Boston Scientific focuses on M&A, AI to reach next level

Mike Mahoney uses fantasy football to describe Boston Scientific He says that, if creating a MedTech team, “it would be the draft you want.”

Speaking at the company’s 2023 Investor Day event, the CEO set the theme as “next level.” He explained his aim to make Boston Scientific a “compelling” and “fantastic place to be 10 years from now.”

The company is making moves — in M&A, digital and more — to invest in that over the long term.

“We’re taking our performance to the next level,” Mahoney said. “We have high aspirations for the company, but we want to do so while always maintaining a great culture — a caring culture for our employees — doing the right things for society while, hopefully, delivering a unique set of financials along the way.”

An M&A strategy geared toward category leadership
Just one day before planning to discuss its M&A strategy, Boston Scientific made a major M&A play. Yesterday, the company announced the $850 million acquisition of Relievant Medsystems.

The agreement to acquire Relievant marks the third such move for Boston Scientific in the last 12 months. At the end of 2022, the company announced its plan to acquire a majority stake in Acotec, worth around $523 million. In April, the company completed a $615 million acquisition of Apollo Endosurgery.

It marks a clear strategy for Boston Scientific, which has made a number of moves over the past several years, including buys of Farapulse, Baylis Medical and Lumenis.

Mahoney says category leadership represents a key enabler — with the Relievant buy demonstrating another example of that. He said Boston Scientific has “the broadest, most comprehensive portfolio for key position call points.”

“M&A continues to be a focus area for us,” Mahoney said. “It reinforces category leadership, moving us into faster growth markets, which you hear often is our goal, but it’s actually what we do. We’ve acquired, I think, over 40 companies or so over the past 10 years, most recently signing Relievant. … We’ve had a few that haven’t worked out over the years, but the majority of these tuck-in M&As have really improved our innovation cadence and our weighted average market growth rate.”

Boston Scientific also centers a lot of focus on its venture capital portfolio. Mahoney said they “tend to get into companies earlier than some of our peer groups.” Like acquisitions, some work and some don’t, but that remains another successful, active portfolio.

“We have R&D, collaboration, incubator partnerships all over the world,” Mahoney explained. “This is where we spend a lot of energy as a company. But, we’re not just talking about it once a quarter. We talk about it every day — our portfolio and how we can make it better.”

More on the Relievant acquisition
Relievant develops the Intracept intraosseous nerve ablation system for chronic pain. The minimally invasive, FDA-cleared, same-day, outpatient procedure treats chronic vertebrogenic low back pain. It uses targeted radiofrequency energy to ablate the basivertebral nerve (BVN). This stops the nerve from transmitting pain signals to the brain. The procedure takes approximately one hour to perform.

Jim Cassidy, president of Neuromodulation at Boston Scientific, spoke at Investor Day about what Relievant brings to the company.
“You look at Relievant, and it’s a whole new category of vertebrogenic pain,” Cassidy said. “It’s a significant unmet need, and it’s unique to Boston Scientific.”

Boston Scientific expects the deal to close in the first half of 2024, subject to customary closing conditions. It anticipates more than $70 million in sales generated by Relievant in 2023, with year-over-year growth expected to eclipse 50% in 2024.

On an adjusted basis, the company expects an immaterial impact to earnings per share in 2024. It plans for a slightly accretive impact in 2025, with an increasingly accretive effect thereafter. Boston Scientific expects a more dilutive GAAP impact due to amortization expense and acquisition-related charges.

Cassidy lauded the way the Relievant buy folds into Boston Scientific’s portfolio.

“Look at our portfolio,” he said. “We’ve got spinal cord stimulation, traditional RF, Vertiflex, Relievant — that’s a compelling portfolio. That’s a portfolio that’s tough to match. I think it sets us apart in this space and puts us as clear leaders in interventional pain.”

Jesse Feinkind, VP and GM of Boston Scientific’s pain franchise, said the move ties into Boston Scientific’s category leadership goals.

“It’s a nice feather in our cap when it comes to being a category leader.” Jesse Feinkind “We feel like this is a fantastic platform, therapy, to add to our interventional pain management therapy portfolio. It adds to our growth and our category leadership strategy.”

Boston Scientific sets its sights on AI and digital
Mahoney also explained that the company’s future includes a foray into artificial intelligence (AI) and the digital sphere. He pointed to imaging, neuromodulation, urology and more as areas already implementing the technology.

“You’ll see lots of examples of digital and AI that are embedded today in our products,” Mahoney said. “You’ll see active AI — not just talking about it, but it being used every day.”

Art Butcher, group president for Boston Scientific MedSurg in Asia Pacific, added that the company is working on what it calls the “omnichannel strategy.” This goes beyond incorporating AI into the devices themselves and utilizing it to enhance the business side of things.

