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Boston Scientific Corp. (NYSE:BSX)

Q1 FY08 Earnings Call

April 22, 2008, 8:30 AM ET

Executives

Larry Neumann - VP, IR

Samuel R. Leno - CFO

James R. Tobin - President and CEO

Paul A. LaViolette - COO

Analysts

Robert Hopkins - Lehman Brothers

Glenn Reicin - Morgan Stanley

Frederick Wise - Bear Stearns

Michael Weinstein - J.P. Morgan

Joanne Wuensch - BMO Capital Markets

Christine Stuart - Credit Suisse

Bruce Nudell - UBS

Larry Biegelsen - Wachovia Securities

Matthew Dodds - Citigroup

Philip Legendy - Thomas Weisel Partners

Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Q1 Boston Scientific Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. [Operator Instructions]. And as a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Vice President of Investors Relation, Mr. Larry Neumann. Please go ahead.

Larry Neumann - Vice President, Investor Relations

Thank you Rachel, and Good morning everyone. Thank you for joining us. With me on the call today, our Chief Executive Officer, James Tobin, Chief Operating Officer, Paul LaViolette and Chief Financial Officer, Sam Leno. We issued a press release toward the evening regarding our Q1 2008 results. Key financials are attached to press release, and we have also posted to call schedules to our website which you may find useful as well.

The agenda for this call will include review of the Q1 financial results, as well as Q2 guidance from Sam, an update on the CRM business from Jim, our review for the Cardiovascular and other businesses from Paul and a CEO perspective from Jim, followed by question-and-answer session.

Before we begin, we will be making forward-looking statements on the call today. So, I would like to remind everyone Safe Harbor Statement. This call contains forward-looking statements, the company wishes to caution the listener that actual results may differ from those discussed in forward-looking statement, and may be affected by among other things risks associated with our financial performance, our restructuring plan, our programs to increase share holder value, new product development, regulatory approvals, in additional in growth strategy, company's overall business strategy, and other factors described in company's filings with the Securities and Exchange Commission.

I will now turn it over to Sam for his view on first quarter results.

Samuel R. Leno - Chief Financial Officer

Thanks, Larry. Let me begin our first quarter results by first discussing revenue. Consolidated revenues for the first quarter was $2.046 billion, approaching the high end of our guidance range of $1.965 billion to $2.080 billion. This represents a 2% decrease compared to the first quarter last year, and a 5% decline compared to the last quarter's revenue. During the quarter we completed the divestures of 5 non-strategic businesses, previously announced. Excluding the impact of these businesses in both years, consolidated revenue for the first quarter was $2.015 billion, representing a 3% increase over the $1.951 billion in the first quarter of the last year, and a slight increase over the last quarter's revenue of $2.007 billion.

Compared to the foreign currency contribution assumed, our first quarter guidance range foreign exchange contributed deposits $7 million. Without this incremental benefit revenue would have been $2.039 billion, exceeding the mid point of the range, and overall the contribution of foreign currency in sales growth for the first quarter of 2008 was approximately $100 million, or positive 5%.

Compared to the first quarter last year excluding divestures, domestic revenue declined 4% while international revenue increased 15% reported or 2% in constant currency. Paul will provide more detail on the drug-eluting stent market dynamics for the quarter. But I will share the revenue results to view it a high level.

World wide DES came in at quarter to $28 million exceeding the mid-point of our guidance range of 395 to 455, in that 8% in the first quarter of 2007. Geographically, U.S. DES revenue was $218 million, at the low end of our guidance range of $215 million to $235 million and 25% below the first quarter of last year.

International drug-eluting stent sales were $210 million, approaching the high end of our guidance range of $180 million to $220 million and representing an increase of 20% over the first quarter of 2007. Before Jim provides more detail on the CRM market, I'll review some of the specifics with CRM sales here.

CRM, once again had a strong quarter, posting the highest 4 million revenues since the acquisition.

Important revenue of $565 million represents a 5% increase over the $539 million in the first quarter of 2007. In U.S., sales and revenues were $356 million representing a 2% increase over the prior year while international CRM sales were $209 million, an increase of 10% over the prior year.

With respect to the defibrillators, world wide ICD sales of $411 million were at the mid point of the guidance range of 395 to 430, and 3% over the first quarter of 2007. ICD sales in U.S. was $274 million, that was inline with last year and it's a low end of our guidance range of $270 million to $290 million. International ICD revenue of $137 million was at the high end of our guidance range of $125 million to $140 million, and represents a 9% increase over last year. Paul will provide greater details in the rest of our business but I will make a few comments on global revenues.

Worldwide revenue, adjusted for divestitures and excluding drug-eluting stent in CRM continued its strong performance with $1.022 billion in revenue for the quarter, representing an 8% growth over the first quarter of 2007. This includes continued strong performance by our Endosurgery business with a 9% increase over the prior year, including endoscopy sales of $229 million, representing an 11% increase over the prior year.

In addition our neuromodulation business continued its strong performance with 40% growth over the prior year. In summary, while recovery of our two largest markets remain slow, our diversified portfolio of other businesses, allow us to achieve 3% growth overall in the quarter. Reported gross profit margin for the quarter was 71.7% which was 120 basis-points higher than the fourth quarter 2007, and 110 basis-points lower than the first quarter of 2007. Adjusted gross profit margin for the quarter excluding acquisition and restructuring related charges was 71.8%, with 120 basis-points higher than last quarter and 110 basis points lower than the first quarter of 2007. As well as the case, during all of 2007 revenue mix was a key contributor to the lower gross profit margin compared to prior year.

The low index of drug-eluting stent sales to total revenue resulted from... resulting from both the client in the U.S. drug-eluting stent market versus prior year, as well as our estimated market share in the quarter contributed to the reduction in gross profit margin versus prior year. Additionally, the weakening of the U.S. dollar and the resulting settlement of foreign currency hedge contracts in cost of sales eroded our gross profit margin by 45 basis-points compared to prior year.

Our reported SG&A expense in the first quarter was $661million which was 10% lower than the first quarter 2007, and 6% lower than the last quarter. Adjusted SG&A expenses excluding restructuring related items were $652 million, which was $74 million or 10% lower than the first quarter of last year and $52 million or 7% lower than last quarter.

We continue to execute well in our restructuring plans. We are tracking favorably for expectations at the end of the first quarter of 2008, which will result in attributed cost improvements for the company as we move forward. The reported research in development remained 12% of sales with spending of $244 million quarter, which was down $45 million versus Q1 2007, and down $12 million compared to Q4 of 2007.

We continue to see the benefits of swift execution of our restructuring plans which resulted in reduced R&D spending for the quarter. And we believe that our reduced R&D spending, driven in a large part by rapidly limiting projects, and at lower link limited success will not negatively affect our ability to restore short and long-term profitable sales growth.

I'm pleased to say that we continue to make significant progress and executing a number of the shareholder value recruitment program so we have been discussing publicly in the last few quarters. We reported GAAP operating profit of $580 million, quarter and have an adjusted basis excluding acquisition in restructuring related charges, as well as amortization expense and divestiture related gains.

Operating income for the quarter was $530 million and 25.9% of sales, up 230 basis points from the fourth quarter 2007, and up 410 basis points in the first quarter of 2007.

I'd like to address the GAAP selling items in a bit more detail here, our total amortization expense was $123 million pre tax, which was $12 million lower than the first quarter of 2007. And as a result of the divestitures, we continue to anticipate a decrease and our annual amortization expense is approximately $50 million for full four year of 2008, lowering future quarterly amortization expense to approximately $135 million.

We recorded acquisition related charges of $13 million pre-tax associated with our recently announced license agreement with Surgi-Vision to develop MRI safe cardiac device technology. We recorded $44 million pre-tax of restructuring related charges in the quarter, which are primary related to severance, retention and third party agreements from conjunction with our previously announced extensive reduction initiatives. These charges are in line with the guidance we provided to you during last quarter's earnings call.

