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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31,2002 Commission File No. 1-11083
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BOSTON SCIENTIFIC CORPORATION
(Exact Name Of Company As Specified In Its Charter)
DELAWARE 04-2695240
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
ONE BOSTON SCIENTIFIC PLACE, NATICK, MASSACHUSETTS 01760-1537
(Address, Including Zip Code, Of Principal Executive Offices)
(508) 650-8000
(Company's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
COMMON STOCK, $.01 PAR VALUE PER SHARE
(Title Of Class)
Securities registered pursuant to Section 12(g) of the Act:
NONE
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Indicate by check mark whether the Company (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Company was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes: X No ______
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Company's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes: X No ______
-1-
The aggregate market value of Common Stock held by non-affiliates (persons other
than directors, executive officers, and related family entities) of the Company
was approximately $9.1 billion based on the closing price of the Common Stock on
June 28, 2002.
The number of shares outstanding of the Company's Common Stock as of March 21,
2003, was 409,947,858.
DOCUMENTS INCORPORATED BY REFERENCE
The Company's 2002 Consolidated Financial Statements for the year ended December
31, 2002 which are filed with the Securities and Exchange Commission (the
"Commission") as an exhibit hereto and the Company's 2003 Proxy Statement to be
filed with the Securities and Exchange Commission on or about April 4, 2003 are
incorporated by reference into Parts I, II and III hereof.
-2-
PART I
ITEM 1. BUSINESS
THE COMPANY
Boston Scientific Corporation (the "Company") is a worldwide developer,
manufacturer and marketer of less-invasive medical devices. The Company's
products are used in a broad range of interventional medical specialties,
including interventional cardiology, peripheral intervention, neurovascular,
electrophysiology, vascular surgery, gastroenterology, gynecology, oncology and
urology. The Company's products are generally inserted into the human body
through natural openings or small incisions in the skin and can be guided to
most areas of the anatomy to diagnose and treat a wide range of medical
problems. These products provide effective alternatives to traditional surgery
by reducing risk, trauma, cost, procedure time and the need for aftercare.
The Company's history began in the late 1960s when the Company's co-founder,
John Abele, acquired an equity interest in Medi-tech, Inc., a development
company. Medi-tech's initial products, a family of steerable catheters, were
introduced in 1969. They were used in some of the first less-invasive procedures
performed, and versions of these catheters are still being sold today. In 1979,
John Abele joined with Pete Nicholas to form the Company, which indirectly
acquired Medi-tech, Inc. This acquisition began a period of active, focused
marketing, new product development and organizational growth. Since then, the
Company's net sales have increased substantially, growing from $1.8 million in
1979 to more than $2.9 billion in 2002.
The Company's growth has been fueled in part by strategic acquisitions and
alliances designed to improve the ability of the Company to take advantage of
growth opportunities in less-invasive medicine. These acquisitions have helped
the Company to achieve a strategic mass which allows it to offer one of the
broadest product lines in the world for use in less-invasive procedures. The
Company's strategic mass has also enabled it to compete more effectively in, and
better absorb the pressures of, the current health care environment of cost
containment, managed care, large buying groups and hospital consolidations.
AVAILABLE INFORMATION. Copies of the Company's annual report on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to
those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 are available free of charge through the
Company's website (www.bostonscientific.com) as soon as reasonably practicable
after the Company electronically files the material with or furnishes it to the
Securities and Exchange Commission ("SEC"). The Company's proxy statement and
Code of Conduct (and amendments thereto), which applies to all employees and
officers of the Company, including the Chief Executive Officer and Chief
Financial Officer, are also available on the Company's web site. Printed copies
of these materials are also available free of charge to shareholders that
request them in writing from Investor Relations. Information on the Company's
website or connected thereto is not incorporated by reference into this Form
10-K.
-3-
CORONARY STENTS AND THE DRUG ELUTING STENT OPPORTUNITY
During 2002, the Company reestablished its position in the coronary stent market
with the highly competitive Express(TM) coronary stent system. The Company also
marketed its next-generation coronary angioplasty balloon, the Maverick(R)
balloon dilatation catheter, now the market leader. The Company then combined
the original Express stent with the advanced Maverick balloon catheter
technology to create the Express(2) stent system, which was launched in Europe
and the United States during the year. As a result, at the end of 2002 the
Company regained leadership in the cardiovascular and peripheral vascular
catheter labs.
The Company believes that the combination of drugs and coronary stents offers
the possibility of a more lasting solution for coronary artery disease,
particularly the processes that lead to instent restenosis, the growth of
neointimal tissue within an artery after angioplasty and stenting. Drug-eluting
stents are expected to reduce the need for repeat procedures - or more expensive
surgical procedures - and to significantly reduce health care costs, as well as
overall patient risk, trauma, procedure time and the need for post-procedural
care.
Since 1997, the Company has been developing a proprietary polymer-based,
paclitaxel-eluting stent technology for reducing coronary restenosis. The
Company's TAXUS(TM) paclitaxel-eluting coronary stent system is built on the
Express stent technology. The conformability of the stent within a diseased
coronary artery benefits the Company's polymer-based drug eluting technology and
contributes to the clinical differentiation of the TAXUS drug-eluting stent
platform from others.
The Company has invested in the TAXUS clinical program, a series of studies
designed to collect data on the TAXUS paclitaxel-eluting stent. Prior studies
have demonstrated promising results by dramatically reducing restenosis. The
proprietary polymer on the stent allows for controlled delivery of paclitaxel.
Paclitaxel is a multi-functional microtubular inhibitor that controls platelets,
smooth muscle cells and white blood cells, all of which are believed to
contribute to restenosis.
-4-
An overview of the Company's TAXUS clinical program, initiated in 1997, is
presented below.
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Overview Findings
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TAXUS I - A feasibility study designed to assess the safety of a - No stent thromboses were reported at six months.
slow release formulation, paclitaxel-eluting coronary stent - Thirty day MACE (Major Adverse Cardiac Events
for the treatment of de novo coronary lesions. including death, myocardial infarction and
- A 61-patient, randomized, double blind, revascularization) was zero percent.
multi-center safety trial. - This study is currently approaching 2 year
- Conducted at three centers in Germany. follow-up.
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TAXUS II - A 536-patient, 15 country, randomized, double - The slow release formulation cohort reported an
blind, controlled study of paclitaxeleluting coronary in-stent binary restenosis rate of 2.3 percent and
stents. an in-segment binary restenosis rate of 5.5 percent
- Two sequential cohorts of patients with standard at six months.
risk, de novo coronary artery lesions. - The moderate release formulation cohort reported an
- Slow release and moderate release formulations in-stent binary restenosis rate of 4.7 percent and
studied in separate cohorts. an in-segment binary restenosis rate of 8.6 percent
at six months.
- This study has recently completed one-year
follow-up.
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TAXUS III - A 29-patient, single-arm registry examining the - At six-month follow up, the trial confirmed
feasibility of implanting up to two paclitaxel-eluting safety and reported no stent thromboses.
stents for the treatment of in-stent restenosis. - An overall binary restenosis rate, including distal
- Patients with complex vascular disease having and proximal edges, of 16 percent, and an in-stent
recurrent occlusion in a stent, who tend to have an restenosis rate of 4 percent was reported at
increased probability of restenosis. six-month follow up.
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-5-
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- Overview - Findings
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TAXUS IV - A pivotal trial studying 1,326 patients designed to - Thirty-day safety data showed an overall favorable
collect data to support regulatory filings for U.S. MACE rate of three percent.
product commercialization. - The trial has a primary endpoint based on nine-month
- A prospective, randomized, double-blind study target vessel revascularization.
assessing the safety and efficacy of a slow release - This study is currently approaching nine-month
formulation for the treatment of de novo coronary lesions. follow-up.
- The TAXUS IV trial uses the Company's internally developed
Express(TM) stent.
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TAXUS V - This multi-center trial will study a higher risk - This trial, which began in March 2003, has a primary
patient population than TAXUS IV, including patients with endpoint based on nine-month target vessel
smaller vessels and longer lesions. revascularization.
- The trial includes the use of multiple stents. - This study is currently enrolling patients.
- Received conditional approval from the FDA.
- This trial uses the Company's internally developed
Express stent.
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TAXUS VI - An International multi-center trail studying 448 patients - This trial has a primary endpoint based on
with complex coronary artery disease at 44 sites nine-month target vessel revascularization.
designed to establish the safety and efficacy of a - This study is currently approaching 30-day
moderate release formulation in the treatment of longer follow-up.
lesions of 18 to 40 mm in length.
- The trial includes the use of multiple stents.
- This trial uses the Company's internally developed
Express stent.
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-6-
The Company has also initiated a transitional registry program (WISDOM) as part
of a limited international commercial launch. This multi-center, prospective,
observational registry is collecting and analyzing "real world" data on the
performance of the TAXUS paclitaxel-eluting stent system for the treatment of
patients with coronary artery disease. A registry program enlists large numbers
of clinicians to document the performance of a specific therapy for a particular
disease or condition. To date, this registry has enrolled more than 400
patients.
In March 2003, the Company began a post-approval European registry (Milestone
II) with the TAXUS coronary stent system. This registry is targeting 100 sites
and plans to enroll 2,000 patients to study real-world usage patterns.
To support commercialization of the TAXUS coronary stent system in the United
States, the Company submitted the first two modules of its application for
Pre-Market Approval to the Food & Drug Administration ("FDA") during February
and March 2003. A total of five modules are expected to be submitted between
February and June 2003. The last module will include data from the TAXUS IV
clinical trial. In March 2003, the FDA notified the Company that it had granted
the TAXUS coronary stent system "expedited review" status, which means that the
application is designated to receive priority review before other pending
applications. The Company expects to launch the TAXUS paclitaxel-eluting
coronary stent in the United States in late 2003 and in Japan in early 2005,
pending regulatory approvals.
The worldwide coronary stent market is dynamic and highly competitive with
significant market share volatility. The introduction of drug-eluting stents is
likely to have a significant impact on the market size for coronary stents and
on the distribution of market share across the industry. The Company believes
drug-eluting stent technology represents one of the largest market opportunities
in the history of the medical device industry. It is estimated that the annual
worldwide market for coronary stents, including drug-eluting stents, may grow to
$5 billion by 2005, compared to approximately $2.2 billion today. Although the
Company believes it is positioned to be one of only two early entrants in this
market, uncertainties exist about the rate of development and size of this new
market. The Company's success with drug-eluting stents could be adversely
affected by more gradual physician adoption rates, changes in reimbursement
policies, delayed or limited regulatory approvals, unexpected variations in
clinical results, the earlier availability of a competitor's technology, third
party intellectual property, the outcome of litigation and the availability of
inventory to meet customer demand. A more gradual physician adoption rate may
limit the number of procedures in which the technology may be used and the price
at which institutions may be willing to purchase the technology. Together, these
and other factors contribute to the uncertainty surrounding the evolution of the
drug-eluting stent market and the Company's position in it.
-7-
STRATEGIC ACQUISITIONS AND ALLIANCES
The Company has entered into a series of strategic acquisitions and alliances,
each intended to further expand the Company's ability to offer its customers
effective, quality medical devices that satisfy their interventional needs. Over
the last year, the Company completed the following representation of
acquisitions and alliances, adding new or complementary technologies to its
already diverse portfolio.
Acquisitions
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BEI Medical Systems Acquisition of Hydro
Company, Inc. ThermAblator(R) (HTA(R)) System, a
less-invasive technology for global
endometrial ablation designed to treat
excessive uterine bleeding due to benign
causes. Expands the Company's product
offerings in the area of women's health.
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Enteric Medical Acquisition that adds Enteryx(R)a
Technologies, Inc patented liquid polymer for the
treatment of gastroesophageal reflux
disease (GERD).
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Smart Therapeutics, Inc. Acquisition that broadens the Company's
neurovascular portfolio with the
Neuroform(TM) Microdelivery stent system
for the treatment of wide neck
intracranial aneurysms.
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Alliances
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Advanced Neuromodulation Systems, Inc. Distribution rights in Japan of
implantable therapies to manage chronic
pain and other disorders of the central
nervous system.
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Aspect Medical Systems, Inc. Strategic alliance that focuses on the
development and distribution of brain
monitoring technology specifically
designed to enhance the safety,
efficiency and delivery of sedation to
patients undergoing less-invasive
medical procedures.
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Celsion Corporation Distribution rights to Celsion's
Microfocus BPH 800 Microwave
Urethroplasty(TM) system for the
treatment of benign prostatic
hyperplasia (BPH).
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Therus Corporation Equity investment and exclusive
distribution rights which strengthens
and expands the Company's vascular
sealing device portfolio.
