Ladies and gentlemen, thank you for standing by. Welcome to the Boston Scientific Q4 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, today’s conference is being recorded. And I’d now like to turn the conference over to our host, Ms. Susie Lisa. Please go ahead.

Thank you, Brad. Good morning, everyone, and thanks for joining us. With me on today's call are Mike Mahoney, President and Chief Executive Officer; and Dan Brennan, Executive Vice President and Chief Financial Officer. We issued a press release earlier this morning announcing our Q4 2014 results, 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 to the Investor Relations section of our Web site under the heading, Financial Information. The duration of this morning's call will be approximately one hour. Mike will begin our prepared remarks with an update on our business progress and his perspectives on the quarter and year. Dan will then review our overall Q4 2014 and full-year 2014 financial results as well as guidance for full-year 2015 and Q1 2015. During today's Q&A session, Mike and Dan will be joined by our Chief Medical Officers, Dr. Keith Dawkins and Dr. Ken 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. They include, among other things, statements about our growth and market share; new product approvals and launches; clinical trials; cost savings and growth opportunities; our cash flow and expected use; our financial performance, including sales, margins, earnings and other Q4 and full-year 2014 results and 2015 guidance; as well as our 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 the 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, Susie, and good morning, everyone. Boston Scientific delivered excellent well balanced results in Q4 as the Company continues to strengthen execution, diversify our portfolio on regional mix and build global momentum. in the quarter is the result of broad: Importantly, our Q4 results built upon the momentum generated over the past few years and contributed to the following full-year ’14 results. Number one, we delivered above market revenue growth with 6% operational growth and 4% organic, excluding the acquired sales from Bard EP and Bayer Peripheral. We expanded adjusted operating margins 130 basis points over 2013 to 20.2%. And number three; we grew adjusted EPS to $0.84, which represents 15% growth for the full-year despite currency headwinds in the fourth quarter. We are continuing our track record of consistent results and exceeding the goals we provide at our February 13 Investor Day conference. We really continue to believe that Boston Scientific is uniquely positioned to deliver at or above market revenue growth and consistent double-digit EPS growth via our ongoing operating margin improvement initiatives. Our results demonstrate that we’re a Company that continues to deliver on those commitments. Since joining Boston Scientific three years ago, I’ve met with many customers globally and its really clear that we’re becoming a strong partner of choice, given our focus on meaningful innovation to improve patient outcomes and reduce overall healthcare cost. Our strategy is to provide market leading, comprehensive and innovative products and solutions to targeted clinical service lines. We strive to address several of the pressures facing healthcare systems today, the need to improve outcomes, lower costs, and increase access to life-saving and life enhancing therapies. Our fourth quarter and full-year 2014 results reflect this focus on delivering meaningful innovation to our patients and physicians, while also providing clinical and…

Thanks, Mike. I will start with some overall perspective on the quarter before diving into the details. We generated adjusted EPS of $0.22 achieving the high-end of our guidance range of $0.20 to $0.22. The strong performance in Q4 was driven primarily by operational revenue growth, gross margin expansion, and a lower than expected tax rate. Unfavorable foreign exchange impacted Q4 adjusted EPS by one penny. Our Q4 2014 adjusted operating margin of 20.7%, represents improvement of 210 basis points over Q4 of 2013. We’re pleased that we also exceeded our profitability goal for the full-year of 2014 delivering an adjusted operating margin of 20.2%, representing 130 basis points of adjusted operating margin improvement over the full-year of 2013. In addition, we generated adjusted free cash flow of $508 million and operating cash flow of $439 million in the quarter. The strong cash flow generation this quarter helped us exceed our adjusted free cash flow goal of $1.2 billion for the full-year of 2014. Now I'll provide a detailed review of our Q4 business performance and operating results. Unless stated otherwise, references to quarterly results increasing or decreasing are in comparison to the fourth quarter of 2013 and all revenue growth rates are given on a year-over-year constant currency basis. For the fourth quarter of 2014, consolidated revenue of $1.887 billion represented operational revenue growth of 7%, which excludes the impact of foreign exchange and the divested Neurovascular business. On an as reported basis, revenue grew 3% year-over-year. Excluding foreign currency impact, divestments and an approximate 200 basis point contribution from the Bard EP and the Bayer Interventional acquisitions, organic revenue growth was 5% in the quarter. The foreign exchange impact on sales was a $71 million headwind or approximately 385 basis points compared to the prior year period and…

Thanks, Dan. Brad, let's open it up to questions for the next 25 minutes. In order to enable us to take as many questions as possible, please limit yourself to one question and one related follow-up. Brad, please go ahead.