We also reported pre-tax gain of $215 million or $114 million after-tax, primarily related to the sale of our fluid management business during the quarter. The cumulative effect of these pre-tax items was $50 million in reduced adjusted operating profit compared to GAAP operating profits. Interest expense was $131 million in the quarter, which was down $6 million in the first quarter as we prepaid $625 million of net debt in the first quarter. Interest expense was $10 million lower than the first quarter of last year primarily as a result of our $1.375 billion debt pre-payments during our past 12 months.

Our average annual interest expense rate of 6.3% of the quarter was unchanged from last quarter. In other net income, it was $13 million including net charges of $6 million primarily related and associated with write-downs to our investment portfolio offset by gains and investment sales.

Interest income was $17 million in the quarter, which was $1 million lower than last quarter and $5 million; lower than the first quarter 2007 primarily due to lower investment rates. Reported GAAP tax rate for the quarter was 30% and the adjusted affected tax rate was 13%. Our tax rates for the quarter do not reflect any benefit for the U.S. R&D tax credit which expired at the end of 2007. In addition, our tax rates for the quarter reflect discreet tax benefits of $43 million, our adjusted Q1 affected tax rate without discounted was a little over 23% as expected and communicated during the first quarter guidance segment of our Q4 earnings call.

We anticipate that our annual operational affective tax rate of Q2 and Q3 will be approximately 23% and full year 2008 will be 21% including our estimated Q4 operational rate of 15% assuming that the R&D tax credit will be extended in the fourth quarter with retroactive effective date January 1st of this year.

GAAP earnings for share for the first quarter was $0.21 compared to a loss of $0.31 per share for the fourth quarter and also compares a positive EPS $0.08 in the first quarter of last year. GAAP results from quarter include $0.05 for the acquisition, divesture and restructuring related charge that I mentioned earlier. Our adjusted earnings per share in the first quarter excluding amortization expense, restructuring and acquisition related charges as well as the gain in the sale of non-core businesses was $0.24 for the quarter compared to $0.24 last quarter and $0.17 in the first quarter of 2007.

As a reminder, the first quarter of 2007 also included negative $0.09 cents per share related to the company's 2006 acquisition and guidance corporation and amortization. A $0.24 achieved in this quarter is well above our guidance range of $0.15 to $0.020. Included in this $0.24 is a $0.03 benefit for this pre-tax items and $0.01 benefit associated with divested businesses. Excluding these items, adjusted earnings per share for quarter would have been $0.20... for the quarter at the high-end of our range. Stock compensation was $41 million in all share calculations were computed using $1.5 billion

shares outstanding.

Turning to working capital management. Day sales outstanding were 67 days at the end of the quarter versus the increase of one day compared to last quarter and an increase of five days compared to the first quarter in 2007. The one day increase was largely related to the CapEx impacts from accounts receivable. Days inventory on hand were 123 days, up 8 days compared to the fourth quarter of last year and down three days from the first quarter of last year. Inventory of the quarter was higher than the last quarter due to inventory bills necessary to support upcoming new product launches as well as a transition time to new production facilities.

First quarter 2008 operating cash flow was $266 million, an increase of $325 million from the negative $59 million of operating cash flow in the first quarter of 2007. The improvement was primarily due to the $386 million tax payment in the first quarter of last year related to the gain of the sale of the guidance. Cash grew business to add that partially offset by higher restructuring payments of $67 million in the first quarter of this year.

Operating cash flow declined by $22 million compared to the fourth quarter of last year primarily due to the timing of annual employee incentive payments and additional restructuring payments that were partially offset by lower interest payments due to timing of summer annual interest, payments on our senior notes reduced working capital and higher operating income. Capital expenditures were at $57 million in the quarter which is $33 million lower in the fourth quarter of 2007 and $39 million lower than the $96 million recorded in the first quarter of 2007.

Free cash flaw was $209 million in a quarter representing $364 million increase over the first quarter of last year due to improved operating cash flow and lower capital expenditures. Free cash flow was largely in line with our fourth quarter 2007 results which were $218 million. We receive net proceeds $1.3 billion in the divestiture of cardiac surgery, vascular surgery, fluid management being in excess the advanced managed, auditory and drug path business, and a former cardiovascular businesses.

We used a portion of the proceeds to pay the $650 million of fix payments due to former advance balance shareholders within their stimulation business and we nearly completed the monetization of the public investment portfolio and are in a process of monetizing majority of our private portfolio.

During the first quarter of 2008, we receive $37 million primarily from the sale certainly of our private portfolio investments, the tool remaining book-value of our equity investment portfolio at the end of the quarter, just $321 million.

We recorded gains of $15.05 million in the quarter, primarily associated with investment sales, and these gains were offset by write off of $21.6 million in the quarter. We closed the quarter with $7.568 million of gross debt and $1.739 million of cash resulting in net debt for first time below $6 billion at [ph] $5,829 million. Net debt was $1.7 billion lower in the first quarter 2007 as a result of prepaying approximately $1.3 billion with gross debt while increasing our cash on hand by $14 million.

In the first quarter, we reduced net debt by $908 million by prepaying $625 million in bank debt, an increase in cash on hand by $287 million. Our bank debt repayments in the first quarter 2008 included the remaining $200 million of debt due in 2009, as well as $235 million of our 2010 debt maturities. We now saw our initiatives to improve surely the divested time of our third quarter earnings call in 2007. We told you that we would provide updates at each quarter, I'm pleased to say that we are on track with processes and the activities that will drive proceedings targets that we have previously disclosed.

We said that we would exit 2008 remembering annualize savings and operating expenses of $475 million to $525 million and plan to achieve 90 plus percent of those savings in 2008. We also announced that we would be eliminating 4300 positions with 2000 associated with the businesses, identify for divestiture as well as 2300 from ongoing business reductions. Our savings initiatives are running slightly in this schedule as evidenced by our first quarter 2008 operating expenses. And with respect to headcount, our divestitures were completed during the first quarter of 2008 and the associated 2000 positions have accomplished out of the company as planned.

With respect to our restructuring reduction, we're on track with our original trend line through first quarter 2008 with more than half of the positions eliminated. Financial sales guidance for the second quarter of 2008, consolidated revenues are expected be in a range of $1,950 million-$2,75 million, operating is 1% to 7% from the $1,932 million recorded in the second quarter of last year excluding divestitures. The current foreign exchange rates hold comps for the second quarter, a contribution from foreign currencies should be approximately $90 million in 4% of our growth. For drug-eluting stents we are targeting world wide revenue to be in the range of $360 million to $405 million with U.S. revenue of $160 to $185 million while our U.S. revenue will be in the range of $200 million to $220 million. Included in our U.S. drug-eluting stent in total sales estimates for the quarter is a sales return reserve of approximately $40 million for Taxus Express related to the plan U.S. launch of Taxus Liberté in the third quarter.

Our defibrillator business, we expect revenue of $410 million to $440 million worldwide with $270 million to $290 million in the U.S. and $140 million to $150 million, outside the U.S. We are also reaffirming our full year sales guidance of $8 billion to $8.2 billion, as discussed during our fourth quarter 2007 earnings call.

For the second quarter, adjusted earnings per share excluding charges with limited acquisitions, divestures and restructuring, as well as the exclusion of amortization expense are expected to be in a range of $0.14 and $0.19. This range includes the three set negative impact of expected Taxus Express returns, as well as inventory opstalistic rate after resulting from the expected U.S. launch of Taxus Liberté as discussed above. Given our Liberté large assumption, we should get $0.02 of this $0.03 back in the third quarter when we replace we turn the Taxus Express products with Liberté.

