Boston Scientific Corporation (BSX) Q4 2012 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to the Boston Scientific Fourth Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Michael Campbell. Please go ahead.

Thank you, Greg. Good morning, everyone, and thanks for joining us. With me on today's call are Mike Mahoney, President and Chief Executive Officer; and Jeff Capello, Executive Vice President and Chief Financial Officer. We issued a press release earlier this morning announcing our Q4 and full year results for 2012, which included reconciliations of the non-GAAP measures used in the release. We have posted a copy of that release, as well as reconciliations of the non-GAAP measures used in today's call, along with other supporting schedules, to the Investor Relations section of our website under the heading Financial Information. The duration of this morning's call will be approximately 1 hour. Mike will begin our prepared remarks with an update on our business progress and his perspectives on the quarter and 2013. Jeff will then review our Q4 financial results and business performance, as well as Q1 and full year 2013 guidance. We will then open the call up to questions. During today's Q&A session, Mike and Jeff will be joined by our Chief Medical Officers, Dr. Dawkins and Dr. Stein. Before we begin, I'd 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. These forward-looking statements include, among other things, statements about our growth and market share; our products including new product approvals, launches and performance; procedural volumes and pricing; clinical trials and results; cost savings and growth opportunities; our cash flow and expected uses; our expected financial performance including sales, margins, earnings and other guidance for Q1 and full year 2013; as well as expected tax rates, R&D spend and other expenses. Actual results may differ materially from those discussed in the forward-looking statements. Factors that may cause such differences include those described in our Risk Factors section of our most recent 10-K and subsequent 10-Qs and 8-Ks filed with the SEC. These statements speak only as of today's date and we disclaim any intention or obligation to update them. At this point, I'll turn it over to Mike for his comments. Mike?

Thank you, Michael, and good morning, everyone, and thanks for joining us this morning. So I'll begin today with some comments regarding our fourth quarter performance, which Jeff will cover in more detail in a few minutes. Overall, we demonstrated improved performance during the quarter. We delivered sales of $1,821,000,000, down 1% on both a reported and an operational basis, which excludes the impact of foreign exchange and the divested Neurovascular business. This was above our guidance range and Street consensus. Meanwhile our adjusted EPS of $0.18 was at the higher end of our guidance range and above Street consensus. We also generated strong operating cash flow of $370 million and used a portion of our cash flow to buy back approximately 18 million shares of stock in the quarter. We saw a continued above-market growth in several of our businesses. And the growth figures that I'll highlight are all on a constant currency basis. So starting off. Neuromodulation grew at 14%, Endoscopy grew at 10% and our Peripheral Interventions or our PI business grew at 9%. We also continued to see strong returns on our investments in the emerging markets with combined revenue in Brazil, Russia, India and China growing 35% in the quarter. As we further build our capabilities in these countries, we expect this growth trend to continue into 2013. We continue to make progress on strengthening our CRM and EP business with the U.S. launch of the S-ICD System and the completion of the acquisition of Rhythmia Medical. Additionally, we continue to expand the high-growth adjacent markets such as hypertension by completing our acquisition of Vessix Vascular. So let me now go into more detail regarding our business performance for the quarter. In the Interventional Cardiology or IC market, global PCIs continue to grow mid-single digits…

