UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Commission File No. 1-11083

BOSTON SCIENTIFIC CORPORATION

ONE BOSTON SCIENTIFIC PLACE, NATICK, MASSACHUSETTS 01760-1537
(Address Of Principal Executive Offices)

(508) 650-8000
(Company’s Telephone Number)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:
NONE

        Indicate by check mark if the Company is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes: ý No o

        Indicate by check mark if the Company is not required to file reports pursuant to Section 12(g)13 or Section 15(d) of the Act:
NONEAct. Yes: o No ý

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:þý Noo

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’sthe Company's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer o Accelerated filer ý Non-accelerated filer o

        Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes:þo Nooý

The aggregate market value of the Company’sCompany's common stock held by non-affiliates of the Company was approximately $26$17 billion based on the closing price of the Company’sCompany's common stock on June 30, 2004,2005, the last business day of the Company’sCompany's most recently completed second fiscal quarter.

The number of shares outstanding of the Company’sCompany's common stock as of February 28, 2005,22, 2006, was 838,757,151.

DOCUMENTS INCORPORATED BY REFERENCE

Our 2005 Proxy Statement to be filed with the Securities and Exchange Commission (SEC) on or about April 4, 2005 is incorporated by reference into Part III of this report.

PART I

ITEM 1. BUSINESS

The Company

Boston Scientific Corporation is a worldwide developer, manufacturer and marketer of medical devices that are used in a broad range of interventional medical specialties including interventional cardiology, peripheral interventions, vascular surgery, electrophysiology, neurovascular intervention, oncology, endoscopy, urology, gynecology and neuromodulation. When used in this report, the terms “we,” “us,” “our”"we," "us," "our" and the “Company”"Company" mean Boston Scientific Corporation and its divisions and subsidiaries.

Since we were formed in 1979, we have advanced the practice of less-invasive medicine by helping physicians and other medical professionals improve their patients’patients' quality of life by providing alternatives to surgery and other medical procedures that are typically traumatic to the body. Our 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.

Some of our less-invasive medical products are used for enlarging narrowed blood vessels to prevent heart attack and stroke; clearing passages blocked by plaque to restore blood flow; opening obstructions and bringing relief to patients suffering from various forms of cancer; performing biopsies and intravascular ultrasounds; mapping electrical problems in the heart; placing filters to prevent blood clots from reaching the lungs, heart or brain; treating urological, gynecological, renal, pulmonary, neurovascular and gastrointestinal diseases; and modulating nerve activity to treat deafness and chronic pain.

Our history began in the late 1960s when our co-founder, John Abele, acquired an equity interest in Medi-tech, Inc., a research and development company focused on developing alternatives to surgery. Medi-tech’sMedi-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 used today. In 1979, John Abele joined with PeterPete Nicholas to form Boston Scientific Corporation, which indirectly acquired Medi-tech. This acquisition began a period of active and focused marketing, new product development and organizational growth. Since then, our net sales have increased substantially, growing from $1.8 million in 1979 to approximately $5.6$6.3 billion in 2004.2005.

Our growth has been fueled in part by strategic acquisitions and alliances designed to improve our ability to take advantage of growth opportunities in less-invasive medicine. For example, in June 20042005 we acquired Advanced Bionics Corporation,Stent Technologies, Inc. (AST), CryoVascular, Inc., Trivascular, Inc. and Rubicon Medical Corporation. AST is a developer of stent delivery systems that are designed to address coronary artery disease in bifurcated vessels; TriVascular is a developer of medical devices and procedures used for treating abdominal aortic aneurysms (AAA); CryoVascular is a developer and manufacturer and marketer of neuromodulation devices useda proprietary angioplasty device to treat neurological conditions such as deafnessatherosclerotic disease of the legs and chronic pain. Thisother peripheral arteries; and Rubicon is a developer of embolic protection filters for use in interventional cardiovascular procedures. These and other acquisitions have helped us add promising new technologies to our pipeline and to offer one of the broadest product linesportfolios in the world for use in less-invasive procedures. The depth and breadth of our product portfolio has also enabled us to compete more effectively in, and better absorb the pressures of, the current healthcare environment of cost containment, managed care, large buying groups and hospital consolidation.

        On January 25, 2006, we entered into an agreement and plan of merger with Guidant Corporation pursuant to which we will acquire Guidant for $27 billion (net of proceeds from option exercises). Guidant develops, manufactures and markets products that focus on the treatment of cardiac arrhythmias, heart failure and coronary and peripheral disease. The acquisition will enable us to become a major provider in the high-growth cardiac rhythm management business. The transaction is subject to customary closing conditions, including clearances under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the European Union merger control regulation, as well as approval of Boston Scientific and Guidant shareholders. Subject to these conditions, we currently expect the acquisition to occur during the week of April 3, 2006.

Information on revenues, profits and total assets for our business segments and by geographical area appears in our 2004 consolidated financial statements for the year ended December 31, 2004,2005, which are included in Item 8 of this report.

The Drug-Eluting Stent Opportunity

Our broad, innovative product offerings have enabled us to become a leader in the interventional cardiology market. This leadership is in large part due to our coronary stent product offerings. 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 from the heart. We have further enhanced the outcomes associated with the use of coronary stents, particularly the processes that lead to restenosis (the growth of neointimal tissue within an artery after angioplasty and stenting), through dedicated internal and external product development and scientific research. We believe that the combination of certain drugs and coronary stents offers the opportunity for a more lastingdurable solution for coronary artery disease.

Use of our products in the United States and abroad has demonstrated that drug-eluting stents reduce the need for repeat procedures - procedures—or more expensive surgical procedures - procedures—and significantly reduce healthcare costs, as well as overall patient risk, trauma, procedure time and the need for post-procedural care.aftercare. Since its U.S. launch in March 2004 and its Europe and Inter-Continental launch in 2003,

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our proprietary polymer-based paclitaxel-eluting stent technology for reducing coronary restenosis, the TAXUS® Express²™ paclitaxel-eluting coronary stent system, has become the worldwide leader in the drug-eluting coronary stent market. The proprietary polymer on the stent allows for controlled delivery of the drug paclitaxel. Paclitaxel is a multi-functional microtubular inhibitor that affects platelets, smooth muscle cells and white blood cells, all of which are believed to contribute to restenosis. The flexibility of the device facilitates placement of the stent in the coronary anatomy and improves the conformability of the stent within a diseased coronary artery. This, combined with our polymer-based drug-eluting technology, contributes to the differentiation of the TAXUS paclitaxel-eluting coronary stent platform. In November 2004, we converted to exclusive our license for the use of paclitaxel and other agents for licensed applications in the coronary vascular field. In 2004,2005, approximately 38%41% of our net sales were derived from sales of our TAXUS stent system.

We are continuing to enhance our product offerings in the coronary and drug-eluting stent markets.market. We recently launched our next-generation coronary stent, the TAXUS® Liberté ™ paclitaxel-eluting coronary stent system, in Europe and in 18 countries in our Inter-Continental markets, and we expect to launch the product in Europe later in 2005 and in the U.S. induring the second half of 2006, subject to regulatory approval. The Liberté ™ coronary stent is designed to further enhance deliverability and conformability, particularly in challenging lesions. We receivedAlso, in conjunction with the Guidant acquisition, Abbott Laboratories has agreed to acquire Guidant's vascular intervention and endovascular solutions businesses and to share the drug-eluting stent technology it acquires from Guidant with us. This will enable us to access a CE Mark in Europe to market the bare-metal Libertésecond drug-eluting stent system in late 2003.program that will complement our TAXUS coronary stent program.

