Feb 4, 2014
Executives
Susan Lisa - Investor Relations Michael F. Mahoney - President and Chief Executive Officer Daniel J.
Brennan - Executive Vice President and Chief Financial Officer Keith D. Dawkins - Global Chief Medical Officer and Executive Vice President Ken Stein - Senior Vice President and Associate Chief Medical Officer of Cardiac Rhythm Management
Analysts
David R. Lewis - Morgan Stanley Michael N.
Weinstein - JP Morgan Chase & Co. Robert A.
Hopkins - BofA Merrill Lynch Frederick A. Wise - Stifel, Nicolaus & Co., Inc.
Glenn J. Novarro - RBC Capital Markets Brooks West – Piper Jaffray Josh T.
Jennings - Cowen & Co., LLC Lawrence Biegelsen - Wells Fargo Securities, LLC Matthew J. Dodds - Citigroup Inc Bruce Nudell – Credit Suisse
Operator
Ladies and gentlemen, thank you for standing by. And welcome to the Boston Scientific Q4, 2013 Earnings Conference Call.
At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time.
(Operator Instructions). As a reminder this conference is being recorded.
I would now like to turn the conference over to our host, Susie Lisa. Please go ahead.
Susan Lisa
Thank you, Roxanne. Good morning, everyone.
Thanks very much for joining us. With me on today's call are Mike Mahoney, President and Chief Executive Officer; and Dan Brennan, Executive Vice President and Chief Financial Officer.
We issued a press release earlier this morning announcing our fourth quarter and full year results for 2013, which included reconciliations of 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 begin our prepared remarks with an update on our business progress and his perspectives on the quarter, the year and the outlook.
Dan will then review our overall fourth quarter and full year 2013 financial results and then discuss goals for full year and first quarter of 2014. 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 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 opportunity; our cash flow and expected use; our financial performance, including sales, margins, earnings and other Q1 and full year 2014 guidance; as well as our tax rates, R&D spend and other expenses.
Actual results may differ materially from those discussed in the forward-looking statements. Factors that may cause such differences include those described in the Risk Factors section of our most recent 10-K and subsequent 10-Qs and 8-Ks filed with the SEC.
These statements speak only as of today's date and we disclaim any intentions or obligation to update them. At this point I'll turn it over to Mike for his comments.
Mike?
Michael F. Mahoney
Thank you, Susie. Good morning, everyone.
I will begin today with some highlights regarding our fourth quarter and full year performance for 2013, and then provide some thoughts on our 2014 outlook. Dan will then review the financials and 2014 guidance and then we will take your questions from there.
So please note that throughout the commentary all growth rates discussed are on constant currency basis and represent fourth quarter 2013 year-on-year growth unless otherwise specified. So overall fourth quarter was a very good quarter for Boston Scientific.
We are pleased that we are delivering on our commitment and building momentum. In fourth quarter we exceeded our guidance and delivered 5% operational revenue growth.
We also exceeded our EPS guidance in the fourth quarter delivering adjusted EPS of $0.21. We estimate that most of our business units grew faster than the market.
For 2013 we committed to turnaround our performance and return to positive growth and we've achieved that goal early by posting 2% operational growth in second quarter and then improving upon that with a 4% growth rate in third quarter and now 5% in the fourth quarter. And throughout the year we returned cash to shareholders with $225 million worth of stock repurchased in fourth quarter and $500 million for the full year, or 43% on adjusted operating cash flow for the year.
I will turn now to a few highlights from the fourth quarter and provide some commentary on 2014. Our MedSurg business, which now represents 33% of company sales are growing faster than the market and driving a balanced portfolio mix, led by impressive growth in neuromodulation, with continued above market growth in both our endoscopy, urology and women's health business.
In endoscopy we had another strong quarter and we continued to grow faster than the market. Our key growth drivers include our hemostasis franchise, failure devices and our Endoscopic Ultrasound needle platform.
We are also really excited about the progress we are making with our Spyglass Direct Visualization System that's recently been launched in China. The Spyglass System was launched earlier in 2013 and this platform allows GI physicians to visualize the insides of the biliary tree and it's been very favorably received.
Also within Endoscopy Alair, our Bronchial Thermoplasty platform delivered 28% full year growth as we surpassed 350 worldwide treatment sites. We also continue to experience improving reorder rates and consistent case-by-case approvals by large commercial insurers.
So in 2014 we expect the Endoscopy division to continue to deliver solid growth across all regions fueled by a very strong pipeline and broader emerging market expansion. Now turning to Neuromodulation, which is also within our medical surgical reporting sector.
Neuromodulation during fourth quarter sustained excellent momentum from the previous quarter and grew at 33%. Our team at Neuromodulation is really performing at very high level and we continue to strengthen our leadership position and gain significant market share particularly in the U.S.
spinal cord stimulation market. Physicians have enthusiastically adopted our next generation Precision Spectra Spina Cord Stimulator platform which is designed to improve pain relief to a wide range of chronic pain patients.
Also at the North American Neuromodulation Society annual meeting last month we presented compelling clinical outcomes data using the Precision Spectra SCS System. Although preliminary these real world results affirm the advantage of using this novel platform to treat pain patients.
Precision Spectra validates our focus on developing other clinically meaningful innovations such as the Vercise Deep Brain Stimulator System which is available in Europe. So turning to Urology and Women's Health, this division also grew 5% in the quarter and this growth was led by our international expansion efforts in several new product launches.
We expect to deliver above market growth also in this business in 2014 as we continue to build momentum. Now turning to intervention cardiology.
Our IC business did not grow in fourth quarter primarily due to softness in drug-eluting stents. However the business is stabilizing and we are well positioned to improve our DES performance in 2014.
We're excited about our newly enhanced IC portfolio and capability including the recent approval and launch of the Promus PREMIER drug-eluting stent in the U.S. PREMIER delivered excellent outcome offering physicians a custom architecture that improves actual strength while providing outstanding deliverability.
So in 2014 we expect Promus PREMIER to be a catalyst for our global DES franchise. And we anticipate PREMIER approval in Japan in the second half of the year.
In addition adoption of physician training for our BridgePoint chronic total occlusion platform continues to expand. Internationally our next generation SYNERGY stent continues to perform well.
We have seen good results from the limited launch we began in Europe and we're expanding to a broader EU launch this year supported by a comprehensive SYNERGY clinical evaluation portfolio which includes almost 28,000 patients. Synergy is priced at a premium through our PREMIER platform.
And Synergy has done very well in targeted markets in Europe and it's becoming a first choice for physicians for tackling complex coronary cases. Moving to our core IC business we continue to see strong performance.
Our IC business X stents grew faster than the market in fourth quarter up double-digits. The growth is driven by the revitalization of our complex PCI product portfolio including the Emerge Balloon in the OptiCross coronary IVUS catheter as well as emerging market expansion.
We continue to expect this business to grow faster than the market in '14 as we expand our commercial rollout of seven new products. Next I'd like to highlight WATCHMAN, which is our Left Atrial Appendage Closure device we're very pleased with the favorable December FDA panel vote.
The panel supported WATCHMAN 13 to one across the three areas of device safety, efficacy and benefits that outweigh the risk. This is really a significant milestone for the therapy in bringing this innovative technology to the U.S.