Thanks, Mike. Let me begin by providing some overall perspective on the quarter before getting into the details. Despite continued challenging global economic and market conditions, we generated adjusted earnings per share of $0.18, which was at the higher end of our guidance range of $0.15 to $0.18 and above consensus. This solid profitability was driven by better top line performance, continued gross margin improvement and a favorable tax rate and fewer shares outstanding, partially offset by increased investments in our strategic growth initiatives. In addition to our solid adjusted earnings performance, we also generated $376 million in adjusted free cash flow and repurchased approximately 18 million more in shares in this quarter. Consolidated revenue for the fourth quarter of $1,821,000,000 represents a decrease of 1% on both a reported and an operational basis, which excludes the impact of foreign exchange and the divested Neurovascular business. The actual headwind from foreign exchange on sales was $19 million and slightly higher than what we had assumed in our fourth quarter guidance range. Now, I'll move to the detailed review of our business performance and operating results in the quarter. Starting with Interventional Cardiology. Worldwide revenue came in at $534 million in the fourth quarter, representing a constant currency decrease of 9% compared to the fourth quarter of 2011. Worldwide DES revenues came in at $312 million in the fourth quarter, representing a constant currency decrease of 11% compared to the fourth quarter of 2011. U.S. DES revenues were $118 million in the quarter, representing a decline of 29% compared to the fourth quarter last year. This decrease was primarily due to a strong comparison to the prior year quarter, driven by the launch of PROMUS Element Plus in the fourth quarter of 2011, lower share due to competitive products, lower ASPs…

Thanks, Jeff. Greg, let's open it up to questions for the next 20 minutes or so.

[Operator Instructions] Your first question comes from the line of Glenn Novarro from RBC Capital Markets.

Two questions. One, can you elaborate a little bit more on the restructuring that is new going forward? In the press release, you talked about headcount reduction and some of the savings, but can you talk to us about which divisions is it -- are we coming from? Is this coming from CRM? Is it stents? Is it U.S., o-U.S.? Any type of color would be helpful.

Glenn, this is Jeff. Let me respond to that one. So as you remember, a couple of years ago, we talked about the opportunity through the emerging markets initiative and Zero Based Budgeting to take out $100 million to $200 million out of the cost structure of the company focused primarily on kind of the corporate infrastructure. And we've been saying all along throughout this year that we felt that we could do in excess of that. We came out with a restructuring plan midway through 2011 and said we would do somewhere between $225 million to $275 million in total savings by focusing primarily on those corporate infrastructure-type departments. So this program here is an extension of that. It's predominantly centered around the corporate functions that currently are larger than they need to be relative to the size of the business. There are some adjustments we are making to some of the businesses that are primarily outside of the commercial infrastructure. And so it's more or less right in line with what we anticipated doing relative to a couple of years ago and then the step-up we'd done a year ago.

Okay. And then just as a follow-up on the ICDs, your U.S. number did come in line with our expectation, so probably better execution. You talked about the new products gaining traction, but I was also wondering with the subcutaneous ICD in the marketplace today, have you been able to pick up any new accounts that you were previously cut out of?

Sure. I'll touch on that, Glenn. We did have a controlled launch in 2012, 2013 as we continue to ramp up supply chain to meet the demand. But the uniqueness of the product, one, is allowing us to open up new accounts in Europe and the U.S. to sell S-ICD, which we do sell at a premium and does enable some pull-through as well. So we think that, combined with a broader portfolio, that we touched on in the discussion points with our investments in EP and Rhythmia as well are also assisting with that.

Your next question comes from the line of David Lewis from Morgan Stanley.

Jeff, just a couple of quick questions here on 2013. I guess, first off, you mentioned the Vessix and Rhythmia and Mike did as well in his prepared remarks. Can you just give us a sense of what contribution you could expect in '13 from inorganic drivers, specifically Vessix and Rhythmia and others?

So David, we're probably not going to get into as much depth as you'd like right now on those contributions. At our Investor Day, on the 12th of February, we're going to get into a little more detail in terms of what we expect the programs to generate. And I guess what I can help you with is we said all along that we've got 3 or 4 programs we expect to contribute to earnings in '13 and that'll be accelerated in '14 with another 3 to 4 programs, and we'll take you through that in more detail at the Investor Day.

Okay, very helpful. And then just one more quick one on margins. The restructuring announcement and clearly your buyback sentiments are very positive and a little higher than what we would have expected for '13. But it still looks like based on your guidance, Jeff, operating margins are expected to be down year-on-year. And I guess the biggest disconnect there, if that's correct, is gross margin. Maybe help us understand what are some maybe the key headwinds in gross margin that we're sort of not appreciating because we expected obviously this year to be a little stronger given some of those headwinds in '12 began to fade?