The introduction of drug-eluting stents has had a significant impact on the market size for coronary stents and on the distribution of market share across that market. Our drug-eluting stent system is currently one of only two drug-eluting stent products in the U.S. market. Our share of the

drug-eluting stent market may be adversely affected as additional competitors enter the market, which began during the third quarter of 2005 internationally and there is uncertainty regardingexpected to occur during the timingsecond half of new entrants into that market. In 2004, Johnson & Johnson announced its intent to acquire Guidant Corporation. These two companies are two of our primary competitors2007 in the coronaryU.S. In July 2005, Medtronic, Inc. received approval from European regulators to begin commercial sales of its Endeavor™ drug-eluting stent marketsystem in the European market. Guidant received similar regulatory approval to commence European sales of its XIENCE™ V drug-eluting stent system on January 30, 2006. If the acquisition is consummated and thisfollowing Abbott's acquisition may create increased volatility and uncertainty withinof Guidant's drug-eluting stent portfolio, Abbott will sell the coronaryXIENCE™ V drug-eluting stent market.system in competition with us. In addition, on February 17, 2006, Conor Medsystems, Inc. received a CE Mark for its CoStar™ paclitaxel-eluting stent system.

The most significant variables that may impact the size of the drug-eluting coronary stent market and our position within this market include unexpectedthe entry of additional competitors in international markets and the U.S.; declines in the average selling prices of drug-eluting stent systems; variations in clinical results or product performance of our or our competitors’competitors' products; the timing of new competitive product launches; the average selling prices of drug-eluting stent systems; delayed or limited regulatory approvals and reimbursement policies; litigation related to intellectual property; continued physician confidence in our technology; the average number of stents used per procedure; expansion of indications for use; anda reduction in the overall number of procedures performed; the international adoption rate of drug-eluting stent technology.technology; and the level of supply of our drug-eluting stent system and competitive stent systems.

Business Strategy

Our mission is to improve the quality of patient care and the productivity of healthcare delivery through the development and advocacy of less-invasive medical devices and procedures. Our mission 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. Our approach to innovation combines internally developed products and technologies with those obtained externally through strategic acquisitions and alliances. Building relationships with development companies and inventors allows us to deepen our current franchises as well as expand into complementary businesses.

Key elements of our overall business strategy include the following:

Product Quality

        Our commitment to quality and the success of our quality objectives are designed to build customer trust and loyalty. This commitment to provide quality products to our customers runs throughout our organization and is one of our most critical business objectives. During 2005, in order to strengthen our existing quality controls, we established a new cross-functional initiative further to improve and harmonize our overall quality processes and systems.

Innovation

We are committed to harnessing technological innovation through a mixture of tactical and strategic initiatives that are designed to offer sustainable growth in the near and long term. Combining internally developed products and technologies with those obtained through acquisitions and alliances allows us to focus on and deliver products currently in our pipeline as well as to strengthen our technology portfolio by accessing third partythird-party technologies.

Clinical Excellence

Our commitment to innovation is further demonstrated by our rapidly expanding clinical capabilities. Our clinical group is focused on driving innovative therapies that can transform the practice of medicine. Our clinical teams are organized by therapeutic specialty better to better support our

research and development pipeline and marketing and sales efforts. During 2004,2005, our clinical organization planned, initiated and conducted an expanding series of focused clinical trials that support regulatory and reimbursement requirements and demonstrate the safe and effective clinical performance of critical products and technologies.

Product Diversity

We are committed to reinvesting our profits into our drug-eluting stent technology and other product lines. We offer 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 our product lines permit medical specialists and purchasing organizations to satisfy many of their less-invasive medical device requirements from a single source.

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Operational Excellence

We are focused on continuously improving our supply chain effectiveness, strengthening our manufacturing processes and optimizing our plant network in order to increase operational efficiencies within our organization. By centralizing our operations at the corporate level and shifting global manufacturing along product lines, we are able to leverage our existing resources and concentrate on new product development, including the enhancement of existing products and their commercial launch. In addition, weWe are committing additional resources to support our growth and implementing new systems designed to provide improved service, greater efficiency and lower supply chain costs.

Focused Marketing

        We consistently strive to understand and exceed the expectations of our customers. Our commitment to quality and the success of our quality objectives are designed to build customer trust and loyalty.

Focused Marketing

Each of our business groups maintains dedicated sales forces and marketing teams focusing on physicians who specialize in the diagnosis and treatment of different medical conditions. We believe that this focused disease state management enables us to develop highly knowledgeable and dedicated sales representatives and to foster close professional relationships with physicians. In recent years, we have expanded our direct sales presence worldwide so as to be in a position to take advantage of expanding market opportunities.

Active Participation in the Medical Community

We believe that we have excellent working relationships with physicians and others in the medical industry, which enable us 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

We believe that success and leadership evolve from a motivating corporate culture that rewards achievement, respects and values individual employees and customers, and focuses on quality, integrity, technology integrity and service. We believe that our success is attributable in large part to the high caliber of our employees and our commitment to respecting the values on which our success has been based.

Research and Development

Our investment in research and development is critical to drive our future growth. We have directed our development efforts toward innovative technologies designed to expand current markets or enter new markets. Enhancements to existing products that are typically originated and developed within our research and development, manufacturing and marketing operations contribute to each year’s

year's sales growth. We believe that streamlining, prioritizing and coordinating our technology pipeline and new product development activities are essential to our ability to stimulate growth and maintain leadership positions in our markets. By centralizing certain new platform technology development at the corporate level, we are able to pursue technologies that can be leveraged across multiple markets. Our approach to new product design and development is through focused, cross-functional teams. We believe that our formal process for technology and product development aids in our 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 our product development cycle. This collaboration allows these teams to concentrate resources on the most viable and game-changing new products and technologies and get them to market in a timely manner. In addition to internal development, we work with hundreds of leading research institutions, universities and clinicians around the world to develop, evaluate and clinically test our products.

We believe our future success will depend upon the strength of these development efforts. There can be no assurance that we will realize financial benefit from our development programs, continue to be successful in identifying, developing and marketing new products or that products or technologies developed by others will not render our products or technologies noncompetitive or obsolete. In 2004,2005, we expended approximately $569$680 million on research and development, representing approximately 1011 percent of our 20042005 net sales. The investment in research and development reflects spending on new product development programs as well as regulatory compliance and clinical research, particularly relating to our next-generation stent platforms and other development programs acquired in connection with our business combinations.

Strategic Initiatives

Since 1995, we have undertaken a strategic acquisition program to assemble the lines of business necessary to achieve the critical mass that allows us to continue to be a leader in the medical industry. In 2004,2005, we invested more than $1.2 billion$500 million (including both cash and issuance of our common stock) in approximately 5040 new and existing strategic alliances.alliances and acquisitions. These initiatives are intended to further expand our product offerings by adding new or complementary technologies to our already diverse technology portfolio.

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Many of our alliances involve complex arrangements with third parties and include, in many instances, the option to purchase these companies at pre-established future dates, generally upon the attainment of performance, regulatory and/or revenue milestones. These arrangements allow us to evaluate new technologies prior to acquisition.acquiring them.

As        We expect that our acquisition of Guidant will enable us to become a major provider in the healthcare environment continues to undergo rapid change,high-growth cardiac rhythm management business. In addition, we expect that we will continue to focus selectively on strategic acquisitions and alliances in order to provide new products and technology platforms to our customers. In addition, we expect to makecustomers, including making additional investments in several of our existing strategic relationships.

Products

Our products are principally offered for sale by twothree dedicated business groups - groups—Cardiovascular, Endosurgery and Endosurgery.Neuromodulation. Our Cardiovascular organization focuses on products and technologies for use in interventional cardiology, peripheral interventions, vascular surgery, electrophysiology and neurovascular procedures. Our Endosurgery organization focuses on products and technologies for use in oncology, endoscopy, urology and gynecology procedures. In addition, during 2004, weWe entered the Neuromodulation market through theour acquisition of Advanced Bionics Corporation which specializes in 2004. This organization currently focuses on the treatment of auditory disorders and chronic pain. During 2004,2005, approximately 8078 percent of our net sales were derived from our Cardiovascular business group,

approximately 1920 percent from our Endosurgery business group and approximately 12 percent from our Neuromodulation business.business group.

