Boston Scientific Corp (BSX) — Q2 2025 Earnings Call Transcript

Thank you, Drew, and thanks to everyone for joining us today. With me on today's call are Mike Mahoney, Chairman and Chief Executive Officer; and Jon Monson, Executive Vice President and Chief Financial Officer. During the Q&A session, Mike and Jon will be joined by our Chief Medical Officer, Dr. Ken Stein. We issued a press release earlier this morning announcing our Q2 results, which included reconciliations of the non-GAAP measures. 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 certain acquisitions and divestitures for which there are less than a full period of comparable net sales. For more information, please refer to the Q2 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 is 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, 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 it over to Mike.

Thanks, Lauren, and thank you, everyone, for joining us today. Our second quarter results outperformed our expectations, led by our Cardiovascular segment closing a phenomenal first half of 2025. In the second quarter of 2025, total company operational sales grew 22% and organic sales grew 17%, which exceeds the high end of our guidance range of 13% to 15% and far outpacing our underlying weighted average market growth rate. Second quarter adjusted EPS of $0.75 grew 23%, also exceeding the high end of our guidance range of $0.71 to $0.73, inclusive of charges related to the worldwide discontinuation of our ACURATE valve. Second quarter adjusted operating margin was 27.6%. Turning to our third quarter and our full year 2025 outlook. We're guiding to organic growth of 12% to 14% for third quarter 2025 and raising our full year guidance from 12% to 14% to 14% to 15%, reflecting the momentum across our global businesses. Our third quarter adjusted EPS guide is $0.70 to $0.72, and we now expect our full year adjusted EPS to be $2.95 to $2.99, representing growth of 18% to 19%, inclusive of updated assumptions for tariffs and the impact related to ACURATE. John will provide more details within the financial section. I'll now provide some additional highlights on the quarter. Regionally, on an operational basis, the U.S. grew 31%, driven by our category-leading and broad-based cardiovascular portfolio. Europe, Middle East, and Africa grew 2% on an operational basis and 7% excluding the discontinuation of our ACURATE valve. As a reminder, the vast majority of the $200 million in ACURATE revenue was generated in EMEA. Within EMEA, growth within the quarter was led by double-digit growth for FARAPULSE, WATCHMAN, and Complex PCI. Asia Pacific grew 15% operationally, led by strong double-digit growth across our largest markets in the region: Japan, China, and Australia. Japan grew high teens driven by FARAPULSE, which has moved into the leading position in PFA with over 15,000 patients treated since launch in Japan, supported by new account openings and the launch of FARAWAVE NAV. China also returned to mid-teens growth in the second quarter with diversified growth across businesses led by FARAPULSE and IVUS. And we expect this mid-teens growth to continue in China in the second half of the year. I'll now provide some additional commentary on our business units. Urology sales grew 28% operationally and 6% organically. Growth in the quarter was driven by the stone management and prosthetic urology franchises with double-digit growth in Rezum, which received expanded indication for large glands in the U.S. within the quarter. Integration of the Axonics business has progressed well as we have worked through short-term commercial disruption and destocking in the first half of the year. Endoscopy delivered a strong quarter, growing 8% globally and double-digits in the U.S., with global performance driven by strong growth in our anchor products, including EXALT-D, MANTIS, AXIOS, and OverStitch, which saw notable growth from both ESG and closure procedures. In the second half of the year, we expect continued high single-digit growth led by our proprietary technologies and strategic partnerships globally. Neuromodulation sales grew 7% in the quarter with mid-teens growth in our brain franchise, led by continued adoption of the Cartesia X/HX leads and Illumina 3D in the U.S., both of which drive optimized patient outcomes. The pain franchise grew mid-single digits, led by strong double-digit growth in Intracept, which surpassed 50,000 patients treated with our innovative technology backed by robust clinical evidence. Cardiology delivered another outstanding quarter with sales growing 28%. Within Cardiology, Interventional Cardiology therapy sales grew 9% and, excluding ACURATE, grew very strong double digits. For the second half of 2025, we expect an approximate 800 basis point impact to ICTx growth in the second half from the discontinuation of ACURATE. Coronary therapy's high teens growth was driven