This range also includes the potential of Xience and Promus approval in the second quarter. [indiscernible] expects earnings per share on a GAAP basis in the second quarter of 2008 of $0.04 to $0.09 and we expect to record restructuring related charges of $40 to $50 million or $0.02 of earnings per share in the quarter.

We are increasing our full year adjusted earnings per share guidance on a forward sense of favorable discrete income tax items, and income from divested businesses that we experience in the first quarter of this year, therefore our new full year 2008 adjusted earnings per share guidance is 83 to $0.84

As a remainder, we will record a $250 million pre-tax gain due to us from Avid when they receive U.S. FDA approve of Xience and this gain is not in our guidance for the second quarter.

That's it for guidance, our second quarter earnings call will be at 6:30 AM Eastern Daylight Time on July 22, 2008. Now let me turn over to Jim, to review the share investment.

James R. Tobin - President and Chief Executive Officer

Thank you, Sam. Sam's taking you through the numbers. I'm going to make some more qualitative remarks on part of making CRM. Let me start by saying that the market remains somewhat growth challenged. We see double-digit growth outside the United States, that essentially flat inside, 5% overall with both defibrillators and pacers around that number. We think that our share remains stable in Q1, but with Medtronic still to report, we don't have all the information. Against that back drop, yesterday we marked the second anniversary of Boston Scientific acquisition of guide, for the past two years our over riding focuses has been the rebuilding of our CRM foundation, and I believe we have made remarkable progress in that.

We've reengineered the way we designed, build and test our products. We have refocused our R&D process and we have developed an impressive pipeline of products that are now beginning to roll out. During the past quarter alone, we received regulatory approval for seven CRM products, and we've just received an [indiscernible], last week in Japan.

With a renewed commitment to clinical excellence, we plan to add significantly to the bottom value of revenue based mix in the coming years. As the CRM market continues to recover, we're well positioned to take advantage of the substantial opportunities before. Our intention is now directed towards booming revenue when the most recent sales numbers indicate, we are moving in that direction. And this past quarter, we have posted our best sales number since the acquisition despite the new product will not come in for '08 in the quarter. With the CRM warning letter now, well behind this and our new qualities business employees, renewed engineering resources from remediation back in the product development.

We've to first lay the plan product launches for 2008 which began in earnest this past quarter. In January, we announced CE market will go for the tag in CRTV intelligent ICD, entirely new platform within a month in worlds smallest in administrate energy devices and offers significant advantages including extended battery life, self correcting software and improved programming technology.

Both COGNIS and TELIGEN are currently pending FDA approval which we expect to receive in the second half of the year. In the U.S., we announced the launch of the first Boston Scientific brand, its all generators, the company in ICD and [indiscernible] CRTV. We also continue to add to our industry leading portfolio that would be leased, in March we receive European approval for the ACUITY Spiral Leads and we anticipate the FDA approval in that during Q2.

ACUITY Spiral features the smallest of the lead tip profile on the market. Just last week we announced regulatory approval, reimbursement and of the ACUITY Spiral that will leaded in Japan. And we expect Japanese approval of the reliance G- defibrillators lead in Q2.

We expect to launch now Pacemaker in the U.S. and Europe next month, this is our first Boston Scientific brand of Pacemaker, and another example of a new platform built on the foundation of our enhanced quality processes and standards.

To improve our device monitoring capabilities, we also launched our LATITUDE

4.0 upgrade. We plan an additional software release in the launch of new in home communicators later this year. These will be followed by expansion in the selected European countries in early '09 to support our COGNIS intelligent makeshift. We are approaching a 100,000 patients involved on the LATITUDE system, and we expect this strong with options to continue as our next generation platforms are ruled out. We are also refocusing attention on clinical excellence, building on more than a decade of landmark studies sponsored by guide in Boston scientific.

We are in the final stage of completing enrollment in our mid CRTD, CRT trial, which is designed to determine whether CRT therapy slows the progression of heart failure in minimally symptomatic patients. It is an event driven trial, powered to support its primary end point with an enrollment of 1820 patients and long term patients follow up. We expect it to expand on the recently announced results of the 610 patients reverse trial which also study patients with early stage heart failure.

We are hopeful that CRT will confirm the potential of CRT therapy to slow the progression of heart failure through earlier intervention. In addition to this trial, we are initiating 8 new clinical studies this year alone, with both U.S. and international patient enrollment. We have taken advantage of the past 2 years to put it out in some order. We enter our third year with better quality systems, focused R&D spending, a stronger pipeline, no regulatory restrictions, and perhaps most importantly, a talented dedicated team that is proved what it can do in this very good one.

Our belief in our people, our products and the therapies is greater than ever. I will share some additional perspective with you later in the call, but now I am going to turn it over to Paul LaViolette.

Paul A. LaViolette - Chief Operating Officer

Thank you, Jim and good morning to all. I will focus my comments on the DES market and our performance, and the strength of the rest of our businesses.

Three general statements; First, the DES market is now exhibiting clear evidence of recovery, and we are performing well against new competition. Second, our quality and warning letter status continues to progress as I stated a number of times earlier, I will not comment further on the details of that progress but it is consistent with our prior expectations. Third, we are seeing trend in softness in some of our leading businesses due to the lack of new product growth. We are refilling pipelines, but this quarter and next, we will continue to exhibit core franchise pressure. I'll elaborate on this later in my comments.

The worldwide DES market was $1.027 billion Q1, down 9% from Q1 of '07. With more concentrated impacts on the incurred trial and DES penetration loss, the U.S. market was up by 21% to $422 million but began strengthening following the stability achieved in recent past quarters. The U.S. market in Q1 was larger than either Q4 or Q3 of 2007.

PCI volume in the quarter was 251,000 procedures, a 5% gain from Q3 '07 which represented the low point in volume post ACC 2007. Q1 also exhibited sequential growth over Q4 but average daily volume was equivalent. If these trends continue, Q2 of '08 would be the first quarter to show year-over-year volume growth, this outlook is further reinforced by our bell weather product index which showed sales of non-stent PCI products in Q1, returning to 98% of prior year levels at the highest in flat ACC. Well, PCI showed some improvement, penetration added back further market value.

Penetration in Q1 was 63% of 1% sequentially, independent MRG they had reported penetration rates of 63, 64 and 67% for the three months in the quarter although these rates seem a bit high it was, we believe they are directionally correct. Combining procedure volume and penetration, the U.S DES unit market was 333,000 or 4% higher than the average level produced for the last three quarters of 2007. Based on our projections for Q1 BSE held 52% DES share in the U.S market the first quarter with the third competitor, although difficult to predict into all three competitors report sales, we believe the endeavor stands held 8% in the quarter... we believe endeavor uptake will be based on favorable deliverability and lower price and it has been limited by efficacy data and that the launch made by two in the low to mid-teens market share.

This result highlights the resilience of the Turkish [ph] brand and goes very well for our performances upon approval of the promised end with differentiated evolveness, efficacy and support deliverability. Taxes average daily revenues increased in March over February at the height of the Endeavour launch, further demonstrating its staying power. Taxes pricing was down 1% sequentially and 6% versus prior years consistent with stated expectation with EPS and at a similar rate of change to bear number of terms and diluted capitals.

Although risks of a more rapid price decline has increased with a lower price competitor, taxes has thus far retained its price premium over sight and is well above Endeavor commence or as we believe with its clinical value propositions. Overall, with healthy procedure volume and a penetration reversal even in the presence of a third entrant, taxes revenues of 218 million in the U.S were down sequentially, a comparatively low 3%. We believe this is a good sign for our cardiovascular business.

The international DES market also showed signs of hope. Europe's 286,000 PCI procedures were higher than in the prior four quarters and the rest of the world markets were stable. Penetration remained 46% for Europe and approximately 60% elsewhere. Boston Scientifics' market shares remain strong in the upper 30% range in Europe and shares also stabled from Japan in the mid 40s. When combined with the U.S., this created once again the number one overall market position with 42% global share. This is comprised of the global and leading taxes brand and continued fast growth of PROMUS altered by the international launch of PROMUS 2.25 and late Q1 reimbursement in France.