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TriVascular, Inc. Exclusive international distribution
rights for percuataneous aortic stent
graft technology designed to improve the
outcome of procedures to treat abdominal
aortic aneurysm (AAA).
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As the health care environment continues to undergo rapid change, the Company
expects that it will continue to focus on strategic initiatives and make
additional investments in its existing relationships.
-8-
BUSINESS STRATEGY
The Company's mission is to improve the quality of patient care and the
productivity of health care delivery through the development and advocacy of
less-invasive medical devices and procedures. This is accomplished through the
continuing refinement of existing products and procedures and the investigation
and development of new technologies that can reduce risk, trauma, cost,
procedure time and the need for aftercare. The Company's approach to innovation
combines internally developed products and technologies with those obtained
externally through strategic acquisitions and alliances.
Key elements of the Company's overall business strategy are as follows:
Innovation. The Company is committed to driving growth through harnessing
technological innovation both in the near and long term. The Company's approach
to enhancing innovation includes a mixture of tactical and strategic initiatives
that are designed to offer sustainable growth. Combining internally developed
products and technologies with those obtained through acquisition and alliances
allows the Company to focus on and deliver new products currently in its
pipeline as well as strengthen the Company's technology portfolio and
development processes and tools.
Product Diversity. The Company offers products in numerous product categories
which are used by physicians throughout the world in a broad range of diagnostic
and therapeutic procedures. The breadth and diversity of the Company's product
lines permit medical specialists to satisfy many of their less-invasive medical
device requirements from a single source.
Clinical Excellence. The Company's commitment to innovation is further
demonstrated by its rapidly expanding clinical capabilities. The Company's
clinical teams are organized by therapeutic specialty to better align with
research and development, marketing and sales teams. During 2002, the clinical
organization planned, initiated and conducted a series of focused clinical
trials that support regulatory requirements and demonstrate the safe and
effective clinical performance of products and technologies.
Operational Excellence. The Company is focused on continuously improving its
supply chain effectiveness, strengthening its manufacturing processes and
optimizing its plant network in order to increase operational efficiencies
within the organization and generate savings. By centralizing its operations at
the corporate level and shifting global manufacturing along product lines, the
Company is able to leverage its existing resources and concentrate on new
product development and launch.
Focused Marketing. Each of the Company's business groups maintain dedicated
sales forces and marketing teams focusing on physicians who specialize in the
diagnosis and treatment of different medical conditions and offer products to
satisfy their needs. The Company believes that this focused disease state
management enables it to develop highly knowledgeable and dedicated sales
representatives and to foster close professional relationships with physicians.
-9-
Active Participation In The Medical Community. The Company believes that it has
excellent working relationships with physicians and others in the medical
industry which enable it to gain a detailed understanding of new therapeutic and
diagnostic alternatives, and to respond quickly to the changing needs of
physicians and patients. Active participation in the medical community
contributes to physician understanding and adoption of less-invasive techniques
and the expansion of these techniques into new therapeutic and diagnostic areas.
Corporate Culture. Management believes that success and leadership evolve from a
motivating corporate culture which rewards achievement, respects and values
individual employees and customers, and has a long-term focus on quality,
technology, integrity and service. The Company believes that its success is
attributable in large part to the high caliber of its employees and the
Company's commitment to respecting the values on which its success has been
based.
PRODUCTS
The Company's products are offered by two dedicated business groups -
Cardiovascular and Endosurgery. During 2002, the Cardiovascular organization
focused on products and technologies for use in interventional cardiology,
interventional radiology, electrophysiology, peripheral vascular intervention
and neurovascular procedures. The Endosurgery organization focused on products
and technologies for use in oncology, vascular surgery, endoscopy, urology and
gynecology procedures. During 2002, approximately 68% of the Company's net sales
were derived from the Company's Cardiovascular business and approximately 32%
from its Endosurgery business.
The Company's principal Cardiovascular and Endosurgery products are offered in
the following medical areas:
CARDIOVASCULAR
Coronary Revascularization. The Company markets a broad line of products used to
treat patients with atherosclerosis. Atherosclerosis, a coronary vessel disease
and a principal cause of heart attacks, is characterized by a thickening of the
walls of the arteries and a narrowing of arterial lumens (openings) caused by
the progressive development of deposits of plaque. The majority of the Company's
products in this market are used in percutaneous transluminal coronary
angioplasty ("PTCA") and percutaneous transluminal coronary rotational
atherectomy and include PTCA balloon catheters, the Rotablator(R) and
Rotalink(R) rotational atherectomy systems, guide wires, guide catheters and
diagnostic catheters. In 2002, the Company's Maverick(R) balloon dilatation
catheter, offered for commercial sale around the world, became the market
leading angioplasty catheter. The Maverick balloon catheter features
TrakTip(TM), which creates a flexible kink-resistant taper. The TrakTip's low
lesion entry profile is designed to enable excellent crossability and easy
lesion engagement. In December 2002, the Company launched two new balloon
catheters in the United States, the Maverick(2)(TM) Monorail(R) Coronary Balloon
Dilatation Catheter and the Quantum(TM) Maverick(R) Coronary Balloon Dilatation
Catheter.
-10-
The Company also offers the Cutting Balloon(TM) catheter, a balloon angioplasty
device that combines features of conventional angioplasty with advanced
microsurgical technology. During 2002, the Company launched the Cutting
Balloon(TM) Monorail(R) Device and expects to launch the Cutting Balloon
Ultra(2)(TM) Microsurgical Dilatation Catheter in the United States during 2003,
pending regulatory approval.
Coronary Stents. The Company markets both balloon-expandable and self-expanding
coronary stent systems. Coronary stents are tiny, mesh tubes used in the
treatment of coronary artery disease and implanted in patients to prop open
arteries and facilitate blood flow to the heart.
During 2002, the Company launched its Express(2)(TM) coronary stent system in
the United States, Europe and other international markets and expects to launch
the product in Japan later in 2003. The Express(2) coronary stent system,
developed exclusively by the Company, features two of its most impressive
technologies - the Express stent and the Maverick(R) balloon dilatation
catheter. The Express stent is a laser-cut, balloon-expandable stent that
features a unique design concept called Tandem Architecture(TM). The Tandem
Architecture stent design integrates short, thin Micro(TM) elements designed for
flexibility and conformability, with long, wide Macro(TM) elements designed to
enhance radiopacity. The Express(2) stent system features a laser-bonded,
flexible tip with a long, low profile designed for easier tracking.
Fluid Management. The Company markets a broad line of fluid delivery sets,
pressure monitoring systems, custom kits and accessories that provide for the
injection of contrast and saline or the withdrawal and disposal of bodily waste.
Electrophysiology. The Company's electrophysiology product offerings include
catheters and systems for use in less-invasive procedures to diagnose and treat
tachyarrhythmias (abnormally fast heart rhythms). The Company markets RF
generators, mapping systems, intracardiac ultrasound and steerable ablation
catheters, many of which incorporate proprietary steering, temperature
monitoring and control technology, as well as a line of diagnostic catheters and
associated accessories. The Company also offers the Chilli(R) cooled ablation
catheter and Realtime Position Management(TM) system. These products are
designed for ablating (neutralizing) the tissue in the heart that is responsible
for starting or maintaining the tachyarrhythmia and for navigating EP catheters
within the heart.
Peripheral Vascular Intervention. The Company sells various products designed to
treat patients with peripheral vascular disease (disease which appears in blood
vessels other than in the heart), including a broad line of medical devices used
in percutaneous transluminal angioplasty and thrombolysis (the catheter-based
delivery of clot dissolving agents directly to the site of a blood clot).
Additionally, the Company's peripheral vascular product line includes balloon
catheters, thrombectomy catheters, and stents (including the Wallstent(R)
endoprosthesis).
-11-
Embolic Protection. One of the most promising areas in interventional medicine
is embolic protection. Internationally, the Company offers the Filterwire EX(TM)
device, which is designed to capture material dislodged into the bloodstream
during cardiovascular interventions, potentially preventing a heart attack or
stroke. The FilterWire EX device is available for use in coronary, saphenous
vein graft, carotid and peripheral vessel applications in markets outside the
United States. During the fourth quarter of 2002, the Company submitted an
application to the FDA for 510(k) clearance to market the Filterwire EX device
for saphenous vein graft application in the United States.
Caval Interruption Systems. The Company markets the Greenfield(R) vena cava
filter system for use in patients who are at risk of developing a pulmonary
embolism due to an existing medical condition or post-surgical complications.
Once the filter is implanted, circulating emboli (blood clots) can be captured
and held by the lattice design of the filter, allowing the clots to dissolve
naturally before they can reach the pulmonary system. The Company expects to
launch a new reduced profile vena cava filter, the Greenfield(R) RP Vena Cava
Filter, later in 2003, pending regulatory approval.
Intraluminal Ultrasound Imaging. The Company markets a family of intraluminal
catheter-directed ultrasound imaging catheters and systems for diagnostic use in
blood vessels, heart chambers and coronary arteries, as well as certain
nonvascular systems.
Neurovascular Interventions. The Company markets a line of micro-guidewires,
micro-catheters, guiding catheters and embolics to treat diseases of the
neurovascular system. The Company also markets the GDC(R) (Guglielmi Detachable
Coil) system to treat and prevent the rupture of cerebral aneurysms that are
otherwise either considered to be inoperable or high risk for surgery. Results
from the International Subarachnoid Aneurysm Trial (ISAT) demonstrated that
less-invasive endovascular treatment with detachable platinum coils, such as the
Company's GDC(R) coil, produce better outcomes than neurosurgical clipping for
patients suffering from ruptured brain aneurysms. During 2002, the Company
completed its acquisition of Smart Therapeutics, Inc. ("Smart"), a company that
has developed a stent system for treating "wide neck" aneurysms, which are among
the most difficult to treat. The combination of Smart's stent and the Company's
GDC coil may provide a less-invasive treatment alternative for patients whose
only previous option may have been open surgery.
The Company's next generation Matrix(TM) Detachable Coil features a proprietary
bioabsorbable polymer and leverages technology from the well known, clinically
proven GDC(R) system. The Matrix Detachable Coil has received clearance from the
FDA for endovascular treatment of cerebral aneurysms and was granted the CE Mark
in Europe. This technology is being introduced into selected worldwide markets
in conjunction with physician training programs.
-12-
ENDOSURGERY
Esophageal, Gastric And Duodenal (Small Intestine) Intervention. The Company
markets a broad range of products to diagnose, treat and palliate a variety of
gastrointestinal diseases and conditions, including those affecting the
esophagus, stomach and colon. Common disease states include esophagitis,
gastroesophageal reflux disease ("GERD"), portal hypertension, peptic ulcers and
esophageal cancer. The Company's products in this area include disposable single
and multiple biopsy forceps, balloon dilatation catheters and enteral feeding
devices. The Company also markets a family of esophageal stents designed to
offer improved dilatation force and greater resistance to tumor in-growth.
During 2002, the Company completed its acquisition of Enteric Medical
Technologies, Inc. ("EMT"), adding EMT's Enteryx(TM) liquid polymer technology,
designed to treat symptoms associated with chronic GERD, to the Company's
portfolio. Currently, the Enteryx product is under Pre-Market Approval (PMA)
review at the FDA, making it the first less-invasive medical device treatment
for GERD to undergo this stringent evaluation. In January 2003, the
Gastroenterology and Urology Device Panel voted unanimously to recommend to the
FDA the approval of the Enteryx product for the treatment of symptoms of GERD in
patients who require and respond to pharmaceutical therapy.
Colorectal Intervention. The Company markets a line of hemostatic catheters,
polypectomy snares, biopsy forceps, enteral stents and dilatation catheters for
the diagnosis and treatment of polyps, inflammatory bowel disease,
diverticulitis and colon cancer.
Pancreatico-Biliary Intervention. The Company sells a variety of products to
diagnose, treat and palliate benign and malignant strictures of the
pancreatico-biliary system (the gall bladder, common bile duct, hepatic duct,
pancreatic duct and the pancreas) and to remove stones found in the common bile
duct. The Company's products include diagnostic catheters used with contrast
media, balloon dilatation catheters and sphincterotomes. The Company also
markets self-expanding metal and temporary biliary stents for palliation and
drainage of the common bile duct.
Pulmonary Intervention. The Company markets devices to diagnose, treat and
palliate diseases of the pulmonary system. The major devices include pulmonary
biopsy forceps, transbronchial aspiration needles, cytology brushes and
tracheobronchial stents used to dilate strictures or for tumor management.
