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Transcript of BSX JPM Jan 14 2019 - Investor Relations – Boston Scientific › ~ › media › ... · This...
Mike Mahoney
Chairman and Chief Executive Officer
Safe harbor for forward-looking statements
This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may be identified by words like
“anticipate,” “expect,” “project,” “believe,” “plan,” “estimate,” “intend” and similar words. These forward-looking
statements are based on our beliefs, assumptions and estimates using information available to us at the time and are not
intended to be guarantees of future events or performance. If our underlying assumptions turn out to be incorrect, or if
certain risks or uncertainties materialize, actual results could differ materially from the expectations and projections
expressed or implied by our forward-looking statements.
Factors that may cause such differences can be found in our most recent Form 10-K and Forms 10-Q filed or to be filed
with the Securities and Exchange Commission under the headings “Risk Factors” and “Safe Harbor for Forward-Looking
Statements.” Accordingly, you are cautioned not to place undue reliance on any of our forward-looking statements.
We disclaim any intention or obligation to publicly update or revise any forward-looking statements to reflect any
change in our expectations or in events, conditions, or circumstances on which they may be based, or that may affect
the likelihood that actual results will differ from those contained in the forward-looking statements.
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Regulatory disclaimers
Product Regulatory Disclaimer
WATCHMAN FLX™ CE Marked. U.S.: Caution: Investigational Device. Limited by Federal (or U.S.) law to investigational use only. Not available for sale.
ACURATE neo2™ Self-Expanding Valve Platform Pending CE Mark. U.S.: Caution: Investigational Device. Limited by Federal (or U.S.) law to investigational use only. Not available for sale.
Millipede Mitral Repair Technology Device under development. Not available for use or sale worldwide.
LOTUS Mantra™ Valve System Device under development. Not available for use or sale worldwide.
EXALT™ Model D Pending CE Mark. Not available for sale outside of the U.S.
SpyGlass™ Discover Device under development. Not available for use or sale worldwide.
EXALT™ Model B Device under development. Not available for use or sale worldwide.
EXALT™ Model Bx Device under development. Not available for use or sale worldwide.
EXALT™ Model TG Device under development. Not available for use or sale worldwide.
SpyGlass™ DS III Device under development. Not available for use or sale worldwide.
PEG Scope Device under development. Not available for use or sale worldwide.
iNod™ Ultrasound Guided Needle Device under development. Not available for use or sale worldwide.
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Financial disclaimers
Market Estimates:
Unless noted otherwise, all references to market sizes, market share positions, and market growth rates are BSX internal estimates.
Non-GAAP Financial Measures:
This presentation contains non-GAAP measures (denoted with *) in talking about our company’s performance. The reconciliations of those non-GAAP measures to their most
comparable GAAP measures are contained within this document including appendices attached to the end of this presentation.
Revenue Growth:
All growth rates are operational unless otherwise noted. Operational growth rates are non-GAAP measures that exclude the impact of foreign currency fluctuations. Organic growth
rates are non-GAAP measures that exclude the impact of foreign currency fluctuations and the sales from the acquisitions of the electrophysiology business of C.R. Bard Inc., the
Interventional Division of Bayer AG, the American Medical Systems male urology portfolio, EndoChoice Holdings, Inc., Symetis SA, NxThera, Inc., Claret Medical, Inc., Augmenix, Inc.,
Vertiflex, Inc. and BTG plc (BTG) in the periods for which there are no prior period related sales. Organic revenue growth also excludes the impact of the divestiture of our global
embolic microspheres portfolio, a transaction entered into in connection with obtaining the antitrust clearances required to complete the BTG transaction.
Medical Devices:
We have three historic reportable segments comprised of Medical Surgical (MedSurg), Rhythm and Neuro, and Cardiovascular, which represent an aggregation of our operating
segments that generates revenues from the sale of medical devices (Medical Devices). As part of our BTG acquisition, which closed on August 19, 2019, we acquired an
Interventional Medicine business, which is now included in our Peripheral Interventions’ operating segment's 2019 revenues from August 19, 2019 through December 31, 2019.