The following section describes some of our Cardiovascular, Endosurgery and Neuromodulation offerings:

Cardiovascular

Coronary Stents

Drug-Eluting Stents

We launched        In 2005, we marketed our TAXUS Express² paclitaxel-eluting coronary stent system in the U.S., Europe and certain other international markets, during 2003 and in the U.S. during the first quarter of 2004. Wewe expect to launch the TAXUS Express² stent system in Japan during the first half of 2007, pending regulatory approval. In 2005, we also launched our next-generation coronary stent, the TAXUS® Liberté™ coronary stent system, in lateEurope and in 18 countries in our Inter-Continental market. We expect to launch the TAXUS Liberté coronary stent in the U.S. during the second half of 2006, pending regulatory approval.

Bare-Metal Stents

        In April 2005, we received FDA approval for our Liberté coronary stent system. The Liberté coronary stent system serves as the platform for our next generation paclitaxel-eluting stent system, the TAXUS Liberté coronary stent system. The Liberté bare-metal coronary stent is designed to enhance deliverability and conformability, particularly in challenging lesions, and is offered for sale in the U.S., Europe and certain other international markets.

We also market both balloon-expandable and self-expanding coronary stent systems. Following its launch in Japan in early 2004, ourOur Express² coronary stent system is now offered on a worldwide basis. The Express² coronary stent system — system—an Express stent combined with advanced Maverick® balloon catheter technology — technology—features a laser-bonded, flexible tip with a long, low profile designed for easy tracking and is the platform for our drug-eluting stent system. Its Bioslide® hydrophilic coating is designed to reduce friction, while the proprietary Crimp 360™ process technology secures the stent to the balloon.

In January 2005, we launched our next-generation coronary stent, the TAXUS Liberté paclitaxel-eluting coronary stent, in 18 countries in our Inter-Continental market and expect to launch the product in Europe in late 2005 and in the U.S. in 2006, pending regulatory approval. Our Liberté coronary stent is designed to enhance deliverability and conformability, particularly in challenging lesions. We received a CE Mark in Europe to market the bare-metal Liberté stent system in late 2003.

Coronary Revascularization

We market 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 our products in this market are used in percutaneous transluminal coronary angioplasty (PTCA) and percutaneous transluminal coronary rotational atherectomy and include PTCA balloon catheters, such as the MaverickMaverick® balloon catheter, the Cutting Balloon® microsurgical dilatation device, rotational atherectomy systems, guide wires, guide catheters and diagnostic catheters. We also market a broad line of fluid delivery sets, pressure monitoring systems, custom kits and accessories that enable the injection of contrast and saline or the withdrawal and disposal of bodily waste.otherwise facilitate cardiovascular procedures.

Intraluminal Ultrasound Imaging

We market a family of intraluminal catheter-directed ultrasound imaging catheters and systems for use in coronary arteries and heart chambers as well as certain peripheral systems.

Embolic Protection

Our FilterWire™FilterWire EZ™ Embolic Protection System is designed to capture embolic material that may become dislodged during cardiovascular interventions, which could otherwise travel into the

microvasculature where it could cause a heart attack. The

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FilterWire EZ™ System is a low-profile filter mounted on a rapid-exchange deployment system designed to capture embolic debris released during a procedure and prevent it from traveling to the brain, where it could cause a stroke. It has been granted CE Mark and is commercially available in Europe and other international markets for multiple indications, including the treatment of disease in peripheral, coronary and carotid vessels. We launched the FilterWire EZ System in August 2004It is also available in the U.S. for the treatment of saphenous vein grafts (SVGs). The FilterWire EZ System is also currently in clinical trials to evaluate the benefits of embolic protection during primary percutaneous coronary interventions, or stenting, to treat acute myocardial infarction. We have an equity investment in and option to purchaseIn April 2005, we acquired Rubicon Medical Corporation, a developer of embolic protection devices, including a filter that is integrated into a guidewire. The Rubicon®Rubicon™ filter, is deployed by pulling back on a small wire that runs through the middle of the system. By pulling an inner wire instead of an outer sheath, Rubicon is able to deliver the same size filter with aembolic protection system that traps and removes debris that may be dislodged during interventional procedures, received CE Mark in April 2005. It has a much smaller diameter delivery profile.been cleared for commercialization in three indications—SVGs, native coronary arteries and carotid arteries. Product evaluations in Europe will enable us to determine our commercialization strategy for the Rubicon filter.

Peripheral Interventions

We sell various products designed to treat patients with peripheral disease (disease which appears in blood vessels other than in the heart and in biliary structures), including a broad line of medical devices used in percutaneous transluminal angioplasty and peripheral vascular stenting. Our peripheral product line includes vascular access products, balloon catheters, stents and peripheral vascular catheters, wires and accessories. During the thirdsecond quarter of 2004,2005, we launched ourcompleted the acquisition of CryoVascular Systems, Inc., the manufacturer of the PolarCath™ Peripheral Cutting Balloon® microsurgicalDilatation System. The PolarCath peripheral dilatation devicesystem is used in CryoPlasty Therapy®, an innovative approach to the treatment of peripheral artery disease in the U.S.lower extremities. The device features tiny, longitudinally mounted microsurgical blades on the surface ofPolarCath peripheral dilatation system uses nitrous oxide to fill an angioplasty balloon within a blocked artery, cooling the balloon's surface to score a lesion with precise incisions, allowing-10° C. As it is inflated, the cold surface of the balloon cools the vascular lesion, which exerts both mechanical and biological effects that may help prevent restenosis. In addition, we expect to dilatelaunch the vesselSterling™ Balloon dilatation catheter, a dilatation catheter with less pressure. The device is expectedseveral differentiating features, including the only pre- and post-stent dilatation indication for carotid artery stenting, in 2006, subject to be used to treat patients who are undergoing hemodialysis for end stage renal disease, which occurs when both kidneys are impaired. We also sell the Peripheral Cutting Balloon device internationally.receiving regulatory approvals.

Vascular Surgery

We design abdominal, thoracic and peripheral vascular grafts for the treatment of aortic aneurysms and dissections, peripheral vascular occlusive diseases and dialysis access. Our Hemashield® grafts and fabrics are used for peripheral vascular and cardiovascular indications.

Electrophysiology

We offer medical devices for the diagnosis and treatment of cardiac conditions called arrhythmias (abnormal heartbeats). Included in our product offerings are RF generators, mapping systems, intracardiac ultrasound and steerable ablation catheters, as well as a line of diagnostic catheters and associated accessories. In 2005, we launched the Chilli II™ cooled ablation catheter, the first bidirectional cooled-tip catheter available in the U.S.

Neurovascular Intervention

We market a line of coils (coated and uncoated), micro-delivery stents, micro-guidewires, micro-catheters, guiding catheters and embolics to neuroradiologists and neurosurgeons to treat diseases of the neurovascular system. We market the GDC® Coils (Guglielmi Detachable Coil) and Matrix® systems to treat brain aneurysms. During 2005, the FDA granted a Humanitarian Device Exemption (HDE) approval for the Wingspan™ Stent System with Gateway™ PTA Balloon Catheter. The Wingspan Stent System is designed to treat atherosclerotic lesions or accumulated plaque in brain arteries. Designed for the brain's fragile vessels, the Wingspan™ Stent System is a self-expanding,

nitinol stent sheathed in a delivery system that enables it to reach and open narrowed arteries in the brain. The Wingspan Stent System is currently the only device available in the U.S. for the treatment of intracranial atherosclerotic disease (ICAD) and is indicated for improving cerebral artery lumen diameter in patients with ICAD who are unresponsive to medical therapy.