by AGENT DCB and our global imaging portfolio, buoyed by additional support from the U.S. coronary societies upgrading intravascular imaging to a Class Ia recommendation for complex lesions, further validating its clinical value. In the U.S., AGENT DCB growth accelerated with new account openings and strong reorders, supported by confidence in long-term reimbursement with permanent CPT I codes established in the quarter that will go into effect in January 2027. We continue to invest in expanding our portfolio and are pleased with the progress of our fracture trial, studying the Bolt IVL system in coronary patients, which is expected to complete enrollment by the first half of 2026. Additionally, we closed the acquisition of SoniVie in the second quarter, which continues to enroll in the THRIVE IDE, a global randomized and sham-controlled study designed to demonstrate the effectiveness and safety of the TIVUS system in hypertensive patients. Cardiac Rhythm Management sales grew 1%. In Q2, our diagnostic franchise grew low double digits, fueled by strong growth of our LUX-Dx ICM device with our latest generation LUX-Dx II launching in Europe in the quarter. In core CRM, our low-voltage business declined low single digits and our high-voltage business was roughly flat for the year. In the second half, we do expect contributions from our expanded conduction system pacing portfolio in the U.S. and Europe and anticipate FDA approval of the EMPOWER leadless pacemaker by year-end. WATCHMAN grew 28% in this quarter, reflecting continued concomitant uptake in the U.S. and the strong safety profile of our latest generation WATCHMAN FLX Pro, which recently received CE Mark. We continue to invest further in the LAAC market, including the development of our fourth-generation WATCHMAN device, which we anticipate initiating the IDE trial for next year. We continue to see considerable physician interest in concomitant procedures with over 60% of WATCHMAN implanting EPs in the U.S. having performed a concomitant procedure. Recently, we enrolled our first patient in the OPTION-A trial, studying concomitant use of WATCHMAN and FARAPULSE in Asia. We also received expanded labeling for WATCHMAN as a first-line therapy in post-ablation patients in the U.S. following the positive OPTION data, supporting continued confidence in our long-term outlook. Electrophysiology sales grew 94%, lapping our first full quarter of the FARAPULSE launch in the U.S. and growing mid-teens sequentially, supported by accelerated placements of the OPA mapping system, our portfolio of access solutions, and uptake of concomitant procedures. Global momentum continued through the quarter, driven by the safety, predictability, and versatility of the FARAPULSE device, particularly in de novo AFib ablations for paroxysmal and persistent AF, for which we recently received expanded labeling in the U.S. We anticipate CE Mark as well as approval in Japan and China for this expanded labeling in the coming months. We continue to invest in clinical evidence to expand the served patient population with our FARAPULSE technology, including the recent initiation of the ReMATCH AF trial designed to study FARAWAVE and FARAPOINT in redo persistent AF patients, which currently represent approximately 1/3 of AF ablations. Also within the quarter, we announced positive 12-month primary endpoint results from the second phase of the ADVANTAGE AF trial, which will be used to support approval of the FARAPOINT PFA catheter as an adjunct technology to treat atrial flutter in patients with persistent AF, which we expect to receive by year-end 2025. Peripheral Intervention sales grew 17% operationally and 7% organically. Our Interventional Oncology and embolization franchise grew strong double digits, led by our broad embolization and cancer therapies portfolio. In the quarter, we closed the acquisition of Intera Medical, strengthening our interventional oncology portfolio by adding a complementary therapy to expand our offerings to treat both primary and metastatic forms of liver cancer. Within our vascular franchise, we saw low single-digit growth in arterial with low single-digit drug-eluting growth driven by our participation in the China VBP, which we anticipate will result in our ability to serve more patients across China. In venous, we did see strong double-digit growth led by continued strength in Varithena and notable growth in ECOS, particularly internationally. We continue to be pleased with the integration of Silk Road, which we expect to improve growth in the second half of the year, driven by a stabilization and investment of the commercial team. In closing, I'm very proud of the commercial execution of our high-performing global team and both in the near- and long-term growth catalysts across our businesses, which we look forward to sharing more details at our upcoming Investor Day on September 30 in New York City.