Our same pipeline continues to make very solid progress. We are confirming expectations of launching the taxes over day and PROMOUS end platforms in mid 2008. The global strength of taxes over day and the promising of our deliverable PROMUS alternative 45 DES expectations. Taxes item, the first 2.25mm U.S. DES products and our instant reach notice indication expansion are also depending approvals and our expected mid-year. And acute indication may also follow pending outcomes of the horizon we announced at TCT.

The taxes element clinical trials will likely complete enrolment this year and PROMUS element having now completed design review, will be in its ITC trial next year. These two next generation platforms will set a new standard for DES portfolio performance with early commercial activity targeted before the end of next year.

Looking briefly at other CV lines, our U.S. stent business from 5% year-over-year and gained share in the quarter on the strength of the Liberté product performance. Our leadership in balloon dilatation strengthened with 64% share and 4% year-over-year growth and this will be bolstered by the Apex balloon launch in Q3.

Our IDUS platform continued excellent performance based on utilization gains and the eye-lab technology benefits, yielding 11% U.S. capital growth and 22% global growth in dimiging [ph] systems. Our cardiovascular leadership was also leaded by growth despite TCI'S offer in both the cutting balloon and of any product lines. Overall, we believe we are extremely well positioned with the number one DPS position, sole possession of a two-drug offering in long with the franchise strength and improving fundamentals in the PCI and DPS markets.

We believe our relative strength is the over all cath lab leaders will increase over the next two years. We had areas of strength and weakness across our remaining portfolio of businesses. Growth has slowed in some areas due to new product resource diversion to warning letter resolution. This focus is making us a better company now and we believe this growth pressure will also moderate in the coming quarters as new product cycles accelerate just as we have seen with the CRN business now one year remove from its warning letter status.

Two areas of softness were peripheral interventions and neurovascular. We like our ability to lead in these markets over time and our new product schedule over the next 9 to 18 months will be increasingly productive. Neurovascular experienced negative growth due to cord's reentering in coils and our first ever competition in stent. Despite this short term pressure, we retain 48% coil share, 55% in microcatheters, 68% in guidewires, 71 % in stents and 50% overall fro neurovascular. This position combined with our 10% procedure growth, and upcoming coil and stent product launches creates reason for optimism.

Similarly, in protocols, we are number two overall and a growth market, number one in multiple categories, we have pending colladed [ph], leno, and billiary stent approval and expect gains in balloons and wires from new product improvements.

We have a similar outlook in urology and gynecology. As the historic leader in the neurology, we hold 65% share in stone management today and have gained the number 1 position in DTH therapy aided by 28% pro-league system growth in the quarter, positioning us well for continued neurology growth. We have a similar status with gynecology, continuing to perform well with 7% public floor and 10% user in therapy growth in the quarter. Endoscopy remains very strong, growing 5% year-over-year with accelerating performance in our largest franchises including U.S. billiary and homeostasis growth rate of 17 and 15% respectively.

Overall, we have exceedingly strong platforms, large growth markets and leading positions but clear, short term growth challenges as we shift engineering teams back toward a focus of filling our pipelines. This is happening now and will gain momentum through 2008 and we will increasingly yield beneficial results in the second half and through out next year.

I want to close my comments by highlighting neuromodulation, which continued impressive growth in U.S. at 38% due to competitive and clinical advantages of our physician systems, market share gains and increasing success in side-by-side patient therapy evaluation using our ONG device. This strong showing in the spinal cord stimulation market is a positive leading indicator for our future in neuromodulation.

That concludes my remarks, and I will turn it over to Jim to provide his CEO perspective.

James R. Tobin - President and Chief Executive Officer

Thank you, Paul. I'm going to provide some brief on the quarter and then will open it up for questions.

You've heard the numbers so you know we came in the middle of guidance range on sales and that adjusted EPS was $0.24. Sam walked you through the $0.24, but let me say that our earnings benefited from ongoing expense management as well as comparable tax guidance. Overall, we continue to make good progress during the quarter. In drug-eluting stents, we maintain their leadership positions in both the U.S. and worldwide markets despite arrival of a strong competitor in U.S.

At last month's meeting of the ACC, we saw further evidence with the data type continues to turn in the direction of drug-eluting events. Once again, new data show that in addition to being more effective drug-eluting stents are as safe or safer than their biomedical counterparts, and we expect to receive FDA approval in the not too distant to two new drug-eluting stents, taxes paying from, and CRM and number points there reiterate. We receive date approvals in less than four months. I said earlier, yesterday was the second anniversary of our acquisition of guiding over the past two years, we have transformed our CRM organization across a range of metrics from quality to R&D to pipeline to clinical science and beyond, we have built or actually re-built a world class organization,

We have confidence in the market and we believe at what we cover, and we are well placed and have hardened confidence in ourselves and then as an organization. Elsewhere neuromodulation played an impressive performance year-over-year growth by 40% and in those surgeries, turned in another solid quarter with 9% growth.

We continue to reduce our net debt and increase our financial flexibility. Over the last 12 months, we've reduced net debt to $5.8 billion that number starts with 5 now. And, with the completion of the sale of 5 non-strategic businesses, we have further streamlined and simplified the organizations. We have also significantly enhanced our ability to focus on our remaining strategic businesses and into invest for profitable growth in those businesses. So another core progress and one in which we continue to move in the right direction. There's a lot if we look forward to in the rest of the year as we anticipate corporate warning letter restrictions being lifted. Taxus Liberté and Cognis being approved, U.S. approval of COGNIS and TELIGEN, the carotid wall stent being approved, the results of the number of clinical studies and the impact of our continued expense reduction when we start restructuring programs on the bottom-line.

So with that, let me turn it back to Larry, and we will now moderate the Q&A.

Larry Neumann - Vice President, Investor Relations

Thank you, Jim. Rachael, let's open it up for questions and in efforts to enable us to deal with many questions as possible in remaining time, I would request that to ask no more than two questions at a time.

Question And Answer

Operator

Thank you, [Operator Instructions]. And, the first question is from the line of Bob Hopkins with Lehman Brothers. Please go ahead.

Robert Hopkins - Lehman Brothers

Hi, thank you. I've a question for Paul, and a question for Sam, I'll start with Paul. Paul, could you just give us a senses to where Medtronic exited the quarter in terms of their endeavor market share and could you elaborate a little bit more on how much you think their discounting on drug-eluting stent pricing, thank you, and that I want for Sam.

Paul A. LaViolette - Chief Operating Officer

I would say that--- there 8% in the quarter and having fully launch or two of the three months that probably reflected above there sort of waded average for the quarter so, I wouldn't take their exit rate around 12 or 13 and that's what we are using based on the status of their launch and their current position to project as I indicated their plateau share in the low teen division.

I won't comment specifically on pricing, other than just as we see quite aggressive pricing, it's generally tied to non performance requirements so there is a fair amount of entry level pricing if you will and as I said, I believe that is reflected above the market's perception of the clinical utility of the device.

Robert Hopkins - Lehman Brothers

I am sorry, did you say, is it roughly 10 or 20% discount, or you not commenting on what the discount is?

Paul A. LaViolette - Chief Operating Officer

I won't comment specifically on our perceptions of the pricing differential, I believe MRG has reported that their discount is around 7 plus percent, and we will use that as the starting point.

Robert Hopkins - Lehman Brothers

Okay, and then, thank you. And then for Sam, Sam just to clarify on your $0.83 to $0.84 guidance, does that include the $0.20 number or the $0.24 number for Q1, and for Q2 does it assume the mid point of your range or the extra, or do you add back the $0.03 issue that you talked about related to Liberté?

