Ladies and gentlemen, thanks for standing by. Welcome to the Second Quarter 2016 Boston Scientific Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session; instructions will be given at that time. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Susie Lisa. Please go ahead.

Thank you, Greg. Good morning, everyone, and thanks for joining us. With me on today's call are Mike Mahoney, Chairman and Chief Executive Officer and Dan Brennan, Executive Vice President and Chief Financial Officer. We issued a press release earlier this morning announcing our Q2 2016 results, which included reconciliations of the non-GAAP measures used in the release. We have posted a copy of that release as well as reconciliations of the non-GAAP measures used in today's call to the Investor Relations section of our website under the heading Financial Information. The duration of this morning's call will be approximately one hour. Mike will provide strategic and revenue highlights of Q2 2016, Dan will review the financials for the quarter and then Q3 2016 and full-year 2016 guidance, and then we'll take your questions. During today's Q&A session, Mike and Dan will be joined by our Chief Medical Officers, Dr. Keith Dawkins and Dr. Ken Stein. Before we begin, I'd like to remind everyone that on the call, organic revenue growth is defined as excluding the impact of changes in foreign currency exchange rates and sales from the acquisition of the American Medical Systems, AMS, Male Urology portfolio over the prior-year period. Also of note, this call contains forward-looking statements within the meaning of federal securities laws, which may be identified by words like anticipate, expect, believe, estimate, and other similar words. They include, among other things, statements about our growth and market share, new product approvals and launches, clinical trials, cost savings and growth opportunities, our cash flow and expected use, our financial performance including sales, margins, earnings and other Q2 2016 results and Q3 and full-year 2016 guidance as well as our tax rates, R&D spend and other expenses. Actual results may differ materially from those discussed in…

Thanks Dan. Greg, let's open it up to questions for the next 30 minutes. In order to enable us to take as many questions as possible, please limit yourself to one question and one quick follow-up. Greg, please go ahead.

Thank you. Your first question comes from the line of Mike Weinstein from JPMorgan. Please go ahead.

Yes, good morning. First off, can you hear me okay? Daniel J. Brennan - Chief Financial Officer & Executive Vice President: Hey. Good morning, Mike. Michael F. Mahoney - Chairman, President & Chief Executive Officer: Hear you fine, Mike. Thanks.

All right. Well, first off, fantastic quarter, obviously, so congratulations. Let me just clarify just on a few items. So number one, the pacemaker performance being as strong as it is on the back of the MRI launch, one question I've already gotten from people, is that a clean number? Is there any stocking in that number that we should be aware of? Second, the move in the Structural Heart guidance to the high end of the range, is that WATCHMAN more than Lotus? If you could kind of share any insights into that? And then I'll follow up. Thanks. Michael F. Mahoney - Chairman, President & Chief Executive Officer: Sure. Good morning, Mike. On the pacemaker, our team has been waiting for a long time for that product approval. We've had some slow quarters in our pacemaker business in the U.S. Outside the U.S. has done quite well with that product for a while, so that's not a stocking number. We were ready for that launch for quite a while. And the team, our commercial teams did an excellent job executing it. So we think it's a very innovative product and long in coming. And the U.S. team essentially did what the OUS teams have done with that product for a while. And Structural Heart, we continue to be really excited about the future for Structural Heart. It continues to be our largest investment area as a company. We're comfortable with the high end of our guidance that we provided at $175 million to $200 million. We continued to invest long-term in R&D capabilities, clinical capabilities and commercial capabilities to prepare ourselves for the launch in the U.S. And we're really excited about the upcoming data that we expect to see in London Valves on our pacemaker rate with the addition of Lotus Edge and depth guard. So it's really an important category for us. As you know we continue to – we outlined at Investor Day back in I think 2013 and 2015 our focus to continue to grow in our core businesses and take share, which we're doing, and importantly expand into faster growth markets. And that's exactly what you're seeing as a company. And our Structural Heart investment really is kind of leading the pack there.

So Mike, I apologize, the question was within Structural Heart, WATCHMAN is what's driving to the high end of the range there? Michael F. Mahoney - Chairman, President & Chief Executive Officer: What's driving the high end of the range there is we're just -continue to open up new accounts. We continue to improve our account utilization. And we continue to build up our commercial capabilities in the U.S.

