Introduction
Boston Scientific Corporation is a worldwide developer, manufacturer and marketer of medical devices that are used in a broad range of interventional medical specialties. Our business strategy is to lead global markets for less-invasive medical devices by developing and delivering products and therapies that address unmet patient needs, provide superior clinical outcomes and demonstrate compelling economic value. We intend to achieve leadership, drive profitable sales growth and increase shareholder value by focusing on:
• Customers

• Innovation

• Quality

• People

• Financial strength

In the first quarter of 2008, we completed the divestiture of certain non-strategic businesses. We are involved in several post-closing separation activities through transition service agreements, some from which we continue to generate net sales. These transition service agreements expire throughout 2009 and 2010. Refer to Strategic Initiatives and Note G - Divestitures to our unaudited condensed consolidated financial statements contained in Item 1 of this Quarterly Report for a description of these business divestitures. Financial Summary
Three Months Ended June 30, 2009
Our net sales for the second quarter of 2009 were $2.074 billion, which included net sales from divested businesses of $2 million, as compared to net sales of $2.024 billion for the second quarter of 2008, which included net sales from divested businesses of $19 million, an increase of $50 million or two percent. Excluding the impact of foreign currency exchange rates, which contributed a negative $83 million to net sales, and net sales from divested businesses, our net sales increased seven percent for the second quarter of 2009, as compared to the same period in the prior year. See Quarterly Results for a discussion of the components of our net sales. Our reported net income for the second quarter of 2009 was $158 million, or $0.10 per share, as compared to $98 million, or $0.07 per share, for the second quarter of 2008. Our reported results for the second quarter of 2009 included intangible asset impairment charges; acquisition- and divestiture-related charges; restructuring and restructuring-related costs; and discrete tax items (after-tax) of $36 million, or $0.03 per share, consisting of:
• $8 million ($10 million pre-tax) of intangible asset impairment charges associated primarily with certain Urology-related intangible assets;

• $17 million, on both a pre-tax and after-tax basis, of purchased research and development charges, associated with the acquisition of certain technology rights;

• $22 million ($30 million pre-tax) of restructuring and restructuring-related costs associated with our Plant Network Optimization plan and 2007 Restructuring plan; and

• an $11 million credit for discrete tax items related to the application of a state law change to certain tax positions taken in a prior period.

Our reported results for the second quarter of 2008 included acquisition- and divestiture-related net charges as well as restructuring and restructuring-related costs (after-tax) of $98 million, or $0.06 per share, consisting of $64 million ($96 million pre-tax) of losses associated with the divestiture of certain non-strategic investments, $19 million ($16 million pre-tax) of purchased research and development charges, and $15

million ($21 million pre-tax) of restructuring and restructuring-related costs. Six Months Ended June 30, 2009
Our net sales for the first half of 2009 were $4.084 billion, which included net sales from divested businesses of $7 million, as compared to net sales of $4.071 billion for the first half of 2008, which included net sales from divested businesses of $51 million, an increase of $13 million, or less than one percent. Excluding the impact of foreign currency exchange rates, which contributed a negative $167 million to net sales, and net sales from divested businesses, our net sales increased six percent for the first half of 2009, as compared to the same period in the prior year. See Quarterly Results for a discussion of the components of our net sales. Our reported net income for the first half of 2009 was $145 million, or $0.10 per share, as compared to $420 million, or $0.28 per share, for the first half of 2008. Our reported results for the first half of 2009 included intangible asset impairment charges; acquisition-, divestiture-, and litigation-related net charges; restructuring and restructuring-related costs; and discrete tax items (after-tax) of $236 million, or $0.15 per share, consisting primarily of:
• $8 million ($10 million pre-tax) of intangible asset impairment charges associated primarily with certain Urology-related intangible assets;

• $17 million, on both a pre-tax and after-tax basis, of purchased research and development charges, associated with the acquisition of certain technology rights;

• $47 million ($66 million pre-tax) of restructuring and restructuring-related costs associated with our Plant Network Optimization plan and expense and 2007 Restructuring plan;

• $240 million ($287 million pre-tax) of litigation-related charges associated with various litigation matters; and

• a $74 million credit for discrete tax items related to certain tax positions taken in a prior period.