Specialty Pharmaceuticals:
As part of our BTG acquisition, which closed on August 19, 2019, we acquired a Specialty Pharmaceuticals business (Spec Pharma). Subsequent to acquisition, Spec Pharma is a
stand-alone operating segment presented alongside our Medical Device reportable segments. Spec Pharma net sales are substantially U.S. based. Our chief operating decision
maker (CODM) reviews financial information of our globally managed Spec Pharma operating segment at the worldwide level without further disaggregation into regional results. As
such, Spec Pharma net sales are presented globally, and our Medical Devices reportable segments regional net sales results do not include Spec Pharma.
Emerging Markets:
We define Emerging Markets as the 20 countries that we believe have strong growth potential based on their economic conditions, healthcare sectors and our global capabilities in
our Medical Devices business. Periodically, we assess our list of Emerging Markets; effective January 1, 2019, we updated our list of Emerging Market countries. Our current list is
comprised of the following countries: Argentina, Brazil, Chile, China, Colombia, Czech Republic, India, Indonesia, Malaysia, Mexico, Philippines, Poland, Russia, Saudi Arabia, Slovakia,
South Africa, South Korea, Thailand, Turkey and Vietnam. The revision had an immaterial impact on prior year sales.
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Our Mission and Values
Boston Scientific is dedicated to
transforming lives through innovative
medical solutions that improve the
health of patients around the world.
CaringMeaningful
Innovation
High
Performance
Global
Collaboration
Diversity &
Inclusion
Winning
Spirit
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What to expect from BSX 2020+
1. Highly engaged and driven team – patient-centric,
motivated and innovative global culture
2. Continued execution of category leadership strategy
and portfolio diversification into higher growth,
adjacent markets
3. Compelling and differentiated pipeline driven by
meaningful innovation
4. Commitment to corporate social responsibility and
sustainable business models
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5. Consistent, high performance to deliver shareholder value;
long term financial goals for 6-9% organic revenue growth
and margin expansion to drive double-digit adj EPS growth
Category leadership driving growth2019 revenue1 $10.7B, 11.1% op* growth, 7.3% organic* growth
Neuromodulation
Electrophysiology
Cardiac Rhythm Management
$329M, +7%
Interventional Cardiology(incl. Structural Heart)
Structural Heart
Peripheral Interventions(incl. IM, excl. Spec Pharma)
$2.8B, +11%, +10%
$1.4B, +19%, +8%
High end of
$700-725M guidance2
$1.9B, +1%
Endoscopy Urology & Pelvic Health
$1.9B, +9%
$873M, +13%, +7%
$1.4B, +15%, +8%
+Spec Pharma $81M 7Growth rates listed are operational*, organic*Endo, CRM and EP operational and organic growth rates are equivalent
Strong, balanced growth in every region Emerging Markets remain a key growth driver 2020+
Driving global expansion
Building scale and capabilities
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$6.1B, +10%
$2.3B, +9%
$1.9B, +12%
$0.4B, +7%
US
LACA
APAC
EMEA
2019
Revenue1t
$1.25B, +19%
2019 2020E 2021E 2022E
+15%
2
t Excludes Spec PharmaGrowth rates are operational*
Driving market share, entering new high growth segments and expanding geographic reach
2013 2014 2015 2016 2017 2018 2019 2020E-
2022E
12011 2012
(1%)
6%
7%
6-9%
Organic* CAGR
Organic* CAGR
Organic* CAGR
Est Organic* CAGR
Track record of delivering high performance:
Organic revenue growth
9