Okay. The gross margin kind of issues in the quarter, I think that you did a good job of, Dan, walking through what those are. So if we look at the back half of the year and expect an improvement in the gross margin, that's because, one, your inventory issues from the AMS transaction basically you get to a better, safer cost on those products, and then the FX headwind that you saw this quarter on the gross margin should dissipate, is that accurate? Daniel J. Brennan - Chief Financial Officer & Executive Vice President: No, somewhat. Let me just make sure we're clear on that. So we're at 70.7% in the quarter. The guidance range for Q3 and the full year is 71.5% to 72.5%. So it implies the uptick that you mentioned in the second half. I think the two key drivers of that are the inventory charges for the CRM products related to the better uptake of MRI-safe brady and quad in the U.S. as well as the WATCHMAN FLEX. We don't believe that those repeat themselves. And then secondly, we will get the full benefit in the second half of the lower manufacturing costs that we have for 2016 standards because we'll now be selling all the inventory at the new standards, and we will have sold off all the inventory at last year's standards. Those are the two main drivers that put us back into the 71.5% to 72.5% range. FX, we actually assume, is probably somewhat in the same range as where it was in Q2. That's really the reason, if you think back to last quarter, our guidance for FX in gross margin would have implied about 70 to 75 basis points each quarter for Qs 2, 3, and 4. Now it's 120; so that's a 50 basis point difference. And that's the reason why the guidance for the full year came from 72% to 73% to 71.5% to 72.5%.

Got it. All right. I have a long list of questions, but I'll let some others jump in. Thank you. Daniel J. Brennan - Chief Financial Officer & Executive Vice President: Thanks, Mike.

Your next question comes from the line of David Lewis from Morgan Stanley. Please go ahead.

Good morning. In light of a very strong revenue quarter, guys, I hate to ask something as banal as cash flow, Dan, but you don't give us multi-year cash flow estimates that often and I noticed that your $6 billion free cash estimate in the next three years is 10% higher than what we were looking for. Can you just sort of walk us through kind of why that would be and some of the components? I imagine one component's CapEx and perhaps the other is margins. But our margins numbers are pretty high and you're still 10% above us. So what could be driving that significant upside? Daniel J. Brennan - Chief Financial Officer & Executive Vice President: I think you answered your own question there, David, a bit. It's margins and CapEx. So one of the things that we have this year is, as we detailed in our guidance at the beginning of the year, is a CapEx number at $350 million that's $100 million higher than we think we need to effectively run each year. So we get that back, hopefully, each of the next three years and then expanding margins. So our goal next year is 25%-plus. And as we've given guidance for or long-term goals for 27% to 28% by 2020, the combination of those two factors and the CapEx I think gets you a long way there. And then the other piece is that we're going to continue to try, from a working capital perspective, to make that be our friend. We have a lot of inventory initiatives in place to really hopefully lead the industry in that regard and be best-in-class. And when we do that, that'll turn something that's going to drag on cash flow into a positive and hopefully see the beginnings of that this year. You see that from us taking our guidance from 1.5 billion to 1.6 billion; a piece of that is the inventory initiatives.

Okay. Very helpful. And then, Mike, maybe a couple of product questions. I guess the first is just sort of the forgotten biz for Boston MedSurg is sort of no longer forgotten given the organic growth. And specifically, Endoscopy has gone from mid-single growth last year to double-digit growth this year. I wonder if you could just give us a sense of sort of where we are in the product cycles. Is it share gain from competitors? Is it product cycles that is driving that? And then secondarily, on DES on SYNERGY, where do you think we are in sort of share versus mix? And obviously you're growing dramatically ahead of market. So what are some of the factors that are driving that? And I'll jump back in queue. Thanks. Great quarter. Michael F. Mahoney - Chairman, President & Chief Executive Officer: Thanks, David. Yeah. We've definitely never forgotten about Endo. It's really an incredibly high-performing business and it has been for a number of years. And they really have just continued to grow and expand. So our Endo business enjoys a, first of all, a strong market; a bit fewer competitors in our Endoscopy markets than some of our others. It has very strong growth profile in terms of the market growth and OUS expansion. And we are a very strong category leader across the globe, and we continue to expand particularly in the emerging markets. The portfolio is really driving a lot of the launch, a lot of the success that you've seen in 2016, led by our SpyGlass digital DS platform, which is driving solid double-digit growth and helps pull through the core portfolio. We also launched a product called the AXIOS Stent which is doing very well, as well as a hemostasis clip. So the portfolio…