Yes, so if you look at gross margins, we exited 2012 with gross margin of 67.8%. And as you look forward, we continue to expect that price will be a headwind and I think we can do better on price and we've got a number of things that we're working on, on the pricing side. However, as a percentage basis, we think our standard cost improvement can largely offset the margin erosion on price. So that's good and we're stepping up more, and the manufacturing team's doing a great job on that front. So that pretty much neutralizes those 2 impacts from a margin perspective. And then we've got some benefits coming through for the last segment of the PROMUS Element transition. The 2 factors that weigh a little bit on gross margins, one is the impact of acquisitions. Some of these acquisitions are a little smaller in terms of revenue and as we ramp them up, they're below our average gross margins, so that has an impact. And the second impact is we did do, for consistency purposes, some reclasses between R&D and gross margins for next year, which moves some costs out of R&D up into gross margins to be consistent across all the businesses. The combination of the acquisitions and the movement of R&D is worth about 100 basis points on gross margins. So margins would be up more. I would tell you, though, that we expect to end the year at a higher rate gross margin-wise. So our margins will start off a little bit slower because of some of these smaller acquisitions and they'll end at a higher rate.

Your next question comes from the line of Rick Wise from Stifel, Nicolaus. Frederick A. Wise - Stifel, Nicolaus & Co., Inc., Research Division: A couple of questions. First, on WATCHMAN, pretty extraordinary performance. We were at Boston Nature [ph] recently, and frankly, we were really impressed and surprised and excited by the physician reactions. It seems like they're very excited. Can you talk to us about when is the data coming out? What are we looking for? Do you expect another panel? And maybe talk about the launch and the uptick, just the -- and market potential, just all that background with WATCHMAN.

Yes, this Mike. I'll make a couple of comments, then we turn it over to Ken Stein who's on the phone as well. We're very encouraged about the size of the market as you indicate. We think it's about -- it could grow to a $500 million to $750 million market. We're seeing nice uptick in Europe as we continue to train more physicians and drive growth there. Relating to the clinical data, the PREVAIL enrollment was completed, say, early third quarter of 2012. And we're currently analyzing the data and we'll be looking to discuss with the FDA the submission strategy in the near future here. So we'll be able to provide a very detailed update on WATCHMAN at the upcoming Investor Day. Frederick A. Wise - Stifel, Nicolaus & Co., Inc., Research Division: Okay. Two last quick ones. Can you talk about what it would take to get to the upper end of your 2013 sales guidance. Is it market, is it product timing, launches, execution? And maybe on the asthmatic front you've got your CPT I code. Can you characterize at all the 2013 outlook there and the uptick potential?

A lot of components to that one, Rick, but I'll say a couple of things. One on the end markets. We see the end markets very consistent and stable versus 2012. So across BSC portfolio, we think of the end markets as kind of 0% range. With our -- if you want to classify, our DES and CRM markets, in the globally, the negative 3% to 5% range. In our other businesses, market's about 3%. So we think neutralize for all that, our markets are essentially flat. So when you look at potential for the future, we see ourselves continue to grow very effectively in our MedSurg businesses and our PI where we'll grow faster than market. And our second focus area is to significantly improve our execution in IC and CRM. So on a combined basis, those businesses grew last year, call it, negative 9%. And so, we're going to put a lot of focus on that and improve those results. So you'll see the 45% of our business, MedSurg and PI, continue to grow faster than market and a lot of execution to improve our results and performance for 2012. And then as you mentioned, on top of our core business, we'll layer on the impact of Alair, WATCHMAN, the S-ICD, as well as Vessix new adjacencies. And the results of that, combined with our focus on BRIC, provide us upside. I hope that's helpful for you.

Your next question comes from the line of Mike Weinstein from JPMorgan. Michael N. Weinstein - JP Morgan Chase & Co, Research Division: Just a couple of clarifications first. Jeff, you had mentioned difference in selling days in the first quarter. Were they the same in the fourth quarter year-over-year?