Included in this product offering is the Ultraflex(TM) Tracheobronchial Stent
System and the Wallstent(R) Tracheobronchial Endoprosthesis.
Urinary Tract Intervention and Bladder Disease. The Company sells a variety of
products designed primarily to treat patients with urinary stone disease,
including ureteral dilatation balloons used to dilate strictures or openings for
scope access; stone baskets used to manipulate or remove the stone;
intracorporeal shock wave lithotripsy devices and holmium laser systems used to
disintegrate stones; ureteral stents implanted temporarily in the urinary tract
to provide short-term or long-term drainage; and a wide variety of guidewires
used to gain access to a specific site. The Company has also developed other
devices to diagnose and treat bladder cancer and bladder obstruction.
-13-
Prostate Intervention. For the treatment of Benign Prostatic Hyperplasia
("BPH"), the Company currently markets electro-surgical resection devices
designed to resect large diseased tissue sites and an automatic disposable
needle biopsy system, designed to take rapid core prostate biopsies. In January
2003, the Company announced an alliance with Celsion Corporation to distribute
Celsion's Microfocus BPH 800 Microwave Urethroplasty(TM) system for the
treatment of BPH.
Urinary Incontinence. The Company markets a line of less-invasive devices and
dermal sling materials to treat stress urinary incontinence, an affliction
commonly treated with various surgical procedures. The Company's Precision
Tack(R), Precision Twist(R) and Capio(R) devices and Vesica(R) systems offer
less-invasive alternatives for treating incontinence.
Gynecology. In 2002, the Company expanded its product offerings in the area of
women's health through the acquisition of BEI Medical Systems Company, Inc. BEI
designs, manufactures and markets the Hydro ThermAblator(R) (HTA(R)) System, a
less-invasive technology for the treatment of excessive uterine bleeding by
ablating the lining of the uterus, the tissue responsible for menstrual
bleeding.
Oncology Intervention. The Company markets a broad line of products designed to
treat, diagnose and palliate various forms of cancer. Its current suite of
products include a variety of microcatheters, embolic materials, coils and other
products used to restrict blood supply to targeted organs of other areas of the
body as well as biopsy devices. In addition, the Company also markets
radiofrequency based therapeutic devices for the ablation of various forms of
soft tissue lesions (tumors). In 2002, Contour(R) SE Microspheres, a novel
spherical embolization product used to treat hypervascular tumors and
arteriovenous malformations, was launched in the United States. The Contour(R)
SE Microsphere product is designed to shrink and destroy hypervascular tumors
and arteriovenous malformations by blocking the blood supply feeding them.
Central Venous Access. The Company offers a venous access line which includes
valved and non-valved product offerings. The innovative PASV(R) valve technology
is designed to reduce the incidence of occlusion and blood stream infection.
Surgical And Endovascular Grafts. The Company designs vascular grafts and
endovascular stent grafts for the treatment of thoracic dissection, dialysis
access, abdominal aortic aneurysms and peripheral vascular occlusive diseases,
including the Exxcel(TM) vascular graft for peripheral indications and dialysis
access and a line of Hemashield(R) grafts and fabrics for peripheral vascular
and cardiovascular indications. Effective January 1, 2003, this product line was
moved from the Endosurgery business group to the Cardiovascular business group.
-14-
MARKETING AND SALES
During 2002, the Company marketed and sold its products through six divisions.
To best serve its customers, the sales and marketing organizations of these six
divisions were aligned and centralized under two groups, Cardiovascular and
Endosurgery. During 2002, Scimed, EP Technologies and the peripheral vascular
business of Medi-tech operated within the Cardiovascular Group. The Target
Therapeutics division remained a distinct marketing and sales organization
within the Cardiovascular Group. The Medi-tech Surgery/Oncology, Microvasive
Urology and Microvasive Endoscopy businesses operated within the Endosurgery
Group.
In early 2003, Boston Scientific announced a master branding initiative. This
initiative marks the Company's evolution from a collection of divisional
identities into one, unified organization. The master brand will enable the
Company to better focus efforts on strengthening the recognition of the Boston
Scientific name and building equity in that name, as well as conveying the depth
and breadth of the Company, growing the business, recruiting and retaining
strong talent, and ultimately increasing shareholder value.
The Company's tag line: Delivering what's next.(TM)conveys the essence of Boston
Scientific: a committed, forward-looking company executing on its promises and
bringing the latest medical innovations to its customers and their patients.
-15-
Following the launch of the Company's branding initiative later in 2003, the
Company will market its products through nine principal operating businesses,
each focusing upon physicians who specialize in the diagnosis and treatment of
different medical conditions and disease states. An overview of the Company's
2002 divisional and 2003 operating business structure is outlined below.
Cardiovascular Group
- ----------------------------------------------------------------------------------------------------
2002 2003
- ----------------------------------------------------------------------------------------------------
Divisional Identity Market New Business Descriptor
- ----------------------------------------------------------------------------------------------------
Scimed Markets devices to * Interventional Cardiology
interventional * Peripheral Interventions
cardiologists,
interventional
radiologists and
vascular surgeons for
the diagnosis and
treatment
of coronary and
peripheral vascular
disease and other
cardiovascular
disorders.
- ----------------------------------------------------------------------------------------------------
Target Markets a line of * Neurovascular
micro-guidewires,
micro-catheters,
coils,
embolics and other
medical devices which
aid neuroradiologists
and neurosurgeons in
the treatment of
neurovascular
diseases.
- ----------------------------------------------------------------------------------------------------
EP Technologies Offers a * Electrophysiology
line of
electrophysiology
catheters and systems
for use
by interventional
electrophysiologists
in the diagnosis and
treatment of
tachyarrhythmias.
- ----------------------------------------------------------------------------------------------------
Medi-tech Markets devices to * Vascular Surgery
cardiologists,
interventional
radiologists and
vascular surgeons who
treat abdominal aortic
aneurysmal disease.
- ----------------------------------------------------------------------------------------------------
-16-
Endosurgery Group
- -----------------------------------------------------------------------------------------------------
2002 2003
- -----------------------------------------------------------------------------------------------------
Divisional Identity Market New Business Descriptor
- -----------------------------------------------------------------------------------------------------
Microvasive Endoscopy Markets therapeutic, * Endoscopy
diagnostic and
palliative devices,
which aid
gastroenterologists
and pulmonologists in
performing flexible
endoscopic procedures
involving the
digestive tract and
lungs.
- -----------------------------------------------------------------------------------------------------
Microvasive Urology Offers a line * Urology
of therapeutic and * Gynecology
diagnostic devices
which aid
urologists and
urogynecologists in
performing
ureteroscopic and
other less-invasive
endoscopic procedures
as well as devices to
treat urinary
incontinence and
abnormal bleeding.
- -----------------------------------------------------------------------------------------------------
Medi-tech Markets devices to * Oncology
interventional
radiologists and
surgical
oncologists who treat
diseases requiring
management of
cancerous and
non-cancerous tumors
as well as patients
requiring venous
access.
- -----------------------------------------------------------------------------------------------------
A dedicated sales force of approximately 1,200 individuals in over 40 countries
internationally and over 800 in the United States marketed the Company's
products worldwide as of December 31, 2002. Sales in countries where the Company
has direct sales organizations accounted for approximately 99% of the Company's
net sales during 2002. A network of distributors and dealers who offer the
Company's products in more than 35 countries worldwide accounts for the
remaining sales. The Company also has a dedicated corporate sales organization
in the United States focused principally on selling to major buying groups and
large integrated health care networks.
In 2002, the Company sold its products to over 10,000 hospitals, clinics,
out-patient facilities and medical offices. The Company is not dependent on any
single institution and no single institution accounted for more than 10% of the
Company's net sales in 2002. Large group purchasing organizations, hospital
networks and other buying groups have, however, become increasingly important to
the Company's business. The trend toward managed care and economically motivated
and more sophisticated buyers in the United States may result in continued
pressure on selling prices of certain products and resulting compression on
gross margins. These purchasers of medical devices also tend to limit the number
of suppliers from whom they purchase medical
-17-
products. There can be no assurance that these entities will continue to
purchase products from the Company.
The Company also distributes certain products for third parties, including an
introducer sheath and certain guidewires. Together, these distributed products
represented less than 10% of the Company's 2002 net sales. Leveraging its sales
and marketing strength, the Company expects to continue to seek new
opportunities for distributing complementary products as well as new
technologies. The Company expects that it will continue to enter into
distribution arrangements that include options to acquire technology from third
parties at pre-established future dates. These distribution arrangements often
allow the Company to evaluate new technologies prior to acquisition.
INTERNATIONAL OPERATIONS
Internationally, the Company operates through three business segments divided
among the geographic regions of Europe, Japan and Inter-Continental. Maintaining
and expanding its international presence is an important component of the
Company's long-term growth plan. Through its international presence, the Company
seeks to increase net sales and market share, leverage relationships with
leading physicians and their clinical research programs, accelerate the time
within which new products can be brought to market and gain access to worldwide
technological developments that may be implemented across its product lines.
In 2002, international sales accounted for approximately 40% of the Company's
net sales. Net sales, operating income (excluding special charges) and total
assets attributable to significant geographic areas are presented in Note P to
the Company's 2002 Consolidated Financial Statements, which are filed with the
Securities and Exchange Commission as an exhibit to this document.
In recent years, the Company has expanded its direct sales presence worldwide so
as to be in a position to take advantage of expanding market opportunities. As
of December 31, 2002, the Company had direct marketing and sales operations in
over 40 countries internationally. The Company believes that it will continue to
leverage its infrastructure in markets where commercially appropriate and to use
third parties in those smaller markets where it is not economical or strategic
to establish a direct presence.
The Company has four international manufacturing facilities in Ireland.
Presently, approximately 30% of the Company's products sold worldwide are
manufactured at these facilities. The Company also maintains an international
research and development facility in Ireland and a training and research and
development center in Miyazaki, Japan.
The Company's international presence exposes it to certain financial and other
risks. Principal among these is the potentially negative impact of foreign
currency fluctuations on the Company's sales and expenses. Although the Company
engages in nonspeculative hedging transactions that may offset the effect of
fluctuations in foreign currency exchange rates on foreign currency denominated
assets, liabilities, earnings and cash flows, financial exposure may
-18-
nonetheless result, primarily from the timing of transactions, forecast
volatility and the movement of exchange rates. International markets are also
being affected by economic pressure to contain reimbursement levels and health
care costs. The Company's profitability from its international operations may be
limited by risks and uncertainties related to economic conditions in these
regions, regulatory and reimbursement approvals, competitive offerings,
infrastructure development, rights to intellectual property, and the ability of
the Company to implement its overall business strategy. Any significant changes
in the competitive, political, regulatory, reimbursement or economic environment
where the Company conducts international operations may have a material impact
on revenues and profits, especially in Japan, given its high profitability
relative to its contribution to revenues. The Company's Japan business is
expected to be under continued pressure, particularly in the coronary stent
market, due to competitive product offerings and the lack of physician
acceptance of the NIR(R) coronary stent platform. Deterioration in the Japanese
and/or Inter-Continental economies may impact the Company's ability to grow its
business and to collect its accounts receivable in international markets.
Additionally, the trend in countries around the world toward more stringent
regulatory requirements for product clearance, changing reimbursement models and
more vigorous enforcement activities has generally caused or may cause medical
device manufacturers to experience more uncertainty, greater risk and higher
expenses.
MANUFACTURING; RAW MATERIALS
The Company designs and manufactures the majority of its products in twenty
technology centers around the world. During 2000, the Company approved and
committed to a global operations plan consisting of a series of strategic
initiatives designed to increase productivity and enhance innovation. The plan
includes manufacturing process and supply chain programs and a plant
optimization initiative. During the second quarter of 2002, the Company
substantially completed its plant optimization initiative. The plant
optimization initiative has created a better allocation of the Company's
resources by forming a more effective network of manufacturing and research and
development facilities. The Company's plan resulted in the consolidation of
manufacturing operations along product lines and the shifting of significant
amounts of production to the Company's facilities in Miami and Ireland and to
contract manufacturing. The Company's plan included the discontinuation of
manufacturing activities at three facilities in the United States, and included
the planned displacement of approximately 1,950 manufacturing, manufacturing
support and management employees.
Most components used in the manufacture of the Company's products are readily
fabricated from commonly available raw materials or off-the-shelf items
available from multiple supply sources. The fabricated items are custom made for
the Company to meet its specifications. The Company believes that in most cases,
redundant capacity exists at the suppliers and that alternative sources of
supply are available or could be developed within a reasonable period of time.
