Boston Scientific Corporation is a worldwide developer, manufacturer and marketer of medical devices that are used in a broad range of interventional medical specialties including cardiac rhythm management, electrophysiology, interventional cardiology, peripheral interventions, neurovascular, endoscopy, urology, women’s health and neuromodulation. Our mission is to improve the quality of patient care and the productivity of health care delivery through the development and advocacy of less-invasive medical devices and procedures. This is accomplished through the continuing refinement of existing products and procedures and the investigation and development of new technologies that can reduce risk, trauma, cost, procedure time and the need for aftercare. When used in this report, the terms “we,” “us,” “our” and “the Company” mean Boston Scientific Corporation and its divisions and subsidiaries.
Our history began in the late 1960s when our co-founder, John Abele, acquired an equity interest in Medi-tech, Inc., a research and development company focused on developing alternatives to surgery. In 1969, Medi-tech introduced a family of steerable catheters used in some of the first less-invasive procedures performed. In 1979, John Abele joined with Pete Nicholas to form Boston Scientific Corporation, which indirectly acquired Medi-tech. This acquisition began a period of active and focused marketing, new product development and organizational growth. Since then, we have advanced the practice of less-invasive medicine by helping physicians and other medical professionals treat a variety of diseases and improve patients’ quality of life by providing alternatives to surgery and other medical procedures that are typically traumatic to the body. Some of the uses of our products include: enlarging narrowed blood vessels to prevent heart attack and stroke; clearing passages blocked by plaque to restore blood flow; detecting and managing fast, slow or irregular heart rhythms; mapping electrical problems in the heart; performing biopsies and intravascular ultrasounds; placing filters to prevent blood clots from reaching the lungs, heart or brain; treating urological, gynecological, renal, pulmonary, neurovascular and gastrointestinal diseases; and modulating nerve activity to treat chronic pain.
Our net sales have increased substantially over the last thirty years, growing from $2 million in 1979 to approximately $8.2 billion in 2009. Our growth has been fueled in part by strategic acquisitions and alliances designed to improve our ability to take advantage of growth opportunities in the medical device industry. On April 21, 2006, we consummated our acquisition of Guidant Corporation. With this acquisition, we became a major provider in the worldwide cardiac rhythm management (CRM) market, enhancing our overall competitive position and long-term growth potential and further diversifying our product portfolio. This acquisition has established us as one of the world’s largest cardiovascular device companies and a global leader in microelectronic therapies. This and other strategic acquisitions have helped us to add promising new technologies to our pipeline and to offer one of the broadest product portfolios in the world for use in less-invasive procedures. We believe that the depth and breadth of our product portfolio has also enabled us to compete more effectively in, and better absorb the pressures of, the current healthcare environment of cost containment, managed care, large buying groups, government contracting and hospital consolidation and will generally assist us in navigating the current turmoil in the global economic markets and potential U.S. healthcare reform measures.
Our business strategy is to lead global markets for less-invasive medical devices by developing and marketing innovative products, services and therapies that address unmet patient needs, provide superior clinical outcomes and demonstrate proven economic value. The components of our business strategy are as follows:
• Strengthen Leadership and Communication
We believe that our success will be driven by strong leadership, robust communication and the high caliber of our employees. Our leadership team is measured against the following competencies: vision, integrity, accountability, passion, perseverance, communication, resourcefulness, team building, intellect and customer driven focus. We intend to strengthen our focus on leadership development and instill these leadership characteristics within our corporate culture.
• Restructure the Business Model
We will implement a restructured business model that will allow us to operate in a more efficient manner and allow for enhanced execution, while providing better value to hospitals, better solutions to physicians and better outcomes to patients. In 2010, we began implementing several restructuring initiatives designed to strengthen and position us for long-term success, including the integration of our Cardiovascular and CRM groups into one stronger and more competitive organization that will improve our ability to deliver innovative products and technologies, leading clinical science and exceptional service; as well as the restructuring of certain other businesses and corporate functions.