Thanks, Mike. Second quarter consolidated revenue of $5.061 billion represents 22.8% reported growth versus the second quarter of 2024 and includes a 120 basis point tailwind from foreign exchange, which was favorable versus our expectations. Excluding this $50 million foreign exchange tailwind, operational revenue growth was 21.6% in the quarter. Sales impact from closed acquisitions contributed 420 basis points, resulting in 17.4% organic revenue growth, exceeding our second quarter guidance range of 13% to 15%. Q2 2025 adjusted earnings per share of $0.75 grew 23% versus 2024, exceeding the high end of our guidance range of $0.71 to $0.73, primarily driven by our strong sales performance in the quarter. Adjusted gross margin for the second quarter was 69.4%, representing a 100 basis point decline versus the second quarter of 2024, driven by the negative impact from inventory charges related to the worldwide discontinuation of our ACURATE valve. Based on the current schedule of expected tariffs, we now anticipate a full year headwind of approximately $100 million, down from our approximate $200 million estimate that we provided on our Q1 earnings call. We continue to expect full year adjusted gross margin to be roughly in line with 2024. Second quarter adjusted operating margin was 27.6%, expanding 50 basis points versus the second quarter of 2024, driven by strong drop-through on our top line performance and smart spend controls, offsetting the charges related to ACURATE. On a GAAP basis, second quarter operating margin was 16.2%. Moving to below the line, second quarter adjusted interest and other expenses totaled $110 million, slightly unfavorable to our expectations. On an adjusted basis, our tax rate for the second quarter was 12.6%, which includes favorable discrete tax items. Our operational tax rate was 14.2% for the second quarter. Fully diluted weighted average shares outstanding ended at 1.494 billion shares in the second quarter. Free cash flow for the second quarter was $1.129 billion with $1.286 billion from operating activities, less $157 million in net capital expenditures. We now expect full year 2025 free cash flow to be approximately $3.5 billion. As of June 30, 2025, we had cash on hand of $534 million. And during the quarter, we were pleased to receive a credit rating upgrade from Moody's to A3. With this upgrade, we now hold A- equivalent credit ratings from all three major agencies. Our gross debt leverage ratio was 2.1x. Our top capital allocation priority remains strategic tuck-in M&A and high-growth adjacencies, followed by share repurchases. In alignment with this strategy, we recently closed the acquisitions of SoniVie and Intera Oncology, which complement our existing Interventional Cardiology and Peripheral Interventions businesses, respectively. Our legal reserve was $300 million as of June 30, with $47 million of this reserve already funded through our qualified settlement funds. I will now walk through guidance for Q3 and full year 2025. We now expect full year 2025 reported revenue growth to be in a range of 18% to 19% versus 2024. Excluding an approximate 50 basis point tailwind from foreign exchange based on current rates, we expect full year 2025 operational growth to be in the range of 17.5% to 18.5%. Excluding a 350 basis point contribution from closed acquisitions, we expect full year 2025 organic revenue growth to be in a range of 14% to 15% versus 2024. We expect third quarter 2025 reported revenue growth to be in the range of 17% to 19%. Excluding an approximate 50 basis point tailwind from foreign exchange based on current rates, we expect third quarter 2025 operational growth to be in the range of 16.5% to 18.5%. Excluding an approximate 450 basis point contribution from closed acquisitions, we expect third quarter 2025 organic revenue growth to be in a range of 12% to 14%. Based on our first half margin performance, we now expect to expand full year adjusted operating margin by 75 to 100 basis points while increasing our level of investment in R&D to fuel durable, differentiated revenue growth. We now expect full year 2025 adjusted below-the-line expenses to be approximately $440 million. Under current legislation, including enacted laws and issued guidance, we forecast a full year 2025 operational tax rate of approximately 14% and an adjusted tax rate of approximately 12.5%. For 2026, we had previously forecasted a 200 to 300 basis point headwind to our tax rate, driven by changes to certain provisions scheduled under the TCJA. With the recent passage of the OBBB, this anticipated headwind has largely been eliminated. We'll share more specific 2026 tax rate guidance on our Q4 2025 earnings call. We expect full year 2025 adjusted earnings per share to be in a range of $2.95 to $2.99, representing growth of 18% to 19% versus 2024, including an approximate $0.04 headwind from foreign exchange. We expect third quarter adjusted earnings per share to be in a range of $0.70 to $0.72. In closing, I'm pleased with our strong second quarter financial performance and look forward to executing on our full year guidance of 14% to 15% organic revenue growth, 75 to 100 basis points of adjusted operating margin expansion, and 18% to 19% adjusted earnings per share growth. For more information, please check our Investor Relations website for Q2 2025 financial and operational highlights, which outlines more details on Q2 results and 2025 guidance. And with that, I'll turn it back to Lauren, who will moderate the Q&A.

Thanks, Jon. Drew, let's open 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 and one related follow-up. Please go ahead.