Generally, the Company has been able to obtain adequate supplies of raw
materials and components in a timely manner from established sources. In certain
cases, the Company may not be able to quickly establish additional or
replacement suppliers for specific components or materials, largely due to the
FDA approval system and other regulatory requirements and the complex nature of
the manufacturing processes employed by the Company and many suppliers.
-19-
The reduction or interruption in supply, an inability to develop and validate
alternative sources if required, or a significant increase in the price of raw
materials or components could adversely affect the Company's operations and
financial condition.
QUALITY ASSURANCE
The Company is committed to providing high quality products to its customers. To
meet this commitment, the Company has implemented state-of-the-art quality
systems and concepts throughout the organization. The Company's quality system
starts with the initial product specification and continues through the design
of the product, component specification process and the manufacturing, sales and
servicing of the product. The quality system is designed to build in quality and
to utilize continuous improvement concepts throughout the product life. These
systems enable the Company to satisfy the quality system regulations of the FDA
with respect to products sold the United States. Many of the Company's
operations are certified under ISO 9001, ISO 9002, ISO 13485, ISO 13488, EN46001
and EN46002 international quality system standards. ISO 9002 requires, among
other items, an implemented quality system that applies to component quality,
supplier control and manufacturing operations. In addition, ISO 9001 and EN46001
require an implemented quality system that applies to product design. These
certifications can be obtained only after a complete audit of a company's
quality system by an independent outside auditor. Maintenance of these
certifications requires that these facilities undergo periodic reexamination.
During 2002, the Company established an initiative to seek ISO 14001
certification at various plants around the world. The ISO 14001, a standard in
the ISO 14000 series, provides a voluntary approach regarding environmental
management systems that helps organizations assure positive environmental
performance. This initiative will continue until our facilities become
certified. In March 2003, the Company received corporate certification to
ISO 9001, MDD and EN 46001 standards.
COMPETITION
The Company encounters significant competition across its product lines and in
each market in which its products are sold from various entities, some of which
may have greater financial and marketing resources than the Company. The
Company's primary competitors include: Abbott Laboratories, Inc., C.R. Bard,
Inc., Cook, Inc., Guidant Corporation (including its subsidiary Advanced
Cardiovascular Systems, Inc.), Johnson & Johnson (including its subsidiary,
Cordis Corporation), Medtronic, Inc. (including its subsidiary, Medtronic AVE,
Inc.) and Tyco International, as well as a wide range of companies which sell a
single or limited number of competitive products or participate only in specific
market segment. In addition, the worldwide coronary stent market is dynamic and
highly competitive, with significant market share volatility. Technology and
competitive offerings, particularly a competitor's prior entry in the
drug-eluting stent market, may negatively impact the Company's revenues. The
Company also faces competition from non-medical device companies, such as
pharmaceutical companies, which may offer non-surgical alternative therapies for
disease states which are currently or intended to be treated using the Company's
products.
-20-
The Company believes that its products compete primarily on the basis of their
ability to safely and effectively perform diagnostic and therapeutic procedures
in a less-invasive manner, ease of product use, product reliability and
physician familiarity. In the current environment of managed care, economically
motivated buyers, consolidation among health care providers, increased
competition and declining reimbursement rates, the Company has also been
increasingly required to compete on the basis of price, value and efficiency.
The Company believes that its continued competitive success will depend upon its
ability to create or acquire scientifically advanced technology, apply its
technology cost-effectively across product lines and markets, develop or acquire
proprietary products, attract and retain skilled development personnel, obtain
patent or other protection for its products, obtain required regulatory and
reimbursement approvals, manufacture and successfully market its products either
directly or through outside parties and supply sufficient inventory to meet
customer demand.
RESEARCH AND DEVELOPMENT
Enhancements of existing products or expansions of existing product lines, which
are typically developed within the Company's manufacturing and marketing
operations, contribute to each year's sales growth. The Company believes that
streamlining, prioritization and coordination of its technology pipeline and new
product development activities are essential to its ability to stimulate growth
and maintain leadership positions in its markets. By centralizing platform
technology development at the corporate level, the Company is able to pursue
technologies that can be leveraged across multiple markets. The Company's
approach to new product design and development is through focused, cross
functional efforts. The Company believes that its formal process for technology
and product development aids in its ability to offer innovative and
manufacturable products in a consistent and timely manner. Involvement of the
R&D, clinical, quality, regulatory, manufacturing and marketing teams early in
the process is the cornerstone of a product development cycle. This
collaboration allows the team to concentrate resources on the most viable and
profitable new products and technologies and get them to market in a timely
manner.
-21-
In 2002, the Company expended approximately $343 million on research and
development, representing approximately 12 percent of the Company's 2002 net
sales. The investment in research and development dollars reflects spending on
new product development programs as well as regulatory compliance and clinical
research. The increase in research and development expense from 2001 levels is
primarily due to investment in the development of, and clinical trials related
to, the Company's TAXUS(TM) drug-eluting stent program and to investment in
development programs acquired in connection with the Company's business
combinations. The Company currently anticipates research and development
expenses as a percentage of net sales to remain at approximately 12 percent in
2003. There can be no assurance, however, that the Company's performance will
not be affected by management's decisions relating to investments in research
and development at anticipated levels during 2003.
In addition to internal development, the Company works with hundreds of leading
research institutions, universities and clinicians around the world in
developing, evaluating and clinically testing its products. The Company believes
its future success will depend upon the strength of its development efforts.
There can be no assurance that the Company will realize financial benefit from
its development programs, will continue to be successful in identifying,
developing and marketing new products or enhancing its existing products, or
that products or technologies developed by others will not render the Company's
products or technologies non-competitive or obsolete.
REGULATION
The medical devices manufactured and marketed by the Company are subject to
regulation by numerous regulatory bodies, including the FDA and comparable
international regulatory agencies. These agencies require manufacturers of
medical devices to comply with applicable laws and regulations governing the
development, testing, manufacturing, labeling, marketing and distribution of
medical devices. Devices are generally subject to varying levels of regulatory
control, the most comprehensive of which requires that a clinical evaluation
program be conducted before a device receives approval for commercial
distribution.
In the United States, permission to distribute a new device generally can be met
in one of two ways. The first process requires that a pre-market notification
(the "510(k) Submission") be made to FDA to demonstrate that the device is as
safe and effective, that is, substantially equivalent to a legally marketed
device that is not subject to pre-market approval ("PMA"). Applicants must
compare this device to one or more similar devices commercially available in the
United States and make and support their substantial equivalency claims. A
legally marketed device is a device that (i) was legally marketed prior to May
28, 1976, (ii) has been reclassified from Class III to Class II or I, or (iii)
has been found to be substantially equivalent to a device following a 510(k)
Submission. The legally marketed device(s) to which equivalence is drawn is
known as the "predicate" device(s). Applicants must submit descriptive data and,
when necessary, performance data to establish that the device is substantially
equivalent to a predicate device. In some instances, data from human clinical
trials must also be submitted in support of a
-22-
510(k) Submission. If so, these data must be collected in a manner that conforms
with specific requirements in accordance with federal regulations. The FDA must
issue an order finding substantial equivalence before commercial distribution
can occur.
Changes to existing devices covered by a 510(k) Submission which do not
significantly affect safety or effectiveness can generally be made by the
Company without additional 510(k) Submissions.
The second process requires that an application for PMA be made to the FDA to
demonstrate that the device is safe and effective for its intended use as
manufactured. This approval process applies to certain Class III devices. In
this case, two steps of FDA approval are generally required before marketing in
the United States can begin. First, the Company must comply with investigational
device exemptions ("IDE") regulations in connection with any human clinical
investigation of the device in the United States. Second, the FDA must review
the Company's PMA application which contains, among other things, clinical
information acquired under the IDE. The FDA will approve the PMA application if
it finds that there is a reasonable assurance that the device is safe and
effective for its intended purpose.
The FDA can ban certain medical devices, detain or seize adulterated or
misbranded medical devices, order repair, replacement or refund of these
devices, and require notification of health professionals and others with regard
to medical devices that present unreasonable risks of substantial harm to the
public health. The FDA may also enjoin and restrain certain violations of the
Food, Drug and Cosmetic Act and the Safe Medical Devices Act pertaining to
medical devices, or initiate action for criminal prosecution of such violations.
International sales of medical devices manufactured in the United States that
are not approved by the FDA for use in the United States, or are banned or
deviate from lawful performance standards, are subject to FDA export
requirements. The Export Reform Act of 1996 has simplified the process of
exporting devices which have not been approved for sale in the United States.
Exported devices are subject to the regulatory requirements of each country to
which the device is exported. Some countries do not have medical device
regulations, but in most foreign countries medical devices are regulated. In
many of these countries the medical device regulations are similar to drug
regulations. The majority of the Company's products are expected to be so
regulated in these countries. Frequently, regulatory approval may first be
obtained in a foreign country prior to application in the United States to take
advantage of differing regulatory requirements. The Company has completed CE
Mark registrations for substantially all of its products in accordance with the
implementation of various medical device directives in the European Union.
The process of obtaining clearance to market products is costly and
time-consuming in virtually all of the major markets in which the Company sells
products and can delay the marketing and sale of new products. Countries around
the world have recently adopted more stringent regulatory requirements which are
expected to add to the delays and uncertainties associated with new product
releases, as well as the clinical and regulatory costs of supporting such
releases. No assurance can be given that any of the Company's new medical
devices will be
-23-
approved on a timely basis, if at all. In addition, regulations regarding the
development, manufacture and sale of medical devices are subject to future
change. The Company cannot predict what impact, if any, such changes might have
on its business. Failure to comply with regulatory requirements could have a
material adverse effect on the Company's business, financial condition and
results of operations.
The Company is also subject to environmental laws and regulations both in the
United States and abroad. The operations of the Company, like those of other
medical device companies, involve the use of substances regulated under
environmental laws, primarily in manufacturing and sterilization processes. The
Company believes that compliance with environmental laws will not have a
material impact on its financial position, results of operations, or liquidity.
Given the scope and nature of these laws, there can, however, be no assurance
that environmental laws will not have a material impact on the Company.
-24-
THIRD-PARTY COVERAGE AND REIMBURSEMENT
The Company's products are purchased by hospitals, doctors and other health care
providers who are reimbursed for the health care services provided to their
patients by third-party payors, such as governmental programs (e.g., Medicare
and Medicaid), private insurance plans and managed care programs. Third party
payors may provide or deny coverage for certain technologies and associated
procedures based on assessment criteria as determined by the third-party payor.
Reimbursement by third-party payors for these services is based on a wide range
of methodologies that may reflect the services' assessed resource costs,
clinical and economic value. These reimbursement methodologies confer different,
and often conflicting, levels of financial risk and incentives to health care
providers and patients, and these methodologies are subject to frequent
refinements. Third party payers are also increasingly adjusting reimbursement
rates and challenging the prices charged for medical products and services.
There can be no assurance that the Company's products will be automatically
covered by third-party payors, that reimbursement will be available or, if
available, that the third-party payors' coverage policies will not adversely
affect the Company's ability to sell its products profitably.
Initiatives to limit the growth of healthcare costs, including price regulation,
are also underway in many countries in which the Company does business.
Implementation of healthcare reforms in significant markets such as Japan,
Europe, and other countries may limit the price of, or the level at which
reimbursement is provided for, the Company's products and may influence a
physician's selection of products used to treat patients.
PROPRIETARY RIGHTS AND PATENT LITIGATION
The Company relies on a combination of patents, trademarks, trade secrets and
non-disclosure agreements to protect its intellectual property. The Company
generally files patent applications in the United States and foreign countries
where patent protection for its technology is appropriate and available. The
Company holds more than 2,800 United States patents (many of which have foreign
counterparts) and has more than 4,600 patent applications pending worldwide that
cover various aspects of its technology. In addition, the Company holds
exclusive and non-exclusive licenses to a variety of third party technologies
covered by patents and patent applications. There can be no assurance that
pending patent applications will result in issued patents, that patents issued
to or licensed by the Company will not be challenged or circumvented by
competitors, or that such patents will be found to be valid or sufficiently
broad to protect the Company's technology or to provide the Company with a
competitive advantage.
The Company relies on non-disclosure and non-competition agreements with
employees, consultants and other parties to protect, in part, trade secrets and
other proprietary technology. There can be no assurance that these agreements
will not be breached, that the Company will have adequate remedies for any
breach, that others will not independently develop equivalent proprietary
information or that third parties will not otherwise gain access to the
Company's trade secrets and proprietary knowledge.