Keith. Keith D. Dawkins - Global Chief Medical Officer & Executive VP: Yes, David. I think the SYNERGY stent operators around the world are appreciating the best-in-class acute performance because obviously if you can't deliver the stent, that's really the end of the discussion. And we have a lot of data now, including the EVOLVE II pivotal data, the EVOLVE (39:35) five-year data, and the real-world scar (39:40) data from Europe confirming the safety. Everybody, both patients and physicians, are interested in stent thrombosis. And the stent thrombosis, as you know from the data, is very low. We have 20,000 patients in investigative sponsored trials with SYNERGY, and these trials are beginning to release their data. And you'll see more flows of data at the meetings during the rest of this year and next year.

Great. Thank you very much. Daniel J. Brennan - Chief Financial Officer & Executive Vice President: Thank you. Michael F. Mahoney - Chairman, President & Chief Executive Officer: Thanks, David.

Your next question comes from the line of Larry Biegelsen from Wells Fargo. Please go ahead.

Good morning, guys. Thanks for taking the question and congrats on a really strong quarter. So, Dan, you raised the organic growth from 6% to 8% to 8% to 9%, but you only raise the EPS guidance by a penny. And so can you talk about why you're not getting better leverage on the incremental revenue? You kept the operating margin guidance the same. And then I had one follow-up. Daniel J. Brennan - Chief Financial Officer & Executive Vice President: Sure, Larry. I think probably the best way to explain that just to do a quick summary of the increase in revenue. So the revenue is $170 million higher at the midpoint of guidance and that breaks down into three things: $20 million comes from FX; $75 million comes from revenue that already came in Q2; and then $75 million comes in the second half. I think the main factor that's offsetting that is if you look at our R&D rate, our R&D rate in the first half was 10.5%. And looking at the second half it's going to be 11.5% to get to the full-year rate of 11%. So that's 100 basis point increase in R&D, largely related to timing and the investments in the Structural Heart that Mike had mentioned. So that, for the most part, offsets the additional flow-through in the revenue that you get – the additional $75 million of revenue you get in the second half...

Got it – sorry. Daniel J. Brennan - Chief Financial Officer & Executive Vice President: And then we're also – just as you look at it still very pleased to be at 15% to 19% full-year EPS growth which would be four years straight of double-digit adjusted EPS growth.

Got it. Sorry to interrupt there. And then for my follow-up, at the 2015 analyst meeting, the organic revenue goal was 3% to 6% in 2016 and 2017. You're now guiding to 8% to 9% in 2016. How should we think about the sustainability of the 8% to 9% and your goals in 2017 and beyond? And I recognize you're not giving guidance here, but you're way outperforming what you expected to do at your analyst meeting last year. Thanks for taking my questions. Michael F. Mahoney - Chairman, President & Chief Executive Officer: Yes. Thank you. The team is outperforming as part of the high performance culture that we have as a company. We're very excited about the full-year guidance, 8% to 9%. As you said, it compares to 3% to 6% we laid out, so it's a pretty strong beat there, and strong momentum across really each region and each business. So, we're not going to provide any outlook into 2017. Clearly outperforming the market at this level is not likely sustainable each year. But that being said, we're constantly looking to outperform the market. We're investing in faster growth businesses, and we're very confident in our ability long-term to drive mid-single-digit revenue growth, improve margins and drive double-digit EPS growth.

Thanks for taking my questions, guys. Daniel J. Brennan - Chief Financial Officer & Executive Vice President: Thanks, Larry.

Your next question comes from the line of Bob Hopkins from Bank of America. Please go ahead.