We also continue to expect U.S. approval in the first half of 2014 and we believe we have a significant timing advantage over our competitors.
We also continue to show good progress with our Lotus TAVR program. In the fourth quarter the final end point data from the REPRISE II CE Mark trial was presented at PCT conference and this demonstrated excellent results.
Highlights of the 120 patient study include that 83.6% had no or trace paravalvular aortic regurgitation at 30 days, 1% had moderate aortic regurgitation and 0% had severe aortic regurgitation. We also received Lotus CE Mark approval and initiated commercial sales in Europe in the quarter.
So the impressions from the commercial accounts we have launched into thus far has been very positive and we look forward to expanding the roll-out of this second generation Lotus Valve platform in the international market and initiating the REPRISE III U.S. IDE trial in 2013.
Also within cardiovascular is our peripheral interventions division. This division continues the strong consistent performance.
The PI business delivered above market growth for the eight consecutive quarter. Our market leading balloons, stents and intervention oncology franchises continue to lead the way, with a particularly strong performance in the U.S., Latin America and Canada.
During the quarter we strengthened our peripheral embolization business with multiple U.S. launched and we are advancing our drug coated technologies and expect to achieve important clinical and commercial milestones later in 2014, including our drug-coated balloon platform, which we expect to launch in certain international markets in the second half of this year.
Turning to hypertension, we are starting our Vessix platform in Europe and remain enthusiastic about both its clinical impact and long-term business potential. It's important to know that Vessix is a second generation balloon expandable multi-point renal denervation platform.
We believe Vessix is highly differentiated from the competitor's product that recently announced missing its efficacy endpoint in the U.S. pivotal trial.
We recognize that this is an important development in the market, yet potentially an opportunity for BSC. So regarding our U.S.
trial, we will carefully examine the forthcoming available data and work collaboratively with the scientific community to determine the next steps for our Vessix clinical program. Let me now discuss our rhythm management segment.
And we are really encouraged by the improved revenue performance of this business and its return to operational growth over the last two quarters. While we weren't satisfied with the margins within our rhythm management growth and we are focused on improving those in 2014 and throughout our multi-year strategic plan.
So in terms of the market we believe the worldwide CRM market continues to stabilize over the course of 2013, with year-over-year market growth rate slightly flat to low single digits in the fourth quarter. In our defib business we estimate our worldwide Q4 market share to be up sequentially from the third quarter, driven by improved share in our international core defib business and worldwide growth of the highly differentiated S-ICD platform.
During the fourth quarter we expanded the worldwide launch of the S-ICD platform and continued to observe high demand for the system in our physician training programs. The S-ICD franchise is delivering on our manufacturing ramp-up objectives and training is proceeding on plan.
We remain very excited about S-ICDs ability to product sudden cardiac death protection without touching the heart. So today physicians have used the S-ICD to treat primary and secondary preventive patients while it's still very early in the launch of the system recent publications such as the one by [Dr.
Poole and Gold] in circulation clearly articulate the value of rationale for implanting S-ICD in various indicative patient populations. In addition in December we initiated the European launch of our new quadripolar X4 CRT-D patient system.
Our X4 quad lead offers three different lead options and the most pacing vectors in the industry. The system also builds upon the longevity advantages of our CRT-D devices with nearly twice the battery capacity, thus reducing the risk of additional hospitalization and clinical complications associated with early change out including resection.
We also expected to begin our X4 Quadripole IDE trial in the U.S. in the first half of 2014.
Turning now to our pacer business, this franchise delivered good results in both the U.S. and international markets and we believe continues to drive worldwide pacer share gains in the fourth quarter.
In the first quarter we plan to launch our MI technology more broadly with the approval of the [INGENIO] pacemaker lead in Europe and system approval in Japan. We expect these new opportunities will build upon our differentiated RF remote monitoring capabilities that are designed to assist patients and physicians in detecting clinical events sooner.
In EP we closed the acquisition of Bard's EP business on November 1st. It's an important acquisition that expands our portfolio of EP technologies and brings stronger global capability to our EP division.
We expect to improve our performance in EP in '14 through new product launches and synergies from our broader rhythm management capabilities. So I will wrap up the fourth quarter and 2013.
Overall we are really pleased with the fourth quarter, our full year results and the momentum we are building as a company. Last year we committed to turnaround our performance and return to positive revenue growth and we did exactly that.
We returned to growth faster than anticipated and we improved our quarterly revenue growth rate on an operational basis throughout the year. We continue to focus on margins, we are targeting significant improvements.
We are strengthening both our portfolio and utilization fees through meaningful innovation that delivers unique value to patients and savings to the healthcare system. We delivered full year adjusted EPS above our guidance range and we continue to deploy a balanced capital allocation strategy throughout the year with a strong emphasis on returning cash to shareholders.
As we look forward to 2014 we are highly satisfied with our performance. We have we have numerous growth opportunities in front of us and there is significant room for improved execution and performance across many of the businesses and regions.
We remain focused on executing our strategic plan and in 2014 we expect to continue to improve our performance, expand operating margins and accelerate full year revenue and earnings growth. In terms of the broader market the global markets are dynamic and certainly challenging.
However we see relative stabilization of market growth rates in most regions and slight market growth rate improvements from a year-ago in CRM and IC. Our aim in 2014 is to grow our core business faster than the market and to grow our operating income faster than sales.
In this year we plan to continue to devote our R&D and commercial investments and deliver meaningful innovation in new products, new solutions and new commercial models. Our pipeline of new products such as S-ICD, WATCHMAN, PREMIER, Alair, SYNERGY, Lotus and VESSIX are advancing and we expect them to generate a more meaningful revenue contribution in '14.
Our organization is developing stronger global capabilities, and we now operate, measure and reward our business leaders from a global perspective. As a result we are improving our customer focus, registering more products internationally and more purposefully investing our commercial resources for growth.
So today we are still under penetrated in emerging markets relative to some of our peers, however we are making great strides to narrow the gap and we are developing capabilities more fully in emerging markets. Our emerging markets sales increased to 9% of our total company operating sales in fourth quarter 2013 and we anticipate emerging market sales will grow to an estimated 15% of our mix by 2017.
So as a result of these plans we expect to continue to generate strong cash flow which we believe will support a balanced capital allocation strategy that is aligned with our strategic priorities, while enabling us to maintain sufficient flexibility. So overall we have numerous opportunities to create value for shareholders by accelerating both the sales and earnings growth in '14.
And finally I would like to thank our employees around the world for their winning spirit and their commitment to Boston Scientific. Now let me turn the call over to Dan for more detailed review of our financials and ’14 guidance.
Daniel J. Brennan
Thanks Mike. Let me begin by providing some overall perspective on the quarter before getting into the details.
We generated adjusted EPS of $0.21 compared to $0.18 in Q4 last year in our guidance range of $0.18 to $0.20. This improved profitability from the prior year was primarily driven by our operational revenue growth, continued gross margin expansion which was up 190 basis points year-over-year and a lower effective tax rate.
This was partially offset by investments in our strategic growth initiatives and our core infrastructure, variable expenses associated with higher sales levels as well as a $0.01 impact from the medical device tax. In addition we generated operating cash flow of $268 million in the quarter and used over 80% of that to repurchase approximately 19 million additional shares in the quarter.