Endosurgery

Esophageal, Gastric Andand Duodenal (Small Intestine) Intervention

We market 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. Our products in this area include disposable single and multiple biopsy forceps, balloon dilatation catheters, hemostasis catheters and enteral feeding devices. We also market a family of esophageal stents designed to offer improved dilatation force and greater resistance to tumor in-growth. Our ENTERYX® Liquid Polymer Technology is designed to less invasively treat symptoms associated with chronic GERD in patients who respond to pharmaceutical therapy.

Colorectal Intervention

We market 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

We sell 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. Our products include diagnostic catheters used with contrast media, balloon dilatation catheters and sphincterotomes. We also market self-expanding metal and temporary biliary stents for palliation and drainage of the common bile duct.

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Pulmonary Intervention

We market 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.

Urinary Tract Intervention and Bladder Disease

We sell 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. We have also developed other devices to diagnose and treat bladder cancer and bladder obstruction.

Prostate Intervention

For the treatment of Benign Prostatic Hyperplasia (BPH), we currently market electro-surgical resection devices designed to resect large diseased tissue sites and an automaticsites. We also market disposable needle biopsy system,devices, designed to take rapid core prostate biopsies.biopsy samples. In addition, we distribute and market the Prolieve™ thermodilitationProlieve® thermodilatation system, a transurethral microwave thermotherapy system and the DuoTome SideLite™ holmium laser treatment system for treatment of symptoms associated with BPH.

Urinary Incontinence

We market a line of less-invasive devices, including a full line of mid-urethral sling products, sling materials and injectables, to treat stress urinary incontinence, an affliction commonly treated with various surgical procedures. In October 2004, we launched a full line of mid-urethral sling products for the treatment of female stress urinary incontinence.

Gynecology

We also market products in the area of women’swomen's health. Our Hydro ThermAblator® System (HTA®) system) offers a less-invasive technology for the treatment of excessive uterine bleeding by ablating the lining of the uterus, the tissue responsible for menstrual bleeding. In March 2004, we received FDA clearance to market our Contour SE™ Microspheres embolic agent for the treatment of uterine fibroids.

Oncology

We market a broad line of products designed to treat, diagnose and palliate various forms of cancer.benign and malignant tumors. Our current suite of products includes a variety of microcatheters, embolic materials,agents and coils and other products used to restrict blood supply to targeted organs or other areas of the body as well as biopsy devices.body. In addition, we market radiofrequency basedradiofrequency-based therapeutic devices for the ablation of various forms of soft tissue lesions (tumors).

Neuromodulation

Cochlear Implants

Advanced Bionics develops        We develop and marketsmarket in the U.S., Europe and Japan the HiResolution® 90K Cochlear Implant System to restore hearing to the profoundly deaf. The technology consists of an external sound processor, which captures and processes sound information from the environment and transmits the digital information through the skin to the implant. The implant delivers digital pulses of electrical current to precise locations on the auditory nerve, which the brain perceives as sound.

Spinal Cord StimulationPain Management

We market Advanced Bionics’the Precision® Spinal Cord Stimulation System for the treatment of chronic pain of the lower back and legs. This system delivers advanced pain management by applying a small electrical signal to mask pain signals traveling from the spinal cord to the brain. The Precision System utilizes a rechargeable battery and features a patient-directed fitting system for fast and effective programming.

Growth Initiatives

In addition to the products and technologies described above, we intend to focus significant resources on the following additional growth initiatives:

Next-Generation Drug-Eluting Stent Platforms

Our next-generation TAXUSTAXUS® Liberté™ coronary stent system combines the TAXUS® drug-eluting stent technology with a more flexible stent that is intended to enhance deliverability to the lesion site and improve conformability to the natural contours of the

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vessel. We launched the TAXUS Liberté coronary stent system in Europe and certain Inter-Continental markets in early 2005. We2005, and expect to launch the TAXUS Liberté coronary stent system in Europe during 2005 and in the U.S. during the second half of 2006, subject to receiving regulatory approval. In addition, we intend to continue to invest aggressively onin next-generation drug-eluting stent systems and underlying technologies.

        In addition, in conjunction with our acquisition of Guidant, Abbott Laboratories has agreed to acquire Guidant's vascular intervention and endovascular businesses and to share the drug-eluting stent

technology it acquires from Guidant with us. This will enable us to access a second drug-eluting stent program that will complement our existing TAXUS stent program.

Bifurcation Stenting

In March 2005, we completed our acquisition ofacquired Advanced Stent Technologies (AST), a development stage company that has developed a coronary bifurcation stent, with a proprietary Petal™ stent feature. We intend to use the AST technology to develop a bifurcation stent that combines a drug-eluting stent with a dual-wire delivery system to address the special challenges of stent therapy at bifurcation sites (branches in the arterial tree).

Carotid Artery Stenting

Carotid stents representartery stenting represents a less-invasive and potentially safer alternative to endarterectomy, the traditional surgical treatment.treatment for obstructions in the carotid artery in the neck. Our Carotid Wallstent® Monorail® Endoprosthesis is a self-expanding stent loaded within a rapid exchange deployment system engineered to open the carotid artery and improve blood flow to the brain. Our FilterWire EZEZ™ Embolic Protection System is a retrievable device placed distal to the area where the stent is being implanted to capture embolic debris released during the procedure and prevent it from migrating to the brain, where it could cause serious harm. We are in the process of seeking FDA approval to market our Carotid Wallstent and Filterwire EZ embolic protection system. In addition, we have collaborated with Endotex Interventional Systems, Inc. to conduct a clinical trial which combines our FilterWire EZ system with the Nextent®Endotex NexStent® carotid stent. In 2005, the NexStent® Monorail® system, developed and manufactured by Endotex, received CE Mark for commercialization in Europe and certain other international markets. We have the rightbegan to distribute the Nextent carotid stentproduct during 2005 in international markets with a launch anticipated in 2005 and an optionthose markets. In addition to these exclusive distribution rights, we also expect to acquire Endotex.Endotex during the second half of 2006 prior to or upon receipt of FDA approval of the NexStent Monorail system.

Vascular Sealing

We have acquired an equity stake in and the option to acquire Therus Corporation, an early-stage company developing less-invasive devices to control bleeding. Therus’ closure system uses focused ultrasound technology to seal arterial punctures non-invasively. By focusing sound waves on the puncture site, the closure system uses heat energy to coagulate the surrounding tissue and rapidly stop bleeding.

Endovascular Aortic Repair

We        In April 2005, we acquired the distribution rights for and an option to acquire Trivascular, Inc., an early stage company focused on the development of a stent graft for the treatment of abdominal aortic aneurysms, a weak, bulging section of the wall of the aorta that can rupture and lead to death. The Trivascular®Enovus™ device replaces much of the metal in a traditional stent graft with a liquid polymer injected into channels within the stent graft during the procedure, resulting in a graft that can use a small delivery system while potentially providing enhanced durability, positive fixation and seal. A Phase I trial has already been completed and we expect to commence a Phase II trial in 2007 upon completion of certain technical improvements to the device.

Endoscopic Video Imaging

Our Endovations™ Endoscopy Suite is an integrated system that includes a scope, a console and a flat screen monitor for use in endoscopic procedures, such as colonoscopies. By employing lighter, disposable scopes, Endovations is designed to reduce reprocessing costs, improve efficiency and make procedures easier for clinicians and less painful for patients. We expect to launch ourconduct first-in-man clinical trials of the Endovations Endoscopy Suite in 2006.2007.