Yes. Michael N. Weinstein - JP Morgan Chase & Co, Research Division: Okay, and then you were talking about gross margins, Jeff, in 2013. And one component that I thought was left out was the transition service agreements. My math had the expiration of those TSAs adding them up 60 basis points to the gross margin and that really kind of kicking in the second half the year. Did that change?

No, no. There is a benefit associated with the Neurovascular transition, and it's not far off. There's some other various factors that kind of add up that neutralized that, so I kind of gave you a more condensed version of the lot, I guess. Michael N. Weinstein - JP Morgan Chase & Co, Research Division: Okay, and then can you talk about sustainability of the tax rate? Obviously the tax rate is coming in below what people were modeling in for 2013. And you had the lowest tax rate in the sector. Can you talk us a little bit about that over the next few years, in particular as you go out to the period in which those Guidant transfers, intercompany transfers expire and then roll off and then what will your tax profile look like once that occurs?

Yes. So tax rate was lower this year than we anticipated due to kind of geographic mix of earnings. I explained that in the prepared comments. As we look forward, as we continue to migrate more manufacturing offshore, that pulls down our tax rate. And so some of the activities we had commenced as part of the Plant Network Optimization program and some other things we'd done in our international locations were putting downward pressure on the rate, so kind of the 13% to 15%. I think I said last quarter kind of 16-percent-ish was what we thought for this year. We're now a little bit lower than that. We continue to kind of migrate more things offshore. That looks fairly sustainable as far as we see today. I think everyone knows we had this dispute with the IRS relative to the Guidant transfer pricing and we do reserve for that in our rates. That's built into the rate on a normal basis. And so our 13% to 15% reflects that. And we think we're appropriately reserved and we're appropriately positioned. We'll have to see how that plays out. And as a reminder, that's probably a couple of years out, 2 to 3 years out in terms in terms of full resolution. Michael N. Weinstein - JP Morgan Chase & Co, Research Division: And then what I was asking, Jeff, was just when your intercompany debt transfers, when you basically played all those out -- going back to the Guidant acquisition, what will your tax rate look like once that's done, which I think is 14%, 15%?

Yes, you're referring to now the repatriation of cash, not the tax rate. Michael N. Weinstein - JP Morgan Chase & Co, Research Division: Yes.

Okay, sorry, misunderstood. So we have at least a couple of years left with those intercompany notes to kind of bring cash back assuming we don't do something different from a tax structure perspective, which is always possible. So it's probably a couple of years. And thereafter, we'll be in a position similar to other companies that are kind of building more cash outside the U.S. and less cash within the U.S. One of the things, though, that's helpful for that is as we continue to migrate more activity offshore, which we're doing as part of this restructuring, that rebalances our expense base and our cash flow mix. So we're naturally readjusting where we generate and consume cash by moving more activities outside the U.S. So that helps as well.

Your next question comes from the line of Bruce Nudell from Credit Suisse. Bruce M. Nudell - Crédit Suisse AG, Research Division: Jeff, clearly you're reinvesting next year, but you've kind of set the table with savings. And just looking at your operating cash margins around 19% in 2012, could you just give us a flavor of where that margin might go kind of in the midterm?

