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

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 13 or Section 15(d) of the Act. 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: ý No o

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 the 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: o No ý

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

The number of shares outstanding of the Company's common stock as of February 22, 2006, was 821,567,300.

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' 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'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 Pete 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 $6.3 billion in 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 2005 we acquired Advanced 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 of a proprietary angioplasty device to treat atherosclerotic disease of the legs and other 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 portfolios 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 consolidated financial statements for the year ended December 31, 2005, which are included in Item 8 of this report.

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 durable 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—or more expensive surgical procedures—and reduce healthcare costs, as well as overall patient risk, trauma, procedure time and the need for aftercare. Since its U.S. launch in March 2004 and its Europe and Inter-Continental launch in 2003, 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 2005, approximately 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 drug-eluting stent 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 the U.S. during 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. Also, 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 second drug-eluting stent 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 is expected to occur during the second half of 2007 in the U.S. In July 2005, Medtronic, Inc. received approval from European regulators to begin commercial sales of its Endeavor™ drug-eluting stent system 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 following Abbott's acquisition of Guidant's drug-eluting stent portfolio, Abbott will sell the XIENCE™ V drug-eluting stent 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 the 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' products; new competitive product launches; 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; a reduction in the overall number of procedures performed; the international adoption rate of drug-eluting stent technology; and the level of supply of our drug-eluting stent system and competitive stent systems.

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.

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.

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-party technologies.

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 support our

research and development pipeline and marketing and sales efforts. During 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.

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.

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. We are committing additional resources to support our growth and implementing new systems designed to provide improved service, greater efficiency and lower supply chain costs.

We consistently strive to understand and exceed the expectations of our customers. 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.

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.

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 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.

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 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 2005, we expended approximately $680 million on research and development, representing approximately 11 percent of our 2005 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.

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 2005, we invested more than $500 million (including both cash and issuance of our common stock) in approximately 40 new and existing strategic 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.

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 acquiring them.

We expect that our acquisition of Guidant will enable us to become a major provider in the 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, including making additional investments in several of our existing strategic relationships.

Our products are principally offered for sale by three dedicated business groups—Cardiovascular, Endosurgery and 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. We entered the Neuromodulation market through our acquisition of Advanced Bionics Corporation in 2004. This organization currently focuses on the treatment of auditory disorders and chronic pain. During 2005, approximately 78 percent of our net sales were derived from our Cardiovascular business group,

approximately 20 percent from our Endosurgery business group and approximately 2 percent from our Neuromodulation business group.

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

In 2005, we marketed our TAXUS Express² paclitaxel-eluting coronary stent system in the U.S., Europe and certain other international markets, and we 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 Europe 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.

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. Our Express² coronary stent system is offered on a worldwide basis. The Express² coronary stent system—an Express stent combined with advanced Maverick® balloon catheter 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.

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 include PTCA balloon catheters, such as the Maverick® 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 otherwise facilitate cardiovascular procedures.

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.

Our 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 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. It is also available in the U.S. for the treatment of saphenous vein grafts (SVGs). In April 2005, we acquired Rubicon Medical Corporation, a developer of embolic protection devices, including a filter that is integrated into a guidewire. The Rubicon™ filter, an embolic protection system that traps and removes debris that may be dislodged during interventional procedures, received CE Mark in April 2005. It has 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.

We sell various products designed to treat patients with peripheral disease (disease which appears in blood vessels other than 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 second quarter of 2005, we completed the acquisition of CryoVascular Systems, Inc., the manufacturer of the PolarCath™ Peripheral Dilatation System. The PolarCath peripheral dilatation system is used in CryoPlasty Therapy®, an innovative approach to the treatment of peripheral artery disease in the lower extremities. The PolarCath peripheral dilatation system uses nitrous oxide to fill an angioplasty balloon within a blocked artery, cooling the balloon's surface to -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 launch the Sterling™ Balloon dilatation catheter, a dilatation catheter with several differentiating features, including the only pre- and post-stent dilatation indication for carotid artery stenting, in 2006, subject to receiving regulatory approvals.

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

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.

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.

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, 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.

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.

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.

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.

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.

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

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.

We also market products in the area of women'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.

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

We develop and market 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.

We market 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.

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

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

In March 2005, we acquired 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 represents a less-invasive and potentially safer alternative to endarterectomy, the traditional surgical 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 EZ™ 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 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 began to distribute the product during 2005 in those markets. In addition to these exclusive distribution rights, we also expect to acquire Endotex during the second half of 2006 prior to or upon receipt of FDA approval of the NexStent Monorail system.

In April 2005, we acquired 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 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.

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 conduct first-in-man clinical trials of the Endovations Endoscopy Suite in 2007.

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 2009, subject to regulatory approval.

Our agreement to acquire Guidant will enable us to become a major provider in the high-growth cardiac rhythm management business. Guidant makes a variety of implantable devices that can monitor the heart and deliver electricity to treat cardiac abnormalities, including tachycardia (abnormally fast or chaotic heart rhythms), heart failure and bradycardia (slow or irregular heart rhythms).

We also have an equity investment in and option to purchase Cameron Health, a company that is developing a subcutaneous 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 certain cardiac rhythm abnormalities. In conjunction with our acquisition of Guidant, we have agreed, if required, to divest our equity investment in Cameron Health.