-25-
There has been substantial litigation regarding patent and other intellectual
property rights in the medical device industry, particularly in the areas in
which the Company competes. The Company has defended, and will likely continue
to defend, itself against claims and legal actions alleging infringement of the
patent rights of others. Adverse determinations in any patent litigation could
subject the Company to significant liabilities to third parties, require the
Company to seek licenses from third parties, and, if licenses are not available,
prevent the Company from manufacturing, selling or using certain of its
products, some of which could have a material adverse effect on the Company.
Additionally, the Company may find it necessary to initiate litigation to
enforce its patent rights, to protect its trade secrets or know-how and to
determine the scope and validity of the proprietary rights of others. Patent
litigation can be costly and time-consuming, and there can be no assurance that
the Company's litigation expenses will not be significant in the future or that
the outcome of litigation will be favorable to the Company. Accordingly, the
Company may seek to settle some or all of its pending litigation. Settlement may
include cross-licensing of the patents which are the subject of the litigation
as well as other intellectual property of the Company and may involve monetary
payments to or from third parties.
OTHER LITIGATION AND RISK MANAGEMENT
The testing, marketing and sale of human health care products entails an
inherent risk of product liability claims. The Company is involved in various
lawsuits arising in the normal course of business from product liability claims,
and product liability claims may be asserted in the future relative to events
not known to management at the present time. As a result of current economic
factors impacting the insurance industry, at the beginning of the third quarter
of 2002, the Company elected to become substantially self-insured with respect
to general and product liability claims. Losses for claims in excess of the
limits of purchased insurance would be recorded at the time and to the extent
they are probable and estimable. Management believes that the Company's risk
management practices, including limited insurance coverage, are reasonably
adequate to protect against anticipated general and product liability losses.
However, unanticipated catastrophic losses could have a material adverse impact
on the Company's financial position, results of operations and liquidity.
See the "Legal Proceedings" section below and Note L - Commitments and
Contingencies to the Company's 2002 Consolidated Financial Statements (Exhibit
13.1 filed herewith) for a further discussion of patent and other litigation and
proceedings involving the Company.
EMPLOYEES
As of December 31, 2002, the Company had approximately 13,900 employees,
including more than 7,800 in operations, 1,400 in administration, 1,400 in
clinical and research and development and 3,200 in selling, marketing,
distribution and related administrative support. Of these employees,
approximately 2,100 were employed in the Company's international operations. The
Company believes that the continued success of its business will depend, in
part, on its ability to attract and retain qualified personnel.
-26-
SEASONALITY
Worldwide sales do not reflect any significant degree of seasonality, however
customer purchases have been lighter in the third quarter of prior years than in
other quarters. This reflects, among other factors, lower demand during summer
months, particularly in European countries.
-27-
CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
The Cautionary Statement for Purposes of the Safe Harbor Provisions of the
Private Securities Litigation Reform Act of 1995 appearing on pages 15 through
16 of the Company's 2002 Consolidated Financial Statements (Exhibit 13.1 filed
herewith) is incorporated herein by reference.
ITEM 2. PROPERTIES
The Company's world headquarters are located in Natick, Massachusetts. It
maintains regional headquarters in Tokyo, Japan; Paris, France; and Singapore.
As of December 31, 2002, the Company's manufacturing, research, distribution
and other key facilities totaled approximately 5 million square feet, of which
approximately 50% was owned by the Company and the balance was leased. As of
December 31, 2002, the Company's principal technology centers were located in
Massachusetts, Indiana, Minnesota, New Jersey, Florida, California, Utah, New
York and Ireland, and its distribution centers were located in Massachusetts,
The Netherlands and Japan. As of December 31, 2002, the Company maintained
twenty technology centers, sixteen in the United States and four in
Ireland. Many of these facilities produce and manufacture products for more than
one of the Company's divisions and include research facilities. The Company
believes that its facilities are adequate to meet its current needs and
continues to assess its plant network strategy.
ITEM 3. LEGAL PROCEEDINGS
Note L - Commitments and Contingencies to the Company's 2002 Consolidated
Financial Statements, appearing on pages 36 through 43 thereto (Exhibit 13.1
filed herewith), is incorporated herein by reference. The following paragraphs
update the disclosure appearing in Note L.
RECENT PATENT LITIGATION ACTIVITY
Litigation with Johnson & Johnson
On March 13, 2002, the Company and Boston Scientific Scimed, Inc. filed suit for
patent infringement against the Johnson & Johnson and Cordis Corporation
(Cordis), a subsidiary of Johnson & Johnson, alleging that its Cypher(TM)
drug-eluting stent infringes a patent owned by the Company. The suit was filed
in the District Court of Delaware seeking monetary and injunctive. On March 20,
2003, the Company filed a motion seeking a preliminary injunction with respect
to the sale of the Cypher stent in the United States.
On January 13, 2003, Cordis filed suit for patent infringement against the
Company and Scimed Life Systems, Inc. (SCIMED) alleging the Company's
Express(2)(TM) coronary stent is infringed by a U.S. patent owned by Cordis. The
suit was filed in the U.S. District Court for the District of Delaware seeking
monetary and injunctive relief. On February 14, 2003, Cordis filed a motion
requesting a preliminary injunction. On March 5, 2003, the Company answered the
complaint,
-28-
denying the allegations, and filed a counterclaim against Cordis, alleging that
certain products sold by Cordis infringe a patent owned by the Company. A
hearing on the preliminary injunction motion has been scheduled for June 23 and
24, 2003, with post-hearing briefing to follow.
On February 20, 2003, Janssen Pharmaceuticals NV, an affiliate of Johnson &
Johnson, filed suit against the Company (through its subsidiaries) and Medinol
alleging that BX Velocity stents manufactured in Belgium do not infringe a
European patent owned by Medinol and exclusively licensed to the Company. The
suit was filed in Belgium seeking a declaration of invalidity and
noninfringement of the Medinol patent and monetary relief. A hearing is
scheduled for June 16, 2003.
On March 30, 2000, the Company (through its subsidiary) filed suit for patent
infringement against two subsidiaries of Cordis alleging that Cordis' BX
Velocity stent delivery system infringes a published utility model owned by
Medinol and exclusively licensed to the Company. The complaint was filed in the
District Court of Dusseldorf, Germany seeking monetary and injunctive relief. A
hearing was held on March 15, 2001, and on June 6, 2001, the Court issued a
written decision that Cordis' BX Velocity stent delivery system infringes the
Medinol published utility model. Cordis appealed the decision of the German
court. A hearing on the appeal has been suspended until a decision is rendered
in a related action pending in the U.S. District Court for the Southern District
of New York between the Company and Medinol.
Litigation with Guidant Corporation
On December 3, 2002, Advanced Cardiovascular Systems, Inc. (ACS), a subsidiary
of Guidant Corporation (Guidant), filed suit for patent infringement against the
Company and SCIMED alleging the Company's Express(TM) stent infringes a U.S.
patent owned by ACS. The suit was filed in the U.S. District Court for the
Northern District of California seeking monetary and injunctive relief. On
January 30, 2003, the Company filed an answer denying allegations of the
complaint and concurrently filed a counterclaim seeking declaratory judgment of
patent invalidity and noninfringement and alleging that certain ACS products
infringe five U.S. patents owned by the Company. The Company seeks monetary and
injunctive relief. On March 17, 2003, ACS filed an amended complaint alleging an
additional patent is infringed by the Company's product.
On December 30, 2002, the Company and certain of its subsidiaries filed suit for
patent infringement against Guidant, and Guidant Sales Corporation and ACS
alleging that certain stent delivery systems (Multi-Link Zeta(TM) and Multi-Link
Penta(TM)) and balloon catheter products (Agil-Trac(TM)) sold by Guidant and ACS
infringe nine U.S. patents owned by the Company. The complaint was filed in The
U.S. District Court for the Northern District of California seeking monetary and
injunctive relief. On February 21, 2003, Guidant filed an answer denying the
allegations of the complaint and filed a counterclaim seeking declaratory
judgment of patent invalidity and noninfringement and alleging that certain
Company products infringe patents owned by ACS. A scheduling conference has been
set for May 9, 2003.
On July 30, 2002, Guidant and Cook Group Incorporated, the parent of Cook, Inc.
announced their agreement to merge Cook Group Incorporated into a wholly-owned
subsidiary of Guidant. On the same day, Guidant filed suit against the Company
seeking a declaratory judgment that
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upon completion of the merger, the license granted under the License Agreement
among Angiotech Pharmaceuticals, Inc. (Angiotech), Cook and the Company may be
assigned or sublicensed by Cook to ACS and that ACS is entitled to use the
information, data or technology generated or gathered for the purposes of
obtaining regulatory approval for a coronary stent utilizing the Angiotech
technology. The Company answered the complaint and counterclaimed for
declaratory and injunctive relief alleging that Guidant is tortiously
interfering with Cook's performance under the Agreement. Guidant has announced
the termination of their agreement to merge with Cook, and on March 13, 2003,
the Company and Guidant filed a joint motion to dismiss the claims and
counterclaims between the parties without prejudice. On March 14, 2003, the
Court granted the joint motion.
On June 30, 1998, Cook, Inc. (Cook), filed suit in the Regional Court,
Dusseldorf Division for Patent Disputes, in Dusseldorf, Germany against the
Company alleging that the Company's Passager(TM) peripheral vascular stent graft
and Vanguard(TM) endovascular aortic graft products infringe the same Cook
patent. A hearing was held on July 22, 1999, and a decision was received in
September 1999 finding that the Company's products infringe the Cook patent. The
Company appealed the decision. The hearing originally scheduled for March 27,
2003 has been postponed until March 25, 2004.
Litigation with Medinol Ltd.
On September 10, 2002, the Company filed suit against Medinol Ltd. (Medinol)
alleging Medinol's NIRFlex(TM) and NIRFlex(TM) Royal products infringe two
patents owned by the Company. The suit was filed in Dusseldorf, Germany seeking
monetary and injunctive relief. A hearing previously scheduled for February 4,
2003 has been rescheduled for September 23, 2003.
Other Proceedings
On October 31, 2000, the Federal Trade Commission (FTC) filed suit against the
Company for alleged violations of a Consent Order dated May 5, 1995, pursuant
to which the Company had licensed certain intravascular ultrasound technology
to Hewlett-Packard Company (HP). The suit was filed in the U.S. District Court
for the District of Massachusetts seeking civil penalties and injunctive
relief. The Company filed a motion to dismiss the complaint and the FTC filed a
motion for summary judgment. On October 5, 2001, the Court dismissed three of
the five claims against the Company and granted summary judgment of liability
in favor of the FTC on the two remaining claims. On March 28, 2003, the Court
entered a judgment against the Company in the amount of approximately $7
million. The Company is evaluating whether to appeal the judgment.
The Company is involved in various lawsuits from time to time. In management's
opinion, the Company is not currently involved in any legal proceedings other
than those specifically identified above or in Note L - Commitments and
Contingencies to the Company's 2002 Consolidated Financial Statements which,
individually or in the aggregate, could have a material effect on the financial
condition, operations or cash flows of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The Directors and executive officers of the Company as of December 31, 2002 were
as follows:
DIRECTORS:
John E. Abele 65 Director, Founder
Ursula M. Burns 44 Director, Senior Corporate Vice President and
President, Business Group Operations, Xerox
Corporation
Joseph A. Ciffolillo 64 Director, Private Investor
Joel L. Fleishman 68 Director, Senior Advisor to the Atlantic
Philanthropies and Professor of Law and Public
Policy, Duke University
Marye Anne Fox, Ph.D. 55 Director, Chancellor of North Carolina State
University
Ray J. Groves 67 Director, President and Chief Executive Officer of
Marsh Inc.
Lawrence L. Horsch 68 Director, Chairman of Eagle Management &
Financial Corp.
Ernest Mario, Ph.D. 64 Director, Chairman and Chief Executive Officer,
IntraBiotics Pharmaceuticals, Inc.
N.J. Nicholas, Jr. 63 Director, Private Investor
Peter M. Nicholas 61 Director, Founder, Chairman of the Board
Uwe E. Reinhardt, Ph.D. 65 Director, James Madison Professor, Princeton
University
Senator Warren B. Rudman 72 Director, Former U.S. Senator, Partner, Paul, Weiss,
Rifkind, Wharton, & Garrison
James R. Tobin 58 Director, President and Chief Executive Officer
At the Company's 2003 Annual Meeting of Stockholders, stockholders will be asked
to vote for the election of John E. Pepper, age 64, to serve as a Class III
member of the Board of Directors of the Company. Mr. Lawrence L. Horsch, a Class
II Director, is retiring from the Board and will not be standing for
re-election.