Congrats on another fantastic quarter here. Two for me, kind of intertwined, so it is a related follow-up. Maybe to start, though, the WATCHMAN number was just phenomenal, plus 30% in the U.S., 28 worldwide. Big acceleration. I imagine a lot of that is coming on the back of OPTION and concomitant. But maybe just speak to the durability of that, the breadth and depth of usage that's driving it and what you're hearing in the field just as we think about going into champion next year, which could be another leg of growth for this franchise?

Yes, I'll make some initial comments, and Ken can certainly add more detail to it. We're really pleased with the results in the quarter at 28%, and you also saw some good news in the script there. WATCHMAN FLX Pro approvals outside the U.S., and over the next LRP period, we aim to get more contributions outside the U.S. than we currently do today with that device, which has proven to be so safe and effective in the U.S., which is really the reliability and the trust that the physician community and referring physicians have in that device, along with our clinical and sales team is driving that. And obviously, the continued investment in clinical studies that you've noted on your comments there. Concomitant, as we've said in previous calls, is really a breakthrough opportunity for hospitals, physicians, and patients to be able to use the WATCHMAN device and the safety and efficacy profile combined with FARAPULSE and the same really superior safety and efficacy profile versus the competition, and the ability to do that in the same procedure has proven to be very valuable, and we're maximizing it as best we can commercially. Looking forward, we continue to believe that this category could grow in the plus 20% range as it continues to scale larger and larger each quarter. And we'll provide you with more updates at Investor Day in terms of our programs on our next-generation valve and continued focus on clinical studies.

Yes, Robbie, I don't have too much to add to that, right? I think it's the positive data from OPTION. We are very pleased to see the uptake of concomitant procedures. As Mike said on the call earlier, right, 60% of our EPM planters are already adopting the use of concomitant procedures. It's a win for everyone. It's better for patients. It's clearly safer and easier for them. It's a win for hospitals as well. We do look forward to presenting the CHAMPION data at a major conference first half of next year. I do think it's important to say, though, it will take time for all of that to play out. We were very pleased to get the updated label from the OPTION to be used as first-line therapy in patients post-ablation, but it still will take time for reimbursement to catch up to that updated label. And again, even once we present the data from CHAMPION, it will still take time for that data, if they are positive, to make their way into a national coverage decision and into society guidelines.

Great. Maybe just a follow-up on that. Jon, the gross margin missed the Street, but some Eagle Eye people noticed there's a $130 million write-down from the ACURATE exit, which is 260 basis points for the quarter, which would have put you in a great position, big year-over-year beat and beat versus the Street. Maybe just speak to the drivers of that. How much of that is new products versus underlying improvements? And how we should think about sort of that underlying gross margin ex-tariff through the rest of the year?

Yes. Thanks, Robbie. And maybe a couple of points. Maybe first to the Eagle Eye folks. So the $130 million in the ACURATE discontinuation impacted a number of different areas of the P&L. Within the adjusted P&L, we had some inventory charges in sales returns reserves related to ACURATE that totaled approximately $100 million. Then we also had restructuring and intangible asset impairment charges that impact the GAAP-only P&L. So that's the $130 million that was in the appendix of our operational highlights that the Eagle Eye folks picked up. So as far as our adjusted gross margin, roughly $100 million impact there from the ACURATE charges. Importantly, we are really pleased to see that we're able to offset that through the strong sales performance that you heard Mike go through as well as strong spend control to make sure that we offset the impact there and through the full P&L and delivered the strong EPS performance that you saw in the quarter. And so looking forward, Robbie, we expect gross margin for the year to be roughly flat. So we have the impact of tariffs, the impact, which are now roughly $100 million is our estimate. The impact of those ACURATE charges, the roughly $100 million that I just talked about being offset predominantly by favorable mix. You saw the WATCHMAN numbers. FARAPULSE continues to perform very well for us, and that's accretive to our gross margin. So we have those two items that we didn't anticipate at the start of the year with the ACURATE charge and tariffs being a large headwind but mix offsetting that largely to get to flat for the year is our expectation for gross margin.

I'll echo Robbie's congratulations. So for Mike or Dr. Stein, maybe you talked about the growth vectors for your EP business market growth, PFA adoption, new geographies, new products, etc. How would you have us think about these pieces and what your EP business could look like in 3 to 5 years? And any color on the proposed ASC codes and what they could mean for you?