Of course. [Operator Instructions] And our first question today comes from the line of David Lewis with Morgan Stanley. Please go ahead.

Good morning. Mike, just two questions here. Maybe one for you, one for Dan. So just taking ’15 guidance for a second here, a little stronger at the top end of the range than we’d have expected, but maybe help us understand what drives the top and the bottom end of this view and specifically what assumptions have you made for key pipeline products in ’15 and namely they are S-ICD, WATCHMAN and SYNERGY? And just had a quick follow-up.

Sure, David. I'll take that one and then I'll hand your call off as well. As you look at the 3% to 6%, we’re not going to get into the specifics of what the individual line item guidance is for specific products within that, but at the low end of that, its markets that may not be as strong as they are today. Maybe pricing is a little bit more unfavorable. Always have to be wary of the global economy and then specific around Structural Heart maybe it's a slower ramp in some of our Structural Heart products, LOTUS and then WATCHMAN in the U.S. The flip side of that on the higher end of that is, maybe the core end markets are a little bit better. Some of them -- some of our markets we call kind of flat to slightly up. If those are a little bit better, then that’s closer to the top end. The flip of the slower ramp in Structural Heart is maybe there is a stronger uptick relative to those products. And then, MedSurg which doesn't get a lot of attention on the high-end maybe better and earlier new product launches on MedSurg front could get us closer to the higher range as well. Hopefully that -- directionally hopeful that’s helpful in terms of what would put us at each end of that range.

Okay, very helpful. And then, maybe a related question on margins and growth. By our math, you’ve got 10% to 15% constant currency earnings growth which is, obviously nothing to sneeze at for the year. But one of the big drivers has obviously been gross margin. This is the fourth straight quarter of GM expansion, the third straight year of GM expansion, and you’re guiding to another robust GM year for ’15. So, can you just give us specifically, what are those drivers of GM on the upside here for ’15, and your confidence in this 500 basis points of operating margin expansion over the next two to three years. Thank you.

Sure, David. You’re correct. I mean, gross margin has been a significant point of strength for the company over the last two to three years. And we look for that to continue going forward. It’s probably about a -- at the mid-point of our range, 80 basis points over 2014. So, we were 70.7 in 2014, and the mid-point of our range is 71.5. So, within that, it’s a continuation of the same things that we’ve been doing and executing on over the last couple of years, which is taking high single-digits of cost out of the system every year relative to standard cost. It obviously offsets the pricing impact that we have. And then we have other efforts in OCOGs around period expenses and excess and obsolete charges to really accelerate the gross margin improvement. So, it’s been a big part of our story, and I would look for it to continue to be a big part of our margin expansion story going forward.

Thank you very much.

Thanks, David.

And we do have a question from the line of Mike Weinstein with JPMorgan. Please go ahead.

Thanks for taking the question. Maybe just a couple of items on the guidance. Dan, I think you commented that you had a goal of producing SG&A by a 100 basis points in 2015. Could you just talk a bit about that, and what drives that and how you get there?

Sure, Mike. Thanks for the question. So, clearly as we look at ’14 -- 2014, the $379 million is higher than we wanted to it be, so we’re redoubling our efforts on SG&A in ’15. I’d probably look at three key reasons and three key drivers that we’re looking at for ’15. You’ll have better leverage in the adjacencies as sales continue to ramp at a lower operating cost. You think of LOTUS, you think of a U.S. rollout of WATCHMAN. So, overall structural heart just gets better in terms of a leverage perspective. We are doing some things around challenging our global team to really focus on reducing spending with a variety of new initiatives and programs. I’d say undergoing a cultural shift to focus more directly on spending, everything from travel to meetings to suppliers to royalties. No stone left unturned there and then a continuation of what we’ve done in the past which is, the G&A competitive benchmarking and making sure that all of our G&A functions have competitive benchmarks and time horizons to get to best in class against those benchmarks. There is a few others you think of leverage in the emerging markets, particularly in BRIC, reduced integration cost from prior acquisitions. So, there are other things, but I think those other three are really the key drivers that are going to get us down to that 37% in ’15.

Okay. Let me ask couple of pipeline items before I drop. So one, have you submitted the G&A supplement for EMBLEM? Two, could you talk about the timing of INGENIO 2.0 in Europe which has started to rollout and then in U.S. and then third, can you give us any sense of when you expect to complete enrollment in REPRISE III for those? Thanks.