• Create Higher-Payoff New Products
We will centralize corporate research and development to refocus and strengthen our innovation efforts; and we will organize our clinical organization to take full advantage of the global resources available to conduct more cost effective clinical studies, accelerate the time to bring new products to market, and gain access to worldwide technological developments that we can implement across our product lines. We will direct our research and development and business development efforts to higher payoff product investments and increase our discipline and metrics to improve returns on our investments. We will continue to invest in our core franchises, and are also investigating opportunities to further expand our presence in, and diversify into, areas including atrial fibrillation, underserved defibrillator populations, acute ischemic stroke, coronary artery disease, peripheral vascular disease, structural heart disease, vascular closure, hypertension, women’s health, endoluminal surgery, diabetes/obesity, endoscopic pulmonary intervention and deep brain stimulation.
• Increase Global Sales Focus
We will increase our global sales focus through targeted sales force expansions and through delivering new global best practice capabilities in crucial areas such as training, management, forecasting and planning, and reaching the economic customer on a global basis. Through our global presence, we seek to increase net sales and market share, and leverage our relationships with leading physicians and their clinical research programs. We plan to align our International regions to be more effective in executing our business strategy and renew our focus on selling, including significant investments into emerging markets, in order to maximize our opportunities in countries whose economies and health care sectors are growing rapidly.
• Refocus Business Portfolio and Expand Footprint
We offer products in numerous product categories, which are used by physicians throughout the world in a broad range of diagnostic and therapeutic procedures. The breadth and diversity of our product lines permit medical specialists and purchasing organizations to satisfy many of their less-invasive medical device requirements from a single source. We plan to focus our business portfolio through the investigation of select divestitures and targeted acquisitions in order to reduce risk, optimize operational leverage and accelerate profitable, sustainable growth, while preserving our ability to meet the needs of physicians and their patients. In addition, we endeavor to expand our footprint in the hospital beyond our current product offerings to provide us greater strategic mass.
We believe that the execution of this strategy will drive innovation, accelerate profitable growth and increase shareholder value.
Research and Development
Our investment in research and development is critical to driving our future growth. We have directed our development efforts toward regulatory compliance and innovative technologies designed to expand current markets or enter new markets. We believe that streamlining, prioritizing and coordinating our technology pipeline and new product development activities are essential to our ability to stimulate growth and maintain leadership positions in our markets. Our approach to new product design and development is through focused, cross-functional teams. We believe that our formal process for technology and product development aids in our ability to offer innovative and manufacturable products in a consistent and timely manner. Involvement of the research and development, clinical, quality, regulatory, manufacturing and marketing teams early in the process is the cornerstone of our product development cycle. This collaboration allows these teams to concentrate resources on the most viable and clinically relevant new products and technologies and bring them to market in a timely manner. In addition to internal development, we work with hundreds of leading research institutions, universities and clinicians around the world to develop, evaluate and clinically test our products.
We believe our future success will depend upon the strength of these development efforts. We expended more than $1 billion on research and development in 2009, 2008 and 2007, representing approximately 13 percent of our net sales each year. Our investment in research and development reflects:
• regulatory compliance, clinical science, and internal research and development programs, as well as others obtained through our strategic acquisitions and alliances; and
• sustaining engineering efforts which incorporate customer feedback into continuous improvement efforts for currently marketed and next generation products.
Acquisitions and Alliances
Since 1995, we have undertaken strategic acquisitions to assemble the lines of business necessary to achieve the critical mass that allows us to continue to be a leader in the medical device industry. We expect to continue to invest in our core technologies, and are also investigating opportunities to further expand our presence in, and diversify into, areas including atrial fibrillation, underserved defibrillator populations, acute ischemic stroke, coronary artery disease, peripheral vascular disease, structural heart disease, vascular closure, hypertension, women’s health, endoluminal surgery, diabetes/obesity, endoscopic pulmonary intervention and deep brain stimulation.
During 2009, our products were offered for sale by six dedicated business groups—CRM, including our Cardiac Rhythm Management and Electrophysiology businesses; Cardiovascular, including our Interventional Cardiology and Peripheral Interventions businesses; Neurovascular; Endoscopy; Urology/Women’s Health; and Neuromodulation. In 2010, we began the implementation of a restructured business model that will allow us to operate in a more effective and efficient manner, and includes the integration of our former CRM and Cardiovascular groups into a newly formed Cardiology, Rhythm and Vascular group, which will include an Endovascular unit that will encompass Peripheral Interventions, Neurovascular, Imaging and Electrophysiology.