Yes, Larry, it's a combination of factors. We will discuss this in more detail during our Investors Day when we present our long-range plan. The quick answer, aside from the overall factors, is the ongoing market growth in the United States, especially considering the safety profile of FARAWAVE and the predictability of outcomes in relation to efficacy. We are accumulating data that shows superior outcomes compared to thermal ablation. We are very satisfied with the international results as well. As Mike mentioned, over 15,000 cases have already been completed in Japan, where we established ourselves as the clear leaders in PFA, despite entering the market third. We are also very encouraged by the adoption of our FARAVIEW process using the OPAL and FARAWAVE NAV catheter. Regarding the proposed ASC rule from CMS in the United States, which would permit ablations in ASCs, we see this as a potential advantage for us. We believe we are in a strong position to benefit from procedures performed in ASCs. This relates not only to safety and predictability but also to the economic benefits of using FARAWAVE with FARAVIEW compared to our competitors.

I'm going to add my congratulations. I'd like to pivot a little bit to the MedSurg business, I think that gets overlooked a fair bit, solid high single-digit revenue growth across the segments. What would you like to highlight in there? And what do you think we may be missing?

Joanne, thanks for the question. I would say one I want to highlight, endoscopy. The U.S. business grew double digits, well above the market, grew 8% globally. That's despite some headwinds that we've talked about in the past with some low-cost scope competitors in Asia and Europe, which our team has really done a nice job of addressing. So we anticipate some of that headwind being mitigated as we look to 2026. So despite that, really strong performance in endo, as you know, high-margin business for us as well. Also pleased to see the enhancement and improvement in neuromodulation. The team there grew strong double digits in DBS and the Relievant acquisition has been integrated extremely well and really providing that strong accretive growth to the company and a wider solution for pain physicians. And we continue, I would say, to have improved momentum in spinal cord stimulation. The team made a number of commercial changes over the past year or so, and that team is starting to come together and strengthening. So we anticipate continued momentum with that neuromodulation business over the horizon. And our urology business is a fantastic franchise. It's grown a little bit under what we typically expect them to deliver, and we signaled that at the end of the first quarter call, given some supply chain constraints that we're working through that will get better in the second half of the year and also some low-cost competition again, that the team is addressing very proactively. The Axonics integration is a super important integration for the franchise and for the company. In the first half of the year there, we really worked through some commercial model changes, some turnaround, which we anticipated. And that team has now kind of restrengthened. We also had quite a bit of stocking that we had to work through in the first half of the year. So we anticipate an improvement in the Axonics growth in the second half of the year and a very strong 2026 for Axonics. So overall, MedSurg has performed well. And hopefully, that color was helpful to you.

Maybe just start us off, if you would, by thinking about the ASC setting and how it sets up growth for next year. And help us think through one thing, obviously, in the hospital, you're seeing very strong concomitant attachment rates or uptake rates. If the PFA moves to the ASC, I don't think that concomitant would be as prevalent. Help us think through those moving pieces and is this still the ASC a net positive, given maybe potentially lower WATCHMAN implants. Just help us think through all that, if you would.

Thank you, Rick. You raise a very nuanced point, so let me share our perspective. Firstly, we still view this as a positive development. There are two key factors to consider. One is the speed at which procedures will transition to the ASC. This is currently just a proposed rule. If approved, it's not a drastic shift into the ASC. Right now, about 20 states do not require Certificates of Need or other regulations that restrict doctors from establishing an ASC, representing around 40% of the market. In the remaining 30 states, which make up the other 60% of the market, the transition will be more gradual. Another important aspect is that, even once an ASC is established, physicians will carefully consider which patients are appropriate for procedures in the ASC versus those who should still undergo them in a hospital, either inpatient or outpatient. We anticipate that the initial cases will involve the simplest patients, such as those with de novo, paroxysmal AFib, starting with the least frail individuals. These patients are generally not candidates for more complex procedures like concomitant treatments or WATCHMAN. Typically, younger patients with fewer comorbidities have a lower stroke risk. Initially, we expect that practitioners will focus on easier, more straightforward cases, which do not involve concomitant procedures. It will take time to transition more complex procedures into the ASC. Overall, we see the ASC as a positive opportunity for us, reinforcing what I mentioned earlier to Larry. We believe our FARAPULSE ecosystem offers significant differentiated advantages as this transition takes place.

As a follow-up, Mike, maybe you could expand a little bit on your thoughts about SoniVie with the deal now closed. How do we think about this, is renal innovation here now, given the recent approvals? Is this just Boston a flyby initial checkout of the RDN scene and waiting for things to evolve? And maybe just share with us if you can, just are there key clinical timelines or data or FDA timing? Just help level set us here.