Hi, good morning, Mike. Yes, on the EMBLEM we’re still confident that we’ll be able to have a full rollout of EMBLEM product by the end of the year in 2015 both in U.S. and Europe, and we’re really building up our internal supply chain capabilities to accommodate that goal for yearend launch in EMBLEM in both those markets. On the enrollment of our LOTUS TAVR valve we’re making good progress there. We have about 50 to 60 patients enrolled currently, and we’re confident of a fourth -- by yearend enrollment in 2015 for TAVR as well as our registry in Europe will continue to mount. And then third one, on WATCHMAN, I don’t think you asked about that one. We’re still confident in a first half approval in the U.S. with WATCHMAN.

And we do have a question from the line of Rick Wise with Stifel. Please go ahead.

Good morning, everybody. Can you talk a little bit about LOTUS in a little more detail? Clearly you’re building momentum; you talked about the EU re-order rates. Is the availability in Europe [indiscernible] valve size making a difference? Is that what's helping? Is that the critical factor? And maybe talk about when we might see some data that reflects this broader size at? Thanks.

Sure. And Keith maybe you could make some comments upfront, I’m done. The addition of the 25 millimeter valve has helped. We see that as the valve size that’s used most frequently in Europe. And so having that valve size added to our matrix is very helpful, and then we should have -- add two additional sizes to our LOTUS fleet if you will by the end of the year. So that will help round out up to five sizes in our matrix in Europe. So we’ll be positioned to have that by the end of the year. And in terms of the reorder rates, they continue to grow nicely off of a small base, and we’ll likely highlight our structural heart business in particular at our upcoming investor day in the second quarter. So, we’ll provide more details on some of the reorder rates and financials behind our TAVR program then. And in terms of the clinical piece, Keith did you have any comments on that?

Yes, Rick. So we are encouraged by the recruitment rates in the respond post market study in Europe which is a 1000 patient study and has the three valve sizes, 23, 25, 27, and at least a third of the patients, so the newest size was 25. And the first 250 of those patients will be presented at PCR in Paris in May. We also have a next-generation delivery system which is being tested and has performed very well, and the data from that will be presented at PCR as well. And as Mike says, REPRISE III is on track. The pivotal trial should complete by the end of the year. That of course had three valve sizes. And then the 21 and the 29 millimeter valve and a new sheath they’re in development. And finally, we’re very encouraged by the sale of the Safari wire, which is a dedicated TAVR wire which is being used not only for LOTUS implants, but also for competitive bowl implant.

Thanks. And just, second question, maybe if you could talk Dan or more about the operating margin made. I mean, with zero margins continuing to expand despite exceeding your S-ICD goal. Maybe just a little more color, is the S-ICD more profitable than we thought? Are you getting it, cost reduction or a mix improvement elsewhere? And did you give a target S-ICD number for 2015, maybe I missed it. Thanks so much.

Sure, Rick. No you didn’t miss it. We didn’t give specific number for S-ICD. We did in ’14 obviously with a lot of interest around the ramp and the uptake and now in ’15 and beyond we look at that really as part of our core business. Relative to your question on margins, I think I’d start with the growth of ’14 versus ’13 in each of our segment. So, Rhythm Management gets a lot of focus. But if you look at operating margin for each of three segments, the cardiovascular was up 220 basis points year-over-year, Rhythm Management was up 310, and MedSurg was up 120. So, yes Rhythm Management is a big piece of that, but all segments are contributing. Specific to Rhythm Management we knew what the profitability was of the S-ICD heading into 2014 obviously and we have other programs and other actions and initiatives in place to ensure that we hit our target. So nothing really surprised us relative to that. We knew what we had heading into ’14. We know what we have now heading into ’15 until we launch EMBLEM by the end of the year in the U.S. and Europe. So, its all part of the overall well documented and executed plan within Rhythm Management to continue to drive margins back to the low-20s.

And we do have a question from the line of Bruce Nudell with Credit Suisse. Please go ahead.

Good morning. Can you hear me okay?

Yes, Bruce.

Good morning, Bruce.

Okay, great. Excellent year, Mike. Well done. The surprise I saw today was really about renal denervation. Could somebody talk about that trial design, when we might have results, and what are the key elements of it that will help tease out the specific treatment effect in what class of patients?

Dr. Dawkins, would you like to take that one?

Sure, Bruce. I mean, we can't release full details of the protocol right now, but we’re having a great protocol with the agency. And we think, there were lots confounders as you know in the simplicity trial. And we feel we should pullout some of the obvious one in relation to patient compliance, manipulation of medication, the length of the primary endpoint and stability of the patient, as well as highlighting the performance of what we think is differentiated products. We remain very confident about renal denervation with Vessix not only for hypertension, but we have trials ongoing, investigator sponsored trials with other applications. And so, we think this will be a very important scientific study not just for Boston Scientific investors but actually for the field to justify the role of renal denervation in the treatment of difficult hypertension.