All right. Thanks. Can you hear me okay? Michael F. Mahoney - Chairman, President & Chief Executive Officer: Yep. Hear you fine, Bob. Daniel J. Brennan - Chief Financial Officer & Executive Vice President: Good morning.

Great. Good morning. So obviously, you've got the best revenue growth here for Boston Scientific essentially since the financial crisis, a higher absolute level of revenues than I think any of us thought, so congratulations on the unbelievable progress. I guess my first question is really kind of philosophical in terms of the long-term now that you've got this sort of higher level revenues and higher level of revenue growth. You guys have given some long-term guidance on operating margin targets and goals. So now that you're kind of outperforming on revenues, what's the thought on those operating margin targets? Is the thought that you'll take an opportunity to spend more and continue to sort of keep those operating margin targets? Or is it more likely that with this higher level of growth that you could be towards the high end or higher of the long-term targets that you've set previously? Daniel J. Brennan - Chief Financial Officer & Executive Vice President: Thanks, Bob. Yeah, I don't think we'll be changing the trajectory in terms of the margin guidance we've given. As we always say, it's about striking a balance between delivering durable, consistent revenue growth and expanding operating margins. And if you look at the numbers and see what we've done for the last three years relative to revenue growth and particularly on the margin expansion front, looking at 27% to 28% adjusted operating margin by 2020, and a consistent durable growing top line through that period and the goal of double-digit adjusted EPS growth each of those years, I think we're going to stick with that as our targets.

No, I understand you're sticking with the targets, but I'm just trying to understand philosophically because you're outperforming so nicely here, is the bias more towards opportunities to invest more? Or let some of that through? Because again, these levels are just so much higher than we originally thought. Daniel J. Brennan - Chief Financial Officer & Executive Vice President: Again, it's striking a balance. We do have a lot of investment, as Mike mentioned, relative to Structural Heart. That's a lot of investment to get to the U.S. market and be successful there. And I think we're – it's always about striking that balance. Michael F. Mahoney - Chairman, President & Chief Executive Officer: Yeah. And I think also we'll do an Investor Day 2017. We haven't nailed down yet. But we're making significant investments in platforms and markets that will have a big impact on the growth rate of the business in 2018, 2019 and 2020. And so you look at our launch in the U.S. of TAVR, our launch in the U.S. in the future of a deep brain stimulation, launching – only one that will have a drug-eluting stent and a drug-coated balloon for peripheral vascular, and we continue to expand into pulmonary and other areas across the company. So we definitely are investing for long-term growth, and a lot of it is big clinical investments in R&D that will impact the company, particularly in 2018, 2019 and 2020.

Great. And then on Structural Heart just real quickly, what was the driver of you guys providing guidance? It'll be at the high end of the range, is that Lotus or WATCHMAN or both? Michael F. Mahoney - Chairman, President & Chief Executive Officer: It's both. Both are doing quite well.

Great. Thanks for taking the questions. Daniel J. Brennan - Chief Financial Officer & Executive Vice President: Thank you.

Your next question comes from the line of Brooks West from Piper Jaffray. Please go ahead. Brooks E. West - Piper Jaffray & Co. (Broker): Good morning. Can you hear me? Michael F. Mahoney - Chairman, President & Chief Executive Officer: Yeah. I hear you fine, Brooks. Brooks E. West - Piper Jaffray & Co. (Broker): Great. Thanks, guys. Just to put a cap on the gross margin discussion, so, Dan, those all seem like transient issues with the inventory. And I'm not trying to push for guidance for next year, but as I look at my model we've got you at about 73% gross margins for 2017. I don't see anything that I really need to flow-through into 2017 from this. Is that the correct way to think about it? I mean, you're a little bit lower for 2016, but in terms of thinking about the forward model that should resolve itself and we should kind of go back to where we thought we were going. Correct? Daniel J. Brennan - Chief Financial Officer & Executive Vice President: Yeah. I mean, I wouldn't talk specifically about a rate for 2017. Obviously, the goal is to continuously increase the gross margin rate. And it'll be part of what we believe is 25%-plus adjusted operating margin for next year, so with that as the goal. The FX in the back half is really the only thing that we believe is consistent from the Q2 performance. The other things I mentioned relative to inventory charges and the benefit from the standards, hopefully, to your point, is a transient thing. So the FX is the only one that continues into the second half. Brooks E. West - Piper Jaffray & Co. (Broker): Okay. Perfect. And then maybe kind of piggybacking on Bob's question,…