While we’re pleased with our execution against goals particularly with respect to the return to operational revenue growth for the year and growth in Q4 against tougher year-over-year comps we believe we still have substantial future potential operating leverage. Now I will move to the more detailed review of our business performance and operating results in the quarter.
For the fourth quarter of 2013 consolidated revenue of $1,838 million represented growth of 1% compared to the prior year on an as-reported basis. On operational basis which excludes the impact of foreign exchange and the divestiture of our Vascular business we grew revenue 5%.
This 5% operational revenue growth includes approximately $15 million in revenue from the CR Bard electrophysiology business we acquired effective November 1st or approximately an 80 basis points contribution to growth. The actual headwind from foreign exchange on sales was approximately $42 million as compared to the previous year and was fairly consistent with the $40 million impact we assumed in our guidance range.
Now let me provide little more granularity on our sales for our three business groups comprised of our seven divisions. To start with MedSurg, this group once again grew at a double-digit rate in constant currency and faster than its underlying markets while contributing strong operating income as well.
Total MedSurg sales of $613 million in the quarter were up 12% with all regions growing double-digit over the previous year period on a constant currency basis. MedSurg operating income for the full year was 31.5% representing a 120 basis points increase over 2012.
MedSurg performed well across all its businesses led by global constant currency revenue growth of 33% in Neuromodulation, 8% Endoscopy and 5% in Urology and Women's Health. To dive into the details just a bit endoscopy sales grew 8% worldwide on a constant currency basis with a very strong international performance with high single-digit growth in Europe and low double-digit growth in Asia.
Urology and Women's Health worldwide sales grew 5% on constant currency basis compared with prior year quarter and this performance was driven by strong international sales of 15% year-over-year constant currency with particular strength in Europe and Latin America as we continue to build our global infrastructure in this business. To close out the MedSurg highlights we are pleased to report a second straight quarter of 13% plus year-over-year sales growth in Neuromodulation with 33% worldwide growth in the fourth quarter on a constant currency basis.
This predominantly U.S business saw 30% domestic sales growth and 70% international sales growth on a constant currency basis for the quarter, compared to the year ago period as the launch of our Precision Spectra system continues to help BSC gain share and drive market growth. Turning now to cardiovascular; global cardiovascular group sales, which consist of our Interventional Cardiology and peripheral intervention's division was flat for the quarter on a worldwide constant currency basis with sales of $705 million.
Cardiovascular full year 2013 operating margin of 25% was essentially unchanged from the 2012 level. Within cardiovascular worldwide Interventional Cardiology sales of $500 million declined 3% compared to the fourth quarter 2012 on a constant currency basis.
Outside of drug-eluting stents worldwide other Interventional Cardiology delivered very solid sales growth of 7% as compared to Q4, 2012 in constant currency terms driven by gains in IRIS, atherectomy and continued adoption of our WATCHMAN Left Atrial Appendage Closure device in international markets. Worldwide drug-eluting stent revenue of $272 million was down 10% year-on-year in constant currency and below the low end of our guidance range.
U.S. DES revenue of $108 million and OUS DES revenue of $164 million declined approximately 9% and 11% respectively compared to Q4 of 2012 on a constant currency basis.
We estimate that our U.S DES share was relatively stable both sequentially and compared with Q4, 2012 in the low to mid 30s. Internationally the DES sales declined reflected disruptions in Germany following the OrbusNeich settlement in late Q3 as well as competitive product launches.
The WATCHMAN® Left Atrial Appendage Closure products continue to show strong growth in international markets with sales up 76% for the quarter on a constant currency basis compared with prior year Q4 which put full international sales growth at just over 50%. Full year WATCHMAN sales were at the low end of the $20 million to $30 million goal we outlined at our February, 2013 Investor Day due to the reimbursement delays in the U.K and Korea.
Lotus percutaneous valve sales with just four weeks of limited launch post European approval in Q4 did not meaningfully contribute to our revenue in the quarter. Peripheral interventions worldwide sales of $205 million in the quarter grew very strong 7% year-on-year in a constant currency led by consistent 6% constant currency growth across the U.S, Europe and Asia and low double-digit in Latin America compared with prior year period.
That brought full year global PI sales growth to 6% on a constant currency basis. Now I'll discuss our Rhythm Management group which consists of our Cardiac Rhythm Management and Electrophysiology business units.
Worldwide Rhythm Management sales in Q4 of $518 million grew 5% year-over-year on a constant currency basis with year-on-year growth in all regions excluding the $15 million contribution from C.R. Bard, Electrophysiology acquisition closed on November 1, Rhythm Management Q4 sales grew 2% year-on-year on a constant currency basis.
Full year 2013 operating margin for the group, of 11% with roughly flat with 2002 level as a result of several one-time items in Q4, 2013. We had incremental expenses associated with the return of the S-ICD to the market, inventory reserves related to our upcoming CRTD and Quad Lead introductions, Bard integration cost and expenses related to the Rhythmia manufacturing ramp.
Increasing management profitability is the key component of our goal of 25% operating margins by 2017 and we remain focused on achieving that objective. Worldwide CRM revenues of $468 million in the fourth quarter, grew 2% year-on-year as reported and 3% on a constant currency basis exceeding the high end of our guidance range and improving upon the 1% year-on-year constant currency growth we posted for the third quarter.
Sales grew in both the U.S. and international which was led by Europe turning in high single digit year-on-year growth for the quarter offset by slightly weaker sales in Asia.
To breakdown CRM a bit further on a worldwide basis defib sales were $333 million in the fourth quarter which was up 1% in constant currency from Q4, 2012 on strong international core defib sales and very encouraging S-ICD sales for the quarter, which brought full year S-ICD sales above the low end of the $25 million to $45 million goal we provided at our February 2013 Investor Day, despite having very limited market presence during the year. Worldwide pacer sales grew 7% on a constant currency basis as compared to Q4 '12, as both our U.S.
and International pacing businesses posted 7% year-over-year growth for the quarter. We continue to see strong performance in the U.S.
and improved OUS results due to the adoption of our INGENIO family of pacemakers. Within Electrophysiology the quarter 35% year-on-year growth on a constant currency basis includes $15 million in revenue from the closing of the Bard EP acquisition.
Excluding the Bard EP contribution global EP sales was down 5% primarily to share loss in therapeutic catheters. Importantly we believe the Bard EP acquisition meaningfully expand our product portfolio and commercial capability and we look forward to improve results in this newly strengthened franchise in 2014 and beyond.
Let me now briefly recap full year 2013 revenue. On a reported basis, consolidated 2013 revenue was $7,143 million, which represents a 1% decrease from the prior year on a reported basis.
In constant currency and excluding the impact of neurovascular divestiture, operationally sales increased 2% compared to 2012. For the full year foreign currency negatively impacted reported full year sales growth by approximately 215 basis points or about $156 million.
Moving on from sales, adjusted gross profit margin for the fourth quarter was 70% or 190 basis points higher than Q4, 2012. The increase was largely attributable to benefits from our improvement programs, favorable product mix which was partially offset by price erosion.
For the full year 2013, adjusted gross profit margin was 69.7% compared to 67.8% for the full year 2012. The 190 basis points net full year gross margin improvement stemmed from improvements in incentive cost, lower sales of divested businesses and Promus profit share and added through ups, partially offset by price as well as volume mix.