And my second question is, when I met with you guys recently, you expressed under-appreciation of your likely success in TAVI. Could you just kind of speak to the position that you hope to be able to retain and what's proving to be a much more robust market than people thought a year ago? And are there dimensions of performance improvement that would -- that could be improved upon in the current LOTUS design?

Do you want to talk to that Mike or?

Just briefly, then you can add to it, Keith. We take a lot of pride in the capabilities of our engineering teams and our clinical teams and our commercial teams. And we have very strong track record of delivering innovation across the cardiovascular business, and we have really excellent capabilities in terms of R&D and manufacturing at Galway. And we’re really building strong knowledge base in structural heart in TAVR as well as WATCHMAN. So, we think given our leadership commercial position and the capabilities of R&D team that the structural heart expectations of the external analysts is quite understated as you go out in the mid and longer term of the strat plan. So we would be very disappointed in delivering against some of the projections that externally have been discussed. So we have a lot of confidence in the program, and we think with the differentiated platform, we’re starting to see that and the revenue growth numbers in the fourth quarter in Europe. And we’re really starting to click in terms of the productivity the R&D teams with, as Keith said with new valve sizes coming, reduction in profile of the device coming, and its really just building up new capabilities everyday. We also think the market as you said continues to expand globally, and we also think this is a very expensive endeavor to be fully committed to the TAVR space. And we don’t think this market is going to be quite as crowded as what we see in Europe globally.

I would just add Bruce that, we’ve got to a very good position in a very short time with the REPRISE program, and I would encourage you to look at the independent Weber [ph] data that we released shortly in Europe to identify the Boston Scientific LOTUS position in Europe. We’d obviously give more granularity about the structural heart side at our New York Investor Day later this year. And finally of course the REPRISE III trial in the U.S, the pivotal trial is in fact incorporating two partner trials in one. So, we’re looking at extreme risk and severe risk, and so, we’ll catch up again. So we think considering we were later into the market we’re in good shape.

Thanks so much.

And we do have a question from the line of Bob Hopkins with Bank of Merrill Lynch. Please go ahead.

Thanks so much, and congrats on a good year. The first question, given that it’s a point of interest for everybody, I was wondering if we could just get a quick litigation update from you in terms of any updated thoughts on the timing from a ruling from the judge in the J&J case, or just any other litigation milestones we should be aware of in 2015 as it relates to mesh or IRS?

Sure, Bob, this is Dan. I’ll take that one. Relative to the J&J litigation, I think it’s where we were at the end of the closing comments in the end of January. With the judge we like our set of facts, and then are looking forward to a favorable resolution in that -- in his words shortly we’ll see what that means relative to timing. With respect to mesh, we continue to try cases in mesh. So, I don’t think there’s anything necessarily to look for there. All the reserves that we have relative to all of our litigation are included in the $972 million that I referenced in my prepared remarks.

And then as a follow-up, I wanted to ask Dan a question on margins. I think you mentioned that Rhythm Management margins in 2015 would be a bit more backend loaded. So I was wondering if you could just explain that, should we expect continued sequential improvement earlier in the year, and to what degree are your pricing trends impacting things, and did pricing trends in the fourth quarter get worse or stay the same relative to earlier in the year? Thank you.

Sure, Bob. No, it’s not necessarily pricing trends, because they have been consistent through ’14, and I don’t think we see those changing in ’15. I think as you look at ’15, we’re talking more about the backend for sequential improvements relative to Rhythm Management. I think in the first half, you’d see it be more flat to where we have been. And then the benefits of EMBLEM and the INGENIO 2, ACCOLADE will really start to kick-in in the second half. So, again I just want to make sure that folks look at broader windows than just 90 day windows. And we feel very good at where we are as we exit ’14, and we would look for, as we exit ’15 to be in the same spot, but I’d just look more to the back half of ’15 for more incremental gains in Rhythm Management operating margins.

Great. Thanks for the color.

Sure.

And we do have a question from the line of Danielle Antalffy with Leerink Partners. Please go ahead.

Hi. Good morning, guys. Thanks so much for taking the question. I was hoping you could give a little bit more color on endoscopy. You guys came in a little bit lower than we were expecting. And just wondering how we think about the Alaris adoption ramp here given the reimbursement pressures in such, and thinking about that in not just ’15 but also longer term?