Your next question comes from the line of Rick Wise from Stifel. Please go ahead. Rick Wise - Stifel, Nicolaus & Co., Inc.: Good morning, everybody. Maybe let me start off with Lotus. Mike, you talked about gaining EU share in the quarter. Maybe give us a little more color on that, are you ready to quantify that at all? You've talked about penetration or share of greater than 30% in your selected accounts. And maybe just add some more color on the Edge launch coming up in September. Is this a share gainer? Or no, that's going to require more time and those additional sizes that are coming in the first half of 2017? Michael F. Mahoney - Chairman, President & Chief Executive Officer: Yep. Sure. Again, the big investment for us in Structural Heart with WATCHMAN and TAVR, and you know, we're planning for the long-term here, particularly with our TAVR, given the market growth profile and how large the market is. And our view that we have a very differentiated platform from the other market contenders, given the controlled release of our Lotus valve and the lowest paravalvular leakage rates. So we think we truly have a differentiated platform in a very large market. We're a bit hamstrung in the near-term in Europe without having all five sizes. We have three of them today. So that hurts us a bit, but we'll solve that with a 21-millimeter in first quarter 2017 and eventually the largest size at probably first half 2017. So that will help. So in the meantime, we continue to do very well with the three valve sizes that we have. We won't provide any additional guidance in terms of number of accounts or penetration, but clearly it is a share taking strategy. The market's…

Your next question comes from the line of Matt Taylor from Barclays. Please go ahead.

Hi. Thanks for taking the questions. So I guess the first question that wanted to clarify when you talked about MRI-safe timelines, could you just inform us what revising the goal for Tacky MRI timeline, entail what the change was there, and then S-ICDs still on track. Can you talk about how that's doing and how you expect MRI-safe approval to potentially improve sales for S-ICD? Michael F. Mahoney - Chairman, President & Chief Executive Officer: Absolutely. We'll ask Dr. Stein to comment on this question.

Yeah, Matt. I mean on the MRI, not going to get into any of the details of the change in the protocol. But in the course of conduct of our ENABLE MRI trial, we have made a decision that we do need to revise the protocol with respect to patient screening and eligibility. And that's just the process of getting that protocol or vision through is what's going to cause the push in the timeline. Still have a goal of getting that approved by the end of 2017.

Great. And on S-ICD?

I'm sorry. Could you clarify the question on S-ICD?

Yeah. I was just curious. I may have missed the comment here because the comments went by kind of fast. But do you still have the same timeline for S-ICD MRI approval? And just how is S-ICD performing today?

Yeah. We still have the same timeline, anticipating approval Q3 of this year. And really couldn't be more pleased with what we've seen in terms of uptake of the EMBLEM MRI where it's been launched in Europe and the existing EMBLEM device in the U.S. and globally. Michael F. Mahoney - Chairman, President & Chief Executive Officer: We expect EMBLEM MRI approval in the U.S. in third quarter.

Q3 this year. Michael F. Mahoney - Chairman, President & Chief Executive Officer: Yep.

Great. And could you just talk about broader utilization? Obviously, your results were phenomenal this quarter. Are you seeing something going on in either the U.S. market or some of the emerging markets that you play in that's contributing to higher levels of utilization that may not continue going forward? Or do you think that you're really just outperforming your markets from good execution? Michael F. Mahoney - Chairman, President & Chief Executive Officer: Well, thanks, Matt. It's Mike. I also don't want to be a broken record here, but I think I want to just reinforce, consistent with our Investor Day presentations in 2013 and 2015, we've continued to invest our portfolio into faster growth markets. So, kind of in the maybe 2011 timeframe, we called our market growth profile about 3% in the markets we compete in. So as we've shifted our portfolio over time into faster growth markets, we think the markets we compete in now are kind of in the 4% to 5% growth range, if you look at the composite of BSC. So we are pleased that we're outperforming the market, but we'll strive to continue to do so. But we think that we have fundamentally shifted the markets that we play in to about a 4% to 5% growth market versus maybe a 2% to 3% growth market 4 or 5 years ago. So the markets are stronger that we compete in and the team is doing a really nice job of outperforming.