Foreign exchange continued to have a very minimal impact upon gross margin as a result of our hedging program. Adjusted SG&A expenses were $704 million or 38.3% of sales in Q4, 2013 compared to $630.3 million or 34.6% of sales in the fourth quarter of 2012.
During Q4, 2013, the impact from our cost savings programs were offset by several one-time investment in our strategic growth initiatives, strengthening execution in our core markets and costs associated was expanding in emerging markets and Europe all with the goal of driving consistent top-line growth. Although it will be necessary to make trade-offs within the P&L in any given time period, we remain focused on achieving our goal of at least 100 basis points annual operating margin improvement and reaching an overall 25% plus operating margin by 2017.
For the full year 2013, adjusted SG&A expenses were $2.63 billion or 36.8% of sales compared to 34.6% of sales in 2012. Recall that SG&A expenses in Q4 and for the full year 2013 includes a negative impact of approximately 100 basis points from the medical device tax.
Adjusted research and development expenses were $215 million for the fourth quarter or 11.7% of sales. This compares to $241 million or 13.2% of sales in the fourth quarter of 2012.
For the full year 2013, adjusted R&D expenses were $859 million or 12% of sales. Royalty expense was $24 million in the quarter or 1.3% of sales compared to $28.3 million in Q4 last year and for the full year 2013 royalty expense was $140 million or 2% or sales.
On an adjusted basis pretax operating income was $342 million in the quarter or 18.6% of sales, down only 10 basis points from Q4, 2012 despite a negative 100 basis point impact from medical device tax and investments in our strategic growth initiatives which were partially offset with targeted cost reduction initiative and higher gross margins. GAAP operating income, which includes GAAP to adjusted items was $126.6 million in Q4 2013.
The primary GAAP to adjusted items included in operating income for the quarter were pretax restructuring charges of $45.6 million, pretax litigation charges of $15 million, pretax loss on the Neurovascular divestiture of 2.6 million, pretax contingent consideration expense of $21.8 million and pretax amortization of $106.2 million. Now we move on to other income and expense which primarily consisted of interest expense.
Interest expense for the quarter was $58 million as compared to $64 million in Q4 last year due primarily to the refinancing of our public debt in Q3 of 2013. Our average interest expense rate in Q4 2013 was 5% or approximately 50 basis points lower than Q4 last year.
For the full year interest expense on an as-reported basis was $324 million or $63 million higher than in 2012 primarily due to a pretax one time charge of approximately $70 million associated with our third quarter debt refinancing. Our tax rate for the fourth quarter was a negative 82.7% on a reported basis, a negative basis 5.7% on an adjusted basis.
The difference between our reported and adjusted tax rate for the quarter is attributable to charges excluded in determining our non-GAAP results. In addition our Q4 adjusted tax rate includes approximately $20 million of net favorable discrete items.
Excluding these discrete tax items our operational tax rate was 1.5% for the fourth quarter and 10.6% for the full year 2013. Our full year tax rate is lower than our previous expectations due to a favorable geographic mix of earnings.
For the full year we reported adjusted earnings per share of $0.73 per share. On a reported GAAP basis 2013 EPS was a loss of $0.09 per share.
GAAP results for 2013 included after tax charges of $1,112 million or $0.82 per share related to goodwill and intangible asset impairment, acquisition and divestiture related cost, litigation, restructuring related expenses and amortization of intangible assets. As a reminder full year 2013 adjusted EPS of $0.73 includes a $0.01 one-time benefit associated with the final adjustment related to our Promus profit share agreement and $0.02 benefit for the 2012 R&D tax credit which was recorded in Q1 of 2013 and certain other discreet tax items, which we don't expect to reoccur.
Moving on to the balance sheet, DSO of 66 days increased three days compared to December of 2012 due primarily to slower collections in Europe. Days inventory on hand of 149 days was up nine days compared to December of last year due to higher inventory in advance of many of the launches we mentioned and lower cost of goods sold driven by standard cost improvements and favorable product mix.
Adjusted free cash flow for the quarter was $316 million compared to $361 million in Q4 of 2012. The decrease is due primarily to investments in inventory support, new product launches as I just mentioned as well as an increase in capital expenditures related to our previously announced restructuring program and infrastructure optimization initiatives.
For the full year adjusted free-cash flow was $1,158 million consistent with 2012. Capital expenditures were $85 million in Q4 of 2013 compared to $63 million in Q4 of 2012 and for the full year capital expenditures were $245 million compared to $226 million in 2012.
Turning to share repurchases, we repurchased approximately 19 million shares for $225 million in the fourth quarter of 2013 as Mike mentioned. For the full year 2013 we repurchased approximately $51 million shares for roughly $500 million.
Since July 2011 we've now repurchased 238 million shares or approximately 15% of our outstanding shares. We currently have $660 million of capacity remaining under our share repurchase authorization.
We believe buying back our stock is a good use of cash and a key part of a balanced capital allocation strategy that values returning cash to our shareholders. We plan to continue our share repurchase program into 2014 subject to business development opportunities, market conditions our stock performance, regulatory trading windows and other factors.
To summarize Q4 was another strong quarter for Boston Scientific as we continued to make solid progress on our global strategy and we remain focused on driving profitable revenue growth. I would also like to take a minute to benchmark against our February 2013 Investor Day guidance where we called for 2013 operational revenue growth of minus 2% to up 2% and delivered up 2%; adjusted operating margin of 18% to 19% and achieved 18.9%; and adjusted EPS of $0.64 to $0.70 achieving adjusted EPS of $0.73, which includes $0.03 of non-recurring benefits I previously mentioned.
We also believe that we continue to have opportunities to enhance profitability and expect to continue to generate strong cash flow. Let me now walk you through our guidance for full year 2014 as well as the first quarter.
For full year 2014 revenue guidance we estimate consolidated revenue to be in the range of $7,300 million to $7,500 million which represents growth of 2% to 5% on as reported basis. Holding current foreign exchange rates constant, we expect the full year impact of FX to be relatively neutral although we do expect $20 million headwind in the first quarter.
On an operational basis which excludes the impact of foreign exchange and the divested neurovascular business we estimate that consolidated 2014 sales will grow in a range of 3% to 5% compared to 2013 and we encourage you to model for the midpoint. Included in this revenue guidance is an estimated 100 plus basis point contribution from our adjacencies including the WATCHMAN Left Atrial Appendage Closure device, Lotus percutaneous valve, Alair system for Bronchial Thermoplasty, Rhythmia mapping system, Vercise deep brain stimulation system and the Vessix renal denervation system.
Our guidance also assumes continued strong revenue growth contribution from emerging markets as we remain underpenetrated in these markets relative to some of our peers. We expect our adjusted gross margin for the year as a percentage of sales to be in the range of 70% to 71%.
Although we expect to see continued downward pricing pressure we expect this headwind to be offset by improved price management principally through market segmentation and tiered offerings and our manufacturing value improvement programs. We believe that the impact of these benefits will increase as we progress through the year.
As we forecast SG&A expense for 2014 we expect to continue to make necessary investments in our strategic growth initiatives to improve our core execution and to enhance our capabilities in emerging markets and Europe. However we believe the cost of these investments should be partially offset by restructuring savings.