During 2009, we derived 31 percent of our net sales from our CRM group, 43 percent from our Cardiovascular group, 12 percent from our Endoscopy business, six percent from our Urology/Women’s Health business, four percent from our Neuromodulation business, and four percent from our Neurovascular business. The following section describes certain of our product offerings:
Cardiac Rhythm Management
We develop, manufacture and market a variety of implantable devices that monitor the heart and deliver electricity to treat cardiac abnormalities, including:
• Implantable cardiac defibrillator (ICD) systems used to detect and treat abnormally fast heart rhythms (tachycardia) that could result in sudden cardiac death, including implantable cardiac resynchronization therapy defibrillator (CRT-D) systems used to treat heart failure; and
• Implantable pacemaker systems used to manage slow or irregular heart rhythms (bradycardia), including implantable cardiac resynchronization therapy pacemaker (CRT-P) systems used to treat heart failure.
A key component of many of our implantable device systems is our remote LATITUDE® Patient Management System, which enables physicians to monitor device performance remotely while patients are in their homes, allowing for more frequent monitoring in order to guide treatment decisions. Previously available only in the U.S. market, during 2009, we received CE Mark approval and launched our LATITUDE® Patient Management System in our Europe/Middle East/Africa (EMEA) region and certain Inter-Continental countries.
Throughout 2008 and 2009, we launched several new CRM products, which accounted for 74 percent of our worldwide CRM group net sales in 2009. We have experienced continued success with our next-generation COGNIS® CRT-D and TELIGEN® ICD systems, as well as our ALTRUA® family of pacemaker systems. In 2010, we will continue to execute on our product pipeline with the expected U.S. launches of a new lead delivery system and next-generation line of defibrillators, which includes new features designed to improve functionality, diagnostic capability and ease of use. Further, we expect to launch our next-generation INGENIO™ pacemaker system in 2011.
Within our Electrophysiology business, we offer medical devices for the diagnosis and treatment of cardiac arrhythmias. Included in our product offerings are RF generators, intracardiac ultrasound and steerable ablation catheters, and diagnostic catheters. Our leading brands include the Blazer™ cardiac ablation catheter, the Chilli II® cooled ablation catheter and the MAESTRO 3000® Cardiac Ablation System. During 2010, we anticipate several new product launches within our Electrophysiology business, including the launch of the next-generation Blazer Prime™ in our EMEA region and certain Inter-Continental countries.
Coronary Stent Systems
Our broad, innovative product offerings have enabled us to become a leader in the interventional cardiology market. This leadership is due in large part to our coronary stent product offerings. Coronary stents are tiny, mesh tubes used in the treatment of coronary artery disease, which are implanted in patients to prop open arteries and facilitate blood flow to and from the heart. Our Liberté® bare-metal coronary stent system is designed to enhance deliverability and conformability, particularly in challenging lesions. We have further enhanced the outcomes associated with the use of coronary stents, particularly the processes that lead to restenosis1, through dedicated internal and external product development, strategic alliances and scientific research of drug-eluting stent systems. Since the worldwide launch of our proprietary polymer-based paclitaxel-eluting stent technology, the TAXUS® Express 2® coronary stent system, in 2004, we have become the worldwide leader in the drug-eluting coronary stent market, exiting 2009 with 39 percent market share during the fourth quarter of 2009. We are now the only company in the industry to offer a two-drug platform strategy with our paclitaxel-eluting stent system, including our second-generation TAXUS® Liberté® stent system, and our everolimus product franchise. We market the PROMUS® everolimus-eluting stent system, currently supplied to us by Abbott Laboratories, as well as our next-generation internally-manufactured everolimus-eluting stent system, the PROMUS® Element™ stent system, which we launched in our EMEA region and certain Inter-Continental countries in the fourth quarter of 2009. Further, the 2009 launches of our TAXUS® Liberté® Atom™ stent system and TAXUS® Liberté® Long stent system have added to our industry leadership for the widest range of coronary stent sizes. We expect to launch our PROMUS® Element™ stent system in the U.S. and Japan in mid-2012. Our product pipeline also includes the next-generation TAXUS® Element™ stent system, which we expect to launch in our EMEA region and certain Inter-Continental countries during the second quarter of 2010, in the U.S. mid-2011 and Japan in late 2011 or early 2012.