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EXECUTIVE OFFICERS:
Lawrence C. Best 52 Senior Vice President-Finance & Administration and
Chief Financial Officer
Fredericus A. Colen 50 Senior Vice President and Chief Technology Officer
Paul Donovan 47 Vice President, Corporate Communications
Paul A. LaViolette 45 Senior Vice President and Group President,
Cardiovascular
Robert G. MacLean 59 Senior Vice President-Human Resources
Stephen F. Moreci 51 Senior Vice President and Group President,
Endosurgery
Paul W. Sandman 55 Senior Vice President, Secretary and General Counsel
James H. Taylor, Jr. 63 Senior Vice President, Corporate Operations
James R. Tobin 58 Director, President and Chief Executive Officer
On February 25, 2003, Dennis A. Ocwieja, age 57, was appointed to the Executive
Committee of the Company as Senior Vice President - Regulatory Affairs.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has standing Audit, Executive Compensation
and Human Resources, Strategic Investment and Governance Committees. Joel L.
Fleishman, Marye Anne Fox, Ernest Mario, Uwe E. Reinhardt, and Warren B. Rudman
currently serve on the Audit Committee. Ursula M. Burns, Joseph A. Ciffolillo,
Ray J. Groves, and Lawrence L. Horsch currently serve on the Executive
Compensation and Human Resources Committee. Ursula M. Burns, Joseph A.
Ciffolillo, Marye Anne Fox, Ernest Mario, N.J. Nicholas, Jr. and James R. Tobin
currently serve on the Strategic Investment Committee. Joel L. Fleishman, Ray J.
Groves, Peter M. Nicholas, Uwe E. Reinhardt, and Warren B. Rudman currently
serve on the Governance Committee. A description of the committees of the Board
of Directors of the Company is set forth in the Company's definitive Proxy
Statement to be filed with the Commission on or about April 4, 2003, and is
incorporated herein by reference.
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BIOGRAPHICAL SUMMARIES
John E. Abele, a co-founder of the Company, has been a Director of the Company
since 1979 and Founder Chairman since 1995. Mr. Abele held the position of
Treasurer from 1979 to 1992, Co-Chairman from 1979 to 1995 and Vice Chairman and
Founder, Office of the Chairman from February 1995 to March 1996. He was
President of Medi-tech, Inc. from 1970 to 1983, and prior to that served in
sales, technical and general management positions for Advanced Instruments, Inc.
Mr. Abele is the Chairman of the Board of the FIRST (For Inspiration and
Recognition of Science and Technology) Foundation and is also a member of
numerous not-for-profit boards. Mr. Abele received a B.A. degree from Amherst
College.
Lawrence C. Best has served as Senior Vice President and Chief Financial Officer
for the Company since 1992. Prior to his work with the Company, Mr. Best was a
partner in the accounting firm of Ernst & Young, where he specialized in serving
multinational companies in the high technology and life sciences fields. He
served a two-year fellowship at the Securities and Exchange Commission from 1979
to 1981 and a one-year term as a White House-appointed Presidential Exchange
Executive in Washington, D.C. He serves on the Board of Directors of Biogen,
Inc. Mr. Best received a B.B.A. degree from Kent State University.
Ursula M. Burns became a Director of the Company in 2002. Ms. Burns is President
of the Business Group Operations and Corporate Senior Vice President of Xerox
Corporation. Ms. Burns joined Xerox in 1980, advancing through several
engineering and management positions. Ms. Burns served as Vice President and
General Manager, Departmental Business Unit from 1997 to 1999, Senior Vice
President, Worldwide Manufacturing and Supply Chain Services from 1999 to 2000,
Senior Vice President, Corporate Strategic Services from 2000 to October 2001
and President of Document Systems and Solutions Group until her most recent
appointment in January 2003. She serves on the Boards of Directors of Banta
Corporation, the National Association of Manufacturers, the University of
Rochester and the Rochester Business Alliance. Ms. Burns earned a Bachelor of
Science degree from Polytechnic Institute of New York and a Master of Science
degree in mechanical engineering from Colombia University.
Joseph A. Ciffolillo joined the Company in 1983 as President of Medi-tech, Inc.
During his tenure at the Company, he also served as President of Microvasive,
Inc. and as Executive Vice President and Chief Operating Officer from 1989 until
his retirement in 1996. In 1992, Mr. Ciffolillo became a director of the
Company. Previously, Mr. Ciffolillo spent twenty years with Johnson & Johnson
where he held a number of management positions including President, Johnson &
Johnson Orthopedic Company. Mr. Ciffolillo is a member of the Spray Venture Fund
Investment Committee and a member of the Board of Directors of MedSource
Technologies, Inc. He also serves on a number of for-profit and not-for-profit
boards. Mr. Ciffolillo is Chairman of the Advisory Board of the Health Science
Technology Division of Harvard University and the
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Massachusetts Institute of Technology. He is also Chairman of the President's
Council of the Massachusetts General Hospital and a Director of South Coast
Health Systems. Mr. Ciffolillo received his B.A. from Bucknell University, where
he also serves as a Member of the Board of Trustees.
Fredericus A. Colen was appointed to the Executive Committee of the Company in
July 2001 as Senior Vice President and Chief Technology Officer. Mr. Colen
joined the Company in 1999 as Vice President of Research and Development of
Scimed and, in February 2001, he was promoted to Senior Vice President,
Cardiovascular Technology of Scimed. Before joining the Company, he worked for
several medical device companies, including Guidant, where he launched the Delta
T DDD Pacemaker platform, and St. Jude Medical, where he served as Managing
Director for the European subsidiary of the Cardiac Rhythm Management Division
and as Executive Vice President, responsible for worldwide R & D for implantable
pacemaker systems. Mr. Colen was educated in The Netherlands and Germany and
holds the U.S. equivalent of a Master's Degree in Electrical Engineering with
focus on medical technology from the Technical University in Aachen, Germany. He
was the Vice President of the International Association of Prosthesis
Manufacturers (IAPM) in Brussels from 1995 to 1997.
Paul Donovan joined the Company in March 2000 as Vice President, Corporate
Communications. Most recently, Mr. Donovan was the Executive Director of
External Affairs at Georgetown University Medical Center, where he directed
media, government and community relations as well as employee communications
since 1998. From 1997 to 1998, Mr. Donovan was Chief of Staff at the United
States Department of Commerce. From 1993 to 1997, Mr. Donovan served as Chief of
Staff to Senator Edward M. Kennedy and from 1989 to 1993 as Press Secretary to
Senator Kennedy. Mr. Donovan received a B.A. degree from Dartmouth College.
Joel L. Fleishman joined the Company as a Director in October 1992. Mr.
Fleishman served as President of The Atlantic Philanthropies from September 1993
until January 2001, when he became Senior Advisor of that organization. He is
also Professor of Law and Public Policy and has served in various administrative
positions, including First Senior Vice President at Duke University, since 1971.
Mr. Fleishman is a founding member of the governing board of the Duke Center for
Health Policy Research and Education and was the founding director of Duke
University's Terry Sanford Institute of Public Policy. He is the director of the
Samuel and Ronnie Heyman Center for Ethics, Public Policy and the Professions.
Mr. Fleishman also serves as Chairman of the Board of Trustees of The John and
Mary Markle Foundation, Vice-Chairman of the Board of Trustees of the Urban
Institute and as a director of Polo Ralph Lauren Corporation. Mr. Fleishman
received A.B., M.A. and J.D. degrees from the University of North Carolina at
Chapel Hill, and an LL.M. degree from Yale University.
Marye Anne Fox became a Director of the Company in October 2001. Dr. Fox is
Chancellor of North Carolina State University and Distinguished University
Professor of Chemistry. From 1976 to 1998, she was a member of the faculty at
the University of Texas, where she taught chemistry and held the Waggoner
Regents Chair in Chemistry from 1991 to 1998. She served as the University's
Vice President for Research from 1994 to 1998. Dr. Fox is the Co-Chair of the
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National Academy of Sciences' Government-University-Industry Research Roundtable
and serves on President Bush's Council of Advisors on Science and Technology.
She has served as the Vice Chair of the National Science Board. She also serves
on the boards of a number of other scientific, technological and civic
organizations, and is a member of the Boards of Directors of Red Hat Corp.,
Pharmaceutical Product Development, Inc., Burroughs-Wellcome Trust and the
Camille and Henry Dreyfus Foundation. Dr. Fox also serves on the Board of
Directors of W.R. Grace Co., a specialty chemical company that filed a petition
for reorganization under Chapter 11 of the Federal Bankruptcy Code in April
2001. She has been honored by a wide range of educational and professional
organizations, and she has authored more than 350 publications, including five
books. Dr. Fox holds a B.S. in Chemistry from Notre Dame College, an M.S. in
Organic Chemistry from Cleveland State University, and a Ph.D. in Organic
Chemistry from Dartmouth College.
Ray J. Groves joined the Company as a Director in May 1999. Mr. Groves is
President and Chief Executive Officer of Marsh Inc., a subsidiary of Marsh &
McLennan Companies, Inc. He served as Chairman of Legg Mason Merchant Banking,
Inc. from 1995 to 2001. Mr. Groves served as Chairman and Chief Executive
Officer of Ernst & Young for 17 years until his retirement in 1994. Mr. Groves
currently serves as a member of the Boards of Directors of Electronic Data
Systems Corporation, The Gillette Company, and Marsh & McLennan Companies, Inc.
Mr. Groves serves on the Board of Trustees of the New York State Public Policy
Institute and is a member of the Council on Foreign Relations. He is a former
member of the Board of Governors of the American Stock Exchange and the National
Association of Securities Dealers. Mr. Groves is former Chairman of the Board of
Directors of the American Institute of Certified Public Accountants. He is a
member and former Chair of the Board of Directors of The Ohio State University
Foundation and a member of the Dean's Advisory Council of the Fisher College of
Business. He is a former member of the Board of Overseers of The Wharton School,
University of Pennsylvania and served as the Chairman of its Center for the
Study of the Service Sector. Mr. Groves is a managing director, a member of the
executive committee and Secretary-Treasurer of the Metropolitan Opera
Association. Mr. Groves received a B.S. degree from The Ohio State University.
Lawrence L. Horsch joined the Company as a Director in February 1995.
Previously, he had been Chairman of the Board of SCIMED Life Systems, Inc. from
1977 to 1994, director from 1977 to 1995 and Acting Chief Financial Officer from
1994 to 1995. Since 1990, Mr. Horsch has served as Chairman of Eagle Management
& Financial Corp., a management consulting firm. He was Chairman and Chief
Executive Officer of Munsingwear, Inc., from 1987 to 1990. Mr. Horsch also
serves on several private company boards. Mr. Horsch received a B.A. degree from
the University of St. Thomas and an M.B.A. degree from Northwestern University.
Paul A. LaViolette joined the Company as President, Boston Scientific
International, and Vice President--International in January 1994. In February
1995, Mr. LaViolette was elected to the position of Senior Vice President and
Group President--Nonvascular Businesses. In October 1998, Mr. LaViolette was
appointed President, Boston Scientific International, and in February 2000
assumed responsibility for the Company's Scimed, EPT and Target businesses as
Group President, Cardiovascular. In March, 2001, he also assumed the position of
President, SCIMED.
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Prior to joining the Company, he was employed by C.R. Bard, Inc. in various
capacities, including President, U.S.C.I. Division, from July 1993 to November
1993, President, U.S.C.I. Angioplasty Division, from January 1993 to July 1993,
Vice President and General Manager, U.S.C.I. Angioplasty Division, from August
1991 to January 1993, and Vice President U.S.C.I. Division, from January 1990 to
August 1991. Mr. LaViolette received his B.A. degree from Fairfield University
and an M.B.A. degree from Boston College.
Robert G. MacLean joined the Company as Senior Vice President--Human Resources
in April 1996. Prior to joining the Company, he was Vice President--Worldwide
Human Resources for National Semiconductor Corporation in Santa Clara,
California from October 1992 to March 1996. Mr. MacLean has held various human
resources management positions in the U.S. and Europe during his career. Prior
to his business endeavors, he was Economics Professor at the University of the
Pacific. Mr. MacLean received his B.A. and M.A. degrees and completed his
doctoral studies in economics from Stanford University.