For the full year we expect adjusted SG&A as a percent of sales to be between 36.5% and 37.5%. We continue to transform our R&D organization and refocus our spending to drive innovation and growth.
In 2014 we expect R&D spending as a percentage of sales to be in the range of 11.5% to 12%. We currently expect 2014 royalties to be relatively consistent with 2013 while interest and other expense is expected to be $20 million to $25 million lower year-on-year primarily due to lower interest rates as a result of our refinancing in Q3 of last year.
This implies the full year operating margin goal in the range of 20%. We expect our adjusted tax rate for the full year 2014 to be between 13% and 15%.
This does not assume an extension of the US R&D tax credit in 2014. It does assume a more normalized geographic of earnings and also excludes any discrete tax items that may arise during the year.
We are subject to tax authority examinations in many jurisdictions that are scheduled to conclude in 2014. The final resolutions of these exams may result in additional favorable or unfavorable discrete tax items during the year that are difficult to forecast but may impact our full year adjusted tax rate.
As a result we expect adjusted earnings per share for the full year 2014 to be in the range of $0.75 to $0.80 and we encourage you to model for the midpoint of the range. On a GAAP basis we expect EPS to be in a range of $0.35 to $0.40.
So again to reference our February 2013 investor day goal, for 2014 we projected low single digit operational revenue growth of 100 basis points improvement in operating margin and mid to high single digit adjusted EPS growth and believe that our guidance measures up favorably against these goals. Lastly, for 2014 our guidance assumes adjusted free cash flow of approximately $1.2 billion, capital expenditures of approximately $250 million, pre-tax amortization expense of approximately $450, stock comp expense of approximately $100 million and our share count of approximately $1.345 billion fully diluted weighted average shares for our EPS calculations for the full year subject to the conditions I mentioned earlier.
We hope you find this level of detail helpful for you modeling. Now turning to Q1, 2014 we expect consolidated revenues to be in the range of $1,755 million to $1,805 million.
If current foreign exchange rates hold constant the headwind from FX should be approximately $20 million as I mentioned or 115 basis points relative to Q1 of 2013. On an operational basis we expect consolidated Q1 sales to grow year-over-year in a range of plus 3% to plus 5%.
For the first quarter adjusted EPS is expected to be in a range of $0.16 to $0.18 per share and reported GAAP EPS is expected to be in a range of $0.06 to $0.08 per share. So with that I'll turn it back to Susie who will moderate the Q&A.
Suzy?
Susan Lisa
Thanks, Dan. Roxanne let's open it up for questions through the next 20 to 25 minutes or so.
In order to enable us to take as many questions as possible, please limit yourselves to one question and one quick related follow-up. Roxanne, please go ahead.
Operator
Certainly (Operator Instructions). The first question comes from the line of David Lewis with Morgan Stanley.
Please go ahead.
David R. Lewis - Morgan Stanley
Good morning.
Michael F. Mahoney
Good morning.
David R. Lewis - Morgan Stanley
Just two quick questions on S-ICD and CRM more broadly, one for Mike and one for Dan. So Mike obviously S-ICD is the key focus for us and investors here in 2014.
I wonder could you characterize fourth quarter S-ICD traction in your commentary that you are above the low end of your expected range. So does this reflect your capacity, can you give us any color on 1Q trends and maybe quantify the 2014 outlook for S-ICD and then a quick follow-up for Dan?
Michael F. Mahoney
Yes, absolutely. So in S-ICD we expanded our IV sites really in the fourth quarter here.
So as we go into right now the first quarter of 2014 the full year we do not have limitations in supply for S-ICD at this point. So the operational improvement that are made we will focus on is physician training and insuring that we have the right, excellent outcomes with S-ICD.
And so to this point we are delivering on expectations operationally. In terms of the results overall for CRM, we saw strong pacer results and we also strong de novo ICD results, the pull down continues to be with our CRT-D results which drove the -- which impacted some of the headwinds of our CRM results.
But overall ICD have been strong, pacers have been strong, and we anticipate S-ICD to be a significant share taker for us for de novo ICD implants as we head in 2014. So we are not going to provide specific guidance as to the carve out of the S-ICD number at this point but we are comfortable with S-ICD in combination with the quad lead that we will be launching in Europe will drive share gains in CRM in 2014.
David R. Lewis - Morgan Stanley
Okay. Thank you and then Dan, we were encouraged by margin outlook for the total corporation in 2014 but you did mention several times in the script here CRM margins being a specific focus for 2014.
So can you in a sense of what type of progress can be made in the CRM margins in 2014 and/or what is the key drivers of margin expansion for the company in 2014?
Daniel J. Brennan
Yeah, David. The Rhythm management profitability as Mike mentioned was essentially flat year-over-year driven mostly by the cost in Q4 which were what we believe one-time in nature and driven by launches and bringing S-ICD back to the market.
So we would look to make considerable progress in 2014 on rhythm management margin and still remain committed that we get that up to the mid-20s by that 2017 timeframe and obviously it's a big piece of how we get to our 25 as an overall company. In terms of how we do that it's really just throughout the P&L.
I mean as you look at these new product launches that we talked about with Quad and the Quad lead and CRT-D those are higher margins than some of the technologies that they are replacing. And that's the theme that will continue over the next few years with CRM as we launch new technologies that will be margin accretive, so that's one piece.
We get operating leverage from increasing sales. So we plan to increase sales within CRM and that gives us the ability to drop through more relative to that sales increase.
And then within SG&A and R&D it's continuing to optimize and drive the most efficient structure that we can. So we are a little disappointed that we stayed flat in 2013 but remain committed for the future increases for management profitability.
David R. Lewis - Morgan Stanley
Thank you very much.
Operator
Our next question is from the line of Mike Weinstein with JPMorgan. Please go ahead.
Michael F. Mahoney
Good morning, Mike.
Michael N. Weinstein - JP Morgan Chase & Co.
Yeah. Can you hear me okay?
Michael F. Mahoney
Yes we can.
Michael N. Weinstein - JP Morgan Chase & Co
Okay, perfect thanks. Could you just spend a minute on margins.
One was the sequential step down in gross margin line if there is anything unusual nature of that? And then secondly just want to make sure I understand your operating margin targets for 2014 relative to your long range plan?
Thanks.
Daniel J. Brennan
Sure so in terms of Q4 versus Q3 gross margin really the thing that impacted at the most was the transition related to inventory charges that we had. So we were at 70.7% gross margin in Q3, we were at 70% gross margin in Q4 and that's worth about 50 basis point in the step down from Q3 to Q4.
Relative to the overall margins for us going forward from an operating margin standpoint, if you heard for 2014 we're looking at something approaching 20% from an operating margin and going forward we'll be in that 100 basis point plus range now through 2017 with increasing revenue new growth to really drop through more leverage and get to that goal or better by 2017. So we still remain committed to 2017 25% operating margin at this point.
Michael N. Weinstein - JP Morgan Chase & Co
And then on the S-ICD re-launch here I think we're a bit surprised that we didn't see more initial progress in the U.S. business in the fourth quarter.
And it's hard for us outside here to judge the supplier ramp over the course of the quarter. So as you are speaking about the first half of this year would you be surprised if you didn't show sequential share gains just based on having full availability at this point?
And do you want to give guidance for ICDs for the first quarter which I think you didn't give for the first time? Thanks.