So we're going to -- as we did a couple of years ago, we're going to step the investment community, investors through kind of our margin expansion opportunity at the upcoming Investor Day in February. But we're confident we can -- we continue to improve our operating margins. As you look at kind of the $650 million to $750 million of short-term cost-saving opportunities and just kind of tick down kind of what's left, as you look at the PROMUS Element transition, there's a piece of that, that's left for '13. The value improvement programs we had said historically 5% cost savings consistently every year, we're going to be able to do better than that. We've got a line of sight for increased ability to kind of take out costs over the next 5 years, so that'll continue to expand gross margins and offset price. Our project transformation on the R&D side we think will continue to offer opportunities. We're done, our Plant Network Optimization programs, we still have 12 plants in the network, so we'll continue to look at whether that makes sense. And then we've got the expanded restructuring program we talked about today that'll throw off more savings in '13 and '14. So those, we've got pieces left of the $650 million to $750 million and on top of that you've got a pretty high level of spend associated with these new programs, which we expect to grow out of as the revenue comes. And as the programs finished their development cycles, so that'll be helpful. We think we can do better on price. We're going to talk a lot about continuous improvement at the Investor Day in terms of getting our costs down even further. So there's certainly no shortage of opportunities to drive our cost base down. And as the revenue comes, it'll be on a lower base of costs, which will naturally help with the margin expansion. Bruce M. Nudell - Crédit Suisse AG, Research Division: Okay, and I guess my follow-up is you guys have repeatedly said that you're doing reasonably well in the de novo part of the ICD business and that your replacements or headwind and certainly the data on FactSet confirms that. Do you feel that, first of all, when is that replacement headwind going to begin to abate? And are the new products, including the S-ICD, enough to stabilize share and actually move forward on a share basis?

Yes, it's Mike, here. So you nailed it. We continue to see some improved sequential share gain in de novo of implants, both in the ICDs and also core pacer. And the headwind on the replacement back from the -- the Guidant recall back in 2005, we believe that, that headwind will begin to soften up more the second half of 2013. So we think the replacement performance will improve in the second half of 2013. That's what -- in the prepared comments, we discussed stabilizing our share in CRM in the first half and improving our share position in the second half to be based on the softening of the replacement headwind, continued impact of S-ICD and also the continued impact of the new pacer and ICD new launches we had in 2012.

Your next question comes from the line of Matthew Dodds from Citigroup.

On Neuromodulation, that business saw a nice uptick. How much of that do you think was due to a competitor's restructuring the business versus the new products cycle you're just under way with? And then also, what's your expectation for DBS in Europe? Is that going to do much at all, do you think, in 2013?

Matt, difficult to determine how much of it was our execution or maybe disruption with some competitors, so tough for us to gauge that. I guess, just the good news, as you saw the results for the fourth quarter are very strong. We had very early launch of Spectra in Europe and we see a full launch of Spectra in the U.S., which we think will be very innovative, the next breakthrough for paying patients. And you'll see the full launch of that -- the results of that in the second half of 2013. So we're very bullish on our guidance for Neuromodulation for 2013. And DBS will just initiate our clinical trial in the U.S. in 2013. And got to get that information. I'm sure we completed enrollment in Europe at this point, so we've completed enrollment in Europe and so we'll see some improvements, obviously, to our DBS sales in Europe and we're launching our clinical trial in the U.S.

And then, Jeff, just a quick one for you. I just want to make sure I had this right. For the model in '13, share repurchase, 1/2 the operating cash flow, that's -- it was in the guidance?

Yes, it'll be 1/2 the available cash flow. So we have, if you look at kind of our legacy acquisitions, we have approximately a couple of hundred million dollars of earn-out payments that we expect to have to make here in 2013. So if you look at the $1.2 billion of adjusted free cash flow, after we make those payments, approximately 1/2 of that cash we'd look to kind of use for share repurchases subject to the business development environment, the price of the stock and regulatory issues.

Okay, but that's what you have in the guidance?

More or less, yes.

Your next question comes from the line of Matt Taylor from Barclays.

Just wanted to ask about the stent performance sequentially better and get your view on expectations for SYNERGY and pricing in stents in the coming year. You should be lapping a bit of a Medtronic headwind, so I'm just curious to get your thoughts there.

Yes, so in the DES market, similar to CRM, we believe we will stabilize our share position. Clearly stabilize that in the first half and we'll drive share gains in the second half of 2013. We do anniversary the Medtronic launch in second quarter. And similar to the prepared remarks, we believe we'll have more of a challenging first quarter based on less days selling and also very difficult competitive comps in first quarter. And we'll lap the Medtronic launch in the second quarter. And the combination of new launches with SYNERGY, trialing increasing and our long lengths will drive share gains in the second half.