Ernest Mario became a Director of the Company in October 2001. Dr. Mario is
currently the Chairman of IntraBiotics Pharmaceuticals, Inc., a pharmaceutical
development company, and has served as a senior executive of a number of major
international companies. From 1993 to 1997, Dr. Mario served as Co-Chairman and
Chief Executive Officer of ALZA Corporation, a research-based pharmaceutical
company with leading drug-delivery technologies, and Chairman and Chief
Executive Officer from 1997 to 2001. Dr. Mario presently serves on the Boards of
Directors of Catalytica Energy Systems, Inc., Maxygen, Inc., Orchid Biosciences,
Inc., Pharmaceutical Product Development, Inc. and SonoSite, Inc. He is also a
Trustee of Duke University and Chairman of the Board of the Duke University
Health System. He is the Chairman of the American Foundation for Pharmaceutical
Education and serves as an advisor to the colleges of pharmacy at the University
of Maryland, the University of Rhode Island and Rutgers University. Dr. Mario
holds a B.S. in Pharmacy from Rutgers, and an M.S. and a Ph.D. in Physical
Sciences from the University of Rhode Island.
Stephen F. Moreci was appointed to the Executive Committee of the Company as
Senior Vice President and Group President, Endosurgery in December 2000. Mr.
Moreci joined the Company in 1989 and most recently served as the Company's
President of its Medi-tech division since 1999. From 1989 until 1999, Mr. Moreci
held a variety of management positions within the Company, including Vice
President and General Manager of Cardiac Assist from 1989 to 1991, Vice
President and General Manager of Microvasive Endoscopy from 1991 until 1995,
Group Vice President of Nonvascular from 1995 until 1996 and President of
Microvasive Endoscopy from 1996 until 1999. Mr. Moreci received a B.S. degree
from Pennsylvania State University.
N.J. Nicholas, Jr. joined the Company as a Director in October 1994. Mr.
Nicholas served as President of Time, Inc. from September 1986 to May 1990 and
Co-Chief Executive Officer of Time Warner, Inc. from May 1990 until February
1992. N.J. Nicholas, Jr. is a director of Xerox Corporation and Priceline.com.
Mr. Nicholas received an A.B. degree from Princeton University and an M.B.A.
degree from Harvard Business School. He is also the brother of Peter M.
Nicholas, Chairman of the Board of the Company.
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Peter M. Nicholas, a co-founder of the Company, has been the Chairman of the
Board of the Company since 1995. He has been a Director since 1979 and served as
the Chief Executive Officer from 1979 to March 1999 and Co-Chairman of the Board
from 1979 to 1995. Prior to joining the Company, he was corporate director of
marketing and general manager of the Medical Products Division at Millipore
Corporation, a medical device company, and served in various sales, marketing
and general management positions at Eli Lilly and Company. He is currently Vice
Chairman of the Board of Trustees of Duke University and a member of the Board's
Executive Committee. Mr. Nicholas is also a member of the American Academy of
Achievement and has recently received the Phoenix Lifetime Achievement Award. He
is also a recent recipient of the Ellis Island Medal of Honor, and is a Fellow
of the American Academy of Arts and Sciences. He is a member of the
Massachusetts Business Roundtable and currently serves on the boards of the Boys
& Girls Club of Boston, Massachusetts High Technology Council, and CEO's for
Charter Schools. Mr. Nicholas also serves on several for profit and
not-for-profit boards. After college, Mr. Nicholas served as an officer in the
U.S. Navy, resigning his commission as lieutenant in 1966. Mr. Nicholas received
a B.A. degree from Duke University, and an M.B.A. degree from The Wharton School
of the University of Pennsylvania. He is also the brother of N.J. Nicholas, Jr.,
a Director of the Company.
Dennis A. Ocwieja was appointed to the Executive Committee of the Company as
Senior Vice President - Regulatory Affairs on February 25, 2003. Mr. Ocwieja
joined the Company in February 2000 as Vice President of Corporate Quality. In
February 2002, his role was expanded to Vice President, Corporate Quality and
Regulatory Affairs. From 1995 until 2000, Mr. Ocwieja was an independent
consultant to several Fortune 100 companies in the medical product industry. He
also served as Vice President, Quality and Regulatory Affairs for the Clintec
Nutrition Company from 1993 until 1995 and Vice President, Quality and
Regulatory Affairs for Arjo-Century from 1992 through 1993. From 1968 until 1992
Mr. Ocwieja held a variety of positions at Baxter Healthcare in Product
Development, Product Service, Corporate Documentation and Quality/Regulatory.
Mr. Ocwieja received a Bachelor of Science in Biology from Roosevelt University.
John E. Pepper is Chairman of the Executive Committee of the Board of Directors
of The Procter & Gamble Company where has served in various capacities since
1963, including Chairman from 2000 to 2002, Chief Executive Officer and Chairman
of the Board from 1995 to 1999, President from 1986 to 1995 and director since
1984. Mr. Pepper is a member of the Board of Directors of Xerox Corporation and
Motorola Inc. and served as a member of the Board of Directors of the Company
from November 1999 until May 2001. Mr. Pepper is a Fellow of The Yale
Corporation and a Trustee of the Christ Church Endowment Fund. He serves on the
boards of Partnership for a Drug Free America and the National Advisory Board of
the National Underground Railroad Freedom Center. Mr. Pepper graduated from Yale
University in 1960 and holds honorary doctorate degrees from Ohio State
University, Xavier University, Mount St. Joseph College and St. Petersburg
University (Russia).
Uwe E. Reinhardt, Ph.D. became a Director in 2002. Dr. Reinhardt is the James
Madison Professor of Political Economy and Professor of Economics and Public
Affairs at Princeton University, where he has taught since 1968. Dr. Reinhardt
is a senior associate of the University of Cambridge, England and Trustee of
Duke University, the Duke University Health System, H&Q Healthcare Investors and
H&Q Life Sciences Investors. He also serves on the Boards of Directors of the
Amerigroup Corporation and Triad Hospital, Inc. Dr. Reinhardt is a member of the
National Advisory Council (NAC) for Health Care Policy, Research and Evaluation
for the Agency for Healthcare Research and Quality, U.S. Department of Health
and Human Services. Dr. Reinhardt received a Bachelor of Commerce degree from
the University of Saskatchewan, Canada and a Ph.D. in economics from Yale
University.
Senator Warren B. Rudman joined the Company as a Director in October 1999.
Senator Rudman became a partner in the international law firm Paul, Weiss,
Rifkind, Wharton, and Garrison in
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1992 after serving two terms as a U.S. Senator from New Hampshire from 1980 to
1992. As of January 1, 2003, he became Of Counsel to Paul, Weiss, Rifkin,
Wharton & Garrison LLP. Senator Rudman serves on the Boards of Trustees of the
Brookings Institution, and the Council on Foreign Relations. He also serves on
the boards of Allied Waste Industries, Inc., The Chubb Corporation, Collins &
Aikman Corporation, Raytheon Corporation and several funds managed by the
Dreyfus Corporation. He is also the founding co-chairman of the Concord
Coalition. Senator Rudman received a B.S. from Syracuse University and a LL.B.
from Boston College Law School and served in the U.S. Army during the Korean
War.
Paul W. Sandman joined the Company as Senior Vice President, Secretary and
General Counsel in May 1993. From March 1992 through April 1993, he was Senior
Vice President, General Counsel and Secretary of Wang Laboratories, Inc., where
he was responsible for legal affairs. From 1984 to 1992, Mr. Sandman was Vice
President and Corporate Counsel of Wang Laboratories, Inc., where he was
responsible for corporate and international legal affairs. Mr. Sandman received
his A.B. from Boston College, and his J.D. from Harvard Law School.
James H. Taylor, Jr. joined the Company as Senior Vice President of Corporate
Operations in August 1999. Mr. Taylor most recently served as Vice President of
Global Technology at Nestle Clinical Nutrition from 1995 to 1997. Prior to
joining Nestle, he completed a thirty-year career at Baxter International, where
he held a broad range of positions in operations management, including from 1992
to 1995, the position of Corporate Vice President of Manufacturing Operations
and Strategy. Mr. Taylor received his B.A. degree from the University of North
Carolina.
James R. Tobin joined the Company as Director, President and Chief Executive
Officer in March 1999. Prior to joining the Company, Mr. Tobin served as
President and Chief Executive Officer of Biogen, Inc. from 1997 to 1998 and
Chief Operating Officer of Biogen from 1994 to 1997. From 1972 to 1994, Mr.
Tobin served in a variety of executive positions with Baxter International,
including President and Chief Operating Officer from 1992 to 1994. Previously,
he served at Baxter as Managing Director in Japan, Managing Director in Spain,
President of Baxter's I.V. Systems Group and Executive Vice President. Mr. Tobin
currently serves on the Boards of Directors of Beth Israel Deaconess Medical
Center, the Carl J. Shapiro Institute for Education and Research, Curis, Inc.,
Osiris, Inc. and Applera Corporation (formerly PE Corporation). Mr. Tobin holds
an A.B. from Harvard College and an M.B.A. from Harvard Business School. Mr.
Tobin also served as a lieutenant in the U.S. Navy from 1968 to 1972.
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PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is traded on the New York Stock Exchange under the
symbol "BSX".
The information set forth under the caption "Market for the Company's Common
Stock and Related Matters" included in the Company's 2002 Consolidated Financial
Statements (Exhibit 13.1 filed herewith) is incorporated herein by reference.
The closing price of the Company's Common Stock on March 21, 2003 was $47.40
ITEM 6. SELECTED FINANCIAL DATA
The information set forth under the caption "Five-Year Selected Financial Data"
included in the Company's 2002 Consolidated Financial Statements (Exhibit 13.1
filed herewith) is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The statements and information set forth under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in the Company's 2002 Consolidated Financial Statements (Exhibit 13.1
filed herewith) are incorporated herein by reference.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information set forth under the subcaption "Market Risk Disclosures"
contained under the caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included on page 14 of the Company's 2002
Consolidated Financial Statements (Exhibit 13.1 filed herewith) is incorporated
herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company and its subsidiaries
included in the Company's 2002 Consolidated Financial Statements (Exhibit 13.1
filed herewith) are incorporated herein by reference. The statements and
information set forth under the caption "Quarterly Results of Operations"
included in the Company's 2002 Consolidated Financial Statements (Exhibit 13.1
filed herewith) are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The required information concerning directors and executive officers set forth
in the Company's definitive Proxy Statement to be filed with the Commission on
or about April 4, 2003 is incorporated herein by reference. See also "Directors
and Executive Officers of the Company" following Item 4 herein.
ITEM 11. EXECUTIVE COMPENSATION
The required information concerning executive compensation set forth in the
Company's definitive Proxy Statement to be filed with the Commission on or about
April 4, 2003 is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The required statements concerning security ownership of certain beneficial
owners and management and related stockholder matters set forth in the Company's
definitive Proxy Statement to be filed with the Commission on or about April 4,
2003 are incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The required statements concerning certain relationships and related
transactions set forth in the Company's definitive Proxy Statement to be filed
with the Commission on or about April 4, 2003 are incorporated herein by
reference.
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ITEM 14. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures
Within 90 days prior to the date of this report (the Evaluation Date), the
Company carried out an evaluation, under the supervision of its President and
Chief Executive Officer and Senior Vice President - Finance & Administration and
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. Based on this evaluation, the
Company's President and Chief Executive Officer and Senior Vice President -
Finance & Administration and Chief Financial Officer concluded that as of the
Evaluation Date, the Company's disclosure controls and procedures are effective
in ensuring that material information relating to the Company required to be
included in the Company's periodic filings with the Securities and Exchange
Commission was made known to them on a timely basis. It should be noted that any
system of controls is designed to provide reasonable, but not absolute,
assurances that the system will achieve its stated goals under all potential
circumstances.
Changes in internal controls
There were no significant changes in the Company's internal controls, or to the
Company's knowledge, in other factors that could significantly affect the
Company's disclosure controls and procedures subsequent to the Evaluation Date.
-42-
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K
(a)(1) Financial Statements.
The response to this portion of Item 15 is set forth under
Item 8.
(a)(2) Financial Schedules.
The response to this portion of Item 15 is filed herewith as a
separate attachment to this report.
(a)(3) Exhibits (* documents filed herewith).
EXHIBIT
NO. TITLE
-- -----
3.1 Second Restated Certificate of Incorporation of the Company
(Exhibit 3.1, Annual Report on Form 10-K for the year ended
December 31, 1993, File No. 1-11083).
3.2 Certificate of Amendment of the Second Restated Certificate of
Incorporation of the Registrant (Exhibit 3.2, Annual Report on
Form 10-K for the year ended December 31, 1994, File No.
1-11083).
3.3 Certificate of Second Amendment of the Second Restated
Certificate of Incorporation of the Registrant (Exhibit 3.3,
Annual Report on Form 10-K for the year ended December 31,
1998, File No. 1-11083).
3.4 Restated By-laws of the Company (Exhibit 3.2, Registration No.
33-46980).