Cardiac Rhythm Management

In 2004, we acquired an equity investment in and option to purchase Cameron Health, a company that is developing a next-generation implantable cardioverter defibrillator (ICD) for cardiac rhythm management. Implanted in subcutaneous tissue, these ICDs automatically deliver high-energy electrical shocks as needed to stabilize the heart’s rhythm when it is beating in a rapid, uncontrolled fashion. Cameron’s ICDs offer a less-invasive alternative for treating cardiac rhythm abnormalities. Cameron has initiated clinical testing of its ICD technology outside the U.S. and expects to begin a U.S. investigational device exemption trial in 2005.

Neuromodulation

In June 2004, we acquired Advanced Bionics, an implantable microelectronic device company, which enabled us to expand our operations into the neuromodulation market.

Advanced Bionics’ Precision® Spinal Cord Stimulation System delivers advanced pain management by applying a small electrical signal to mask pain signals traveling from the spinal cord to the brain. We are planning a U.S. market release of a second generation device in 2005 and a release to select markets outside of the U.S. in 2006.

Advanced Bionics’        Our bion® microstimulator is designed, among other things, to relieve migraine pain by sending electrical pulses to the occipital nerves at the base of the skull. The bion microstimulator is currently the subject of a feasibility trial and a commercial release could occur in 2008,2009, subject to regulatory approval.

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        Our agreement to acquire Guidant will also enable us to enter the cardiac surgery business. Cardiac surgery devices are used to perform endoscopic vessel harvesting, cardiac surgical ablation and less-invasive coronary artery by-pass surgery.

While we intend to focus on each of these and other initiatives, there can be no guarantee that any of them will be successful and we may discontinue any or all of these initiatives at any time.

Marketing and Sales

A dedicated sales force of approximately 1,8001,900 individuals in over 4045 countries internationally and over 1,8002,000 individuals in the U.S. marketed our products worldwide as of December 31, 2004.2005. Sales in countries where we have direct sales organizations accounted for approximately 99 percent of our net sales during 2004.2005. A network of distributors and dealers who offer our products in more than 4050 countries worldwide accounts for our remaining sales. We also have a dedicated corporate sales organization in the U.S. focused principally on selling to major buying groups and integrated healthcare networks.

In 2004,2005, we sold our products to over 10,000 hospitals, clinics, out-patient facilities and medical offices. We are not dependent on any single institution and no single institution accounted for more than 10 percent of our net sales in 2004.2005. Large group purchasing organizations, hospital networks and other buying groups have, however, become increasingly important to our business and represent a substantial portion of our U.S. net sales.

We also distribute certain products for third parties, including an introducer sheath and certain guidewires, which may only be available into 2006, as well as BPH devices, various graft materials and acellular tissuepneumatic and laser lithotripters for use in connection with urology and gynecology procedures. Our agreement to distribute certain guidewire and sheath products will expire during the first quarter of 2006. We have identified replacements for these products. However, the sales level associated with the replacement products is expected to be less than that of our previously distributed products. Together, these distributed products represented less than 10 percent of our 20042005 net sales. Leveraging our sales and marketing strength, we expect to continue to seek new opportunities for distributing complementary products as well as new technologies.

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International Operations

Internationally, we operate through three business segments divided among the geographic regions of Europe, Japan and Inter-Continental. Maintaining and expanding our international presence is an important component of our long-term growth plan. Through our international presence, we seek to

increase net sales and market share, leverage relationships with leading physicians and their clinical research programs, accelerate the time to bring new products to market and gain access to worldwide technological developments that may be implemented across our product lines. In 2005, we moved functional positions from a regional to a country level in Europe to better address the local business needs. We also created a single cross-functional organization for our international business to improve coordination among, and leverage the resources within, Europe and Inter-Continental.

International sales accounted for approximately 3839 percent of our net sales in 2004.2005. Net sales and operating income attributable to significant geographic areas are presented inNote ON—Segment Reporting to our 20042005 consolidated financial statements which are included in Item 8 below.of this Form 10-K.

In recent years, we have expanded our direct sales presence worldwide so as to be in a position to take advantage of expanding market opportunities. As of December 31, 2004,2005, we had direct marketing and sales operations in over 4045 countries internationally. We believe that we will continue to leverage our 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.

We have four international manufacturing facilities in Ireland and one in Costa Rica. Presently, approximately 3435 percent of our products sold worldwide are manufactured at these facilities. We also maintain an international research and development facility in Ireland and a training and research and development center in Miyazaki, Japan.

Our international presence exposes us to certain financial and other risks. One of these risks is the potentially negative impact of foreign currency fluctuations on our sales and expenses. Although we engage in 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 nonetheless result, primarily from the timing of transactions, forecast volatility and the movement of exchange rates.

International markets are also affected by economic pressure to contain reimbursement levels and healthcare costs. Our profitability from our international operations may be limited by risks and uncertainties related to economic conditions in these regions, foreign currency fluctuations, regulatory and reimbursement approvals, competitive offerings, infrastructure development, rights to intellectual property and our ability to implement our overall business strategy. Any significant changes in the competitive, political, legal, regulatory, reimbursement or economic environment where we conduct international operations may have a material impact on our revenues and profits.

Further, the trend in countries around the world, including Japan, 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, delay, greater risk and higher expenses.expense. In addition, we are required to renew regulatory approvals in certain international jurisdictions, which may require additional testing and documentation. A decision not to dedicate sufficient resources, or the failure to timely renew these approvals, may limit our ability to market our full line of existing products within these jurisdictions.

Manufacturing;Manufacturing and Raw Materials

We design and manufacture the majority of our products in technology centers around the world. Many components used in the manufacture of our products are readily fabricated from commonly available raw materials or off-the-shelf items available from multiple supply sources. Certain items are custom made for us to meet our specifications. We believe that in most cases, redundant capacity exists at our suppliers and that alternative sources of supply are available or could be developed within a reasonable period of time. Nevertheless, weWe also have an ongoing program to identify single sourcesingle-source components and to develop alternative back-up supplies. However, in certain cases, we may not be able to quickly

establish additional or replacement suppliers for specific components or materials, largely due to the regulatory approval system and the complex nature of the manufacturing processes employed by us and many suppliers. A 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 our operations and financial condition, particularly materials or components related to our TAXUSTAXUS® paclitaxel-eluting coronary stent system.

Quality Assurance

        On January 26, 2006, we received a corporate warning letter from the FDA notifying us of serious regulatory problems at three facilities and advising us that our corporate wide corrective action plan relating to three warning letters issued to us in 2005 was inadequate. The letter expressed concerns about our quality systems at six facilities as well as recent recalls, rather than any specific product performance issues. The FDA corporate warning letter does not prevent the continued distribution of products referenced in the letter, including our TAXUS coronary stent system. The letter does state, however, that the FDA will not grant our requests for exportation certificates to foreign governments or approve pre-market approval applications for our class III devices to which the quality control or current good manufacturing deficiencies described in the letter are reasonably related until the deficiencies described in the letter have been corrected. We are working with the FDA to resolve these issues and have recently established a new global complaint information system designed to help address the types of issues raised in the warning letter. We also launched a global, cross-functional initiative to further improve and harmonize our overall quality systems.

We are committed to providing high quality products to our customers. To meet this commitment, we are implementing state-of-the-art quality systems and concepts throughout our organization. Our 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

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product. Our quality system is designed to build in quality and process control and to utilize continuous improvement concepts throughout the product life. These systems are designed to enable us to satisfy the quality system regulations of the FDA with respect to products sold in the U.S. Many of our operations are certified under ISO 9001, ISO 9002, ISO 13485, ISO 13488, EN 46001 and EN 46002 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 EN 46001 require an implemented quality system that applies to product design. These certifications can be obtained only after a complete audit of a company’scompany's quality system by an independent outside auditor. Maintenance of these certifications requires that these facilities undergo periodic reexamination.