Sure. Thanks for asking the question on endoscopy. Overall we’re pleased with the performance for the full year. We grew 5% in the quarter -- fourth quarter, 5% in the full year. We think that’s slightly faster than the market. And the team is really building out – it’s our most global business, and the team is building a number of new capabilities to drive future revenue growth particularly in Biliary in the emerging markets where there is a lot of under-penetrated patient demand as well as the need for greater physician training. So, our team is really pioneering that in the emerging markets. So, we think 5% of solid year. Then also as Dan, mentioned the MedSurg segment improved operating margins. And as you look to 2015, we’ll have a stronger cadence of product launches in the endoscopy business in 2015 which should help. And also as you mentioned Alair which I think some had written off is starting to build some momentum in terms of reimbursement as I mentioned in the opening comments. So we still have a long way to go for Alair to make a meaningful impact on the top line of endoscopy, but we’re not giving up on it, because the product works, the clinical results are very good. And we think over time, we’ll continue to layer on additional reimbursement approvals where Alair maybe not in ’15 but in the strat plan period will have a more significant impact on endoscopy’s top line.

Okay, great. That’s really helpful. And then, on the Neuromodulation side of things, I know this was a tough year. You do have potentially more competition coming here in the back half of the year. So I was wondering if you could give a little bit more color about the trajectory there, and also an update on the clinical side of things. I know you guys are doing to accelerate clinical trial and when we could see some data from that? Thanks so much.

Sure. So, on Neuromod, the performance if you look across 2014 was a 5% grower, and we clearly had very high growth in the first half of the year off of our Spectra launch, and then we really had some very challenging growth comparables in the second -- really the second half of the year. I don’t have the exact number, but growth comparable is probably in the 25% plus range that we’re fighting against. So for the full year to scratch out of 5% growth we think its kind of in line with the market for Neuromodulation. We also are encouraged with as we head into 2015 with some new product approvals with the 32 contact paddle which we think provides additional differentiation with our Spectra platform, and Spectra continues to be really the market share leader in spinal cord stimulation with share gains there. So we have some new products that will come in 2015, and Nevro we anticipated their FDA approval, so that wasn’t a surprise for us. We have been competing with Nevro for a number of years over in Europe and Australia. In Australia we’re very comfortable with our leading market share position. And also as you mentioned, we are investing beyond the technology platforms in additional clinical studies for Neuromodulation, and we’ll continue to report those out as appropriate.

All right. Thanks so much.

Brad, we’ll take one more question please.

Our last question comes from the line of Brooks West with Piper Jaffray. Please go ahead.

Hi, guys. Thanks for sneaking me in. Couple of product questions, I was wondering on the synergy U.S. launch versus how you’re launching that in Europe. You’ve got tiered strategy over there, is that how we should think about the approach to the U.S. or can that be a workhorse stent and just any thoughts on kind of uptake there. Then I’ve got a follow-up.

Yes, we haven’t provided any insights yet in terms of the, kind of the launch strategy in the U.S. We are expecting FDA approval synergy in late ’15, so hopefully we can get a potentially a fourth quarter impact with synergy. And we’re continuing to be very careful about how we price that synergy. We think that’s the best way to preserve the strength of this overall marketplace, the strategy to working for us, and for the full year we grew DES 6% in a combination between PREMIER and Synergy. So, we think we offer a differentiated platform that provides unique value and therefore we should be apprised appropriately that way. So, we’ll continue to refine our launch plans for U.S. and communicate more details on that once it’s approved.

Thanks. And then on the EP platform with Rhythmia, can you give us a little bit more detail again on the launch trajectory there. And then I’m curious in the accounts that have the Rhythmia system, are you seeing pull-through of your diagnostic catheters, and then when could we see the new ablation catheters I believe they’re called the MiFi catheters, is that still on track for kind of the next 18 months here?

Yes. So, on the Rhythmia side we did see -- you saw a few cases if you went to the few live cases at the AFib meeting in Orlando early in January there. So we’ve just really launched our first call it 10 sites or so globally, and we’re seeing some excellent feedback in terms of the speed and acquisition times and the collection points of the Rhythmia platform. In those sites we are seeing some core pull-through as you mentioned in the diagnostic side. And also, lecture physiologists are looking at Boston Scientific as their Rhythm Management provider. So we also see the strength of our CRM business, the capabilities we have there will also help in the overall story with lecture physiologists. So we’re in our early days of the Rhythmia launch but its going well on the sites that have installed it and we have seen some pull-through in diagnostic catheters.

And anything Mike on the MiFi catheters?

Yes, on the MiFi catheters we’re still enrolling in the U.S. and we’re looking to continue to sell the open-irrigated platform for MiFi in Europe.

Great. Thank you. End of Q&A

And with that we’d like to conclude the call. Thanks for joining us today. We sincerely appreciate your interest in Boston Scientific. And before you disconnect Brad will give you all the pertinent details for the replay. Thanks very much.