4.1 Specimen Certificate for shares of the Company's Common Stock
(Exhibit 4.1, Registration No. 33-46980).
4.2 Description of Capital Stock contained in Exhibits 3.1, 3.2,
3.3 and 3.4.
4.3 Form of Debt Securities Indenture (Exhibit 4.4, Registration
Statement on Form S-3 of the Company, BSC Capital Trust, BSC
Capital Trust II and BSC Capital Trust III, Registration No.
333-64887).
4.4 Form of First Supplemental Indenture dated as of December 6,
2001 (Exhibit 4.4, Annual Report on Form 10-K for the year
ended December 31, 2002, File No. 1-110830).
4.5 6.625% Promissory Notes due March 15, 2005 issued by the
Company in the aggregate principal amount of $500 million,
each dated as of March 10, 1998 (Exhibit Nos. 4.1, 4.2 and 4.3
to the Company's Current Report on Form 8-K dated March 30,
1998, File No. 1-11083).
10.1 Form of Credit Agreement among the Company, The Several
Lenders and Banc of America Securities LLC dated as of August
15, 2001 (Exhibit 10.2, Quarterly Report on Form 10-Q for
-43-
EXHIBIT
NO. TITLE
-- -----
the quarter ended September 30, 2001, File No. 1-11083).
10.2 Form of Credit Agreement among the Company and The Several
Lenders dated as of May 31, 2002 (Exhibit 10.1, Quarterly
Report on Form 10-Q for the quarter ended June 30, 2002, File
No. 1-11083).
10.3 Form of Credit and Security Agreement dated as of August 16,
2002 among Boston Scientific Funding Corporation, the Company,
Blue Ridge Asset Funding Corporation, Victory Receivables
Corporation The Bank of Tokyo-Mitsubishi Ltd., New York Branch
and Wachovia Bank, N.A. (Exhibit 10.1, Quarterly Report on
Form 10-Q for the quarter ended September 30, 2002, File No.
1-11083).
10.4 Form of Receivables Sale Agreement dated as of August 16, 2002
between the Company and each of its Direct or Indirect
Wholly-Owned Subsidiaries that Hereafter Becomes a Seller
Hereunder, as the Sellers, and Boston Scientific Funding
Corporation, as the Buyer (Exhibit 10.2, Quarterly Report on
Form 10-Q for the quarter ended September 30, 2002, File No.
1-11083).
*10.6 License Agreement among Angiotech Pharmaceuticals, Inc., Cook
Incorporated and the Company dated July 9, 1997, and related
Agreement dated December 13, 1999.
10.7 Agreement Containing Consent Decree, dated as of February 23,
1995, between the Company and the Federal Trade Commission
(Exhibit 10.16, Annual Report on Form 10-K for the year ended
December 31, 1994, File No. 1-11083).
10.8 Letter Agreement, dated June 22, 1992, between the Company and
Lawrence C. Best (Exhibit 10.11, Annual Report on Form 10-K
for the year ended December 31, 1993, File No. 1-11083).
10.9 Letter Agreement dated March 17, 1999, between the Company and
James R. Tobin (Exhibit 10.34, Annual Report on Form 10-K for
the year ended December 31, 1998, File No. 1-11083).
10.10 Form of Indemnification Agreement between the Company and
certain Directors and Officers (Exhibit 10.16, Registration
No. 33-46980).
10.11 Form of Retention Agreement between the Company and certain
Executive Officers (Exhibit 10.23, Annual Report on Form 10-K
for the year ended December 31, 1996, File No. 1-11083).
*10.12 Boston Scientific Corporation 401(k) Retirement Savings Plan,
as Amended and Restated, Effective January 1, 2001, and
amended as of January 1, 2003.
10.13 Boston Scientific Corporation Global Employee Stock Ownership
Plan, as Amended and Restated (Exhibit 10.18, Annual Report on
Form 10-K for the year ended December 31, 1997,
-44-
EXHIBIT
NO. TITLE
-- -----
Exhibit 10.21, Annual Report on Form 10-K for the year ended
December 31, 2000, Exhibit 10.22, Annual Report on Form 10-K
for the year ended December 31, 2000, File No. 1-11083).
10.14 Boston Scientific Corporation Deferred Compensation Plan,
Effective January 1, 1996 (Exhibit 10.17, Annual Report on
Form 10-K for the year ended December 31, 1996, File No.
11083).
10.15 Boston Scientific Corporation 1992 Non-Employee Directors'
Stock Option Plan, as amended (Exhibit 10.2, Annual Report on
Form 10-K for the year ended December 31, 1996, Exhibit 10.3,
Annual Report on Form 10-K for the year ended December 31,
2000, File No. 1-11083).
10.16 Boston Scientific Corporation 2000 Long Term Incentive Plan
(Exhibit 10.20, Annual Report on Form 10-K for the year ended
December 31, 1999, Exhibit 10.18, Annual Report on Form 10-K
for the year ended December 31, 2001, File No. 1-11083).
10.17 Boston Scientific Corporation 1995 Long-Term Incentive Plan,
as amended (Exhibit 10.1, Annual Report on Form 10-K for the
year ended December 31, 1996, Exhibit 10.5, Annual Report on
Form 10-K for the year ended December 31, 2001, File No.
1-11083)
10.18 Boston Scientific Corporation 1992 Long-Term Incentive Plan,
as amended (Exhibit 10.1, Annual Report on Form 10-K for the
year ended December 31, 1996, Exhibit 10.2, Annual Report on
Form 10-K for the year ended December 31, 2001, File No.
1-11083).
10.19 SCIMED Life Systems, Inc. 1991 Directors Stock Option Plan, as
amended (Exhibit 4.2, Registration No. 33-89772 which was
incorporated by reference to Exhibit A to SCIMED's Proxy
Statement dated June 8, 1994 for its 1994 Annual Meeting of
Shareholders, Commission File No. 0-9301).
10.20 SCIMED Life Systems, Inc. 1992 Stock Option Plan (Exhibit 4.1,
Registration No. 33-89772 which was incorporated by reference
to Exhibit A to SCIMED's Proxy Statement dated May 26, 1992
for its 1992 Annual Meeting of Shareholders, Commission File
No. 0-9301).
10.21 Heart Technology, Inc. Restated 1989 Stock Option Plan
(Exhibit 4.5, Registration No. 33-99766 which was incorporated
by reference to Exhibit 10.4 to the Registration Statement on
Form S-1 of Heart Technology, Registration No. 33-45203).
10.22 EP Technologies, Inc. 1991 Stock Option/Stock Issuance Plan
(Exhibit 4.6, Registration No. 33-80265 which was incorporated
by reference to EPT's Registration Statement on Form S-8, File
No. 33-82140).
10.23 EP Technologies, Inc. 1993 Stock Option/Stock Issuance Plan,
(Exhibit 4.5, Registration No. 33-80265 which was incorporated
by reference to EPT's Registration Statement on Form S-8,
Registration No. 33-93196).
10.24 Target Therapeutics, Inc. 1988 Stock Option Plan (Exhibit
10.2, Quarterly Report of Target Therapeutics, Inc. on Form
10-Q for the quarter ended September 30, 1996, File No.
0-19801).
-45-
EXHIBIT
NO. TITLE
-- -----
10.25 Target Therapeutics, Inc. 1988 Stock Option Plan, (Exhibit
10.3 Quarterly Report of Target Therapeutics, Inc. on Form
10-Q for the quarter ended September 30, 1996, File No.
0-19801).
10.26 Embolic Protection Incorporated 1999 Stock Plan (Exhibit 10.1,
Registration Statement on Form S-8 of the Company,
Registration No. 333-61060).
10.27 Quanam Medical Corporation 1996 Equity Incentive Plan (Exhibit
10.2, Registration Statement on Form S-8 of the Company,
Registration No. 333-61060).
10.28 Quanam Medical Corporation 1996 Stock Plan (Exhibit 10.3,
Registration Statement on Form S-8 of the Company,
Registration No. 333-61060).
10.29 RadioTherapeutics Corporation 1994 Stock Incentive Plan
(Exhibit 10.1, Registration Statement on Form S-8 of the
Company, Registration No. 333-76380).
11 Statement regarding computation of per share earnings
(included in Note O to the Company's 2002 Consolidated
Financial Statements for the year ended December 31, 2002,
filed as Exhibit 13.1 hereto).
*12.1 Statement regarding computation of ratios of earnings to fixed
charges.
*13.1 The Company's 2002 Consolidated Financial Statements for the
year ended December 31, 2002.
13.2 Report of Independent Auditors, Ernst & Young LLP (included in
the Company's 2002 Consolidated Financial Statements for the
year ended December 31, 2002, filed as Exhibit 13.1 hereto).
*21.1 List of the Company's subsidiaries as of March 21, 2003.
*23.1 Consent of Independent Auditors, Ernst & Young LLP.
*99.1 Certification of Chief Executive Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
*99.2 Certification of Chief Financial Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K.
None.
-46-
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Dated: March 31, 2003 BOSTON SCIENTIFIC CORPORATION
By: /s/ Lawrence C. Best
----------------------------------
Lawrence C. Best
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Company and in
the capacities and on the dates indicated.
Dated: March 31, 2003 /s/ John E. Abele
--------------------------------------
John E. Abele
Director, Founder
Dated: March 31, 2003 /s/ Lawrence C. Best
--------------------------------------
Lawrence C. Best
Senior Vice President--Finance and
Administration and Chief Financial
Officer (Principal Financial and
Accounting Officer)
Dated: March 31, 2003 /s/ Ursula M. Burns
--------------------------------------
Ursula M. Burns
Director
Dated: March 31, 2003 /s/ Joseph A. Ciffolillo
--------------------------------------
Joseph A. Ciffolillo
Director
Dated: March 31, 2003 /s/ Joel L. Fleishman
--------------------------------------
Joel L. Fleishman
Director
-47-
Dated: March 31, 2003 /s/ Marye Anne Fox
--------------------------------------
Marye Anne Fox
Director
Dated: March 31, 2003 /s/ Ray J. Groves
--------------------------------------
Ray J. Groves
Director
Dated: March 31, 2003 /s/ Lawrence L. Horsch
--------------------------------------
Lawrence L. Horsch
Director
Dated: March 31, 2003 /s/ Ernest Mario
--------------------------------------
Ernest Mario
Director
Dated: March 31, 2003 /s/ N.J. Nicholas, Jr.
--------------------------------------
N.J. Nicholas, Jr.
Director
Dated: March 31, 2003 /s/ Peter M. Nicholas
--------------------------------------
Peter M. Nicholas
Director, Chairman of the Board
Dated: March 31, 2003 /s/ Uwe E. Reinhardt, Ph.D.
--------------------------------------
Uwe E. Reinhardt, Ph.D.
Director
Dated: March 31, 2003 /s/ Warren B. Rudman
--------------------------------------
Warren B. Rudman
Director
Dated: March 31, 2003 /s/ James R. Tobin
--------------------------------------
James R. Tobin
Director, President and
Chief Executive Officer
(Principal Executive Officer)
-48-
CERTIFICATIONS
I, James R. Tobin, certify that:
1. I have reviewed this annual report on Form 10-K of Boston Scientific
Corporation;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in
this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: March 31, 2003
/s/ James R. Tobin
_______________________
James R. Tobin
Chief Executive Officer
-49-
CERTIFICATIONS
I, Lawrence C. Best, certify that:
1. I have reviewed this annual report on Form 10-K of Boston Scientific
Corporation;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in
this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: March 31, 2003
/s/ Lawrence C. Best
_______________________
Lawrence C. Best
Chief Financial Officer
-50-
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Charges to
Balance at Charges to (Deductions from) Balance at
Beginning Costs and Other End of
Description of Period Expenses Deductions Accounts Period
- ----------- --------- -------- ---------- -------- ------
(In millions)
YEAR ENDED DECEMBER 31, 2002
Reserves and allowances deducted from
asset accounts:
Allowances for uncollectible
amounts and sales returns and allowances $62 3 6(a) (1)(b) $58
YEAR ENDED DECEMBER 31, 2001
Reserves and allowances deducted from
asset accounts:
Allowances for uncollectible
amounts and sales returns and allowances $67 9 7(a) (7)(b) $62
YEAR ENDED DECEMBER 31, 2000
Reserves and allowances deducted from
asset accounts:
Allowances for uncollectible
amounts and sales returns and allowances $63 8 9(a) 5(b) $67
- ----------
(a) Uncollectible accounts written off.
(b) Charges for sales returns and allowances, net of actual sales returns
Certain prior years' amounts have been reclassified to conform to the current
year's presentation.