Michael F. Mahoney
Yeah so we can be more enthusiastic about S-ICD and its ability to treat primary and secondary prevention patients and really the differentiation that we have with us so strategically we think it's very unique and powerful to be a CRM story. We do think we will gain de novo ICD implant share in the first half of the year.
The CRT-D mix that we keep talking about is what's watering that down. So our de novo ICD share we believe has increased in fourth quarter and we believe that will continue to increase in the first half of 2014 driven by the strength of ICD and the S-ICD.
The wane in the CRT-D is what's been dragging that piece down and which will be resolved in Europe and we'll start to explore quad CRT-D trial in the first half of 2014.
Michael N. Weinstein - JP Morgan Chase & Co
So Mike in your internal modeling do you assume that between those pluses and minuses obviously S-ICD being a plus and then the CRT-D competiveness in replacement cycle being negative, do you view yourselves as share gainers in ICDs in 2014, total ICDs?
Michael F. Mahoney
In total ICD we believe for the full year we should gain share. The second half should accelerate with the quad lead being ramped up in Europe.
So for full year we believe we'll be a share taker. We believe we'll definitely be a share taker in that single chamber ICDs, so that's driven by S-ICD.
Michael N. Weinstein - JP Morgan Chase & Co
Okay. Thanks, Mike.
And then if I could ask one other question on the no guidance for ICDs.
Daniel J. Brennan
And really the driver there is we believe now are much more diversified company, less reliance on one product line. So we're going to be much more reticent to provide franchise specific guidance at this point?
Michael F. Mahoney
Okay. Next question?
Operator
Next question is from Bob Hopkins with Bank of America. Please go head.
Robert A. Hopkins - BofA Merrill Lynch
Hi, Thanks for taking the question. I want to ask two things, one on the tax rate and again back on margins.
So obviously the tax rate was a source of upside for this particular year and I think you got about the lowest tax rate of any company that I follow and so Dan I just want to get your sense stepping into the roles for the first time how sustainable kind of a 13% to 15% tax outlook is for the company in light of the fact that long-term some of the inter-company loans might fade straightaway. So how long you think you can enjoy this low of the tax rate and as we model longer term should we model some upward pressure?
Daniel J. Brennan
I think what we have gone on record before saying it's 15% for 2014 and '15 based on some of the geographic mix that we're seeing. I think we're comfortable saying 13% to 15% or next year and 13% to 15% for 2015 as well.
I would be reluctant to go further out than that at this point but I think we're very comfortable that we can have 13% to 15% for this year and next year as well.
Robert A. Hopkins - BofA Merrill Lynch
Okay. That's helpful.
And then on the margin front and I apologize if I have my numbers wrong here but it also looks like the cardiovascular segment margins in Q4 were down sequentially and I was wondering if you could just comment broadly on what you saw in terms of pricing across your franchises this quarter and any particulars on what drove the cardiovascular margin weakness this quarter if I got that numbers right?
Daniel J. Brennan
Yes. We had a slight dip down in margins in our cardiovascular reporting segments there, a couple one is we are now preparing for the launch of our PREMIER platform, so we did a lot, quite a bit of stock in inventory to get PREMIER launch which we have fully launched in the first quarter of 2014.
So a lot of inventory movement there prepared for that which we believe will be share gain for in DES in 2014. Also we have in terms of improvement areas International DES performance in fact our global performance in 2013 is not what we wanted to be.
We did lose a little bit of share in Europe and we are off the market in Germany as well as Japan and our PREMIER approval was late, we just received it shortly after TCP. So with a challenging year overall for DES it was a very positive year for our IC other business segment with 7% and as a mix that IC other businesses is almost the same size as our DES business now.
But going into ' 14 we expect the improvement in our margins in the cardiovascular segments given our preparation in inventory available now for both SYNERGY and PREMIER.
Robert A. Hopkins - BofA Merrill Lynch
And anything going on with pricing that's noteworthy relative to recent trends?
Daniel J. Brennan
Nothing significantly difference we like the positions just going forward in '14 we have a three tier strategy with our synergy prices to premium, in our PROMUS PREMIER and our Promus line. So we believe that will be able to hopefully improve the pricing impact that we observes the past few years but we call Canada a mid-single digit overall price headwind in DES.
Robert A. Hopkins - BofA Merrill Lynch
Great. Thanks for taking the questions.
Daniel J. Brennan
Thanks Bob.
Operator
The next question is Rick Wise with Stifel. Please go ahead.
Frederick A. Wise - Stifel, Nicolaus & Co., Inc.
Hi. Good morning everybody.
If I can follow up on a couple of product points Alair it sounds like you had a terrific quarter on a small base. Mike can you update us on where you are with insurance, you were still hoping to get some of the large insurers what's next and maybe if you could frame the growth and continued roll out a little bit there?
Michael F. Mahoney
Yes on Alair we continue to make progress here we had higher reorder rates for the platform, the payers continued to reimburse although on a one-off basis and we also, as you know, had a five year data that was published in the second half of 2013. So we remain bullish about although I'll point out that we haven't had a major payer reimbursement platform.
And so in 2014, we are going to through another cycle of this major payers to determine what they are going to reimburse the platform and we have appropriate guidance, appropriate projections built in for the platform and we continue to expect strong growth although it won't be breakthrough growth until we can knock down one of these payers and that's where our team's focused on in '14.
Frederick A. Wise - Stifel, Nicolaus & Co., Inc.
Okay, and two quick follow ups on the S-ICD the supply ramp is clearly picking up base on our work. When are you at full launch there and maybe if you could also just quantify the impact of the OrbusNeich impact what kind of the drag in fourth quarter DES sales and I assume that's back now?
Daniel J. Brennan
On the S-ICD this is not like a drug eluting stent, so we don't stock it and replace PREMIER like we would Promus with DES and move it to a 1000 labs in a few weeks. So this is a very controlled thoughtful platform launch that requires training for physicians and a proper amount of clinical work to support it.
So it's not like DES launch. So S-ICD will continue to ramp, we moved the IDE centers, there is clearly a queue physicians that we are successfully training them right now and that queue is quite extensive and so there is lot of enthusiasm for it and we think it will grow it will be a share taker for us for our de novo ICD implants.
And the awareness of the therapy continues to build and support that. And so we think this is really unique opportunity for us and we don't see ourselves being supply constrained, it's more of a constraint on training and effective rollout of the products.
What was the second one? Yeah, the OrbusNeich, what the OrbusNeich in Europe did was basically limit us in terms of hitting the Q4 running relative to some of the tender cycles that will take place in Europe and such that’s why we called that out as kind of a bit of a challenge ramping up in Q4 but we think in 2014 we can put some of that behind us.
Michael F. Mahoney
Drs. Stein, do you want to make any other comments on S-ICD roll out?
Frederick A. Wise - Stifel, Nicolaus & Co., Inc.
Thank you.
Ken Stein
Yeah I think I would just say to reiterate what you said Mike that we are not any longer capacity constrained the productions ramped up, now it’s really a matter of getting physicians through the training both in terms of how to select patients, how to screen patients as well as the implant technique that what we found that physician’s view of the roll of the device where it fits in and in particularly primary prevention patients really changes once it actually been exposed to the training and once they have one or two implants under their belt.
Frederick A. Wise - Stifel, Nicolaus & Co., Inc.