Thanks for the thought.

Greg, we'll take one more question please.

Okay. That question comes from the line of Glenn Navarro from RBC Capital Markets. Please go ahead.

Hi. Thanks for squeezing me in. Two questions. One, drug-eluting stents in the quarter up high-single digits, significantly outpacing the market. You have Abbott launching Absorb. So my question is, is this high-single digits sustainable, given Absorb coming into the market? Or should we anticipate a little moderation going forward? And then I had a quick follow-up. Michael F. Mahoney - Chairman, President & Chief Executive Officer: So, yeah. We're not giving DES guidance for the third quarter or fourth quarter. We're going to continue to run the play, which is we believe we have the best product in the market, and Keith can comment a bit more on the clinical data. And we've been competing with Absorb in Europe for quite a while. We would put it at probably less than a 7% – the BVS probably less than 7% of the global market and it's been on the market for quite a while. So we feel like we're in the position of strength in terms of our product portfolio, and we continue to look at BVS, it's an interesting technology. And we've got a number of bets and it's a fact (57:58) in the future we can look at a second-gen or a third generation device then we'll eventually bring that to market but at this time we believe that SYNERGY is the premium device and we'll continue to focus on driving that.

And then with Keith on the line, I'd love to get his thoughts on kind of SYNERGY versus Absorb. And then my follow-up result was on Eluvia which was just launched in Europe and the data is very strong. And once you come to the U.S. you'll be by far – you'll be the second DES on the market for peripherals but with by far the best data. So how is Eluvia doing in Europe? And it just seems like this is one product that has a significant opportunity that's flying under the radar screen so just thoughts on Eluvia as well. Thanks. Keith D. Dawkins - Global Chief Medical Officer & Executive VP: And so, Glenn, in terms of SYNERGY and BVS, obviously there's not a lot of head-to-head data between the two, but BVS has been available in Europe. It's had CE Mark for five-and-a-half years and the penetration, as Mike said, is mid-single digits. And you and everybody else on the call is well aware of the Absorb II and Absorb III data. The safety profile of drug-eluting stents is paramount. Safety profile is more important than efficacy. And with a stent thrombosis rate that is at least 2x SYNERGY, we feel that the first generation, fully absorbable scaffolds, the safety profile is open to question. We do have an interest in the space. Obviously, as a leader in DES we have to have that. And as you know also we have three shots on goal and our own internal FAST program which is a thinner strap, more deliverable stent, more compliant, less malapposition is in first human use trials now. And we are still anticipating commercialization in Europe in 2018.

And then just your thoughts on Eluvia, how it's performing in Europe? And your thoughts on how it will perform in the United States once launched? Michael F. Mahoney - Chairman, President & Chief Executive Officer: Sure. So we're early with our Eluvia platform. It's a large investment. We'll be announcing additional data sets on both our balloon and our stent at CIRSE, which I think is in Barcelona in September third quarter this year. So we'll continue to lay out our clinical data there. But I think just, again, the strength of having a – in Europe, a drug-coated balloon and a differentiated drug-eluting stents for the peripheral vascular offers physicians more options. And so it uniquely positions us in the SFA and it also helps us pull through our core portfolio. So I think these investments are paying off in Europe, based on the growth, and we've got to wrap up our clinical trial of Eluvia which we anticipate by year-end 2016. And so we look forward to that finishing. And then we'll provide additional comments on our balloon at our third quarter earnings call.

Okay. Thank you for taking the questions. Michael F. Mahoney - Chairman, President & Chief Executive Officer: Thank you. Daniel J. Brennan - Chief Financial Officer & Executive Vice President: Thanks, Glenn.

Great. With that, we'd like to conclude the call. Thanks for joining us today, and we appreciate your interest in Boston Scientific. Before you disconnect, Greg will give you all the pertinent details for the replay.

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