Our reported results for the first half of 2008 included acquisition-, divestiture- and litigation-related net charges as well as restructuring and restructuring-related costs (after-tax) of $23 million, or $0.01 per share, consisting of $47 million ($65 million pre-tax) of restructuring and restructuring-related costs, and $27 million ($29 million pre-tax) of purchased research and development charges, partially offset by a $51 million ($154 million pre-tax) net credit associated with the divestiture of certain of our non-strategic businesses and investments. Business and Market Overview
Cardiac Rhythm Management
Our Cardiac Rhythm Management (CRM) net sales represented approximately 30 percent of our consolidated net sales for the second quarters of 2009 and 2008. We estimate that the worldwide CRM market, including Electrophysiology, will approximate $12.6 billion in 2009, representing a slight increase from approximately $12.2 billion in the prior year. However, we believe that recent results from the Boston Scientific sponsored MADIT-CRT clinical trial and long-term follow up data from our MADIT II clinical study may drive further market expansion by reinforcing the clinical effectiveness of implantable cardioverter defibrillator (ICD) and cardiac resynchronization therapy defibrillator (CRT-D) therapy. Specifically, our landmark MADIT-CRT clinical trial reached its primary endpoint with preliminary results indicating that Boston Scientific's CRT-D therapy significantly reduced the relative risk of all-cause mortality or first heart failure intervention when compared to traditional ICD therapy. This result demonstrated that early intervention with Boston Scientific's CRT-D therapy in certain patients can slow the progression of heart failure. In addition, during the second quarter of 2009, we announced eight-year follow-up data from our MADIT II clinical study, which demonstrated that the life-saving benefits of ICD therapy actually improved over time. Our worldwide CRM net sales in the second quarter of 2009 were at their highest since our acquisition of Guidant Corporation in 2006. The following are the components of our worldwide CRM sales:

                                              Three Months Ended                                  Three Months Ended
                                                June 30, 2009                                       June 30, 2008
(in millions)                     U.S.          International          Total          U.S.          International          Total

ICD systems                      $ 315           $      139           $ 454          $ 276           $      144           $ 420
Pacemaker systems                   90                   65             155             88                   70             158

CRM products                       405                  204             609            364                  214             578
Electrophysiology products          29                    8              37             28                   10              38

Total CRM                        $ 434           $      212           $ 646          $ 392           $      224           $ 616

Our U.S. CRM net sales in the second quarter of 2009 increased $42 million, or 11 percent, as compared to the second quarter of 2008, representing the fifth consecutive quarter of double digit growth. Our U.S. net sales benefited from the successful launch of our next-generation COGNIS® CRT-D and TELIGEN® ICD systems, our CONFIENT® ICD system, LIVIAN® CRT-D system, and ALTRUA™ family of pacemaker systems, as well as an increase in the size of the U.S. CRM market. Our international CRM net sales decreased $12 million, or five percent, in the second quarter of 2009, as compared to the second quarter of 2008, due primarily to foreign currency exchange rates, which contributed a negative $27 million to second quarter 2009 sales as compared to the same period in the prior year. Excluding the impact of foreign currency exchange rates, international sales of our ICD systems grew $13 million, or ten percent, due to the international launch of our COGNIS® CRT-D and TELIGEN® ICD systems, our CONFIENT® ICD system, and our LIVIAN® CRT-D system. We expect to receive approval to launch our COGNIS® CRT-D and TELIGEN® ICD systems in Japan in the fourth quarter of 2009. We are targeting the completion of our international launch of our COGNIS® CRT-D and TELIGEN® ICD systems in early 2010. In addition, in July 2009, we received CE Mark approval for our LATITUDE® Patient Management System and have begun a phased launch in certain European countries. The LATITUDE® technology, which enables physicians to monitor device performance remotely while patients are in their homes, is a key component of many of our implantable device systems. We also plan to launch our next-generation pacemaker system, INGENIO™, in the U.S., our EMEA (Europe/Middle East/Africa) region and certain Inter-Continental countries in the first half of 2011 and believe that these launches position us for sustainable growth within the worldwide CRM market.
Net sales from our CRM group represent a significant source of our overall net sales. Therefore, increases or decreases in our CRM net sales could have a significant impact on our results of operations. We believe we are well positioned within the CRM market; however, the following variables may impact the size of the CRM market and/or our share of that market:
• the ability of CRM manufacturers to maintain the trust and confidence of the implanting physician community, the referring physician community and prospective patients in CRM technologies;

• future product field actions or new physician advisories by us or our competitors;

• our ability to successfully launch next-generation products and technology;

• the successful conclusion and positive outcomes of on-going and future clinical trials that may provide opportunities to expand indications for use;

• variations in clinical results, reliability or product performance of our and our competitors' products;

• delayed or limited regulatory approvals and unfavorable reimbursement policies;

• our ability to retain key members of our sales force and other key personnel;

• new competitive launches; and

• average selling prices and the overall number of procedures performed.