Thank you.
Operator
Our next question is from Glenn Novarro with RBC Capital Markets. Please go ahead.
Glenn J. Novarro - RBC Capital Markets
Hi, thanks. Just a follow-up on the subcutaneous ICD training.
In the percutaneous valve market the companies have been giving us how many centers they think they can train per quarter per year. Is that something you can share with us in other words how many centers you are in today, how many centers you think you can train per quarter?
I would imagine that that’s going to be a big driver of the revenue growth in 2014.
Michael F. Mahoney
It’s Mike here. Today we haven’t.
That’s certainly something we can consider going forward in 2014 but today we haven’t publically stated how many physicians we trained or how many centers going forward.
Glenn J. Novarro - RBC Capital Markets
Okay let me ask just two quick follow-ups just on the stents side, the OUS number did come in where you highlighted Germany. Were there any other sources of weakness outside the U.S.?
Michael F. Mahoney
For drug eluting stents yeah the weakness again Turkey wasn’t a great year for us in drug eluting stents. It was a very strong year in our other interventional cardiology business that grew 7%.
So the weakness in DES really was Japan with some competitive product launches, Europe we were off the market in Germany for a significant part of the year and quite frankly in U.S. where we anticipated approvals of our PREMIER products early in the fourth quarter it didn't receive until just toward the very end of the year.
Glenn J. Novarro - RBC Capital Markets
When does Japan reverse?
Michael F. Mahoney
So in Japan in 2014 we launched PROMUS PREMIER pending approval in Japan we believe in the second half of the year. So we believe we will get back to share taking and a leadership position which we traditionally enjoyed in Japan as we move towards the back half of 2014.
We do have a as it is competition pricing headwind in Japan this year for drug eluting stents as the pricing comes down but overall we believe we will get back to a share taking position in the second half in Japan and we should be in a share taking position in U.S. now as we move into the first quarter.
Glenn J. Novarro - RBC Capital Markets
Great. And then just one quick one, the REPRISE U.S.
trials for Lotus when in 2014 will that start first half, second half?
Michael F. Mahoney
So we haven’t locked that in yet with the FDA but we’re projecting a second half of the year IV initiation.
Glenn J. Novarro - RBC Capital Markets
Okay, great. Thank you.
Operator
Our next question comes from the line of Brooks West with Piper Jaffray. Please go ahead.
Brooks West – Piper Jaffray
Good morning. Thanks for taking the question.
Mike we’ve been much more focused on electrophysiology as a potential growth driver for your CRM franchise and I wonder if you would give us a little bit of color on where are you with the Bard EP integration and where are you with the Rhythmia launch and as we think about how that franchise within CRM kind of performs I imagine you are spending pretty heavily right now, is it fair to assume that as we see revenues ramp we’re also going to see operating margin contribution pretty significantly ramp in EP?
Michael F. Mahoney
Absolutely, Dan touched on earlier -- thanks for the question first of all, the operating income margin of the Rhythm management group is clearly not what we want it to be and we have been purposely making investments in that business because we see the size of the market and the growth potential and we talked about it today with S-ICD, with WATCHMAN, with our quad and all the moves we made to your point in EP, with the acquisition of C.R. Bard, the acquisition of Rhythmia.
So we really like the market profile of this. We don't like our current operating income margin.
And as you indicated as we go through '14 here and we deliver consistent top line growth that will help because the business has suffered historically not growing. So we believe we'll grow the business, we'll see the reverse of the negative dilution of the acquisitions, the short-term negative dilution of Bard and the negative dilution of WATCHMAN and [Livya] Although those kind of acquisitions that have been dilutive will reverse themselves as we move through '14 and '15.
If you combined that with improved gross margins of new products that we're lunching, new S-ICD will be launched, new quad, new platforms of our primary ICD and CRT-Ds will be launched with improved gross margins. So growing consistently the reversal of the dilution of these adjacencies and improved gross margins of new products and smarter SG&A spend will really contribute significant margin improvement and rhythm management which really is the backbone of the strategy for the overall corporation's improvement in operating income margin.
Daniel J. Brennan
And I think it's important point Brooks as well that you bring up which is EPS is kind of sometimes forgotten as a piece of that rhythm management group but we're looking for that to contribute much more significantly to operating income going forward.
Brooks West – Piper Jaffray
Thanks for that and then on neuro guys better than expected growth in Q4. Again I know there is a reimbursement change coming next year.
Can you talk about how we should think about the growth of neuro franchise as you look at anniversary some of the really good performance this year?
Daniel J. Brennan
Yeah so we haven't provided specific guidance but we grew over 30% for second half of 2013 and we've taken a clear leadership position and gained significant share in a market that's nicely profitable. So we really like the platform that we have and the capability advantages that we have and how we can extend that platform into other therapies that we're either in trial and/or considering.
So we would anticipate that, that market, that growth is going to come down in 2014 given the comparables that we're going to have at the start of second quarter and also some of the pricing pressure. So we do believe that, that business would continue to grow faster than market and gain share but not at the levels of 30%.
Brooks West – Piper Jaffray
Great, thanks guys.
Operator
We have a question from the line of Josh Jennings with Cowen & Company. Please go head.
Josh T. Jennings - Cowen & Co., LLC
Hi, good morning thanks for taking the questions. I just want to start off with international drug-eluting stent question, just with that franchise and looking at the full European launch of SYNERGY it seemed to me there would be some meaningful opportunity there to improve on that performance.
Can you just take us through again just what your strategy is there pricing as well as the opportunities that were available on the technology platform?
Michael F. Mahoney
I'll make a few comments and I'll have a comments and then I will have Dr. Dawkins comment as well.
So we've been -- we believe we've been disciplined in trying to come up with a new production tiered product portfolio to address what's historically been a challenging pricing market. So it's still a large business but in drug-eluting stents now we have a strategy where we have a, we believe a highly differentiated bio-absorbable stent with SYNERGY that we are pricing at a premium.
We are launching that product in markets that will support a premium price so that's not the entire European market. Our strategy today has not been to drive that price down to workhorse level to try to gain short-term share at the cost of eroding a market.
So we've been keeping that at a price premium because we think it's the best product and we're really launching that product in geographies that will support that price. The second product that we have is PREMIER which likely we'll have a greater mix in terms of overall mix of DES internationally.
We believe that's the second best stent in the marketplace behind SYNERGY in terms of its ability to be a work horse stent and treat complex coronary arteries and we'll launch that product throughout Europe and essentially that's being done now. And then we have a couple of countries that are very, very price sensitive.
And we have another brand just called Promus that will continue to sell in that those geographies. So that's the strategy.
The fact that we were off the market in Germany which is the large market hurt us in '13, we'll get back in the market in '14 and we hope to use that strategy not only to gain share but to gain share thoughtfully while managing price effectively.
Keith D. Dawkins
I would just add Josh that not only just do we want a premium for SYNERGY but we want to support the product with a very wide clinical trial portfolio. And you would have heard in Mike's comments earlier on the call that we have now almost 28,000 patients in both Boston Scientific Studies and investigator-sponsored Research.
Exploring SYNERGY in complex coronary disease in a variety of other scenarios including short DAPT. So we want to underpin the launch not only from a premium price point of view but also with clinical data.
As you know we have now have two year published data for the -- released EVOLVE study, we have completed the EVOLVE IDE trial and we in 2014 have already started a number of investigator sponsored trials which will give us additional data on the platform. With regards to your comments about bio-absorbable we are interested in the total bio-absorbable space synergy, you know we made an investment in a start-up Amaranth.
We don't think the current availability VVS technology which has a sub 5% market share is a workhorse product. We think the stats are big, we think the delivery is in period and we think that the large polymer load lasts too long.
And we will be working both internally and externally on a platform. But right now the focus is Synergy because the key performance is what cardiologists want and they want the polymer and the drug to disappear early and that's exactly what's in the…
Josh T. Jennings - Cowen & Co., LLC
Great, and just a quick follow-up obviously from questions on the call here, its big focus on the subcutaneous ICD franchise. I was just hoping you could maybe give us some insight into some advancements in that technology platform and maybe some timelines in terms of can you generate your size down, battery life and what can be improved there and when should we see kind of generation 2.0?
Thanks a lot.
Michael F. Mahoney
Sure. Thanks for the question.
We can always improve on our platforms and right now with S-ICD what we are really focused on excellent training and excellent outcomes to carve out what we think will be a significant category. And for a physician today the S-ICD is the fitness device and a long lasting battery for subcutaneous ICDs.
And so we think it's uniquely positioned today. And if they want a lead solution we have many of those a new platform that we are just launching.
So we think it's uniquely differentiated in its existing platform, we think we have a generation ahead lead in terms of the competition and we will continue to work on new features and capabilities as we look at generation 2.0 and we will certainly give more color on generation 2.0 as we get through 2014. But right now our focus really is on training and delivering excellent outcomes for a very differentiated device in its current generation.
Operator
Our next question comes from the line of Larry Biegelsen with Wells Fargo. Please go ahead.
Lawrence Biegelsen - Wells Fargo Securities, LLC
Good morning and thanks for fitting me in. Guys I have couple of housekeeping items.
For the R&D tax credit Dan, it's not in the guidance, so that's worth roughly 200 basis points or $0.02 I just wanted to confirm that. And then there were two, I think less selling days in the first quarter of last year.
Is there a difference in the day count in the first quarter of this year or any quarter in 2014 that you would call out in? And then just lastly on the Japan cut, there were some significant cuts in 2012.
What are you guys expecting this year kind of overall the high single-digit, mid to high single-digit for the company and anything that you would call out on the FAP cuts for '14 and then I will drop. Thanks.
Daniel J. Brennan
Great, Larry. So this Dan, I can probably take those pretty quickly.
So the tax, yeah you are correct. So we've not assumed the R&D tax credit in 2014 because it has not yet been enacted.
So and that's worth about two points. So I think you are correct there.
So if that were to get enacted that's a two point benefit for us. On days, there should be no change in days for us relative to Q1 or the full year.
And then relative to the Japan price cuts which was your third question. We don't really know that hasn't been released yet, obviously so we don't know the specifics of that.
But that will certainly be a headwind of growth for Japan and for the company in total depending on where that number comes in. But really don't have a sense yet as to what that will be and we will be obviously more forthcoming once the Japanese government finalizes those numbers.
Lawrence Biegelsen - Wells Fargo Securities, LLC
Thanks for taking the questions.
Daniel J. Brennan
Great.
Susan Lisa
Roxanne we have time we will take two more please.
Operator
The next question is from Matthew Dodds with Citigroup. Please go ahead.
Matthew J. Dodds - Citigroup Inc
Hey good morning. I just had a follow up on the last question that Larry asked for the Japan price cuts you have modeled in price cut before changes, you are waiting for the final number, right?
Michael F. Mahoney
Yeah Matt we certainly have modeled that in and we have all of our assumptions on share and volume and the whole bit. And so in Japan certainly it will be a more of a headwind for us in ’14.
We think it will be offset by some volume benefit in the first and second half of the year. As we look at overall mix globally of DES pricing we got kind of call in the negative mid-single digit range and hope that will be offset with our mix strategy that we have in Europe and the new launch with PREMIER in the US.
So we think globally it will be a slight headwind but we will make couple over the volume with some of our new portfolio.
Matthew J. Dodds - Citigroup Inc
And then just quickly MedSurg didn't get a lot of attention today, endoscopy and urology women’s health is there any reason to assume that the growth rates would deviate a lot from this year and you are not giving guidance but is there anything particular that might change what’s been going on in the last couple of quarters?
Michael F. Mahoney
No, we feel very strong and thanks for asking about that, medical surgical represents now 45% of our business mix and growing. We continue to improve its operating income margins.
All three of those businesses and the women’s health urology and endoscopy are growing faster than market. We have new refreshed pipeline that we’ll launch in ’14.
They are expanding internationally and so we don't anticipate any slowdown in the performance of our women’s health urology and endoscopy business.
Matthew J. Dodds - Citigroup Inc
Thanks Mike.
Operator
Our last question comes from the line of Bruce Nudell with Credit Suisse. Please go ahead.
Bruce Nudell – Credit Suisse
Good morning. Thanks for taking the question.
Just looking at your guidance for ’14 you know 4% constant currency middle of range, 20% operating margin and tax at 15% at the high end of the range, that gets you to kind of the high end of EPS guidance. Should we be thinking about or how should we think about things if things go better than that with tax at the low end and you know maybe revenue at the higher end?
Should we be thinking about reinvestment or upside to numbers?
Daniel J. Brennan
Bruce this is Dan. Good question.
I think if you look at the numbers we gave relative to the midpoint of all that it should actually come to the middle of our range which would be albeit not a round number but about $0.775. So I think the math would get you there you can kind of take a tax rate of 14%, you take 4% revenue growth all the way down take the middle of those and you should get kind of that $0.775.
I think what we’ll do relative to if we saw upside in businesses would be to try and book some of that upside and get a head start on the 25%.
Michael F. Mahoney
Yeah I think we’re very comfortable and quite frankly we want our SG&A to go down. The fourth quarter SG&A is high, and we have a focus on improving operating income margins of the company and so if we are fortunate to have some additional room we want to sharpen the SG&A and operating income margin performance for company.
Bruce Nudell – Credit Suisse
Perfect and as you could judge by the questions on the call the S-ICD is an area of extreme focus but just thinking about it more generally and more in the midterm I think most street models have a S-ICD at least 5% unit share and given the ASP that has and the fact that a lot of it’s not cannibalizing your business that has important share connotations as we go forward. Could you just like kind of express your overall goals in terms of ICD share on a global basis you know in the context of the S-ICD and CRT-D launches?
Michael F. Mahoney
Yeah I guess we’ve probably not given color on that area. You know we think that would kind of back to the regional question, we really we do believe that will be a share taker in the ICD market in 2014 with this launch with the S-ICD being broadly available as well as the current capabilities of our existing line, with this battery longevity and leave your liability and remote patient monitoring.
So we believe we’ll take share particularly in de novo ICD. CRT-D will continue to suffer in the U.S.
until we launch our quad core program.
Bruce Nudell – Credit Suisse
Thanks so much.
Susan Lisa
Thanks Bruce. With that we would like to conclude the call.
Thanks very much for joining us today. We appreciate your interest in Boston Scientific.
Before you disconnect Roxanne could you please give the pertinent details for the replay?
Operator
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