Samuel R. Leno - Chief Financial Officer

Yeah, first of all, it includes the $0.24 from Q1 which is why I added the $0.04 for full year previous range that was $0.79 to $0.80. So it includes that. In Q2, it includes an assumption that Liberté will launch in the third quarter but when that launch is, once we know the launch date there are obligated to provide for the return of any in previously sold that was TAXUS Express, and so the ---it also includes the $0.03 in the second quarter and it get back of $0.02 to $0.03 in that third quarter, assuming that the cadence of all that happens as we are expecting.

Robert Hopkins - Lehman Brothers

Okay, and just to be clear in cross cutting, are you sticking to the original guidance that you gave because it seems your already ahead of the schedule in cross cutting, so, is there something that's going to be added back in throughout the rest of the year, or just wondering how wouldn't be that should exceed the original targets, thank you.

Samuel R. Leno - Chief Financial Officer

Nothing, nothing will be added back from the portion of expense reduction that's associated with restructuring. We do have a little more expense reduction that is not part of restructuring with the open acquisitions or things like that, nothing material but we should see continued improvement. And the racing of expenses because when we're through all the programs yet, as we mentioned coming out of the back part of 2007, we had more that half of the 2300 individuals and related expenses, that would be reduced over the, in the system as we enter this year plus throughout the course of this year we have a number of business process improvement programs that would help us get out the rest.

Robert Hopkins - Lehman Brothers

Thank you, very much.

Samuel R. Leno - Chief Financial Officer

Okay.

Operator

And the next question is from the line of Glenn Reicin with Morgan Stanley. Please go ahead.

Glenn Reicin - Morgan Stanley

Good morning folks, can you hear me?

Unidentified Company Representative

Yes, Reicin.

Glenn Reicin - Morgan Stanley

Okay, great, just one couple of questions about warrant house keeping issue related to the restatement of sales, it looks like you took oncology sales and put them in Cardiovascular, and then you took, is it Embolic protection only and put that in neuro?

Paul A. LaViolette - Chief Operating Officer

Yeah, the oncology business got distributed to Cardiovascular Endo and endovascular, and the divestment of the U.S. access business came out of them oncology all together, so it's spread among those three businesses.

Glenn Reicin - Morgan Stanley

Also, it's not the clean break among product lines?

Paul A. LaViolette - Chief Operating Officer

Inadequate break down.

Glenn Reicin - Morgan Stanley

Okay, just to make it fun here. Alright, so can you talk a little bit about some of the businesses here, you said that peripheral was weak, you used to provide that detail in terms of how that business would do as a discrete business, talk a little about what the points that business was within and without the oncology piece of it, and then Jim, if you can talk a little bit about CRM U.S., I would think there has to be very different performances between Europe and Japan, maybe talk a little about the transition to direct sales in Japan?

Paul A. LaViolette - Chief Operating Officer

Event before points is your first question, let me go back to your question on this, on our website at the end of this call, you'll see all of our sales a for each of our businesses restated, now we haven't give you the valuable map of ---you will see the restatement of all of our numbers for all the foreclosure to 2007 to make the remodeling issue.

Glenn Reicin - Morgan Stanley

Okay that's good

Paul A. LaViolette - Chief Operating Officer

Yes, and Glenn, just on the peripheral business. I think this business is one of our legacy businesses is caught in the conversion of resources back to pipeline focus, so we had some weakness in our stent business that is related to the anticipated availability of our FX and wall stent franchises is obviously, neither of those yet approved. Core balloons, PK balloons actually performs well, and we expect that to expand based on the launch of additional Sterling devices, Sterling you may know is the apex technology, also we think that's going to be a leading franchise going forward.

We did have some weakness in the quarter related to a backlog on our trial balloon system that is resolved and should pick up steam in the rest of the year, and basically the rest of the franchises is we're growing with good market including some enhanced performance by ours deployed products which we launched last year to replace the [indiscernible] live wire.

Glenn Reicin - Morgan Stanley

Okay, just to clarify that you said balloons were up 4%, was that units or total?

Paul A. LaViolette - Chief Operating Officer

I didn't say 4% no, the balloons were up with the market but I didn't have the number, we can get you that number offline.

Glenn Reicin - Morgan Stanley

No, I thought you said 4, the dilatation was up 4%.

Samuel R. Leno - Chief Financial Officer

In my commentary earlier, I said that coronary balloons were up 4%.

Glenn Reicin - Morgan Stanley

And that's dollars or units?

Samuel R. Leno - Chief Financial Officer

That was up dollars.

Glenn Reicin - Morgan Stanley

Dollars, okay great. And then, what about PTA and some of the accessories associated with the peripheral?

Paul A. LaViolette - Chief Operating Officer

We can provide you with a detailed offline but I don't have those numbers.

Glenn Reicin - Morgan Stanley

That's great, alright. CRM?

Paul A. LaViolette - Chief Operating Officer

We grew with the market in international, so we were up 11 along with what we think is, we only got half the market as far as numbers at this point but we believe that overall it was up 11. That's basically 9% in defib and 11% in pacers, what we are seeing in Japan, I was just over there, I guess two weeks ago, we are doing okay, I would say, what's really not happening, that I wish was happening is the CRT market doesn't seem to be gaining the penetration at the rate that we expected it would, so the mix between CRT and defib is not moving as quickly as we expected it would pacers on what they are. So, overall I would say that we are a little light on the Japan side, Europe has a flow in new products, and you have got a lot of [indiscernible] and I think are starting to get attraction that we haven't seen it while. So, ...

Glenn Reicin - Morgan Stanley

COT penetration was your... COT penetration or market penetration?

Paul A. LaViolette - Chief Operating Officer

Market penetration.

Glenn Reicin - Morgan Stanley

Okay.

Paul A. LaViolette - Chief Operating Officer

At least as far as we can tell.

Glenn Reicin - Morgan Stanley

Okay, thank you.

Operator

And the next question comes from the line of Rick Wise with Bear Stearns. Please go ahead.

Frederick Wise - Bear Stearns

Good morning, everybody. Jim, back to CRM a bit, you described in the U.S market if I heard you correctly as basically flat, on ACC, we spoke to a couple of docs who had largest centers and I was hearing some encouraging reports of possibly rebounding referrals, are you seeing that and may be just as part of that you came in the U.S. at the lower end of a narrow range, but just a little perspective on what got you there versus the upper end?

Unidentified Company Representative

We didn't see the growth in the U.S. market in Q1 that we had expected to see. Overall, it's probably 2% which is better than the couple other quarter we've seen recently but its not the even mid-single digits really, let alone 8% that we would expect to see arrangement. The... there are all signs of life, but its partly, at some places and not others, its largest centers, not smaller centers, its really hard to gauge whether there is... just sort of normal noise or whether there is anything really there. But, overall 2% revenue growth, that's not the... that's not good.

Frederick Wise - Bear Stearns

Alright, related to that, you all acquired curriculum announced your in terms of product core, may be talk a little about your AF strategy and just what kind of acquisitions might be seen more broadly for the cooperation?

BSX: Well, there's lot of interest in AF, as you know, there are lots of attempts at... of doing something about AF, and almost for those are a marginal utility that works all the time and takes less than 4 to 6 hours to do. Our focus is... we believe that the prior energy source is safe and is likely to be efficacious somewhere between 70% and 85% of the time. We also believe that once we get tools down that we can expect to see those kinds of results in kind of an hour and half, alright instead of the 4.5 to 6. So, the cool patience is there. There is absolutely no doubt about that. They queued with page forever to get lot of time, if we could do hour and a half procedures, we could start work in our way through that pool very quickly and reimbursement as there is for that, that becomes a very, very interesting market. We think with trio cord and their patent position and the technology that we end together has been able to develop, we got something here and we expect to be a player going forth.