And you talked about your share repurchase plans for the year and stock being undervalued. I'm just curious as the stock continues to perform here, when do you start to think about potentially initiating a dividend or changing that kind of a program?

Matt, I think we've been -- this is Jeff, I think we've been fairly consistent with that. That we think from an investor perspective and shareholder value perspective, there's a lot bigger return to driving the growth rate of the company into the low single digits and up north of that versus kind of putting in a dividend program. So we're very focused on getting back to growth the second half of this year in '13 and then moving that growth rate up. I think once we do that and accomplish that, then we can really look at that capital allocation whether we make a dividend more of priority, but it's not -- for the next short while, it's not as much of a priority as is bringing in new technology to drive the growth rate of the company up.

Your next question comes from the line of Bob Hopkins from Bank of America.

So Jeff, just to clarify, your SG&A guidance for 2013, excluding the med tech tax, is roughly in the 34% to 35% range, is that right?

That's correct.

And that's roughly the same as what you did in 2012. And just kind of going back to some of your comments in the Q3 call where you were talking about SG&A and hopefully seeing a good-sized benefit from some of your ongoing programs in 2013, I'm just wondering kind of what's changed between Q3 and Q4 as it relates to SG&A expense and the outlook for some real fall-through as a result of some of the programs you have going on?

Yes, it's a fair question, Bob. And I think as we considered kind of the best potential return from a shareholder perspective, we are getting more than what we anticipated relative to the cost savings. So I think we're doing really well in the cost savings. I think what we're finding is we found a great asset in Vessix, we found a great asset in Rhythmia, both that can be significant revenue growth drivers for us in the next couple of years. So we put more of an onus on investing for growth in the short term versus letting an incremental amount drop through on the SG&A side. So there's a little bit more of a lean towards investing for growth given the very attractive assets and the great position that leaves us in from a growth perspective.

Yes, I'll just add on to that. In the emerging markets, we're seeing very good growth in 2012 and we plan for that to continue to accelerate in '13. And so we're adding quite a significant amount of commercial capabilities in BRIC and other emerging markets.

Okay. So it's incremental investments in SG&A. And then, I just wanted to follow-up, just quickly on S-ICD. I know it's early in the year, but can you give us a sense as to what sort of contribution you expect from that business line in 2013? Is that roughly $40 million to $50 million or is it less than that?

Bob, as David Lewis had asked the same question about the broader contributions, we're going to hold those questions to the Investor Day in the 12th then we're going to walk you through by growth driver what we think it can contribute to '13 and thereafter.

Your next question comes from the line of Kristen Stewart from Deutsche Bank.

I just wanted to just make sure I heard it correctly. On the tax examination with the Guidant, I guess, back tax years, did you say that would be another 2 to 3 years that you expect that to be finalized? And is the viability still in that $1.2 billion range?

Yes, yes. Both are correct. We expect that'll take at least a couple of years to play out through Tax Court and we currently have reserves of about $1 billion in the balance sheet.

Okay, and then the commentary I guess that you made with respect to the S-ICD talking about, I believe, is the MADIT trial where you're talking about how there was a benefit of a more simplified ICD. What do you guys see as the risk moving forward, just overall for the CRM market, to the extent that physicians look at that and not only move to an S-ICD, but more to a basic single-chamber defibrillator. Could that be something that puts pressure on the ICD market incrementally in 2013?

I think we'll have Ken Stein provide some color on that question.

Yes, thanks, Kristen. I think it's a good question. I think the first thing to recognize, so MADIT-RIT was a dual-chamber ICD study and I think the lessons from it bear less on the issue of single versus dual chamber and more on the issue of what's the importance of giving rapid therapy versus a delay to giving therapy, what's the importance of a lot of sophisticated antitachycardia pacing. And so I think I agree with the commentary Mike provided, which is MADIT-RIT, although it's a transvenous ICD trial, supports the design features of the S-ICD. I don't think it says anything at all within transvenous ICDs about single versus dual.