During 2002, we established        We maintain an ongoing initiative to seek ISO 14001 certification at various plants around the world. ISO 14001, the environmental management system standard in the ISO 14000 series, provides a voluntary framework to identify key environmental aspects associated with our businesses. We engage in continuous environmental performance improvement around these aspects. At present, nine of our manufacturing and distribution facilities have attained ISO 14001 certification and we expect one additional facility to become certified during 2005.certification. This initiative willis expected to continue until each of our manufacturing facilities, including those we acquire, becomes certified.

Competition

We encounter significant competition across our product lines and in each market in which our products are sold from various entities,companies, some of which may have greater financial and marketing resources than ours.we do. Our primary competitors include: Abbott Laboratories, Inc., Cook, Inc.,have historically included: Guidant Corporation (including its subsidiary Advanced Cardiovascular Systems, Inc.), Johnson & Johnson (including its subsidiary, Cordis Corporation) and Medtronic, Inc. (including its subsidiary, Medtronic AVE, Inc.), as

well as a wide range of companies which sell a single or limited number of competitive products or participate only in a specific market segment. If the Guidant acquisition is consummated, Abbott Laboratories will become a primary competitor of ours in the interventional cardiology market. In addition, if the worldwide coronary stentGuidant acquisition is consummated, St. Jude Medical, Inc. will become a competitor of ours in the CRM market, in addition to the neuromodulation market.

        Additionally, the medical device market is dynamiccharacterized by extensive research and highly competitive, with significant market share volatility. Technologydevelopment, and competitive offerings, particularly further competitive entriesrapid technological change. Developments by other companies of new or improved products, processes or technologies, in particular in the drug-eluting stent market, may make our products or proposed products obsolete or less competitive and may negatively impact our revenues. If we fail to develop new products or enhance existing products, it could have a material adverse effect on our business, financial condition and results of operations. We also face 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 our products.

We believe that our products compete primarily on the basis of their ability to safely and effectively to perform diagnostic and therapeutic procedures in a less-invasive manner, including ease of use, reliability and physician familiarity. In the current environment of managed care, economically motivated buyers, consolidation among healthcare providers, increased competition and declining reimbursement rates, we have also increasingly been required to compete on the basis of price, value and efficiency. We believe that our continued competitive success will depend upon our ability to create or acquire scientifically advanced technology, apply our 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 our products, obtain required regulatory and reimbursement approvals, manufacture and successfully market our products either directly or through outside parties and supply sufficient inventory to meet customer demand.

Regulation

The medical devices that we manufacture and market 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 U.S., permission to distribute a new device generally can be met in one of two ways. The first process requires that a pre-market notification (a 510(k) Submission) be made to the FDA to demonstrate that the device is as safe and effective as, or substantially equivalent to, a legally marketed device that is not subject to pre-market approval (PMA). A legally marketed device is a device that (i) was legally marketed prior to May 28, 1976, (ii) has been reclassified from Classclass III to Classclass II or I, or (iii) has been found to be substantially equivalent to a device following a 510(k) Submission. The legally marketed device to which equivalence is drawn is known as the “predicate”"predicate" device. 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 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 us without additional 510(k) Submissions.

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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 Classclass III devices. In this case, two steps of FDA approval are generally required before marketing in the U.S. can begin. First, we must comply with investigational device exemption (IDE) regulations in connection with any human clinical investigation of the device in the U.S. Second, the FDA must review our 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 U.S. that are not approved by the FDA for use in the U.S., or are banned or deviate from lawful performance standards, are subject to FDA export requirements. 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. Frequently, regulatory approval may first be obtained in a foreign country prior to application in the U.S. to take advantage of differing regulatory requirements.

In the European Union, we are required to comply with the Medical Devices Directive and obtain CE Mark certification in order to market medical devices. The CE Mark certification, granted following approval from an independent Notified Body, is an international symbol of adherence to quality assurance standards and compliance with applicable European Medical Devices Directives. We also comply with all other foreign regulations such as the requirement that we obtain Ministry of Health, Labor and Welfare approval before we can launch our TAXUS® Express² coronary stent system

in Japan. The time required to obtain these foreign approvals to market our products may be longer or shorter than that required in the U.S., and requirements for such approval may differ from those required by the FDA.

The process of obtaining clearance to market products is costly and time-consuming in virtually all of the major markets in which we sell 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 those releases. No assurance can be given that any of our new medical devices will be 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. We cannot predict what impact, if any, those changes might have on our business. Failure to comply with regulatory requirements could have a material adverse effect on our business, financial condition and results of operations.

We are also subject to various environmental laws, directives and regulations both in the U.S. and abroad. Our operations, like those of other medical device companies, involve the use of substances regulated under environmental laws, primarily in manufacturing and sterilization processes. We believe that compliance with environmental laws will not have a material impact on our capital expenditures, earnings or competitive position. Given the scope and nature of these laws, however, there can be no assurance that environmental laws will not have a material impact on our results of operations. We periodically assess potential environmental contingent liabilities.liabilities on a quarterly basis. At present, we are not aware of any such liabilities which would have a material impact on our business. In September 2004, we received a certification stating that we metWe are also certified with respect to the new enhanced environmental FTSE4Good criteria and were notified that we are a constituent member of the FTSE4Good Index.

Third-Party Coverage and Reimbursement

Our products are purchased by hospitals, doctors and other healthcare providers who are reimbursed for the healthcare services provided to their patients by third-party payers,payors, such as governmental programs (e.g., Medicare and Medicaid), private insurance plans and managed care programs. Third party payersprograms, for the healthcare services provided to their patients. Third-party payors may provide or deny coverage for certain technologies and associated procedures based on assessment criteria as determined by the third-party payer.payor. Reimbursement by third-party payerspayors for these services is based on a wide range of methodologies that may reflect the services’services' assessed resource costs, clinical outcomes and economic value. These reimbursement methodologies confer different, and often conflicting, levels of financial risk and incentives to healthcare providers and patients, and these methodologies are subject to frequent refinements. Third party payersThird-party payors are also increasingly adjusting reimbursement rates and challenging the prices charged for medical products and services. There can be no assurance that our products will be automatically covered by third-party payers,payors, that reimbursement will be available or, if available, that the third-party payers’payors' coverage policies will not adversely affect our ability to sell our products profitably.

Initiatives to limit the growth of healthcare costs, including price regulation, are also underway in many countries in which we do business. Implementation of cost containment initiatives and healthcare reforms in significant markets such as Japan, Europe and other countries may limit the price

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of, or the level at which reimbursement is provided for, our products and may influence a physician’sphysician's selection of products used to treat patients.

Proprietary Rights and Patent Litigation

The interventional medicine market in which we primarily participate is in large part technology driven. Physician customers, particularly in interventional cardiology, move quickly to new products and new technologies. As a result, intellectual property rights, particularly patents and trade secrets, play a

significant role in product development and differentiation. However, intellectual property litigation to defend or create market advantage is inherently complex and unpredictable. Furthermore, appellate courts frequently overturn lower court patent decisions.

In addition, competing parties frequently file multiple suits to leverage patent portfolios across product lines, technologies and geographies and to balance risk and exposure between the parties. In some cases, several competitors are parties in the same proceeding, or in a series of related proceedings, or litigate multiple features of a single class of devices. These forces frequently drive settlement not only of individual cases, but also of a series of pending and potentially related and unrelated cases. In addition, although monetary and injunctive relief is typically sought, remedies and restitution are generally not determined until the conclusion of the proceedings, and are frequently modified on appeal. Accordingly, the outcomes of individual cases are difficult to time, predict or quantify and are often dependent upon the outcomes of other cases in other geographies.

Several third parties have asserted that our current and former stent systems infringe patents owned or licensed by them. We have similarly asserted that stent systems or other products sold by these companies infringe patents owned or licensed by us. Adverse outcomes in one or more of these proceedings against us could limit our ability to sell certain stent products in certain jurisdictions, or reduce our operating margin on the sale of these products. In addition, damage awards related to historical sales could be material. We have similarly asserted that stent systems or other products sold by these companies infringe patents owned or licensed by us.