Frederick Wise - Bear Stearns

Okay, I must stick in one last one for Sam. Sam, gross margin is at 71.7%, could you give us a little more perspective on where they trends from here, can they hold... you talked about mix costs and the hedge contract issues maybe help us think through a little bit, how those three elements are going to play out for this year, obviously you got a lot of new products coming and cost continue to come down I assume.

Samuel R. Leno - Chief Financial Officer

Its actually 71.8%.

Frederick Wise - Bear Stearns

Sorry, what's that?

Samuel R. Leno - Chief Financial Officer

Yeah, it's a growth profits initially in topic because so much it depends on how well we do in the drug-eluting stent market. So, we try not to give line item detail because it could move up one quarter down the next based on product mix and geographic mix. But I think, looking in the area of low 70's in gross profits foreseeable future is probably the right way to think about it, but I think if in quarter given, things that might happen with inventory reserves or product mix, it may bounce around a bit but what I can see in a short-term spike up in gross profits until we get through this year, see where we stand with drug-eluting stents in our market share, how much that, how much versus taxes then we get the full effect later this year in going to next year with a lot more focus on volume equipment programs and process improvements?

Frederick Wise - Bear Stearns

Thanks a lot.

Samuel R. Leno - Chief Financial Officer

Yeah, you're welcome. Before we go to the next question, let me go back and correct something I said as part of my opening comments, for those of you who heard me say 6:30AM was going to be our future earnings call, in case you like to sleep in, we're actually going to start 8:30 like we always do. That was our mistake by me. Operator?

Operator

And the next question comes from the line of Mike Weinstein with J.P. Morgan. Please go ahead.

Michael Weinstein - J.P. Morgan

Good morning and thank you for taking the questions. It's been to walk little bit on DHE, first for Sam to clarify, at your '08 EPS guidance, the adjust EPS guidance, does that include an EPS benefit from the $200 million milestone payment from Abet or non-approval?

Samuel R. Leno - Chief Financial Officer

It does not, that would be an up cycle.

A: Michael Weinstein: Perfect, okay. And then, for Jim the OUS ICT business was up 9% reported, I assume that flat-to-down constant currency, would do you think the OUSICT market is growing right now?

Samuel R. Leno - Chief Financial Officer

9% is what Q1 looks like for us. I think it's probably a little more than that overall, probably 13 something like that.

A: Michael Weinstein: Would you think it is constant currency.

Samuel R. Leno - Chief Financial Officer

Well, it's probably -5 from that. So, 89.

Michael Weinstein - J.P. Morgan

Well, -5 I assume that currency benefit would be more than that.

Samuel R. Leno - Chief Financial Officer

Well, yes that's our number. That's the priority, its our number overall, I have to look that in currency, I don't have the number but the 5% is what our uplift was as a result of currency.

Michael Weinstein - J.P. Morgan

By then let me turn to Paul then, two quick questions, one; the tax of performance in Japan, you didn't really comment on it but share drop of 52% which you call it mid 40's in the weakness talked about it, and then you highlighted the estimate of businesses that didn't do as well as you guys would like them to do and that want us you would highlight with endoscopy through 5% and you call that very good in, remember Scientific 10 to 15 years ago, which it didn't grow double-digit was... it was found upon. So, in light of the cuts the company have made to R&D and pipeline projects for the last couple of quarters, how do you get some of these businesses growing again and can you give us any visibility on what the pipeline products would be in particularly in Endosurgery that would be accelerated growth. Thanks.

Paul A. LaViolette - Chief Operating Officer

Sure Mike, first of all on taxes Japan; in a second half of last year, after our initial launch where we did peak over 50%, we gave back some of the market share as a result of something that I think is need as in Japan which was a course based on a 3.5-4 years of exclusive experience with the side of products and what we saw was primarily is a function of nearly complete angiographic follow-up on all patients. We saw that the late boss associated with taxes which of course has always been higher than Cypher and has never manifested in any clinical distinction. That in the presence of nearly complete angiographic follow-up grow some physicians to perform repeat procedures on taxes stents that probably would never have resulted in any clinical symptoms.

So, that ultimate what I would say is that unnecessary re-intervention cost us in market share as some physicians were concerned that taxes reinvention rate ultimately were going to be higher than Cypher. Of course, we've seen across the 5 million taxes stent today as the best generally not the case. So, we have a unique situation in Japan that led to a shift back in share that shift occurred at the end of last year and actually our shares in Japan subsequent to the beginning of this year have been very stable and obviously we're working to grow that back. We think the clinical performance is well established and although there's harder fact of angiographic followers in Japan is unique and represent a difference in performance, we don't think it should yield a lower market share over time than we have experienced in all of the markets around the globe between Taxus and Cypher. So that's the story there.

Paul A. LaViolette - Chief Operating Officer

Endoscopy, I think your right, 10 or 15 years ago, growth might have been little bit higher... we have grown through... through those years, the business from a 100 or 200 million worldwide to 800 million. So I think, the performance is consistence... we are in broader market categories across endo than we ever has been, and our view on a market like this... is to continue to execute line extension and upgrades in the core businesses that we compete in today, whether that's single use biopsy, hemostasis, and billiary interventions were two that I commented on in my remarks, the same could be said for dilatation, same could be said for pulmonary interventions, so we have a lot of core businesses, they look like they are going to grow in mid high single-digit... on a much larger scale.

We have seen global expansion, the endo business businesses is an example today, is nearly 50-50 on U.S. and international. We expect international to continue to be a growth driver. We expect long term growth that continuously fueled by the trends in colonoscopy and we expect the strategy of our endo business will be to diversify into a broader procedural base... there's lot of being described about, natural orifice intervention, we're obviously exploring that... we have a lot of sort of derivative therapies to offer through endo. So we expect the endo business to be a solid grower, we expect our overall share position to be maintained, more than 50% of all of the worldwide endoscopic accessories come from Boston Scientific. We think this is just going to be a very strong business for the long term.

Michael Weinstein - J.P. Morgan

Okay, great. Thank you for taking the questions.

Operator

And the next question comes from the line of Lawrence Keusch with Goldman Sachs. Please go ahead, sir.

Unidentified Analyst

Hi, everybody. This is Charlie on for Larry, how are you?

Unidentified Company Representative

Good, thanks.

Unidentified Analyst

Just a few questions, first of all, can you speak to whether there is been any mix shift between defibs and CRTDs,and if so, what has been driving that in particular... has there been any meaningful change following the reverse results, and what could we expect from those results in their potential implications for the market?

Paul A. LaViolette - Chief Operating Officer

I think, reverse is sort of good news, bad news scenario. Yes. They missed their end point. But there were signs that therapy really did work, it was more of trial construction issues than the outcome, I think that MADIT CRT is going to fill in that blank, because we use different end points in that study. I expect based on what I saw on reverse for MADIT CRT trial to be positive with three expectations and that sort of thing, there has not been any negative impact of reverse on the market, but it's been 3 weeks. We don't have that good intelligence.

Unidentified Analyst

Okay, thanks and can you just speak to, if you have been detecting any kind of mix shift between defibs and CRTD's?

Paul A. LaViolette - Chief Operating Officer

No.

Unidentified Analyst

And then my follow question is just that, some other earnings results have raise this question as to whether or not, there could be some softening in terms of procedural volumes, now I am talking about Non-cardiology, I'm just wondering if Boston detected any of these trends?

Paul A. LaViolette - Chief Operating Officer

I would say no, when you look across, and I'd say also, that we are not dealing with surgery businesses. So we can't measure our volumes by the number of sutures that we sell. So when you look across the diversity of our businesses across all of Endo urology, gynecology, Endoscopy, peripheral interventions, we do not see softness, we see our historic procedure trends, pretty much in fact.

Unidentified Analyst

Great, thank you very much.

Samuel R. Leno - Chief Financial Officer

Rachel, before we move to the next question. If I can just remind everybody, if they could limit the questions to two, so that we can get as many questions as possible with the time remaining. Thank you.