Sure. Thanks, Rick. We really like where we're positioned with hypertension. So we've liked the market for a while. As you know, we had a previous RF product that we discontinued a number of years ago. We absolutely feel that the ultrasound technology will be preferred. We have to prove it in a clinical trial over radio frequency in terms of its effectiveness and safety profile. So we really like the technology of SoniVie. We made an investment in that company and we acquired it, I guess it closed in early second quarter. So we closed recently. So it's the technology that we had been watching for quite a while, and we jumped on that and acquired it prior to this reimbursement decision, so our timing really was nice there. We're quite early in our clinical trial, so we won't be first to market. There'll be two others, but our timing of anticipated approval, which we anticipate more at Investor Day, isn't that far behind. And given the relationships that we have in this marketplace, we think we have a platform that has enhanced features and benefits over the current generations. We think we'll be well positioned to take advantage of this market over the long-range plan and beyond. I think this market certainly could become a multibillion-dollar market over time, not overnight. And I think, given that market TAM opportunity, given the growth that we'll see, but it will still need additional key milestone takedowns on reimbursement, commercial coverage, and so forth. So this market has the potential to be quite large over time and our position with the device that we have, I think could make this very disruptive for us, assuming we have a positive clinical trial and the market develops.

I was hoping we could dive a little bit deeper into the evolution of the EP portfolio because clearly, you've seen strong adoption on FARAPULSE. But as we look at both indication expansion and new product launches, it would actually seem like there's quite a bit of runway yet to go here. So maybe if we could just kind of think about where you've had adoption so far, most likely in de novo PVIs, maybe some use in persistence. You're accelerating your investment in mapping. FARAPOINT should be coming at some point later this year, early next year. I don't think you have an ice catheter yet. You have the Baylis portfolio. So can you maybe help us think about where you are in capturing the totality of the EP market from a procedure and indication perspective, but then also as you think about the disposables used in an EP case, where you are in capturing the totality of the opportunity there? And then I have one P&L follow-up.

Yes, David. I want to start by reiterating everything you mentioned. Our strategy has always aimed for category leadership, which encompasses all the points you raised. Regarding the current usage of FARAPULSE, as Mike noted, we are pleased to have expanded indications to include persistent AFib alongside paroxysmal AFib. To be honest, we were already observing significant usage within the persistent population. One of the standout features of FARAWAVE is how beautifully it supports options beyond just pulmonary vein isolation, incorporating posterior wall ablation as well. We've been impressed by the number of physicians who have embraced this as their primary workflow. It’s crucial to understand that relying solely on PVI is not enough to meet the needs of most patients undergoing ablation for atrial fibrillation today. Moving into mapping, we've seen positive adoption of FARAVIEW on the OPAL system. However, it requires us to have a comprehensive toolkit, which includes the solutions we acquired with Baylis. We are developing an ice catheter, with more details to be shared at Investor Day, and we also have a full range of additional ablation catheters. I want to emphasize that FARAWAY already launched a second-generation PFA catheter, while many competitors are still working on their first-generation offerings. We remain committed to further developing the FARAWAVE platform and expect to receive approval for our FARAPOINT catheter in the latter half of this year. Our large focal or mapping ablation catheter, FARAFLEX, is in its initial human trials and is progressing well. In summary, we are not stopping with FARAPULSE; we are dedicated to continuous improvement in our ablation catheters and the entire ecosystem surrounding them.

The other thing I'll add to that, besides the widening of the portfolio, which is what Ken talked about, which we have a lot of investment in internally and through our VC portfolio and partners, is there's also regional growth. As Ken mentioned, we're a third of the market in Japan. Now we're the clear market leader in Japan. The Japanese market will benefit from the persistent label that will be coming in the second half of this year. So that should further strengthen, and we continue to roll out mapping systems there. We're very, very early days in China, which is a very, very big market for us, so a lot of emphasis on that. We put a lot of time and attention into this. We not only want to be the clear leader in PFA, but our aim is to be the overall leader in EP in the future.

I appreciate all the perspective. And maybe just on the P&L. Jon, I think if you go back to Q1, you talked a little bit about a slower start to the year on OpEx this quarter, I think you utilized OpEx as a way to offset what looks to be like a $0.06 headwind-ish from the dynamics with ACURATE. Are you at a point now given the top line it's becoming more challenging to spend all the upside and that we should start to see more operating leverage? Or is there something more deliberate going on in OpEx?