We rely on a combination of patents, trademarks, trade secrets and non-disclosure agreements to protect our intellectual property. We generally file patent applications in the U.S. and foreign countries where patent protection for our technology is appropriate and available. We hold more than 3,500approximately 4,000 U.S. patents (many of which have foreign counterparts) and have over 6,000approximately 7,800 patent applications pending worldwide that cover various aspects of our technology. In addition, we hold exclusive and non-exclusive licenses to a variety of third partythird-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 us will not be challenged or circumvented by competitors, or that such patents will be found to be valid or sufficiently broad to protect our technology or to provide us with a competitive advantage.

We rely 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 we 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 our trade secrets and proprietary knowledge.

There has been substantial litigation regarding patent and other intellectual property rights in the medical device industry, particularly in the areas in which we compete. We have defended, and will likely continue to defend, ourself against claims and legal actions alleging infringement of the patent rights of others. Adverse determinations in any patent litigation could subject us to significant liabilities to third parties, require us to seek licenses from third parties, and, if licenses are not available, prevent us from manufacturing, selling or using certain of our products, which could have a material adverse effect on us.

Additionally, we may find it necessary to initiate litigation to enforce our patent rights, to protect our 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 our litigation expenses will not be significant in the future or that the outcome of litigation will be favorable to us. Accordingly, we may seek to settle some or all of our pending litigation. Settlement may include cross-licensing of the patents which are the subject of the litigation as well as our other intellectual property and may involve monetary payments to or from third parties.

SeeItem 3, “Legal3. Legal Proceedings” below andNote K - J—Commitments and Contingencies to our 20042005 consolidated financial statements included in Item 8 belowof this Form 10-K for a further discussion of patent and other litigation and proceedings involving us. In management’smanagement's opinion, we are not currently involved in any legal proceeding other than those specifically identified in Note KJ to our consolidated financial statements, which, individually or in the aggregate, could have a material effect on our financial condition, operations and/or cash flows.

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Risk Management

The testing, marketing and sale of human healthcare products entails an inherent risk of product liability claims. We are involved in various lawsuits arising in the normal course of business from product liability and securities litigation claims. We have elected to become substantially self-insured with respect to general, and product liability and securities litigation claims. As a result of the economic factors currently impacting the insurance industry, meaningful liability insurance coverage became unavailable while the cost of insurance becamedue to its economically prohibitive.prohibitive cost. The absence of third-party insurance coverage increases our potential exposure to unanticipated claims or adverse decisions. However, based on product liability losses and securities litigation experienced in the past, our election to become substantially self-insured is not expected to have a material impact on our future operations. We believe that our risk management practices, including limited insurance coverage, are reasonably adequate to protect against anticipated general, and product liability and securities litigation losses. However, unanticipated catastrophic losses could have a material adverse impact on our financial position, results of operations and liquidity.

Employees

As of December 31, 2004,2005, we had approximately 17,50019,800 employees, including more than 8,750approximately 10,800 in operations, 1,9301,400 in administration, 2,5003,000 in clinical, regulatory and research and development and 4,2704,600 in selling, marketing, distribution and related administrative support. Of these employees, approximately 3,3007,100 were employed in our international operations. We believe that the continued success of our business will depend, in part, on our ability to attract and retain qualified personnel.

Seasonality

Our 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.

Available Information

Copies of our 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 on our website (www.bostonscientific.com) as soon as reasonably practicable after we electronically file the material with or furnish it to the SEC. Our Corporate Governance Guidelines proxy statement and Code of Conduct, which applies to all of our directors, officers and employees, including our Board of Directors, Chief Executive Officer, and Chief Financial Officer and Corporate Controller, are also available on our website (along with any amendments to those documents). Any amendments to or waivers for executive officers or directors of our Code of Conduct will be disclosed on our website promptly after the date of any such amendment or waiver. Printed copies of these materials are also available free of charge to shareholders who request them in writing from Investor Relations.Relations, One Boston Scientific Place, Natick, MA 01760-1537. Information on our website or connected to our website is not incorporated by reference into this Form 10-K.

Cautionary Statement for Purposes of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995

Certain statements that we may make from time to time, including statements contained in this report and information incorporated by reference into this report, constitute “forward-looking"forward-looking statements.”" Forward-looking statements may be identified by words like “anticipate,” “expect,” “project,” “believe,” “plan,” “estimate,” “intend”"anticipate," "expect," "project," "believe," "plan," "estimate," "intend" and similar words used in connection with, among other things, discussions of our financial performance, growth strategy, regulatory approvals, product development or new product launches, market position, sales efforts, intellectual property matters or acquisitions and divestitures. These forward-looking statements are based on our beliefs, assumptions and estimates using information available to us at the time and are not intended to be guarantees of future events or performance. If our underlying assumptions turn out to be incorrect, or if certain risks or uncertainties materialize, actual results could vary materially from the expectations and projections expressed or implied by our forward-looking statements. As a result, investors are cautioned not to place undue reliance on any of our forward-looking statements.

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We do not intend to update these forward-looking statements below or the risk factors described in Item 1A under the heading "Risk Factors" even if new information becomes available or other events occur in the future. We have identified these forward-looking statements below and the risk factors described in Item 1A under the heading "Risk Factors" in order to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Certain factors that could cause actual results to differ materially from those expressed in forward-looking statements are contained below.below and in the risk factors described in Item 1A under the heading "Risk Factors."

Coronary Stents

	•	• Volatility in the coronary stent market, competitive offerings and the timing of receipt of regulatory approvals to market existing and anticipated drug-eluting stent technology and other coronary and peripheral stent platforms;
	•	Our ability to continue growth in revenue, gross profit, earnings and cash flow resulting from the sale of the TAXUS Express2 drug-eluting stent system in the United States, to launch the TAXUS stent system in Japan late in 2006, and to launch the next-generation drug-eluting stent system, TAXUS Liberté stent system, in certain international markets in 2005 and in the United States in 2006;
	•	The continued availability of the TAXUS stent system in sufficient quantities and mix, our ability to prevent disruptions to our TAXUS stent system manufacturing processes and to maintain or replenish inventory levels consistent with forecasted demand around the world;
	•	The impact of new drug-eluting stents on the size of the coronary stent market, distribution of share within the coronary stent market in the United States and around the world, and average selling prices;
	•	The overall performance of and continued physician confidence in drug-eluting stents and the results of drug-eluting stent clinical trials undertaken by us or our competitors;
	•	Continued growth in the rate of physician adoption of drug-eluting stent technology in our Europe and Inter-Continental markets;
	•	Our ability to capitalize on the opportunity in the drug-eluting stent market for continued growth in revenue and earnings and to maintain and expand our worldwide market leadership positions through reinvestment in our drug-eluting stent program;
	•	Our ability to take advantage of our position as one of two early entrants in the United States drug-eluting stent market, to anticipate competitor products as they enter the market and to take advantage of opportunities that exist in the markets we serve; and
	•	Our ability to manage inventory levels, accounts receivable, gross margins and operating expenses relating to our TAXUS stent system and other product franchises and to react effectively to worldwide economic and political conditions.

Research and Development

•

Our ability to manage inventory levels, accounts receivable, gross margins and operating expenses relating to our TAXUS stent system and other product franchises and to react effectively to worldwide economic and political conditions.

	•	Our ability to successfully complete planned clinical trials, to obtain regulatory approvals and to develop and launch products on a timely basis within cost estimates, including the successful completion of in-process projects from purchased research and development;
	•	Our ability to manage research and development and other operating expenses in light of expected revenue growth over the next twelve-months;
	•	Our ability to fund and achieve benefits from our increased focus on internal research and development and external alliances as well as our ability to capitalize on opportunities across our businesses;
	•	Our ability to develop products and technologies successfully in addition to our TAXUS drug-eluting stent technology; and
	•	Our failure to succeed at, or our decision to discontinue, any of our growth initiatives.