Operator

Thank you Mr. Neumann. And the next question is from the line of Joanne Wuensch with BMO Capital Markets. Please go ahead.

Joanne Wuensch - BMO Capital Markets

Thank you for taking the question. My first question has to do with some qualitative information you may be able to give us on some of the new product launches which you had so far given that as limited time in CRM division, and then the second question has to do with, we have two major medical meetings coming up HRSM and with PCR. Could you give us some comments on what we may be able to see there regarding Boston Scientific? Thank you.

Paul A. LaViolette - Chief Operating Officer

With regard to new products in CRM, in the U.S. CONFIENT and LIVIAN seem to have been well received, certainly the field forces excited about them, it extends our capabilities in some areas. That's a really positive bit, the buzz though, is COGNIS and TELIGEN in Europe. The there is all kinds of new capabilities in those camps, they are truly elegant and truly advanced, what people seem to be really be reacting to is that they thin. In little old ladies, they ---you don't get the bump that you get. Knowingly. So cosmetically its--- they are easier and we have an 4 version of that coming out later this year, early next year, and which reduces the header size by half and these things are really are being very-very well received.

And just for PCR, I don't think there is anything earth shattering at PCR. We will have TAXUS fixed, five year result which will just add further I think to our overall clinical array of long term data. We have some arrive data; two year clinical outcomes on patients with diabetes, of course in Europe we already have the CE mark for a diabetic indication. We expect longer term outcome will only fuel our strength for that indication in those markets where it's approved.

I think we will see some longer term registry data out of Western Denmark which will add to our overall --- the bubble charts, if you will, for all of the patients that were following now more than 150,000 patients will see some stunning results from the stent registry which may be foretelling. We have seen some AMI data already at ACC. If we see some additional AMI data, that's positive, that may be a favorable leading indicator for of the horizon's trial and of course, horizon, which studies the TAXUS stents in acute MI could lead to an indication of forward taxes in AMI, that ultimately would potentially both expand the market and do so, exclusively for TAXUS- eluting stent. So those would be the things to look for PCI along with two year follow up from Spirit three.

Operator

And the next question comes from the line of Christine Stuart with Credit Suisse. Please go ahead.

Christine Stuart - Credit Suisse

Hi, thanks for taking my call. Paul, I just wanted to kind of go back to your comments on PROMUS element, you have said that there is going to be an IDE that started next year, and that you had completed design review. Can you just remind us about the relationship that you have with Abbott in terms of, to what degree you continue to have supply of the private label PROMUS stent, and if there is any risk that there may be a little bit of a gap in the U.S. because of what seems to be a little bit delayed entry into the trials?

Paul A. LaViolette - Chief Operating Officer

Yes, we obviously have our supply relationship with the PROMUS device impact, and there is no change to our status in the relationship with Abbott, PROMUS element of course represents the first fully integrated Boston Scientific developed program using the Everolimus from the PROMUS platform on our own element technology and our own stent delivery system, capabilities that program as has been the case of all, with all of our eluting stent programs has been impacted somewhat by the revised FDA timelines. However, we don't see any gaps in our plans today either for international launchers or U.S. launches of PROMUS element.

PROMUS is about one year behind its TAXUS brother if you will on the element pathway so the TAXUS element trial underway today. PROMUS element file underway next year but the first commercial activity that we see for PROMUS element would be sometime around the end of next year in Europe, and so between our currently anticipated European launch time frame and our current development and clinical trial time frame in united states we see no gaps in our supply of PROMUS and conversion to PROMUS element.

Christine Stuart - Credit Suisse

What is it that's taking so long between the design review being completed and the ID? Why didn't you start earlier?

Unidentified Company Representative

Primarily, the completion of pre-clinical data. So, the animal takes real time.

Unidentified Analyst

Okay, and then, I guess just more on a big picture basis, as heard of several companies kind of re-working out there, R&D process, I know you talked a little bit about going through and looking at your R&D sending as well and making some appropriate costs, can you just talk about how you change... how you look at spending levels for drug-eluting stents given some of the higher requirements from the FDA and on the ICD side, given sort of market outlook?

Unidentified Company Representative

Well, we just look at our portfolio and we have been I think fairly public about that. Perhaps the number one change we implemented was the back burning, not based on long term clinical enthusiasm but just based on overall cost and challenge of our fibercation program. So, that was one that certainly has, call has been victimized by the overall regression in market value for de-cast and the final calculation of how many programs can be afforded, but I think we are in a very unique position, we have the number one position in the market place today. We have the benefits of participating in the pack of Taxus and the anonymous markets and offerings customer's choice, we have a leading platform in Liberté, a leading platform in a PROMUS, the ability to leverage the elements stent and the apex center of receipts and technology under those two established drug platforms. So, it really gives us a pretty good ability to drive efficient product development. We also have... I would say the best clinical organization for longest, and most well designed clinical trial program.

So, we are... I think we do this more efficiently than any other company and I don't think other companies that carry 10 or 15 market share points could possibly afford to do what we do. R&D overall is at 12% of sales. So, we still invest I think quite impressively in R&D and our DES investment is clearly broader and I think more powerful than any other competitor.

Unidentified Company Representative

On the CRM side, we cut back on our and our investing the dollars that we reduced back into the primarily in the process control areas. We're pretty more into process developments than we used to. The other opportunity then is to... we now have the EP tether division reporting into [indiscernible] in the CRM space and with this trio project coming along very well I think you will see us spend more dollars on that project. Probably those dollars will come out of the tent and lead side of the business to a certain extent but the overall total will remain more or less what it was the day we locked it up.

Operator

And the next question is from the line of Bruce Nudell with UBS. Please go ahead.

Bruce Nudell - UBS

Hi, thank you. Good morning. I have a question for Jim and one for Paul. Jim, just to clarify since you have reported 15% boost to their OUSICT number due to currency, it looks like CRM for you guys as a whole the OUS sales were boosted 13%, if the OUSICT market wasn't around 13%, I think you said, I mean it really works like costing currency OUSICT market was in low single digits. Is that a cause for concern, is it a temporary operation or the numbers are strong?

James R. Tobin - President and Chief Executive Officer

I don't have the full impact in the data before me, but clearly there is a significant impact of currency and that should be deducted from the quality units growth of the market place and those numbers, if you look at them over time have come down as they have in U.S. and so that's not that surprising. We will see currency continue to benefit us slow or probably the remainder of this year and possibly even in the next year. So, while there is certain to worry about may be long term, short term meaning in the next year or so, I don't see much change there.

Bruce Nudell - UBS

And my follow-up for Paul is, Paul, I was sitting in the audience of the HCC and I was actually, it some what surprised at how Xience s and Taxus over time converts in terms of late loss and metrics of biological potency, if we look out to spread for which I think is a non-angiographic follow-up trial, could you partially, how the TLR rates might stack up next to one another and the other piece of that question is the one lingering problem with Taxus pertains to per procedural MI and the question then is, we deliver to fix that and fasten the case and you have convergence of TLR and you have got rid of the MI problem, isn't the next generation Taxus very important competitor?