Coronary Stent Systems
Net sales of our coronary stent systems represented approximately 23 percent of our consolidated net sales in the second quarter of 2009 and 22 percent in the second quarter of 2008. We estimate that the worldwide coronary stent market will approximate $5.0 billion in 2009. The size of the coronary stent market is driven primarily by the number of percutaneous coronary intervention (PCI) procedures performed, as well as the percentage of those in which stents are implanted; the number of devices used per procedure; average selling prices; and the drug-eluting stent penetration rate (a measure of the mix between bare-metal and drug-eluting stents used across procedures). Uncertainty regarding the efficacy of drug-eluting stent systems, as well as the perceived risk of late stent thrombosis1 following the use of drug-eluting stent systems, contributed to a decline in the worldwide drug-eluting stent market size during 2006 and 2007. However, data addressing this risk and supporting the safety of drug-eluting stent systems has positively affected trends in the growth of the drug-eluting stent market throughout 2008 and into 2009, as referring cardiologists regained confidence in this technology.
We are the only company in the industry to offer a two-drug platform strategy with our TAXUS® paclitaxel-eluting stent system and the PROMUS® everolimus-eluting stent system, supplied to us by Abbott Laboratories. The following are the components of our worldwide coronary stent system sales:

                              Three Months Ended                      Three Months Ended
                                 June 30, 2009                           June 30, 2008
     (in millions)     U.S.      International      Total      U.S.      International      Total

     TAXUS®           $ 111       $      158       $ 269      $ 175       $      183       $ 358
     PROMUS®            127               45         172                          24          24

     Drug-eluting       238              203         441        175              207         382
     Bare-metal          15               28          43         25               33          58

                      $ 253       $      231       $ 484      $ 200       $      240       $ 440

Our U.S. sales of drug-eluting stent systems increased $63 million, or 36 percent, in the second quarter of 2009, as compared to the same period in the prior year. However, our net sales for the second quarter of 2008 included a $22 million sales returns reserve adjustment associated with the planned transition from our TAXUS® Express2 drug-eluting stent system to our second-generation TAXUS Liberté® stent system, which contributed to $22 million, or 15 percent, of the increase in the second quarter of 2009, as compared to the second quarter of 2008. The remaining increase of $41 million, or 21 percent, was due to organic growth of our U.S. drug-eluting stent system net sales. Despite an increase in competition following two new market entrants during 2008, we maintained our leadership position with an estimated 50 percent share of the U.S. drug-eluting stent market, consistent with the first quarter of 2009 and up from 47 percent share during the fourth quarter of 2008. We believe we have maintained our position within the U.S. drug-eluting stent market due to the success of our two-drug platform strategy and the strength of our TAXUS® Liberté® stent system, as well as our TAXUS® Express2® Atom™ stent system, launched in the U.S. during the fourth quarter of 2008. In the second quarter of 2009, we received FDA approval for the TAXUS® Liberté® Atom™ coronary stent system and, in July 2009, received approval for the TAXUS® Liberté® Long coronary stent system, further adding to our industry leadership for the widest range of coronary stent sizes. In addition, increases in the number of stent procedures performed in the U.S. during the second quarter of 2009, as compared to the same period in the prior year, as well as increasing penetration rates, have had a positive effect on the size of the U.S. drug-eluting stent market and our net sales. Average

1 Late stent thrombosis is the formation of a clot, or thrombus, within the stented area one year or more after implantation of the stent.