Consistent double digit adjusted EPS* growth’15-’19E CAGR: 14%
Delivering on adjusted operatingmargin* expansion goals
$0.67 $0.66 $0.73
$0.84 $0.93
$1.11
$1.26
$1.47
$1.55-
$1.58
+DD%
Y/Y
2011 2012 2013 2014 2015 2016 2017 2018 2019E 2020E
- 2022E
19.2% 18.8% 18.9%
20.2%
22.3%
24.1%
25.0%25.5%
26-
26.25%
+50-100
bps Y/Y
2011 2012 2013 2014 2015 2016 2017 2018 2019E 2020E
- 2022E
Track record of delivering high performance:
Operating margin improvement and EPS growth
Adj. operating margin* goal Adj. EPS* growth goal
3 4 3
+11-13%
5
+17%
+13%
+20%
+11%+15%
+10%(2%)(3%)
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BSX portfolio revenue mix
High growth markets (≥8% CAGR):
IC (Structural Heart), RM (EP), PI (Drug Eluting, Venous,
Therapeutic Oncology), NM, Endo (TIPs, Endoluminal
Surgery), UroPH (Prostate Health)
Moderate growth markets (3-7% CAGR):
Endo (Core), PI (Core Arterial + Core Oncology), UroPH
(Core), IC (Complex PCI), RM (ICM)
Low growth markets (<3% CAGR):
RM (Pacers, Defibrillators), IC (DES)
Served
Market
Growth
Consistent portfolio diversification into
higher growth markets
2012 2016 2019 2022E
~45% ~35% ~30% ~20%
~45% ~50% ~45% ~45%
~35%
~25%
~15%
~10%
$11B
$8B
$7B
(~1%) ~4% ~5% ~6%
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1
Excludes Spec Pharma
Internal adjusted R&D* % of
revenue at the high end of peers
Multiple sources of innovation
drive compelling pipeline
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~$1.0B~$1.2B
2017 2019E 2021E
10.5-11%
• Active venture capital portfolio
– 40+ investments in mixed stages
of opportunity
– 5 of 12 most recently closed deals
from VC portfolio
• Employee engagement
– “Imagine If” program
• Multiple incubators + spin outs +
strategic partnerships
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Tsinghua University
Disciplined and balanced
approach to M&AStrategic investments &
partnerships
• Tuck-ins across multiple
businesses
• Strong integration track record
• Healthy pipeline augmented by
VC portfolio
EXALT™ D single-useduodenoscope
LithoVue™ single-useureteroscope
HeartLogic™ HeartFailure Alert
WaveWriter™
Spinal Cord Stimulator Vercise™ Deep Brain Stimulator
~10.5%
10.8%
Large and compelling high growth markets
across the portfolio
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2019 BSX Sales1
Operational* Growth
Mkt Growth2019 – 2022 CAGR
Key Products / New Markets
Interventional
Cardiology$2.8B+11%
+6%
• LAAC Global Expansion (WATCHMAN™)
• TAVR (ACURATE neo™, LOTUS Edge™)
and Embolic Protection (Sentinel™)
• Mitral Repair Technologies
Peripheral
Interventions$1.4B+19%
+6%• Therapeutic Oncology
• Venous Stenting & Pulmonary Embolism
• Drug-eluting (ELUVIA™ DES, Ranger™ DCB)
Rhythm
Management (CRM + EP)
$2.3B+2%
+4%• HeartLogic™ Heart Failure Alert
• Mapping and Navigation (RHYTHMIA™)
• Single Shot for Pulmonary Vein Isolation
Neuromodulation$0.9B+13%
+8-10%• Expanding pain treatment continuum
Superion™ for Lumbar Spinal Stenosis
• DBS for Parkinson’s Disease and Tremor
Endoscopy$1.9B+9%
+5%• Pancreaticobiliary Disease
• Infection Prevention and Pathology
• Therapeutic Imagingt
Urology &
Pelvic Health$1.4B+15%
+6%• LithoVue™ Flexible Ureteroscope, StoneSmart™
• SpaceOAR™ Hydrogel
• MIT benign prostatic hyperplasia (BPH)
$10.7B ~6%t Therapeutic Imaging excluded from Market/CAGR
Excludes BTG Spec Pharma
2020E 2021E 2022E+
Strong product pipeline
supports top tier growth
Coronary Therapies
• SYNERGY XD, 48 mm, MEGATRON – U.S.
• SYNERGY XD – Japan
• Comet II pressure wire
Structural Heart
• WATCHMAN FLX (LAAC) – U.S.
• ACURATE neo2 (TAVR) – EU
• LOTUS Edge (TAVR) – Japan
Peripheral Interventions
• Ranger DCB SFA – U.S.
