., the vast majority of procedures are done with mapping today, we intend to support all different workflows. Whole goal is to make things easier for physicians, not harder. And I think what you're going to see over the long run is, right, the simpler the case is, the easier it is to do.

And more efficient it is to do without any mapping, the more complex the cases, the greater the need for mapping. We believe that we've got some really important differentiated advantages with FARAVIEW on OPAL. That's also behind our acquisition of Cortex, which is an AF mapping specifically AF mapping platform for very complex types of atrial fibrillation.

And I mean our goal overall, not just with mapping, as we look at just EP strategy overall, right, is to provide physicians with the widest possible toolbox. So they have exactly what they need to treat the particular patient who's in front of them.

Vijay Kumar

All right. Thank you, guys.

Operator

The next question comes from Pito Chickering with Deutsche Bank. Please go ahead.

Pito Chickering

Hi, good morning. Like as we comp out the China VBP and Japanese reimbursement cuts in the back half of the year, how should those markets be growing in the back half of this year without those cuts? And can you refresh us on the key drivers in both those markets? Thanks.

Michael Mahoney

Those cuts are happening. So we baked that into our guide. China, a really impressive performance given the VBP, which really is a like taking a daily vitamin, it happens every year. But the team continues to grow nicely above market, and in line or faster than Boston Scientific in China. So we'll have more VBP tailwinds or headwinds, I guess, this year, but they're overcome by the - our product launches.

FARAPULSE, diversification of our portfolio, and greater access to more customers and really speaks to the category leadership portfolio strategy, we have across the company. So the team there continues to do well. Japan, again, there's typically every other year, price cuts in Japan. We know about them. They're built into our guidance. Japan is going to have a really nice year this year with the launch of FARAPULSE.

Daniel Brennan

And just an operating margin comment on that. So even with - despite the price cuts in those countries, we still ask for and get operating margin improvements in those countries. So like we ask of every business unit that we have. So despite absorbing those price cuts, the operating margin for both those countries, you mentioned it goes north each year as well.

Operator

The next question comes from Josh Jennings with TD Cowen. Please go ahead.

Joshua Jennings

Hi. Good morning. Thanks for taking the question and congrats on the year. I wanted to just Mike, get your views and maybe way too early with the new administration issuing some policy decisions, getting some nominees through the congressional process. Can you just talk about, from a high level, any risk you see to the medical devices sector in general, or to Boston Scientific specifically with this new leadership in place? Thanks. Thanks for taking the question.

Michael Mahoney

Yes, certainly a dynamic environment. We think our guide as best we can encompasses macro challenges around the world, including Dan talked about the tariffs, FX is really not a policy name, but tariffs is probably the biggest one, which we think is very manageable. We do hope that the FTC environment is appropriate. And so maybe that could be a positive for the industry.

See on tax reform where that goes. Dan made comments on that. But other than that, Medtech typically hasn't been the tip of spear for major policy changes over many, many different types of presidents that we've had. So we feel overall very comfortable with our guidance and how we can manage through that.

Joshua Jennings

Thank you.

Operator

The next question comes from Chris Pasquale with Nephron Research. Please go ahead.

Chris Pasquale

Thanks. You talked about the move to concomitant procedures being a growth sustainer rather than a catalyst for faster L.A. market growth. Our own conversations high-volume centers suggest many of them are expecting a meaningful up-tick in their own procedures as a result of that change. So is there something else that you think really offset that tailwind. And then maybe, for Dr. Stein can you just remind us how you think about the portion of the AF population that, is really appropriate for both of these procedures?

Michael Mahoney

Yes. On the volume side, we'll see over time, right now, we're kind of calling a 20% market CAGR as the market gets a bit larger, larger that that along with EP is the best market you can be in a Medtech. We have a unique position in both of them. So I think we're comfortable with the 20% CAGR now, and we'll see as the year progresses, if upticks or not.

We want to continue to work with customers on productivity and workflow. They have tremendous demands that they in their cath labs, there's other technologies and structural heart coming out and so forth. But they're very, very comfortable with WATCHMAN, FARAPULSE and the concomitant procedures. So we want to continue to work, to make sure we can drive operational effectiveness and productivity for our customers.