drug-eluting stent penetration rates in the U.S. were 75 percent during the second quarter of 2009, as compared to 66 percent during the second quarter of 2008. Penetration rates in the U.S. consistently increased throughout 2008 and have remained steady at 75 percent for two consecutive quarters, indicating a recovery and stabilization of the U.S. drug-eluting stent market. Partially offsetting the impact of increased penetration rates and unit volume increases on the size of the market were reductions in average selling prices in the first half of 2009, as compared to the first half of 2008.
Our international drug-eluting stent system sales decreased $4 million, or two percent, in the second quarter of 2009 as compared to the second quarter of 2008, due primarily to the impact of foreign currency exchange rates, which contributed a negative $17 million to our second quarter 2009 drug-eluting stent system sales, as compared to the same period in the prior year. Within our international business, net sales of our drug-eluting stent systems in Japan increased $15 million, or 28 percent, driven primarily by the February launch of our second-generation TAXUS® Liberté® stent system. We estimate that our share of the drug-eluting stent market in Japan was 53 percent for the second quarter of 2009, as compared to 44 percent for the second quarter of 2008. Until recently, our TAXUS® drug-eluting stent system was one of only two drug-eluting stent products on the market in Japan. In May 2009, however, an additional competitor entered this market, which negatively impacted our share throughout the second quarter. We expect approval of the PROMUS® everolimus-eluting coronary stent system in Japan during the fourth quarter of 2009, and expect to launch in the fourth quarter of 2009 or first quarter of 2010. Our net sales of drug-eluting stent systems in our EMEA region decreased $17 million, or 16 percent, due primarily to the negative impact of foreign currency exchange rates, while our Inter-Continental region net sales of these systems remained flat with the second quarter of 2008. We expect to launch a next-generation internally-manufactured everolimus-eluting stent system, the PROMUS® Element™ stent system, in our EMEA region and certain Inter-Continental countries in the fourth quarter of 2009 and in the U.S. and Japan in mid-2012. Our product pipeline also includes the next-generation TAXUS® Element™ coronary stent system, which we expect to launch in EMEA and certain Inter-Continental countries during the fourth quarter of 2009 and in the U.S. and Japan in mid-2011.
In July 2008, Abbott Laboratories launched its XIENCE V™ everolimus-eluting coronary stent system in the U.S., and, simultaneously, we launched the PROMUS® everolimus-eluting coronary stent system. As of the closing of Abbott's 2006 acquisition of Guidant Corporation's vascular intervention and endovascular solutions businesses, we obtained a perpetual license to the intellectual property used in Guidant's drug-eluting stent system program purchased by Abbott. We believe that being the only company to offer two distinct drug-eluting stent platforms provides us a considerable advantage in the drug-eluting stent market and has enabled us to sustain our worldwide leadership position, with an estimated 42 percent market share. However, under the terms of our supply arrangement with Abbott, the gross profit and operating profit margin of everolimus-eluting stent systems, including any improvements or iterations approved for sale during the term of the applicable supply arrangements and of the type that could be approved by a supplement to an approved FDA pre-market approval, supplied to us by Abbott is significantly lower than that of our TAXUS® stent system. Specifically, the PROMUS® stent system has operating profit margins that approximate half of our TAXUS® stent system operating profit margin. Therefore, if sales of everolimus-eluting stent systems supplied to us by Abbott increase in relation to our total drug-eluting stent system sales, our profit margins will decrease. Refer to our Gross Profitdiscussion for more information on the impact this sales mix has had on our gross profit margins. Further, the price we pay for our supply of everolimus-eluting stent systems from Abbott is determined by contracts with Abbott and is based, in part, on previously fixed estimates of Abbott's manufacturing costs for everolimus-eluting stent systems and third-party reports of our average selling price of these stent systems. Amounts paid pursuant to this pricing arrangement are subject to a retroactive adjustment at pre-determined intervals based on Abbott's actual costs to manufacture these stent systems for us and our average selling price of everolimus-eluting stent systems supplied to us by Abbott. During 2009, we may make a payment to or receive a payment from Abbott based on the differences between their actual manufacturing costs and the contractually stipulated manufacturing costs, and differences between our actual average selling price and third-party reports of our average selling price, in each case, with respect to our purchases of PROMUS® stent systems from Abbott during 2006, 2007 and a portion of 2008. As a result, during 2009, we may record a gain or loss based on this retroactive adjustment, and our on-going profit margins may be negatively impacted.
We are reliant on Abbott for our supply of everolimus-eluting stent systems. Any production or capacity issues that affect Abbott's manufacturing capabilities or our process for forecasting, ordering and receiving shipments