• OptiCross 35 IVUS Catheter
• AngioJet Clothunter
CRM/EP
• POLARx (Cryo Single Shot) – EU
• LUX-Dx ICM – U.S.
• Ingevity+ Pacing Lead – U.S.
• DIRECTSENSE – U.S.
• Force-Sensing Catheter – EU
• LUMINIZE (RF Single Shot) – EU
• 3300 Programmer
Neuromodulation
• DBS next gen visualization platform
Endoscopy
• Exalt Model D single-use scope – U.S.
• SpyGlass Discover single-use scope
• ORISE ProKnife
• Resolution 360 Ultra hemostasis clip
Urology/Pelvic Health
• Tria Ureteral Stents – U.S. & EU
• SpaceOAR & Rezūm – Int’l expansion
• SpaceOAR Vue Hydrogel
Coronary Therapies
• AVVIGO Guidance System
• ROTAWIRE Drive - US and Japan
Structural Heart
• ACURATE neo2 – U.S.
• WATCHMAN FLX (LAAC) – China
Peripheral Interventions
• Ranger DCB SFA – Japan
• Interventional Oncology Coils
• Athletis PTA Balloon
• CLI Catheter
CRM/EP
• RHYTHMIA 5.0
• Ingevity+ Pacing Lead – EU
Neuromodulation
• SCS/DBS next gen systems
Endoscopy
• Single-use scope platform expansion
• AXIOS expanded indications – U.S.
Urology/Pelvic Health
• LithoVue Ureteroscope next gen
• AMS 700 IPP enhancements
• Core Stone enhancements
Coronary Therapies• NG Atherectomy System
• SYNERGY XD – China
Structural Heart
• Millipede Mitral Valve Repair – EU
• LOTUS Mantra – U.S. & EU
• ACURATE neo2 – Japan
• ACURATE PRIME – expanded sizes U.S. & EU
Peripheral Interventions
• SAVAL DES BTK
CRM/EP
• Resonate 2.0
• POLARx (Cryo Single Shot) – U.S.
• LUMINIZE (RF Single Shot) – U.S.
• Empower leadless pacing/mCRM – U.S.
• Force-Sensing Catheter – U.S.
• Next gen CRM pulse generator
Neuromodulation
• SCS indication expansion
Endoscopy
• Single-use scope platform expansion
• Endoluminal surgery toolkit expansion
Urology/Pelvic Health
• StoneSmart expansion
• Rezūm enhancements
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Key portfolio growth drivers 2020+
Selected product spotlights
Structural Heart
Single-useScopes
BTGVenous &
InterventionalOncology
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1) Structural Heart
Differentiated portfolio stands out in $6B market
LOTUS Edge™ TAVR150 US accounts open by Q2:20
Mantra 29mm clinical trial H2:20E
Prevent
Stroke
Match Aortic
Valve to Need
Prevent
Vascular
Complications
SAFARI2™ Pre-Shaped
GuidewireiSLEEVE™ Expandable Introducer Sheath
SENTINEL™ Cerebral
Protection SystemPROTECTED TAVR
trial launch H1:20E
Cornerstone Repair of
Mitral Annulus
MILLIPEDE TMVr
Initiated feasibility study
ACURATE neo2™ TAVRCE Mark mid-2020E
FDA Approval YE 2021E
WATCHMAN™ LAACWATCHMAN FLX US H2:20E
CHAMPION AF trial (H2H DOAC) launch 2020E
BSX Structural Heart revenue $900M to $1B in 2020E
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Estimated Global
LAAC Market Size
2018~$400M
2023E~$1B
2025E+$2B+
WATCHMAN
Expanding clinical investments: CHAMPION-AF
Penetration into
high-bleed risk NVAF patient
population
Penetration into
low-to-moderate-bleed risk
NVAF patient population
CHAMPION-AF Study
A randomized, controlled trial
studying WATCHMAN FLX vs.