Paul A. LaViolette - Chief Operating Officer

Good question. Its hard for me to postulate on future outcomes, but I don't think there is any question that angiographic follow-up all trials tries a lot of presumption about the performance that have not necessarily manifest certainly as it release Taxus in the clinical settings. So, the thing that we see in spirit too the thing that we've seen in every other comparative trial is the... how solid Taxus perform. It simply performs consistently time after time no matter what its compared to other devices can move up or down based on how the trail is structured and other companies are very shrewd about precisely how to design trials and an effort to tease out those distinctions but generally Taxus performs this thing. So, hard for me to know what longer-term non-angiographic driven outcome will be comparing PROMUS and Taxus what I think will use as a predicate is Cypher with comparable lay boss to PROMUS and year-after-year comparable clinical outcomes to Taxus in the real world settings. So, that's what we expect to see and I think generally speaking, when you take away the angiographic driven influence in the spirit trials that is effectively what you see there as well, I think Liberté clearly has demonstrated in its clinical data a reduction in [indiscernible] that we have only speculated on the fact that that's a function of inner stents and unless carry procedural disruption if you will in the Basel, we think that goes very, very well for TAXUS, Liberté and frankly even perhaps better although the clinical trials will show this to be determined basis for element over time and I think its simply says this up to have two devices PROMUS and then subsequently PROMUS element, Taxus Liberté and then subsequently Taxus element each with outstanding short and long term clinical performance and that's why we think our leadership position in drug-eluting stents is going to be quite strong for the long term.

Operator

Your next question comes from the line of Sierra Michael Moa [ph] with Cowen. Please go ahead.

Unidentified Analyst

Yes, thanks. Good morning. First a question for Sam and then I have got a follow-up for Paul. Sam, you reiterated the revenue guidance for the full year of $820 billion but I just want to clarify, I assume that you did raise sort of FX benefit for the year and if you could just comment on that how much its going to be and not just but here share but I just want to clarify that you are not making a change to your underlying organic revenue growth assumption.

Samuel R. Leno - Chief Financial Officer

No, as we said the guidance for the full year at the end of the fourth quarter for the first quarter as well as for the full year, as you saw in the first quarter the difference between FX rates that were in effect then with respect to the [indiscernible] and what... how we finished the quarter only changed... our only added about $7 million to Q1 revenue. So, FX bounces run enough for that kind of material movements to consider. So, our reiteration for guidance since our underlying performance that we continue to expect from Q2.

Unidentified Analyst

Okay and Paul, you talked about the pricing dynamics in the U.S., can you just comment on what your seeing in Europe, and then, more specifically, if you could just talk about France, and what the share dynamics have been there since the launch of XIENCE and PROMUS in February? Thanks.

Paul A. LaViolette - Chief Operating Officer

France is really to soon... reimbursement just came... at the end of the quarter and both the... both Abbott and Boston really are ruling out so, very-very preliminary and... I would say... we expect France will follow the rest of Europe except that its... it's a sizeable market where Boston Scientific has a leadership position already and of course, with simultaneous launch of PROMUS and XIENCE, we expect that we will do, perhaps a little bit better than historical Europe where we of course, started several quarters late... Pricing in Europe... we don't disclose our specific prices, because there are so many prices... from country to country that probably doesn't make that much sense anyway.

I will say that the thing that we have seen... the thing I find note worthy is TAXUS has emerged as a premium price player, so it seems to be a little bit less by the more active pricing dynamics within the category. So that's observation number one, and I guess observation number two, would be some of the lower share players... seem to be using price a little bit more commonly as a means when we try to hold on to some, our residual [ph] share, and I think its clear that the... aggregate performance of Everolimus on the XIENCE and PROMUS platform and they seem to be the grower... in business when we expect in U.S. that... they will be associated with the premium price.

Operator: And the next question comes from the line of Larry Biegelsen with Wachovia. Please go ahead

Larry Biegelsen - Wachovia Securities

Hi, can you hear me, okay?

Unidentified Company Representative

Yes.

Larry Biegelsen - Wachovia Securities

Thanks for taking the question, just two quick ones. One for Paul on PROMUS element, what's your best guess at the U.S. launch timing on that, and then the second question is overtime where do we see R&D as a percentage of sales go, its about 12% now, could you get to 10% overtime like Medtronic, thanks?

Paul A. LaViolette - Chief Operating Officer

I think the answer to the second question is, yes, we will feather that percentage of sale down to the 10% range over the next couple of years, and PROMUS element in the U.S. is likely to be 2012.

Larry Biegelsen - Wachovia Securities

Thank you

Operator

And the next question comes from the line of Matthew Dodds with Citigroup. Please go ahead.

Matthew Dodds - Citigroup

Hi, just a couple of questions on neuro-stems since we haven't, Paul on the competitive landscape, you got to restore all through now in the market, and I guess St. Jude's launching the ION mini pretty soon. How competitive are those products because they are now little smaller, and then a bigger picture question on neuro for Sam. With cochlear now gone, how profitable, roughly, is that division versus the corporate average, is it adding much as it grows at this 40% rates to the corporate average?

Paul A. LaViolette - Chief Operating Officer

And so, yes now we are very aware of obviously the offerings from Medtronic and St. Jude respectively. Size in this space, there are some significant differences in overall the franchise, and I would say, size and feature both technologies that you allude to are in a catch up mode, the precision technology has always been very small, has had leading battery technology. There is some catch up going on what I 'd call those more fundamental features, but the real elaborate technology that ultimately translates the patient therapeutic differences with our independent current delivery, it is not matched, and so I would say that there the existing technology platforms being used by the two competitors are being improved as much as they can yield, and in effort to close the clinical gap that they but I'd say that in each case, and this is true of the ION mini as well, they fall short of closing that gap, so its catch up, and its definitely not surpassed so, I think our clinical leadership position is sustained from my perspective on the generation of products that are coming out now.

Samuel R. Leno - Chief Financial Officer

And on neuromod, we don't give possibility of any of our distinct businesses but clearly its investment area for us. As you know, we have just recently gained full control of that. We're going to invest that business and grow it. It represents one of the most significant opportunities long term for expanding markets. So we expect us to see, look for ways to continue to invest in R&D across the platform in that business?

Matthew Dodds - Citigroup

Thanks Paul, thanks Sam.

Samuel R. Leno - Chief Financial Officer

And Rachel, we're approaching of the hours and I think we have time for one more question.

Operator

Thank you, sir and the final question comes from the line of Philip Legendy with Thomas Weisel Partners. Please go ahead.

Philip Legendy - Thomas Weisel Partners

Hi, guys I'm slipping here... slipping in just another wire, house keeping questions outstanding still, I just wanted to check, do you think you saw any residual benefit from Medtronic issues in the quarter?

Paul A. LaViolette - Chief Operating Officer

Oh, not really, and we haven't seen that much across the last couple of quarters and its last in arriving.

Philip Legendy - Thomas Weisel Partners

Okay, and then just... a general market question, What are you seeing... in 7 French leads... in terms of, how the market is developing now, and how do you see yourselves participating going forward?

Paul A. LaViolette - Chief Operating Officer

7 French leads if they could be made to work consistently it would be great, but the fact is, that's not the case. We could have 7 French leads... we develop 7 French leads... they didn't work well enough, we chose not introduce them. If someone can crack this case, I think there's a... they would have an advantage in the market place, but... this game isn't over that these... they continue to sale and that's where the marketplace the docs are going to be stuck with that for the foreseeable future. And, it's not a happy thing.

Samuel R. Leno - Chief Financial Officer

Its really a... its really a more than just a minor irritation to... the... the docs would do this and so I we're-- people would love to have 7 French leads but they want whether they have to work, that's way more important from the French side.

Paul A. LaViolette - Chief Operating Officer

Rachel, with that we're going to conclude the call, and I want to thank everybody for joining us today. We appreciate your continued interest in Boston Scientific. Before you disconnect, Rachel will give you all the important details for the replay of this call. Thank you.

Operator

Thank you, Ladies and gentlemen, this conference will be available for replay after 11:00 AM today, to May 2nd, 2008 at 11:59 pm. You may access the AT&T Tele conference replay system at any time by dialing 1-800-475-6701 and entering the access code, 913-614. International participants dial 320-365-3844. Those numbers again, 1-800-475-6701 and 320-365-3844. Access code is 913-614.

That does conclude our conference for today. Thank you for your participation and the use in AT&T Executive Teleconference. You may now disconnect.

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Source: Boston Scientific Corp. Q1 2008 Earnings Call Transcript
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