Who are - still have a strong backlog and demand of patients and other technologies coming out. So effectiveness, we want to make sure WATCHMAN and FARAPULSE really is the solution in terms of ease-of-use and procedural efficiency for hospitals.

A - Kenneth Stein And Chris, just in terms of who are appropriate candidates for these procedures. Again, we're very pleased with the results of option. I think showed really incontrovertibly that the WATCHMAN device is at least as effective as oral anticoagulants in treating high-risk patients after AF ablation that it is certainly safer in terms of long-term leading risk.

We also showed that you can do a concomitant procedure, and in a randomized trial that there was no added risk heading WATCHMAN to an AF ablation at the same time as the procedure, I think particularly with FARAPULSE, given its safety advantages and its efficiency, and it really facilitates people doing concomitant procedures. And as you say, we've certainly seen an uptick in concomitant procedures.

We still do need to get our label expanded for WATCHMAN to allow for use as first-line therapy in people who don't otherwise already have a reason to avoid the long-term use of oral anticoagulants. We will be presenting the CHAMPION data in the first half of next year. And as first line even in patients who aren't candidates for AF ablation. Today, in the United States, between a half and two thirds of patients undergoing ablation.

Are considered to be at high risk of stroke - if you look at the CHA2DS2-VASc score, right, which is the scoring system we use, if you use CHA2DS2-VASc 3 or higher as your cut off, that will be about half of patients undergoing AF ablation. I think it's also important to point out when you think about concomitant procedures. There are patients who are undergoing AF ablation who may get their WATCHMAN.

They get a counter WATCHMAN that they might not have otherwise gotten. There were also patients who were referred in for WATCHMAN procedure, who are now being considered for ablation might never been considered previously for ablation, again, just given the safety and efficacy Advantages of the FARAPULSE system.

So I think just to close, again, excited about the concomitant procedure opportunity. Again, we look at our product portfolio as being the best suited to support that. It's a procedure that's great for patients, right? Saves them have and undergo two consecutive procedures. It's also great for hospitals and for practitioners.

Chris Pasquale

That's helpful. Thanks.

Jonathan Monson

And I understand there's time for one last question. That comes from Marie - sure. That comes from Marie Thibault with BTIG. Please go ahead.

Marie Thibault

Thanks so much for squeezing me in. I wanted to ask a question about recent acquisition. I saw that interventional oncology and embolization killed it again this quarter. I wanted to understand what's going on in that product segment and understand how the Intera Oncology acquisition fits into that product segment, how it can help to accelerate growth? Thanks so much for taking the questions.

Michael Mahoney

Yes. So that that division interventional oncology's doesn't get talked about enough grew mid-teens for the full year, again it's in line with our category leadership strategy that we have across most of our business units. The team had a really excellent launch of an organic R&D program in our Embolics portfolio, which is really a big growth driver for us. Obviously, Y-90 does extremely well for us.

So the combination of those two products and the rest of the remaining portfolio that we have gives us the widest portfolio, and unique differentiation within there with our embolic portfolio Y-90 to capture high share to partner with customers, much like we do with other businesses. And the acquisition, again, is another extension for us to widen out into other adjacencies in interventional oncology with a pump portfolio. It gets us closer to the oncologist.

We also have additional software enhancements coming to improve the efficiency, and workflow of our Y-90 coming in 2025. So we want to continue, much like we do other business units to expand into a smart adjacency to accelerate our growth and enables us to partner more closely with the interventional radiologists and the oncology's team.

Jonathan Monson

Great. Well, thanks, everyone, for joining us today. We appreciate your interest in Boston Scientific. If we are unable to get to your question or if you have any follow-ups, please don't hesitate to reach out to the Investor Relations team. Before you disconnect, Drew will give you all the pertinent details for replay. Thanks, everyone.

Operator

Please note, a recording will be available in one hour by dialing either 1-877-344-7529 or 1-412-317-0088 using replay code 3976753 until February 12, 2025, at 11:59 p.m. Eastern Time. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.