We market a broad line of products used to treat patients with atherosclerosis. Atherosclerosis, a principal cause of coronary artery obstructive disease, is characterized by a thickening of the walls of the coronary arteries and a narrowing of arterial openings caused by the progressive development of deposits of plaque. The majority of our products in this market are used in percutaneous transluminal coronary angioplasty (PTCA) procedures and include bare-metal and drug-eluting stent systems; PTCA balloon catheters, such as the Maverick® balloon catheter; the Cutting Balloon® microsurgical dilatation device; rotational atherectomy systems; guide wires; guide catheters and diagnostic catheters. We continue to hold a strong leadership position in the PTCA balloon catheter market with approximately 57 percent share of the U.S. market in 2009, and are planning a number of additional new product launches during 2010, including the Apex™ platinum pre-dilatation balloon catheter for improved radiopacity, the NC Quantum ApexÔ post-dilatation balloon catheter and the KinetixÔ family of guidewires.
Intraluminal Ultrasound Imaging
We market a family of intraluminal catheter-directed ultrasound imaging catheters and systems for use in coronary arteries and heart chambers as well as certain peripheral vessels. The iLab® Ultrasound Imaging System, available in the U.S., Japan and other international markets, continues as our flagship console and is compatible with our full line of imaging catheters. This system enhances the diagnosis and treatment of blocked vessels and heart disorders.
We sell various products designed to treat patients with peripheral disease (disease which appears in blood vessels other than in the heart and in the biliary tree), including a broad line of medical devices used in percutaneous transluminal angioplasty and peripheral vascular stenting. Our peripheral product offerings include vascular access products, balloon catheters, stents and peripheral vascular catheters, wires and accessories, as well as products used for peripheral embolization procedures. We also sell products designed to treat patients with non-vascular disease (disease which appears outside the blood system). Our non-vascular suite of products includes biliary stents, drainage catheters and micro-puncture sets designed to treat, diagnose and ease various forms of benign and malignant tumors. We market the PolarCath™ peripheral dilatation system used in CryoPlasty® Therapy, an innovative approach to the treatment of peripheral artery disease in the lower extremities. We believe that we are well positioned in the growing Peripheral Interventions market, due in part to the recent launches of our Carotid WALLSTENT® Monorail® Endoprosthesis for the treatment of patients with carotid artery disease who are at high risk for surgery; our Express® SD Renal Monorail® premounted stent system for use as an adjunct therapy to percutaneous transluminal renal angioplasty in certain lesions of the renal arteries; and our Sterling® Monorail® and Over-the-Wire balloon dilatation catheter for use in the renal and lower extremity arteries. In addition, during the first quarter of 2010, we expect to receive FDA approval for an iliac indication for our Express® LD stent system.
Our FilterWire EZ™ Embolic Protection System is a low profile filter designed to capture embolic material that may become dislodged during a procedure, which could otherwise travel into the microvasculature where it could cause a heart attack or stroke. It is commercially available in the U.S., our EMEA region and certain Inter-Continental countries for multiple indications, including the treatment of disease in peripheral, coronary and carotid vessels. It is also available in the U.S. for the treatment of saphenous vein grafts and carotid artery stenting procedures.
We market a broad line of coated and uncoated detachable coils, micro-delivery stents, micro-guidewires, micro-catheters, guiding catheters and embolics to neuro-interventional radiologists and neurosurgeons to treat diseases of the neurovascular system. We currently market the GDC® Coils (Guglielmi Detachable Coil) and Matrix® systems to treat brain aneurysms and plan to launch a next-generation family of detachable coils, including an enhanced delivery system designed to reduce coil detachment times, in the U.S. in 2010. We also offer the NeuroForm® stent for the treatment of wide neck aneurysms and the Wingspan® Stent System with Gateway® PTA Balloon Catheter, each under a Humanitarian Device Exemption approval granted by the FDA. The Wingspan Stent System is designed to treat atherosclerotic lesions or accumulated plaque in brain arteries. Designed for the brain’s fragile vessels, the Wingspan Stent System is a self-expanding, nitinol stent sheathed in a delivery system that enables it to reach and open narrowed arteries in the brain. The Wingspan Stent System is currently the only device available in the U.S. for the treatment of intracranial atherosclerotic disease (ICAD) and is indicated for improving cerebral artery lumen diameter in patients with ICAD who are unresponsive to medical therapy. Within our product pipeline, we are also developing next-generation technologies for the treatment of aneurysms, ICAD and acute ischemic stroke, and are involved in numerous clinical activities that are designed to expand the size of the worldwide Neurovascular market.
We market a broad range of products to diagnose, treat and ease a variety of digestive diseases, including those affecting the esophagus, stomach and colon. Common disease states include esophagitis, portal hypertension, peptic ulcers and esophageal cancer. We offer the Radial Jaw® 4 Single-Use Biopsy Forceps, which are designed to enable collection of large high-quality tissue specimens without the need to use large channel therapeutic endoscopes and, in 2009, began offering this product in a variety of sizes. Our exclusive line of RX Biliary System™ devices provides greater access and control for physicians to diagnose and treat challenging conditions of the bile ducts, such as removing gallstones, opening obstructed bile ducts and obtaining biopsies in suspected tumors. We also market the Spyglass® Direct Visualization System for direct imaging of the pancreatico-biliary system. The Spyglass® System is the first single-operator cholangioscopy device that offers clinicians a direct visualization of the pancreatico-biliary system and includes supporting devices for tissue acquisition, stone management and lithotripsy.
We also offer the WallFlex® biliary stent system and WallFlex® esophageal stent, and our Resolution® Clip Device, used to treat gastrointestinal bleeding, is the only currently-marketed mechanical clip designed to open and close, up to five times, before deployment to help enable a physician to see the effects of the clip before committing to deployment.
We market devices to diagnose, treat and ease pulmonary disease systems within the airway and lungs. Our products are designed to help perform biopsies, retrieve foreign bodies from the airway, open narrowings of an airway, stop internal bleeding, and ease symptoms of some types of airway cancers. Our product line includes pulmonary biopsy forceps, transbronchial aspiration needles, cytology brushes and tracheobronchial stents used to dilate narrowed airway passages or for tumor management.
We sell a variety of products designed to treat patients with urinary stone disease, benign prostatic hyperplasia (BPH), stress urinary incontinence, pelvic organ prolapse and excessive uterine bleeding. We offer the Prolieve Thermodilatation® System, a transurethral microwave thermotherapy system for the treatment of BPH, and distribute and market the DuoTome™ SideLite™ holmium laser treatment system for treatment of symptoms associated with BPH. We offer a full line of mid-urethral sling products, sling materials, graft materials, pelvic floor reconstruction kits, suturing devices and injectables and have exclusive U.S. distribution rights to the Coaptite® Injectable Implant, a next-generation bulking agent, for the treatment of stress urinary incontinence.
We continue to expand our focus on women’s health. We market a range of devices for the treatment of conditions such as female urinary incontinence, pelvic floor reconstruction (rebuilding of the anatomy to its original state), and menorrhagia (excessive menstrual bleeding). Our Hydro ThermAblator® System offers a less-invasive technology for the treatment of excessive uterine bleeding by ablating the endometrial lining of the uterus, the tissue responsible for menstrual bleeding.
Within our Neuromodulation business, we market the Precision® Spinal Cord Stimulation (SCS) system, used for the management of chronic intractable pain of the trunk and/or limbs. This system delivers pain management by applying an electrical signal to mask pain signals traveling from the spinal cord to the brain. The Precision System utilizes a rechargeable battery and features a programming system. We believe that we continue to have a technology advantage over our competitors with proprietary features such as Multiple Independent Current Control, which is intended to allow the physician to target specific areas of pain more precisely. As a demonstration of our commitment to strengthening clinical evidence with spinal cord stimulation, we are initiating a trial to assess the therapeutic effectiveness and cost effectiveness of spinal cord stimulation compared to reoperation in patients with failed back surgery syndrome. We believe that this trial could result in consideration of spinal cord stimulation much earlier in the continuum of care. Further, we expect to launch two new lead products during 2010, which we believe will provide us with continued growth in our Neuromodulation business.
As of December 31, 2009, we had approximately 26,000 employees, including approximately 14,000 in operations; 6,000 in selling, marketing and distribution; 4,000 in clinical, regulatory and research and development; and 2,000 in administration. Of these employees, we employed approximately 10,000 outside the U.S., approximately 6,000 of whom are in the operations function. We believe that the continued success of our business will depend, in part, on our ability to attract and retain qualified personnel.