may impact the ability to increase or decrease our level of supply in a timely manner; therefore, our supply of everolimus-eluting stent systems supplied to us by Abbott may not align with customer demand, which could have an adverse effect on our operating results. At present, we believe that our supply of everolimus-eluting stent systems from Abbott and our current launch plans for our next-generation internally-manufactured everolimus-eluting stent system is sufficient to meet customer demand. Our supply agreement with Abbott for everolimus-eluting stent systems extends through the middle of the fourth quarter of 2009 in Europe, and is currently being reviewed by the European Commission for possible extension; and through the end of the second quarter of 2012 in the U.S. and Japan. We are currently developing a next-generation internally-manufactured everolimus-eluting stent system, the PROMUS® Element™ stent system, and expect that stent system will have gross profit margins more comparable to our TAXUS® stent system and will improve our overall gross profit and operating profit margins once launched. We expect to launch the PROMUS® Element™ stent system in our EMEA region and certain Inter-Continental countries in the fourth quarter of 2009 and in the U.S. and Japan in mid-2012. Historically, the worldwide coronary stent market has been dynamic and highly competitive with significant market share volatility. In addition, in the ordinary course of our business, we conduct and participate in numerous clinical trials with a variety of study designs, patient populations and trial end points. Unfavorable or inconsistent clinical data from existing or future clinical trials conducted by us, by our competitors or by third parties, or the market's perception of these clinical data, may adversely impact our position in, and share of the drug-eluting stent market and may contribute to increased volatility in the market.
We believe that we can sustain our leadership position within the worldwide drug-eluting stent market for a variety of reasons, including:
• our two drug-eluting stent platform strategy;

• the broad and consistent long-term results of our TAXUS® clinical trials, and the favorable results of the XIENCE V™/PROMUS® stent system clinical trials to date;

• the performance benefits of our current and future technology;

• the strength of our pipeline of drug-eluting stent products;

• our overall position in the worldwide interventional medicine market and our experienced interventional cardiology sales force; and

• the strength of our clinical, marketing and manufacturing capabilities.

However, a decline in net sales from our drug-eluting stent systems could have a significant adverse impact on our operating results and operating cash flows. The most significant variables that may impact the size of the drug-eluting stent market and our position within this market include:
• our ability to successfully launch next-generation products and technology features, including the PROMUS® ElementÔ and TAXUS® ElementÔ stent systems;

• physician and patient confidence in our current and next-generation technology, including drug-eluting stent technology;

• the impact of competitive pricing pressure on average selling prices of drug-eluting stent systems available in the market;

• changes in drug-eluting stent penetration rates, the overall number of PCI procedures performed and average number of stents used per procedure;

• the outcome of intellectual property litigation;

• variations in clinical results or perceived product performance of our or our competitors' products;

• delayed or limited regulatory approvals and unfavorable reimbursement policies;

• our ability to retain key members of our sales force and other key personnel; and

• changes in FDA clinical trial data and post-market surveillance requirements and the associated impact on new product launch schedules and the cost of product approvals and compliance.

During the first half of 2009, we successfully negotiated closure of several long-standing legal matters, including any outstanding litigation between us and Medtronic, Inc. with respect to interventional cardiology and endovascular repair cases, and settled all outstanding litigation between us and Bruce Saffran, M.D., Ph.D. However, there continues to be significant intellectual property litigation in the coronary stent market. We are currently involved in a number of legal proceedings with certain of our existing competitors, including Johnson & Johnson, and other independent patent holders. There can be no assurance that an adverse outcome in one or more proceedings would not materially impact our ability to meet our objectives in the coronary stent market, and our liquidity and results of operations. See Note L- Commitments and Contingencies to our unaudited condensed consolidated financial statements contained in Item 1 of this Quarterly Report for a description of these legal proceedings.
Interventional Cardiology (excluding coronary stent systems) In addition to coronary stent systems, our Interventional Cardiology business markets balloon catheters, rotational atherectomy systems, guide wires, guide catheters, embolic protection devices, and diagnostic catheters used in percutaneous transluminal coronary angioplasty (PTCA) procedures; as well as ultrasound and imaging systems. Our worldwide net sales of these products decreased to $252 million in the second quarter of 2009, as compared to $267 million in the second quarter of 2008, a decrease of $15 million or six percent. This decrease includes the unfavorable impact of foreign currency exchange rates, which contributed a negative $8 million to our Interventional Cardiology (excluding coronary stent system) net sales in the second quarter of . . .