Omnichannel is an AI-based sales and marketing platform aimed at bringing together touch points from different platforms. The company feeds data through an AI interface to deliver the right messaging and education at the right time to the right channel. This aims to accelerate revenue and bring additional education opportunities to customers, he said.

A recent pilot for a percutaneous coronary interventions (PCI) guidance platform drove 9% incremental sales growth vs. the base business.

“That’s hugely powerful,” Butcher said. “That’s what the future is going to look like across Boston Scientific. We’re taking the learnings from that pilot and driving it through the rest of the organization.

The company also introduced an e-commerce platform, starting in 2021 with endoscopy. Boston Scientific has since stretched that to urology and plans to bring it to other parts of the business in 2024. Butcher pointed to “delight” for customers and “great cost-savings and efficiency” for sales representatives.

A third example is Boston Scientific’s expert link suite of tools and technologies to enable remote service and support. The company developed it during the Covid-19 pandemic out of necessity but now uses it for remote patient device calibration, capital equipment servicing and physician training.

Butcher said it’s helped in product launches, particularly outside the U.S., over the last 24 months, too. It’s proven to be an accelerator for adoption, he said.

“Those are just three great examples of how we’re using artificial intelligence and digital to delight our customers, accelerate our business and reduce unnecessary duplication,” Butcher said.

Boston Scientific commits to growth in China
Mahoney also stressed the company’s efforts in China. The company describes the country as “one of the most attractive MedRech markets.” It highlighted China’s “unmatched” growth, scale and innovation ecosystem.

Procedure growth, especially in PCI, is an especially attractive point as demand rises, according to June Chang, president of Boston Scientific in Greater China.

The issue remains navigating China’s complexities, with payment reform, local competition and policy pivoting towards local sourcing.

“We know the China playbook has changed and will continue to evolve very rapidly,” said Chang.

Still, Boston Scientific’s China business is on track to exceed $1 billion in revenue by 2024. The company expects to deliver mid-teens revenue growth with “attractive margins,” too.

The company offered some insight into its strategy in the country. It looks to harness the upside while protecting downside, prioritizing speed, localization and scale. That means accelerating product launches and therapy adoption with agile, localized operation to stay competitive.

“We know that it’s not an easy market to play, but it is a compelling market,” Chang said. “So, we stand firm our commitment, but we constantly recalibrate and refresh our approach to maximize our potential and to focus on our core, focus on highly differentiated product technology. And we continue to find new ways to grow. We believe we are in a very, very strong position to win, and we have the best team on the ground to deliver that.”

Driving forward with Farapulse, Watchman
Boston Scientific had specifically positive news regarding some of its most intriguing products, including Farapulse and Watchman.

Farapulse recently made waves with positive study results as analysts tipped it for FDA approval and rapid adoption soon. Watchman FLX Pro, the company’s latest left atrial appendage closure (LAAC) device, received FDA approval just a week later. The company announced today that it surpassed 350,000 patients treated with Watchman.

Dr Angelo de Rosa, Watchman president, says the company believes the market for the device may quadruple by 2030.

“This is really what makes us confident that we can continue to grow significantly in this market in the more short term,” He said. “Thinking about more long-term, today there are 38 million people globally that are suffering from AFib. We believe this number will get up to 60 million people by 2050. Clearly, the number will be increasing. We have a wonderful clinical trial pipeline that make us confident that we can really expand indications in the U.S. and internationally, big-time, and bring this market over $6 billion in 2030.”

On the Farapulse front, Nick Spadea-Anello, president of Electrophysiology, explained the market opportunity for Boston Scientific He highlighted the improvement Farapulse pulsed-field ablation could bring. He stressed positive outcomes for patients, simplified processes for operators and a stress-free procedure for struggling hospital systems.

“It’s the efficiency of it being able to do two or three ablations a day to be able to do four to six,” he said. “That’s real — that’s happening in Europe right now. I think the modeling is really going to be about us introducing it once we have FDA approval, and our belief is that there’s going to be strong and fast adoption. Our belief is that we are leading this.”

Boston Scientific offers multiple modalities, including radiofrequency (RF) and polar ablation. Around the same time as the Farapulse news, Boston Scientific received expanded FDA 510(k) clearance for its Visual Ice cryoablation system. Visual Ice’s approval came just weeks after the FDA approved the company’s POLARx cryoablation system for treating paroxysmal AFib.

Having those options for patients is no bad thing, company officials say.

“We will easily transition them to any other energy modality, whether it’s RF, polar or PFA,” Spadea-Anello said. “In the future, we think it’s going to be PFA. But we’re uniquely positioned to capitalize on some incredible growth.” MassDevice