We're running a little past the hour, so we have time for 2 more questions.

Okay, your next question comes from the line of Larry Biegelsen from Wells Fargo.

Jeff or Mike, could you talk a little bit about the drug-eluting stent performance in the quarter. Outside the U.S., it was very strong. Where was the strength? Was it Japan, Europe, emerging markets? And given that I was a little bit surprised with the guidance for the first quarter was a little bit weaker, the growth rate, than what you saw in Q4 and I think resolute anniversaries, I think, in January 2013.

Yes, in terms of our o-U.S. performance in DES, you hit the major regions, starting -- start with Japan first, where we had very strong fourth quarter and a second half in share gains in Japan. So good strength there in the fourth quarter. Similarly, remaining pieces of Asia Pac. You saw the growth numbers for BRIC. We don't break out China and India specifically, but they're big contributors to that, plus 35% and those markets are heavy DES revenue drivers for us. Europe had some improvement in performance as well in the fourth quarter. In terms of first quarter guidance, we mentioned the impact on days and also we see a larger impact on that days challenge in Japan, which is part of the drivers of the first quarter guidance. We also have a difficult comparable in first quarter 2012 as well. So we're -- similar to the comments, we're optimistic we're going to stabilize share performance in first half and gain share for the full year, just that you see the timing of the quarters consistent what Jeff outlined.

And Larry, just to provide some clarification, our U.S. DES share was 45% in the fourth quarter in 2011, then it went to 47% in the first quarter of '12. So when Mike says comparisons, actually the first quarter of '13 versus first quarter '12 was a more difficult comp than the fourth quarter of '12 versus the fourth quarter of '11.

I got it, that's helpful. Jeff, how many extra days are there -- or less days, I'm sorry, in Q1 2013, if you could just give us those numbers. And just lastly, on asthmatics, at the investor day you guys did last year, if you look at the slides, it was about -- your expectation was about $20 million in 2012 and it was clearly $40 million to $50 million in 2013. Could you just give us a little bit of an update if those goals are on track?

So in terms of the numbers of days, it's approximately -- it rounds to kind of 2 days, so it's not insignificant relative to the first quarter of '13 versus the first quarter of '12. And then the second part of your question, Larry, you were -- I didn't quite follow kind of what you were referring to.

So asthmatics, when you did the Analyst Meeting in 2012, you did give some sales expectations and you had about, if I look at the -- when I looked at the slides, about $20 million was the expectation in 2012 and $40 million to $50 million in 2013. And I was just wondering if you were on track to meet those goals?

So as I responded to David Lewis and Bob Hopkins, we're going to go through each of the major growth drivers and kind of tell you kind of what we did in revenue in '12 and our expectation for '13, so we're going to reserve those questions and that discussion for the Investor Day.

Your next question comes from the line of Jose Haresco from JMP Securities.

Just wrapping up, could you first just refresh us on the what the expectation is for the overall market growth for both CRM and DES? And then on S-ICD, could you just give us an update on how we should think about the inventory build-out and the training schedule for the rest of the CRM team?

So we've got -- this is Jeff, we've got the DES market pegged to be kind of low, to be down low single digits to mid-single digit next year and very similar for the CRM market, both market to be slightly unchanged from this year. The CRM market will be a little bit better because we have now the lapsing of kind of the difficult comps from '11. And then relative to the S-ICD, I'm going to hold that response. We're going to have a separate section on the whole CRM business and our President will talk about kind of the S-ICD plan and that would be a probably a more appropriate time to kind of get into any more details on the S-ICD.

With that, we will conclude the call. Thanks for joining us today. We appreciate your interest in Boston Scientific, and we're looking forward to our Investor Day on February 12. Before you disconnect, Greg will give you all the pertinent details for the replay. Have a good day.

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