Thanks, David. You hit the dynamics pretty well for the second quarter or first quarter. In the second quarter, there was some holdback on OpEx and investment back into the business. As you recall, as we started the quarter on April 2, we had the updates on tariffs. And then midway through the quarter, we announced the ACURATE discontinuation. So a bit of a holdback on OpEx in Q2, which was important to offset the ACURATE charge that we stepped through earlier. So then as we move into the second half of the year, a couple of dynamics there, we'll see the tariff impact really take hold, approximately $100 million, which predominantly impacts the second half of the year. And then we do anticipate continuing to reinvest back into the business to drive differentiated revenue growth for the near and long term. So that's the focus of the company. So I'd expect to see R&D tick up a bit in Q3 and in the second half of the year. A lot we're excited about across the portfolio there. And we'd likely look to invest across the commercial team to make some commercial investments as well, with launch activity going on to continue to drive the growth that we're seeing. So on the whole, I am really pleased with the 75 to 100 basis points of operating margin expansion that we're expecting for the year. I think we're doing a nice job of balancing drop-through to the bottom line and margin expansion with reinvestment back into the business. And I think you see more of that in the second half of the year.

Congrats on a good quarter. I guess kind of before later this year, you're going to be updating the LRP at the Analyst Day, but just kind of bigger picture, how you kind of see the pluses and minuses shaking up over the next few years versus the last couple of years? And your weighted average market growth now is kind of approaching 10%. And so just think about the confidence to continue to kind of outgrow your markets as you've kind of always done historically.

Well, I think that we have like half a day with you at Investor Day to talk about your question. So as nothing breakthrough here, but our goal is to continue to improve our weighted average market growth rate through our organic portfolio, the choices we make in our venture and our M&A, which we've done over many, many years. So we anticipate that to continue. At the same time, we expect our leaders to grow faster than the markets. Not every division or region does it every quarter, but the majority of them do. So we have a strong track record of growing faster than our weighted average market growth rate. As Jon mentioned, we are enhancing our R&D spend, and we have many important shots on goal to drive differentiated growth over the next five years. And we'll talk a lot about that at Investor Day.

Great. And then, Jon, just quickly on the tax rate with some of the new legislation that came out and if there was any kind of update on how you're thinking about the tax rate going forward?

Yes. So we previously, Travis, as you know, expected a 200 to 300 basis point headwind to the tax rate under the TCJA and certain rigs that were set to increase in 2026 and beyond under that now old legislation. Under the OBBB, with new rates that were established there and other provisions, that headwind has largely gone away. So that's the impact to Boston Scientific from the new tax legislation. As we get to the normal course and the Q4 earnings call, we'll update on our specific guide for tax for 2026. But that was a good outcome from the recent legislation.

I have one on Medicare rule making. Another thing that came out during rate season was the physician fee for LAA was proposed down 16%. Year-on-year, the societies came out against this. There's so much going right in that business with WATCHMAN form factor innovation, concomitant, CHAMPION ahead. How much of a challenge does this present, if any? And do you agree with Medicare's math?

Yes, Michael, we certainly think payment ought to be appropriate to the amount of work that's involved in doing a procedure, and I'd say my concern as some of does procedures is whether they are really appropriately valuing the complexity, the decision-making that's involved in managing these patients. We certainly are committed to giving the medical societies the support that they need from us to help mitigate any impact of this proposal. I think, frankly, in terms of impact on growth, I still firmly believe doctors are going to do the right thing for patients and are going to pick the most clinically appropriate treatment. When it comes to something as important as preventing stroke, I'd be very hopeful that this kind of reimbursement cut, if it does persist into the final rule, still will not prevent patients from getting the treatments they need.

I want to extend my congratulations on another strong quarter. I have two questions. First, regarding WATCHMAN and FARAPULSE, I appreciate the recent approval in the ASC, which is definitely beneficial. However, many electrophysiologists are also performing WATCHMAN procedures. While they can do both procedures simultaneously now, at what point do we foresee capacity becoming a concern? Are you experiencing this yet? My second question relates to your ongoing FARAPULSE launch. You mentioned you are still early in the process and not yet fully entering lower volume centers. Have you started to penetrate these lower-volume centers? Are you observing previously low-volume centers increasing their activity now that they have access to this device that makes ablation more accessible?