DOACs
Lower bleeding risk patients with
non-vascular atrial fibrillation
(NVAF)
Expecting ~2,000 NVAF patients
and ~150 sites
Anticipate to begin enrolling in
H2:2020
Co-Chairmen: Dr. Marty Leon and
Dr. Ken Ellenbogen
Principal Investigators: Dr. Shephal
Doshi and Dr. Saibal Kar
Estimated Global LAAC Market Size
17
2) BTG: Venous & Interventional Oncology
Strong strategic fit, high growth adjacencies
Access to BTG IM high growth adjacenciesSignificant operational &commercial synergies
• Engaging customers as a newly
combined entity with complementary
portfolio
• Expect ~$175M in synergies by year 3
- Integration on plan
- Leveraging BSX global footprint
- Est. 80% synergies by end of year 2
2019 Global Revenue Distribution
Cryo, MicrowaveTherapy
Y90 Radiotherapyfor Liver Cancer
Thrombolysis
Treatment
Vena Cava
Filter
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Interventional Oncology
2018 Market: $1.6B
’19-’22 CAGR: ~8%
Venous Disease
2018 Market: $1.4B
’19-’22 CAGR: ~8%
Category Leader in Cancer Therapeutics Scaled Player
Future indications:
Prostate CancerBrain CancerLung Cancer
DVT, PE, SVI
3) Single-use endoscopes: $2B+ market opportunityReduce infection, enhance efficiency, and improve availability
Exalt™ Model D
Duodenoscope
1.5M ERCPs
SpyGlass™ Discover
Choledochoscope
40K procedures
Exalt™ Model B
Bronchoscope
3M procedures
iNod™ Ultrasound
Guided Needle
150K procedures US
Exalt™ Model Bx
2M procedures
Exalt™ Model TG
Therapeutic
Gastroscope
800K procedures
SpyGlass™ DS III
Cholangioscope
150K procedures
PEG Scope
Gastroscope for
PEG Placement
530k procedures
COMPREHENSIVE SINGLE-USE THERAPEUTIC IMAGING PORTFOLIOEXALT MODEL D
Favorable market conditions
Proven commercial channel
Market leading device portfolio
19
Capital structure facilitates growth strategy
Compelling adj. free cash flow*: 10% CAGR 2019E-2022E
Strong cash flow generation outlook
20
~$2.1B~$2.3B
~$2.5B~$2.8B
2019E 2020E 2021E 2022E
• Closed $4B BTG acquisition
August 2019
• Expect to repay $1.6B debt
over 16 months post-BTG
close
• Targeting BBB+ credit ratings
• Flexibility to return cash to
shareholders post debt
paydownDebt-to-
EBITDA~3.3x ~2.6x
3
Long-term
goal ~2.25x- - - - - -
+10%
2019E
Goals
2020E-2022E
Organic Revenue* +7.3%1 +6-9% CAGR
Operational Revenue* +11.1%1 TBD
Adj. Operating Margin* +50-75bps3 Y/Y +50-100 bpsImprovement annually
Adj. Tax Rate* ~9%3 ~11%7
Less ~100bps stock comp benefit
Adj. EPS* Growth 11%-13%ex. 2018 IRS settlement3,5
Double-digit growth
Adj. Free Cash Flow*/Growth $2.1B3 +10% CAGR
Consistent top tier financial performance & outlook
21
35KEmployees
PEOPLE
Ongoing commitment to Corporate Social Responsibility
22
99.9%Gender pay
equityt
55 Awareness &
Education Events
Progress on 10/20/40D&I goals
PLANET
47%greenhouse
gas emissionst
95% of solid
waste diverted from landfillst
30%water
consumptiont
$1B+ Invested in R&D
PRACTICES
114 Active Clinical
Trials
87 Product
launches
Newsweek
2020 Most Responsible
Company
t 2018 figure, greenhouse gas emissions and water consumption compared to 2009 manufacturing operations baseline.
46%Green Real Estate
Ranked
28th
40KVolunteer
hours
Carbon Neutral in Costa Rica
Acronym Reference Guide
Afib Atrial Fibrillation
BPH Benign Prostatic Hyperplasia
CRM Cardiac Rhythm Management
DBS Deep Brain Stimulation
DCB Drug Coated Balloon
DES Drug-eluting Stent
DVT Deep Vein Thrombosis
Endo Endoscopy
EP Electrophysiology
ERCP Endoscopic Retrograde Cholangiopancreatography
EUS Endoscopic Ultrasound
GI Gastrointestinal
IC Interventional Cardiology
ICM Insertable Cardiac Monitor
IM Interventional Medicine
IO Interventional Oncology
MIT Minimally Invasive Techniques
NM Neuromodulation
NVAF Non-valvular Atrial Fibrillation
PCI Percutaneous Coronary Intervention
PE Pulmonary Embolism
PI Peripheral Interventions
RF Radiofrequency
RM Rhythm Management
SCS Spinal Cord Stimulation
SVI Superficial Venous Insufficiency
TAVR Transcatheter Aortic Valve Replacement
TIPs Therapeutic Imaging Platforms
TMVr Transcatheter Mitral Valve Repair
UroPH Urology & Pelvic Health
24
*Non-GAAP measure; for reconciliations of non-GAAP financial measures to the most directly comparable GAAP figures, please refer to Appendix A of this document.
1Based on preliminary, unaudited sales results issued January 14, 2020
2Based on preliminary, unaudited internal estimates
3Based on 2019 guidance issued October 23, 2019
4Full year 2018 adjusted earnings per share of $1.47 and 17% growth includes a $0.07 net tax benefit. This net benefit includes the second quarter $0.06 benefit from settling the IRS Stipulation of Settled Issues for the 2001 through 2010 tax years offset by a fourth quarter $0.05 charge for our previously
announced tax reinvestment strategy. In addition, the net benefit includes a $0.06 benefit in the fourth quarter for the settlement with the IRS of our 2011 through 2013 tax years.
52019E adjusted EPS growth excluding the 2018 net tax benefit $0.07 in the base, as described above in Reference No. 4
6Based on midpoint of 2019 guidance issued October 23, 2019 and preliminary, unaudited sales results issued January 14, 2020
7Estimated tax rate is operational and excludes discrete tax items, such as the benefit related to adoption of ASU 2016-09
References
25
Supplemental Non-GAAP Disclosures
26
FY 2019 Divisional Revenue Growth1 (unaudited) compared to FY
2018 Reported Basis
Less: Impact of
Foreign
Currency
Fluctuations
Operational
Basis
Less: Impact
of Recent
Acquisitions /
Divestitures
Organic
Basis
Endoscopy 8% -2% 9% 0% 9%
Urology & Pelvic Health 13% -1% 15% 6% 8%
MedSurg 10% -2% 11% 3% 9%
Cardiac Rhythm Management -1% -2% 1% 0% 1%
Electrophysiology 6% -2% 7% 0% 7%
Neuromodulation 12% -1% 13% 6% 7%
Rhythm and Neuro 3% -2% 5% 2% 3%
Interventional Cardiology 9% -2% 11% 1% 10%
Peripheral Interventions 17% -2% 19% 11% 8%
Cardiovascular 11% -2% 14% 4% 9%
Medical Devices 8% -2% 10% 3% 7%
Specialty Pharmaceuticals n/a n/a n/a n/a n/a
Net Sales 9% -2% 11.1% 4% 7.3%
FY 2019 Revenue Growth1 (unaudited) compared to FY 2018 Reported Basis
Less: Impact of
Foreign
Currency
Fluctuations
Operational
Basis
Rhythm Management (CRM & EP) 0% -2% 2%
Supplemental Non-GAAP Disclosures
27
FY 2019 Regional Revenue Growth1 (unaudited ) compared to FY
2018 Reported Basis
Less: Impact of
Foreign
Currency
Fluctuations
Operational
Basis
U.S. 10% 0% 10%
EMEA (Europe, Middle East and Africa) 4% -5% 9%
APAC (Asia-Pacific) 10% -2% 12%
LACA (Latin America and Canada) 3% -4% 7%
International 6% -4% 10%
Medical Devices (a) 8% -2% 10%
Specialty Pharmaceuticals (b) n/a n/a n/a
Net Sales 9% -2% 11%
Emerging Markets214% -5% 19%
(a) We have three historical reportable segments comprised of Medical Surgical (MedSurg), Rhythm and Neuro, and Cardiovascular, which
represent an aggregation of our operating segments that generates revenues from the sale of medical devices (Medical Devices). As part of our
acquisition of BTG on August 19, 2019, we acquired an Interventional Medicine business, which is now included in our Peripheral Interventions
operating segment's 2019 revenues from August 19, 2019 through December 31, 2019.
(b) As part of our acquisition of BTG on August 19, 2019, we acquired a specialty pharmaceuticals business (Specialty Pharmaceuticals).
Subsequent to acquisition, Specialty Pharmaceuticals is now a stand-alone operating segment presented alongside our Medical Device reportable
segments. Specialty Pharmaceuticals net sales are substantially U.S. based. Our chief operating decision maker (CODM) reviews financial
information of our globally managed Specialty Pharmaceuticals operating segment at the worldwide level without further disaggregation into
regional results. As such, Specialty Pharmaceuticals net sales are presented globally, and our Medical Devices reportable segments regional
net sales results do not include Specialty Pharmaceuticals.
Supplemental Non-GAAP Disclosures
28
Revenue Growth 2019 1 2018 2017 2016 2015 2014 2013 2012 2011
Revenue growth, as reported 9% 9% 8% 12% 1% 3% -1% -5% -2%
Less: Impact of foreign currency fluctuations -2% 1% 0% 0% -7% -3% -2% -2% 3%
Operational Revenue Growth 11% 8% 8% 12% 8% 6% 1% -3% -5%
Less: Impact of certain acquisitions and divestitures 4% 1% 1% 2% 3% 2% -1% 0% -3%
Organic Revenue Growth 7% 7% 7% 10% 5% 4% 2% -3% -2%
Organic revenue growth (2011-2013) -1%
Organic revenue growth (2014-2016) 6%
Organic revenue growth (2017-20191) 7.0%
Adjusted R&D Margin 2019E3 2017
R&D Margin, as reported 11.0%
Less: Non-GAAP adjustments 0.2%
Adjusted R&D Margin 10.5-11% 10.8%
Adjusted R&D Margin is a non-GAAP measure that excludes the impact of acquisition and divestiture and restructuring related
charges or credits.
Adjusted Operating Margin 2019E 3 2018 2017 2016 2015 2014 2013 2012 2011
Operating Margin, as reported 15.3% 14.2% 5.3% -3.8% -4.1% 1.7% -53.4% 11.9%
Less: Non-GAAP adjustments -10.2% -10.8% -18.8% -26.1% -24.3% -17.2% -72.2% -7.3%
Adjusted Operating Margin 26 - 26.25% 25.5% 25.0% 24.1% 22.3% 20.2% 18.9% 18.8% 19.2%
Growth in basis points (bps) year over year (2018-20193) 50-75
Adjusted operating margin, adjusted earnings per share and their related growth rates are non-GAAP measures that exclude the impacts of certain charges (credits) which may include medical device regulation charges,
amortization expense, goodwill and intangible asset impairment charges, acquisition/divestiture-related net charges and credits, restructuring and restructuring-related net charges and credits, litigation related net
charges and credits, pension termination charges, certain debt extinguishment net charges and credits, certain investment impairment charges, certain tax restructuring transaction net charges and credits and/or certain
discrete tax items.
Supplemental Non-GAAP Disclosures
29
Earnings Per Diluted Share 2019E3,5 2018 4 2017 2016 2015 2014 2013 2012 2011 2010
GAAP net income (loss) per share $0.72 - $0.75 1.19$ 0.08$ 0.25$ (0.18)$ (0.09)$ (0.09)$ (2.89)$ 0.29$ (0.70)$
Non-GAAP adjustments 0.83 0.28 1.18 0.86 1.11 (a) 0.93 (b) 0.82 (c) 3.55 (d) 0.38 1.39 (e)
Adjusted net income (loss) per share $1.55 - $1.58 1.47$ 1.26$ 1.11$ 0.93$ 0.84$ 0.73$ 0.66$ 0.67$ 0.69$
Adjusted net income (loss) per share 1.47$
Less: Impact of 2018 net tax benefit 4 0.07
Adjusted net income (loss) per share, excluding 2018 net tax benefit 1.40$
Adjusted EPS growth from prior year 11-13% 17% 13% 20% 11% 15% 10% -2% -3%
Adjusted EPS CAGR 2015-2019E6 14%
(a) Assumes dilution of 21.5 million shares for the year ended December 31, 2015.
(b) Assumes dilution of 23.7 million shares for the year ended December 31, 2014.
(c) Assumes dilution of 19.5 million shares for the year ended December 31, 2013.
(d) Assumes dilution of 7.7 million shares for the year ended December 31, 2012.
(e) Assumes dilution of 10.0 million shares for the year ended December 31, 2010.
Supplemental Non-GAAP Disclosures
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Tax Rate 2019E3 2018 2017
Tax Rate, GAAP basis 1% -18% 89%
Less: Non-GAAP adjustments -8% -24% 78%
Tax Rate, Adjusted 9% 7% 11%
Adjusted Tax Rates are non-GAAP measures that exclude the impacts of certain charges (credits) which may include medical
device regulation charges, amortization expense, intangible asset impairment charges, acquisition/divestiture-related net
charges and credits, restructuring and restructuring-related net charges and credits, litigation related net charges and credits,
certain investment impairment charges and/or certain discrete tax items.
Adjusted Free Cash Flow ( in billions) 2019E32018 2017 2016
Operating cash flow, reported 0.3$ 1.4$ 1.2$
Less: Purchases of property, plant and equipment 0.3 0.3 0.4
Add: Proceed on disposals of property, plant and equipment - - -
Free Cash Flow, as reported -$ 1.1$ 0.8$
Plus: Special Adjustments 2.1 0.6 0.8
Adjusted Free Cash Flow 2.1$ 2.1$ 1.7$ 1.6$
Adjusted free cash flow and its related growth rate are non-GAAP measures that exclude from free cash flow the cash component of certain charges (credits) that are also
excluded from adjusted net income as well as any cash tax benefits of such charges. In addition, we exclude tax settlements payments and refunds that relate to prior
periods. Free cash flow is a non-GAAP measure that excludes net purchases of property, plant and equipment from cash provided by (used for) operating activities on a
GAAP basis. The GAAP measure that is most directly comparable to adjusted free cash flow and free cash flow is cash provided by (used for) operating activities on a GAAP
basis.
Supplemental Non-GAAP Disclosures
The following is an explanation of the adjustments that management excluded from GAAP measures to calculate the following forward-looking non-GAAP financial measures:
Adjusted Gross Margin: Excludes from GAAP gross margin the impacts of forecasted acquisition- and divestiture- and restructuring-related charges or credits.
Adjusted SG&A: Excludes from GAAP SG&A the impacts of forecasted acquisition- and divestiture- and restructuring-related charges or credits.
Adjusted R&D: Excludes from GAAP R&D the impacts of forecasted acquisition- and divestiture- and restructuring-related charges or credits.
Adjusted Operating Margin and Adjusted Earnings (Loss) Per Share: Excludes from GAAP operating margin and GAAP net income (loss) the impacts of forecasted medical
device regulation charges, acquisition- and divestiture- and restructuring- and restructuring-related charges or credits and amortization expense.
Adjusted Tax Rate: Excludes from GAAP tax rate the tax impacts related to forecasted medical device regulation charges, acquisition- and divestiture- and restructuring- and
restructuring-related charges or credits and amortization expense.
Adjusted Free Cash Flow: Adjusts GAAP operating cash flow to include the impacts of forecasted medical device regulation charges, capital expenditures and excludes the
impact of estimated after-tax acquisition- and divestiture-, restructuring- and litigation-payments.
2020E+ Operational Revenue and related growth rates: Excludes from GAAP revenue and related growth rates the forecasted impact of foreign currency fluctuations.
2020E+ Organic Revenue and related growth rates: Excludes from GAAP revenue and related growth rates the forecasted impact of foreign currency fluctuations and the
forecasted impact of proposed and future acquisitions and divestitures with no comparable sales in the period.
Please refer to our Safe Harbor for forward-looking statements disclosure in conjunction with any forward looking information presented within.
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