Strategic Alliances

	•	Our ability to integrate the acquisitions and other strategic alliances we have consummated since early 2001;
	•	Our decision to exercise options to purchase certain strategic alliances and our ability to fund with cash or common stock these and other acquisitions; and
	•	The timing, size and nature of strategic initiatives, market opportunities and research and development

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platforms available to us and the ultimate cost and success of these initiatives.

Cash Flow

	•	Our ability to meet our projected cash needs and fund our share repurchase program over the next twelve-months, to maintain borrowing flexibility and to renew or refinance our borrowings beyond the next twelve-months;
	•	Our ability to access the public debt market and to issue debt or equity securities on terms reasonably acceptable to us;
	•	Our ability to maintain a 24 percent effective tax rate, excluding certain charges, during 2005 and to recover substantially our deferred tax assets; and
	•	Our ability to repatriate accumulated income earned abroad successfully as permitted by the American Jobs Creation Act of 2004.

International Operations

	•	Risks associated with international operations including compliance with local legal and regulatory requirements; and
	•	The potential effect of foreign currency fluctuations and interest rate fluctuations on revenues, expenses and resulting margins.

Litigation and Regulatory Compliance

•

The effect of litigation, risk management practices, including self-insurance, and compliance activities on our loss contingency, legal provision and cash flow;



•

The impact of stockholder derivative and class action, patent, product liability and other litigation; and



•

Any conditions imposed in resolving, or any inability to resolve, outstanding warning letters or other FDA matters, as well as risks generally associated with regulatory compliance, quality systems standards and complaint-handling.

	•	The effect of litigation, risk management practices including self-insurance, and compliance activities on our loss contingency, legal provision and cash flow;
	•	The impact of stockholder, patent, product liability, Medinol and other litigation, as well as the ultimate outcome of the U.S. Department of Justice investigation; and
	•	Risks associated with regulatory compliance, quality systems standards and complaint-handling.

Innovation

•

Our ability successfully to complete planned clinical trials, to obtain regulatory approvals and to develop and launch products on a timely basis within cost estimates, including the successful completion of in-process projects from purchased research and development;



•

Our ability to manage research and development and other operating expenses consistent with our expected revenue growth over the next twelve months;



•

Our ability to fund and achieve benefits from our focus on internal research and development and external alliances as well as our ability to capitalize on opportunities across our businesses;



•

Our ability to develop products and technologies successfully in addition to our TAXUS coronary stent technology;



•

Our failure to succeed at, or our decision to discontinue, any of our growth initiatives;



•

Our ability to integrate the acquisitions and other strategic alliances we have consummated;



•

Our decision to exercise options to purchase certain companies party to our strategic alliances and our ability to fund with cash or common stock these and other acquisitions; and



•

The timing, size and nature of strategic initiatives, market opportunities and research and development platforms available to us and the ultimate cost and success of these initiatives.

International Markets

•

Increasing dependence on international sales to achieve growth;



•

Risks associated with international operations including compliance with local legal and regulatory requirements; and



•

The potential effect of foreign currency fluctuations and interest rate fluctuations on our revenues, expenses and resulting margins.

Liquidity

•

Our ability to generate sufficient cash flow to fund operations and capital expenditures, as well as our strategic investments over the next twelve months and to maintain borrowing flexibility beyond the next twelve months;



•

Our ability to access the public capital markets and to issue debt or equity securities on terms reasonably acceptable to us;

•

Our ability to achieve a 23 percent effective tax rate, excluding certain charges, during 2006 and to recover substantially all of our deferred tax assets; and



•

Our ability to align expenses with future expected revenue levels and reallocate resources to support our future growth.

Other

•

Risks associated with significant changes made or to be made to our organizational structure or to the membership of our executive committee; and



•

Risks associated with our proposed acquisition of Guidant Corporation, including, among other things, the indebtedness we will incur and the integration challenges we will face after consummation of the acquisition.

•

Risks associated with significant changes made or to be made to our organizational structure or to the membership of our executive committee.

Several important factors, in addition to the specific factors discussed in connection with each forward-looking statement individually and the risk factors described in Item 1A under the heading "Risk Factors," could affect our future results and growth rates and could cause those results and rates to differ materially from those expressed in the forward-looking statements and the risk factors contained in this report. These additional factors include, among other things, future economic, competitive, reimbursement and regulatory conditions, new product introductions, demographic trends, intellectual property, financial market conditions and future business decisions made by us and our competitors, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Therefore, we wish to caution each reader of this report to consider carefully these factors as well as the specific factors discussed with each forward-looking statement and risk factor in this report and as disclosed in our filings with the SEC. These factors, in some cases, have affected and in the future (together with other factors) could affect our ability to implement our business strategy and may cause actual results to differ materially from those contemplated by the statements expressed in this report.

16

At February 28, 2005,22, 2006, there were 8,2598,143 record holders of our common stock.

The closing price of our Common Stockcommon stock on February 28, 200522, 2006 was $32.66.$24.13.

The following table provides information about        There were no shares repurchased under our purchases of our equity securities that are registered pursuant to Section 12 of the Exchange Act duringshare repurchase program in the fourth quarter ended December 31, 2004:

The information regarding securities authorizedof 2005. There are approximately 37 million shares available for issuancerepurchase under our equity compensation plans required by this Item is included in Item 12 below.share repurchase program.

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        In 2005, our gross profit, as a percentage of net sales, increased by 0.9 percentage points as compared to 2004. Shifts in our product sales mix toward higher margin products, primarily drug-eluting coronary stent systems, increased our gross profit as a percentage of net sales by 0.6 percentage points. Our gross profit percentage increased by 1.0 percentage point related to $57 million in inventory write-downs in 2004, including a $43 million write-down attributable to our recalls of certain coronary stent systems and a $14 million write-down of TAXUS stent inventory due to shelf-life dating. Our gross profit for 2005 was reduced as a percentage of net sales by 0.9 percentage points related to period expenses, including manufacturing start-up costs primarily associated with our TAXUS Liberté stent system and increased investment in quality initiatives. The remaining fluctuation in gross profit as a percentage of net sales primarily related to the favorable impact of changes in foreign exchange rates.

In 2004, our gross profit, as a percentage of net sales, increased by 4.6 percentage points as compared to 2003. Shifts in our product sales mix toward higher margin products, primarily drug-eluting coronary stent systems in the U.S., increased our gross profit as a percentage of net sales by 6.5 percentage points. This improvement in our gross profit as a percentage of net sales was partially reduced by 1.0 percentage point related to $57 million in inventory write-downs, with $43 million of that amount attributable to our recalls of certain coronary stent systems and $14 million attributable to the write-down of TAXUS stent inventory due to shelf-life dating.write-downs. In addition, other expenses primarily associated with increased investments in our manufacturing capabilities reduced gross profit as a percentage of net sales during 2004 by approximately 1.0 percentage point. We anticipate that our gross profit will continue to increase during 2005 due to expected sales growth of higher margin products, including our TAXUS stent system.

In 2003, our gross profit, as a percentage of net sales, increased by 2.2 percentage points as compared to 2002. Cost reductions resulting from prior year initiatives that related to plant network optimization, manufacturing process control and supply chain optimization increased gross profit as a percentage of net sales by 3.0 percentage points. In addition, shifts in our product sales mix toward higher margin products, primarily coronary stents, increased gross profit as a percentage of net sales by 1.3 percentage points. These improvements in gross profit were partially reduced by increased period expenses, including start-up costs associated with TAXUS stent system production, which decreased gross profit as a percentage of our net sales by 1.0 percentage point.

22

Operating Expenses

The following table provides a summary of certain of our operating expenses: