Boston Scientific Corporation (BSX) Management on Citi's 2018 Global Healthcare Conference Call (Transcript)

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About: Boston Scientific Corporation (BSX)
by: SA Transcripts

Boston Scientific Corporation (NYSE:BSX) Citi's 2018 Global Healthcare Conference Call December 6, 2018 9:30 AM ET

Executives

Arthur Butcher - SVP & President, Endoscopy

Susan Lisa - IR

Analysts

Amit Hazan - Citi

Amit Hazan

I'm Amit Hazan, the medical device analyst at Citi, and this is for us the beginning of Day 2 and we're really excited to have Boston Scientific with us again this year, we've had them with us here every year but there is something a little bit different this year, we're going to do a little bit of a deep dive into the endoscopy segment which is probably more important segment than many people realized for Boston and I think it's going to become increasingly important. So we've got Art Butcher here who heads up endoscopy and as always, we've got Susan Lisa as well from IR, and we'll get to some questions outside of endoscopy too right at the end.

But I thought what we could do with the time is really make it a little bit more academic and I feel and I think you might feel as well that people may not understand this segment well and spend a lot of time on it; so we're going to work with that understanding and really dive into some of the products and some of the markets on and the key things for you guys. So I thought we would talk about the markets first, talk about you guys within those markets, talk about some of the key products you have today within the markets and then we'll get to some of the new and exciting things that you guys are excited about that might drive future growth. That sounds good.

Arthur Butcher

All right, terrific, thanks for having us.

Amit Hazan

I'll say that for met at least the way I think about it, I mean it's -- you are the third largest segment at Boston, 20% of sales, when we think about it, we think by 2020-2021 you could be the second largest segment of Boston. So you're going in the right direction, some new opportunities that I think are probably almost as bigger -- as big as any at Boston, and so there is a lot to talk about. So I thought what we could do first is, talk about the endoscopy market size overall, not just you guys, just everything. I mean you guys have talked about it as $3 billion a few years ago and then going within about $5 billion now, then going to $7 billion but you're talking about your own markets.

Do you want maybe start and give us the sense of the overall endoscopy market, even beyond that how big it is and then we'll get into your part.

Arthur Butcher

Okay, great. Well, thanks again for having us, very happy to be here and happy to talk about the endoscopy business because as you said, it doesn't always get as much study as the cardiology business does but it is really a gem within Boston Scientific. We've been a consistent grower for a long time and accretive to the profitability profile of the overall company; so it's an important piece of the business and I'm happy to take any questions.

So in terms of the market that we plan, maybe I should define how we define endoscopy. There are other companies that have endoscopy divisions; Stryker, J&J among them. In fact, we define endoscopy very differently, so we wouldn't say that we're in the same markets, we don't compete with either of those companies, our competitors are mainly Olympus and Cook actually. It's a market that is defined through endoscopic procedures in the GI tract and the pulmonary system. And our specialty is providing single-use flexible devices that go through reusable endoscopes and accessories that enable those procedures.

So historically if you go back to like 2015 as you were saying, we were playing in the market segments that we were serving was roughly a $3 billion market, and we had almost half of that. So we went on a journey to -- into adjacencies to expand the market opportunity because having half of a $3 billion market made it harder to continue to grow in high single-digits or low double-digits. So we started to expand into therapeutic imaging, infection prevention, pathology and endoluminal surgery, the Big Four, and that took us into the space as you said today where we really were playing in about a $5 billion market.

So it's not that the market grew from $3 billion to $5 billion over those couple of years, it's that the served market that we participate in grew because we entered into those new segments. And as we go forward, exactly what you said, over the next couple of years, we expect to continue to expand into what would be approximately a $7 billion served market.

Now there are tons of different segments that could be defined as adjacencies, so it's hard to say what is that universe market that you're asking about but certainly other parts of endoscopy like the given imaging property that went over into Medtronic [indiscernible] is an adjacency, and also like the BarX [ph] property, their whole portfolio is actually not competitive with our portfolio, and what's now Medtronic, but you could say that that would be part of the universe as well, all of the Stares [ph] washing machines and Kentel devices could also be part of the universe, so all of the reusable scopes could be part of that universe, these are all adjacencies. So roughly, I mean maybe it adds upto 10 or so but the way we're defining our served market today is about a $5 billion.

Amit Hazan

Okay. And within that, so you're about $1.6 billion in revenues growing high single-digits organically?

Arthur Butcher

2017 we're $1.6 billion.

Amit Hazan

And growing about high single-digits and the markets that you play in today are growing how fast?

Arthur Butcher

We say between 4% and 5%. So we're growing -- we've been growing 8% to 9% and -- yes, so $1.6 billion last year.

Amit Hazan

I thought before we get into kind of breaking down the markets to five segments that you guys like to talk about, that we would try to break it down -- I don't know how far we can get with this discussion but to break it down by the product types, so you've got the endoscopes, you've got the devices that go through the scopes, and even the secondary kind of [indiscernible] type of devices within that, and you've got stents; is that -- I know it's a simplistic way of breaking down your business, is that a fair way of breaking down kind of the business in terms of product?

Arthur Butcher

So we say we've got about 11 different franchises, and you named some of them, so -- but like dilation balloons, biopsy forceps, polypectomy devices, biliary devices, hemostasis devices and so on. So we have 11 of those and within those 6 are over $100 million in revenue and within the 11, also 5 of those categories are growing well into the double-digits. So what you see there is a very balanced portfolio and we're investing in all of those franchises to continue market leadership or to drive to market leadership if there is some of the newer ones.

And if -- do you have specific questions about some of the categories or where would you like to go?

Amit Hazan

Absolutely. I mean that's kind of the -- we can -- why don't we do it that way and then that will lead into a couple of the product areas that we want to ask about that already exists -- in existence. So the way you guys breakdown the market segments; the pancreatic, the biliary, GI cancer, GI bleeding, infection prevention, pulmonary disease -- do you want to just spend just a minute talking about each of those -- the size of those markets if you can in growth rates and then we can get into some of the products within…

Arthur Butcher

Sure. Some of them we don't give out the granularity on but some we do, so we can talk about those. So the biliary market is all of the devices that are used in ERCP procedures, there are about 1.3 million ERCP procedures each year, we are the market leader in biliary devices. So within biliary is guide wires, sphincter tongs, and some balloons and all the things that are used to do the ERCP procedure and ERCP is done with duodenoscope and goes up inside the bile duct to identify cancer or stones in the biliary tree and treat those. So biliary is our biggest business, and it's about $1 billion market worldwide, and we have north of 50% share of that business.

Amit Hazan

And the other guys you would care to -- can you give numbers around the others?

Arthur Butcher

Hemostasis, we can talk about is roughly $500 million, and our market leading product in that category is resolution 360 hemostasis clip, and it's been a terrific growth engine for us, double-digit grower since we launched it in 2015, it's a worldwide market leader in hemostasis clips, and again, we're roughly near 50% in that space.

Amit Hazan

So let's talk about some specific products and so one of the -- SpyGlass is a name that people will be familiar with, I think that comes up on every call and has been a good growth driver for you guys, you launched it in 2014 but Q2, I mean, let's spend a second and explain to people what that actually is. And then if you can, shorter to the component of sales or growth rates or whatever you're able to talk to number-wise?

Arthur Butcher

SpyGlass, I love to talk about SpyGlass. SpyGlass is one of the most innovative and differentiated products in our portfolio, it's the only single operator, single-use cholangioscope that is in existence in the world. And a cholangioscope is an endoscope that goes up inside the bile duct, so it goes through the duodenoscope and then from the duodenoscope it launches up into the bile duct and you can use it to see and treat cancers and stones. So that's what it is but it's a very small endoscope, it's about -- it's a 10-french [ph], which is the size range -- it's about roughly 3 millimeters in diameter. And SpyGlass is now launching right now into it's third generation which is really exciting, so we launched SpyGlass DS which is a digital version in 2014 as you've mentioned and now in October we launched the DS II because the original one was analog and that was in 2007, so this is really Gen III. But what's super exciting about SpyGlass is that it's allowing physicians to see and treat parts of the bile duct that they couldn't see before and we've sold over -- serviced over 75,000 patients with this device and 85% of the time it changes the treatment algorithm based on what the physician was able to see in that case because if you -- before SpyGlass you would look at a fluoroscopic two-dimensional image, basically it looks like an X-ray, and you would try and figure out what's going on in the biliary tree.

With SpyGlass you have eyes and why can look right into the biliary tree and you can see that looks like cancer, I'm going to take a biopsy there or there is a stone here, I'm going to pull it out. So with SpyGlass DS II we are launching with a full suite of accessory devices that will make the utility of SpyGlass that much higher. So we've launched SpyBasket and a SpySnare, we've launched EHL which is an energy source to blow up stones to -- if the stone is too big to pull it out, you can fragment the stone and then pull it out, we're launching an improved biopsy forcep, so you could take tissue. So it's really a platform now. So before all of those devices when we had the SpyGlass version that we launched in 2014, we drove to just under 5% penetration in all of the ERCPs and it's not needed in all of the ERCPs. But we think that with this new set of devices and under 5% we're a $100 million business today to that question, and we think that with all of these devices we can grow that to a 10% or 15% utility rate in ERCPs and that would be a really substantial growth driver for the next several years.

Amit Hazan

Is the an upgrade opportunity for the consoles that are already out there; does that need to happen?

Arthur Butcher

So, there is a software upgrade and it's done -- the sales reps, there is a charge for the upgrade and because it's enhanced visualization, so we do that through our service reps and a thumb drive in the back of the device. So they don't need to buy a whole new council [ph] but the actual scope catheter, the main difference of the new one is that it has a much better camera. So the things that were a little blurry before are now really clear and also image processing software makes a huge difference. If on your iPhone if you have HDR where it takes light and dark and it merges them, we built that in as well, so all the glares reduced, there is a tremendous amount of detail that can be seen in the tissue and the physicians are really responding well to that.

Amit Hazan

So $100 million business growing…

Arthur Butcher

Growing double-digits.

Amit Hazan

Double-digits and with this launch it's happening in October it looks pretty good. Like you said, I mean, you've got…

Arthur Butcher

I wouldn't -- I mean, our hope -- and I don't see why wouldn't that growth should accelerate, we don't have a competitor in the space and now we've made the device that much better from an optic standpoint and given it utility with basket, snare, EHL probe, bringing better biopsy forceps, so it's -- the physicians when I see it, now they are like okay, this -- now I could -- not only does the car drive but it's got heat, it's got windshield wipers and we've built-in some of that next-generation stuff.

Amit Hazan

So the other AXIOS Stent is the other one, also in fact, this is an area as well. Do you want to just talk a little bit to that to size it up for people if you can in terms of that side of the business in growth and opportunities there?

Arthur Butcher

So the AXIOS Stent; if you're familiar with Boston Scientific and stents in general, you probably know about a whole wide-variety of stents that sit within a given lumen when you think of all of our drug eluting cardiovascular stents, event stents in GI, we have esophageal stents, colonic stents, biliary stents; they all sit within a given existing lumen. The AXIOS Stent was the very first stent of it's kind that's designed to go from one lumen to another, and it serves as an internal drain. So the biggest use for AXIOS is if you have a pseudocyst in the abdomen which is essentially a collection of pancreatic fluid that forms into a sealed off reservoir of pancreatic fluid that is symptomatically very bad and dangerous for patients, what you can do is go into the stomach with an AXIOS Stent on -- essentially it's loaded on a cystotome [ph] which creates a whole through the side of the stomach and into this pancreatic pseudocyst and then the AXIOS Stent has a ribbed end that lodges itself inside the pseudocyst and another ribbed end that lodges itself inside the stomach and it creates this miraculous internal drain getting all of that toxic pancreatic fluid to drain through the digestive tract. So it just pops it and pulls it into the digestive track where it's digested without -- with very, very minimal trauma to the patient.

Before this the alternative was very dangerous, you had to go in -- in many cases open procedure and then you're dealing with this very delicate sac of toxic fluid that you really don't want to spill; so this is a really elegant solution. Now, with that application and that indication in the United States and we launched in 2014 or 2015, I can't remember, but it got rapid uptake because it was clearly that much better, and totally differentiated and unique. Now there are several additional indications that we're pursuing because this device is kind of revolutionary. For example, using AXIOS for gall bladder drainage as an alternative to cholecystectomy or the gall bladder removal would be a less invasive option for many, many of those patients and we don't have indication for that yet but we've begun the clinical work to get that indication in the future.

Another indication that we're pursuing is gastric outlet obstruction, so that would be making a connection between the stomach and the small intestine by instead of going through the natural outlet of the stomach if there is blockage there connecting so food can pass that way, it's essentially a bypass. If you think of a gastric bypass, this would be a bypass that's done endoscopically. So if we can prove gastric outlet obstruction, that is one of the fundamental building blocks of the Roux-en-Y procedure or the gastric bypass procedure for obesity; so long-term play and this is definitely not next year or not even to the next few years but we want to do the studies and we've begun to do the studies to start to build the blocks of a endoscopic Roux-en-Y procedure. So imagine a gastric bypass that's done instead of open, endoscopically the opportunity there would be very large.

Amit Hazan

And gall bladder, is that in the near-term in terms of potential approval or is the study…

Arthur Butcher

So it's cleared for use in Europe for gall bladder already so there are many doctors in Europe who are doing it for gall bladder? And primarily, right now, it's done for patients who are not good surgical candidates. And then, in the U.S. we've started the clinical trial, so it's still a couple of years.

Amit Hazan

So the AXIOS franchise is how big?

Arthur Butcher

That's not one we give out.

Amit Hazan

But growth rates?

Arthur Butcher

Growth rate is still healthy double-digits and it's a really exciting space for us, the whole EUS space is -- AXIOS has delivered on a endoscopic ultrasound system, therapeutic EUS is very hot space in all of endoscopy and AXIOS is one of the most unique and useful differentiated devices in that space but our whole acquired needle platform and the expected needle platform are sort of the foundations for a nice business that we're growing across EUS and AXIOS is one of the biggest pieces there.

Amit Hazan

Okay. So let's move to some of the newer opportunities; so single-use endoscopes and I want to -- before we get into Exalt, I thought what we could do here to -- is spend a couple of minutes on just the backdrop of what's been happening with infection risks and duodenoscope; so if you want to just take us through what's happened in the last few years with the FDA action towards some of the big manufacturers, as well Olympus, Fuji, PENTAX? I think people would want to know if you guys evolve, had it all been impacted by that in anyway, any parts of your business but what's been going on there and then we'll get through Exalt, I think that's going to be a good setup for that opportunity.

Arthur Butcher

So what Amit is referring to is, there have been a number of documented infection transmissions in ERCP procedures and they've been linked to the duodenoscope. And so patients have had antibiotic-resistant bacterial infections that have led to major treatment cycles and in some cases death. So there are -- if you just Google ERCP infection outbreak, you can find the cases. Now I don't want to cause panic to anybody that ERCP is still a very safe procedure, these are small percentage, very, very small percentage of patients but when it happens, it's catastrophic to the unit, and certainly to the patient but the whole GI unit in the hospital maybe shutdown, you're talking about -- there can be lawsuits and there can be many patients that can be impacted.

So the reason that it's linked to duodenoscopes is that duodenoscopes have several moving parts at the end of the scope that are very difficult to clean, and of course, you're in the GI tract of very sick patients when you're doing these procedures, so you're picking up all kinds of bugs, and so they need to be thoroughly, thoroughly, thoroughly cleaned in a multi-step process that is difficult to follow; so there is room for error. So there is a great unmet need for a duodenoscope that will universally and assuredly be a 100% sterile and safe every time, and that's why we set out to build the Exalt, single-use duodenoscope about 3.5 years ago. I'm really excited with the progress that we've made, we expect to be in humans for clinical testing in Q1, and we'll be launched into the market in the back half of next year, hopefully early backhalf.

Amit Hazan

So it's a 510(k)?

Arthur Butcher

510(k), yes.

Amit Hazan

So human in Q1 you can get out before the end of the year, what are the docs we going to want to see? What are the studies? What are the endpoints here? What's going to be most important?

Arthur Butcher

So the main thing with these scopes is that the physicians relationship with the scope is almost like they become one with the scope, they use the instrument just like an athlete with their golf club or tennis racket, they are very particular about it. So the main thing that is -- was the build criteria or the product spec for this device was it has to perform just like the existing Olympus, or PENTAX or Fuji reusable scopes. So they need to have that feel, the torquability, the steerability, it's very particular, and then the functionality of the optics and the steering knobs, all has to feel like what the instrument that that they've been using for the last 20-30 years and we believe that we've nailed that. And then with the extra advantage that it's substantially less heavy, it's lighter, so from an ergonomic standpoint, if you're using the scope all-day, every day, the reusable ones are pretty heavy, and I think that will be a benefit for the physicians as well.

Amit Hazan

Is there -- are there any limitations versus the non-disposables that you see?

Arthur Butcher

Limitations; not in terms of performance. I don't see any.

Amit Hazan

So then let's try to set out the market, I mean this is a potentially really big market in terms of volume, in terms of how you guys plan to penetrate this; can you help up set this up so we can try to get our hands around what the numbers could be for you?

Arthur Butcher

So, we can't talk about price, the device has not been cleared by FDA, so price is not something we can talk about. But there are at least 1.3 million ERCPs performed globally each year, close to somewhere around 700,000 of those are in the U.S. And I don't expect that this product will be used in all 1.3 million ERCPs but certainly the indications that we've received from infection prevention specialists in the hospitals, even from hospital officers and gastroenterologists that we've spoken with, there is great interest in this device because it is the only 100% solution for it. You know, in full cander [ph], it is the first of it's kind, so it's hard to know exactly what's going to happen in terms of utilization but interest has been very high. And I would expect that it's reasonable to think that especially for immuno-compromised patients, or patients -- if you have patients that are very sick, that you think -- that you know have communicable diseases or patients that are very, very weak who could be vulnerable to communicable diseases, you can make an argument to take that segment and say let's protect those patients whose immune systems are compromised, even take an extra precaution.

And then I think that will introduce the scope broadly because many, many folks who we've talked to said that they would want to do that at a minimum, and then the reality is the performance of the scope is excellent and the convenience of the single-use offering is that if you have an extra add-on case at the end of the day, that's another great reason to have a single-use scope available if the others are all being reprocessed, so you can add efficiency to your lab. And there are a number of reasons like that that we would expect it to grow substantially as utilization picks up.

Amit Hazan

So if you guys talked about kind of an opportunity as size of this market -- the size of this business that it could get to?

Arthur Butcher

It is certainly possible, certainly within the -- across our therapeutic imaging platforms, that this becomes a $1 billion business, and that is not out of the realm of the possible but I will go back and qualify that by saying, as I said before, it's the first of it's kind so we really don't know what's going to happen but I think it's a sizeable market opportunity.

Amit Hazan

I have to measure that one of the catalyst could be that FDA gets involved with some of the things we're talking about with infection risk and make the move to acquire sterilization of scopes. Is that -- do you think that's a possibility? And if it is, I mean I have to imagine that would be good for this business.

Arthur Butcher

It is a possibility. I can't speak to what the FDA would do but I know that this is something that the FDA, as well as all of the stakeholders including us in endoscopy are focused on and concerned about, looking for solutions. So I can't say what they would do in that case, I will say that we are building substantial capacity for manufacturing in case the demand is greater than we expect.

Amit Hazan

And you're also investing in kind of developing kind of this more comprehensive single-use portfolio. Is there anything else you would highlight?

Arthur Butcher

So the cadence behind Exalt, we're working on a single-use surgical SpyGlass that would be used in laproscopic cholecystectomies, we are bringing to market a bleedscope [ph] which would be used in emergent bleeds and in conjunction with our resolution hemostasis clips; those would be the next couple.

Amit Hazan

So we -- I don't want to spend too much more time there and I want to also get to Suzy [ph] but I do want to touch on endoluminal surgery within the GI cancer market. I don't know if the forced [ph] TRS devices if you think that we're spending [indiscernible] or if there is anything else you would like to highlight?

Arthur Butcher

Yes. So endoluminal surgery, we've been talking for the last -- publicly for the last 18 months or so about our aspirations in that space, and our goal is to create a full line of devices that make endoluminal surgery procedures easier, faster, safer, more reproducible, teachable. And this year we launched our first two, so we launched the ORISE TRS, Tissue Retractor System device which creates surgical space within the colon; so instead of the colon being collapsed, it's like a little pop-tent that opens up and you can -- and it gives you articulating arms. So we're still in the early phase of launch of that enabling device, that will take-off more slowly, we expect it's not going to be widespread adoption but overtime as people really commit to learning these procedures, that takes off. What will take off much faster is our more recent launch which is also in the ORISE Family, it's the ORISE Gel. And ORISE Gel we launched in October along with several other products that we launched in October. We actually launched 12 new products this year, it's been a very, very, very busy year and a lot of those just are launching at the end of the year which will provide nice growth for 2019.

But the ORISE Gel is used -- it's injected underneath tumors in the GI tract to create a blip or a blister underneath the tumor separating it from the tissue beneath, making it easier to excise. So what's been really well received about the ORISE Gel is that it firms up and it doesn't bleak out once you start to excise the tumor, and that's different from what they are using today and it makes it much easier and simpler to efficiently get the tumor removed. So ORISE Gel has been taking off from Day 1.

Amit Hazan

So we haven't got into -- I mean, like you said at the beginning, there is actually a lot of products here that are growing exciting, and on my list there were a few that we didn't get a chance to get through yet but just with even what we've talked about -- if we bring this back to the number, I think you guys, the Analyst Day, before you guys have talked about this being a $2 billion business by 2020, we think about where you are today already and what it takes to get there at 6% growth which is good but just from what you've outlined and where you guys are already are, it just feels like that's -- it's going to be better than that. Is that just a stale number that…

Arthur Butcher

Your math is right. $2 billion in 2020 has a nice ring to it but the way I'm saying it is north of $2 billion in 2020. So we expect to be able to be a high single-digit grower for Boston Scientific for the foreseeable future.

Amit Hazan

Terrific. And then you mentioned profits in the beginning, if we think about just within MedSurg which is kind of very nice operating profits, are you guys accretive to the MedSurg margins as well?

Susan Lisa

We haven't discussed, they are both [indiscernible] they will take them both all-day long.

Amit Hazan

So we've got a few minutes left, let's go through the speed round, I won't get to everything but we've got to ask [indiscernible] get fired if I didn't I suppose. So, the patent work stuff; so we've got -- let's just start with that, it's complicated, everybody knows that, there is a lot of patents involved but you joined Edwards on S3 Ultra in Germany. You have not enforced the S3 junction, why is that?

Susan Lisa

So we take into consideration a lot of factors in making these decisions, market continuity, size of the bond that's required to post, etcetera, so we thought that it made sense, it's also an expiring option, as you know on S3 Ultra, so we choose to act there the option to enjoy in Germany on S3 continues to this day, so we continue to assess our options.

Amit Hazan

Can you talk to the main factors involved and whether you would do it or not like -- as you say, you have multitude of factors that you're thinking about?

Susan Lisa

I mean, overarching what we're trying to do is defend our intellectual property and so that's really the driving force here but certainly market continuity and physician relationship is part of the consideration.

Amit Hazan

Okay. And so your launching orders out there, is that -- that has to add some weight to the market continuity part or at least your ability to contribute?

Susan Lisa

Right. At the time that we originally received the right to and join on S3 in Germany, we essentially didn't have -- we had no supply and remained on-track in Europe to launch LOTUS in Q1 of 2019.

Amit Hazan

And Catalyst [ph] with regard to UK is going to be the next [indiscernible], I think we're all talking about over the next month or two and also over the next 6 months. You want to set that up for us as this is what to expect?

Susan Lisa

So in the UK, the court there actually enforces in junctions, it's not upto the agreed parties; so S3 needs to be off-the-market in the UK by the end of May 2019, and later this month we'll begin the proceedings alleging infringement of Ultra there as well. So they need to convert to Ultra by the end of May as per the court in the UK, and they will begin the proceedings as to whether Ultra infringes later this month. As also mentioned on S3 in the U.S. that trial is ongoing as you know, and sense you could see a decision, a jury decision as early as next week and then we'd assume both sides would appeal but we could get another read on the landscape from an IP perspective later this month.

Amit Hazan

And then the UK decision on Ultra should come possibly before the time that they have to switch to Ultra, is that right?

Susan Lisa

That's right.

Amit Hazan

So it's going to be an interesting first 6 months, next 6 months or so. And in Europe, so -- we did checks out there once in a while to get someone who we talk to in Germany who is -- LOTUS is not launched yet but they will say we are already talking about it and how it's going to fit into our overall contract or so forth. So I'm just wondering even though it's not launched, you're weeks away I guess or you could correct me on that; but how have the discussions been going if that's already been happening? How do you feel like -- with the launch eminent, sales force is prepared for this I imagine; how do you feel going into this launch in Europe?

Susan Lisa

I mean, we're incredibly excited, this has been a long-time coming and we recognized fully that physicians want and need this now, given [indiscernible] with the complete repositionability and retirevability of the application in heavily calcified patients, patients on stable hemodynamics by clusted patients, and we've seen expanding from that to work hour [ph]. So I think the market wants and needs it and we're excited to bring it.

Amit Hazan

Did you guys talked about the share overall for your…

Susan Lisa

No, I think the lessons learned through the whole LOTUS process were out of the share prognostication but with the dual of our strategy is accurate, continues to do very well also, that -- and the rest of the portfolio with watchmen and our sentinel device for valid protection, we're really excited about our position and structural overall.

Amit Hazan

Do you feel like you guys are already still gaining share if you kind of look at the data that you have in the market currently? Are you continuing to gain shares?

Susan Lisa

With accurate and continuing to grow, yes.

Amit Hazan

And gain share in the market?

Susan Lisa

Yes.

Amit Hazan

So let's move to BTG just real quick. So the interventional medicine business, $400 million, kind of versus the rest of the company; your presentation when you guys announced this were kind of almost focused solely on the IM [ph] business, I think almost and the question that I have that's -- I think it's a good clarifying question is, do the synergies that you guys outlined contemplate keeping the rest of the business?

Susan Lisa

So we've talked about $175 million in synergies by year three and it is on the entire base of the business but they are largely focused on the interventional medicines business; so a pretty wide -- BTG essentially has been a roll-up of these different technologies, intravenous and interventional oncology fields with not a lot of integration. So I think there is immediate opportunities and what we've learned from our Bear [ph] acquisition also in PI, in terms of manufacturing footprint, R&D sites, etcetera. And then I'd say overarching right, the cost run publicly listed company, that overarches all of it but most of the synergies are within interventional medicines business, high profitability and very easy, essentially to run the spec pharma and licensing businesses, so the opportunities in IM.

Amit Hazan

If you keep that business or if you don't keep it, it's a big piece of there -- of the company. You can -- so if that business didn't exist, if it was just $400 million, you could achieve the synergies that you laid out?

Susan Lisa

There is a variety of scenarios and we feel very confident in the $175 million in synergies, yes.

Amit Hazan

And can you talk at all to the cadence of synergies in year one and year two?

Susan Lisa

We cannot, no.

Amit Hazan

And the split between revenues and costs; I think -- I have to imagine it takes time to get product approvals U.S., so for me it's kind of the revenue piece that seems like it's going to be later because of that…

Susan Lisa

I mean, 90% of their sales are in the U.S., so that's the primary nearer term revenue synergies, some of those would be pretty easy to list those products and go, others would take more time like getting [indiscernible] into China for instance will probably require some clinical trials but there are definitely some very quick and immediate things that we can do from the revenue synergy side of things but a majority of the synergies are on the cost side and we think that we can get after them pretty quickly.

Now if I could just mention for a minute or two I think because we get a lot of questions, if it's okay, on just sort of the debt paydown profile there. Firmly committed to BBB minus where we think [indiscernible] we think we belong, and as we look at the profile here we've committed to whole of our share for this program, we'll paydown over $1 billion in debt over the 18 months post-close and with a strong cash flow generation profile see us getting back to something like 2.6x by the end of 2020. And even with all of that going on, that still gives us capability of about $1 billion plus in terms of M&A to continue to evolve our category leadership strategy and do other tuck-in acquisitions.

Amit Hazan

Super rapid fire, 30 seconds. The organic kind of guidance for the next couple of years, you had 5.5% to 8.5% is what you guys have already laid out; we're all kind of thinking towards the higher end of that as we think to go into next year. But do you want to just very quickly talk to headwinds and tailwinds that we should be thinking about?

Susan Lisa

Sure. So lots of tailwinds, I mean I'll talk about all the launches in endoscopy, similarly in neurology as they also bring under the tent, you know, CPT code for resume for instance and start to really hit it with augmentics on the prostate cancer side of things. Alluvia [ph] launch in peripheral is another big one, obviously LOTUS launching in interventional cardiology, getting sentinel out and going now that we have the end taps; so there are multiple tailwinds across the businesses, the two primary headwinds remain those that we face this year, primarily drug-eluting stents and pacing. And then obviously tough comps in some areas, thinking primarily DFAB [ph] or we've kind of grown 600 to 700 basis points above market probably from most of this year, so no change there, we still think it resonate and have logic, it will help us drive share, replacement cycle is a tailwind for us there as is SICD but those are tough comps. But as primarily continuation of the tough pricing environment and some portfolio gaps in drug-eluting stents although now we're launching [indiscernible] where we still won't have [indiscernible] pacemaker commercial response for a few years although we will get in the clinic starting early next year.

Amit Hazan

Okay, very quick and nicely done, right at the zero mark. Thank you guys very much, that was extremely informative, especially on the endoscopy side, appreciate that.

Arthur Butcher

Thanks Amit. It was a pleasure.

Amit Hazan

We'll stop there.

Arthur Butcher

Thank you.

Susan Lisa

Thank you.

Question-and-Answer Session

End of Q&A