Sure. Danielle, thanks for the question. I'd say just on capacity, really no difference versus previous comments. Thankfully, the procedure is very safe to FARAPULSE, WATCHMAN, or concomitant. It's a very safe and effective albeit complex procedure that doctors have a lot of confidence in. The hospitals do a good job of knowing the predictability and time allotment for these procedures because they've done a lot of them. So they're able to better plan. We don't like the proposed reimbursement cuts for physicians. However, on the hospital side, these are strong procedures in terms of profitability for hospitals. So we do see some hospitals investing more and more in adding additional labs and potentially prioritizing as best they can for these types of procedures. So to date, we don't see a big constraint. There's still a pretty healthy backlog across most centers for WATCHMAN, FARAPULSE, or concomitant, which, I guess, is a good sign for the future. And as Ken talked about earlier, this ASC potential ruling, which will go into effect in 2026, if it all goes through, we see about 20 states in the U.S. that potentially could act on this that don't have certificate of need regulations that would represent about 40% of the AFib volume. So that won't happen overnight. But over time, you'll see more and more of the PVI posterior wall, these types of procedures moving more to ASC, which will provide some additional capacity. So I think the ASC ruling will help with capacity, and we continue to work on technology solutions to drive better procedure time, more productivity and concomitant procedures. There was a second part of the question. Lower volume centers, for sure, we put the majority of focus in Europe, in the U.S. and Japan on the highest volume centers for obvious reasons. But as we continue to expand the rollout in Europe, primarily in U.S. and Japan, we are moving into some smaller centers as we continue to scale our commercial capabilities and our clinical footprint.

That's right.

Maybe I think Mike talked about the concomitant percentage, about 60% of all procedures now or all of your doctors have done at least one concomitant procedure. How has that trended over maybe the last six to twelve months, especially following the OPTION readout? And then I do have a quick follow-up.

To clarify, the 60% refers to the electrophysiologists who perform WATCHMAN implants. This group includes interventional cardiologists and structural heart physicians, as well as electrophysiologists. Among those electrophysiologists who conduct these procedures and also perform ablations, 60% of them who have done WATCHMAN implants have also begun to adopt concomitant procedures. It's important to note that although some physicians were already integrating concomitant procedures before the Centers for Medicare & Medicaid Services implemented the unique Diagnosis-Related Group payment for them, reimbursement for hospitals for these procedures only started in October of last year. Additionally, the OPTION data was released in November of last year. This is still a relatively new development, and physicians are working to integrate it into their workflows. Thus, we continue to observe significant growth in the adoption of concomitant procedures.

Okay. Yes, Dr. Stein, I know we're early days there. I guess the follow-up question would really be kind of dovetailing off of David Roman's question about the breadth of the portfolio that you have here. In mapping now with concomitant with obviously best-in-class products with WATCHMAN by a mile. Just your ability because I know a big concern that investors have is just competition coming in, you've got some established competitors with big mapping footprint out there. So just your ability to kind of defend yourself or just said another way, the most you're building here between OPAL, all the catheters plus concomitant cases. How wide is that moat in your opinion and how much wider can it get?

We aim to be the clear leader in PFA and the top overall in EP as we expand our portfolio. A strong example is our performance in Japan, where we hold a third of the market despite not having a persistent label indication, which our competitors do. Now, we're clearly leading in Japan and will be adding a persistent label. We believe we have unique advantages with FARAPULSE that are highly differentiated, as Ken has outlined. You'll see more details at Investor Day about our portfolio expansion. The underlying market is currently growing nearly 20%, and while this growth will slow over time, we expect it to remain in the mid-teens, making it the largest and fastest-growing market in med tech. Although there wasn't a question on this topic, I want to highlight our Interventional Cardiology team. Our ICTX business is among the largest in the company and, while not discussed today, it is important. Many companies overlook coronary therapies, focusing on drug-eluting stents, but it demonstrates how our team is bringing focus across all our business units. We're moving into faster markets with unique technology supported by clinical backing. This quarter, our coronary therapies business grew by high double digits, which is rare in this field. Much of this growth is driven by our imaging business and the successful execution of our AGENT DCB clinical study, along with positive coverage decisions and commercial execution. This highlights how our business units are revitalizing their portfolios in a market typically perceived as slow, achieving strong double-digit growth.

Thank you for joining us today. We appreciate your interest in Boston Scientific. If we were 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 of the pertinent details for the replay. Thanks, everyone.