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.

A dedicated sales force of approximately 1,900 individuals in over 45 countries internationally and over 2,000 individuals in the U.S. marketed our products worldwide as of December 31, 2005. Sales in countries where we have direct sales organizations accounted for approximately 99 percent of our net sales during 2005. A network of distributors and dealers who offer our products in more than 50 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 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 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, as well as BPH devices, various graft materials and pneumatic 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 2005 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.

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 39 percent of our net sales in 2005. Net sales and operating income attributable to significant geographic areas are presented in Note N—Segment Reporting to our 2005 consolidated financial statements included in Item 8 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, 2005, we had direct marketing and sales operations in over 45 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 35 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, risk and 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.

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. We also have an ongoing program to identify single-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 TAXUS® paclitaxel-eluting coronary stent system.

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 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's quality system by an independent outside auditor. Maintenance of these certifications requires that these facilities undergo periodic reexamination.

We maintain an ongoing initiative to seek ISO 14001 certification at 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. This initiative is expected to continue until each of our manufacturing facilities, including those we acquire, becomes certified.

We encounter significant competition across our product lines and in each market in which our products are sold from various companies, some of which may have greater financial and marketing resources than we do. Our primary competitors 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 Guidant 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 characterized by extensive research and development, and rapid 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 intended to be treated using our products.

We believe that our products compete primarily on the basis of their ability 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.

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 class III to class II or I, or (iii) has been found to be substantially equivalent to a device following a 510(k) Submission. The legally marketed device to which equivalence is drawn is known as the "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.

The second process requires that an application for PMA be made to the FDA to demonstrate that the device is safe and effective for its intended use as manufactured. This approval process applies to certain class III devices. In this case, two steps of FDA approval are generally required before marketing in the 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 assess potential environmental contingent liabilities on a quarterly basis. At present, we are not aware of any such liabilities which would have a material impact on our business. We are also certified with respect to the new enhanced environmental FTSE4Good criteria and are a constituent member of the FTSE4Good Index.

Our products are purchased by hospitals, doctors and other healthcare providers who are reimbursed by third-party payors, such as governmental programs (e.g. Medicare and Medicaid), private insurance plans and managed care programs, 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 payor. Reimbursement by third-party payors for these services is based on a wide range of methodologies that may reflect the services' assessed resource costs, clinical 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 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 payors, that reimbursement will be available or, if available, that the third-party 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 of, or the level at which reimbursement is provided for, our products and may influence a physician's selection of products used to treat patients.

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 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 approximately 4,000 U.S. patents (many of which have foreign counterparts) and have approximately 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-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 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.

See Item 3. Legal Proceedings below and Note J—Commitments and Contingencies to our 2005 consolidated financial statements included in Item 8 of this Form 10-K for a further discussion of patent and other litigation and proceedings involving us. In management's opinion, we are not currently involved in any legal proceeding other than those specifically identified in Note J 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.

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, product liability and securities litigation claims. As a result of the economic factors currently impacting the insurance industry, meaningful liability insurance coverage became unavailable due to its economically 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, 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.

As of December 31, 2005, we had approximately 19,800 employees, including approximately 10,800 in operations, 1,400 in administration, 3,000 in clinical, regulatory and research and development and 4,600 in selling, marketing, distribution and related administrative support. Of these employees, approximately 7,100 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.

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.

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 and Code of Conduct, which applies to all of our directors, officers and employees, including our Board of Directors, Chief Executive Officer, 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, 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 statements." Forward-looking statements may be identified by words like "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.

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 and in the risk factors described in Item 1A under the heading "Risk Factors."

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.

In addition to the other information contained in this Form 10-K and the exhibits hereto, the following risk factors should be considered carefully in evaluating our business. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. This section contains forward- looking statements. You should refer to the explanation of the qualifications and limitations on forward-looking statements set forth at the beginning of Item 1 of this Form 10-K. Additional risks not presently known to us or that we currently deem immaterial may also adversely affect our business, financial condition or results of operations.

We also face certain risks in connection with our proposed acquisition of Guidant Corporation as described above in Item 1 of this Form 10-K. We encourage you to consider the risks below under the caption "—Risks Related to the Proposed Acquisition and Guidant" and the risk factors set forth in our registration statement on Form S-4 filed with the SEC on February 6, 2006 (Registration No. 333-131608) for additional risk factors relating to our proposed acquisition of Guidant Corporation.

We are subject to extensive medical device regulation which may impede or hinder the approval process for our products and, in some cases, may not ultimately result in approval or may result in the recall or seizure of previously approved products.

Our products, development activities and manufacturing processes are subject to extensive and rigorous regulation by the FDA pursuant to the Federal Food, Drug, and Cosmetic Act (the FDC Act), by comparable agencies in foreign countries, and by other regulatory agencies and governing bodies. Under the FDC Act, medical devices must receive FDA clearance or approval before they can be commercially marketed in the U.S. In addition, most major markets for medical devices outside the U.S. require clearance, approval or compliance with certain standards before a product can be commercially marketed. The process of obtaining marketing approval or clearance from the FDA for new products, or with respect to enhancements or modifications to existing products, could:

Even after products have received marketing approval or clearance, product approvals and clearances by the FDA can be withdrawn due to failure to comply with regulatory standards or the occurrence of unforeseen problems following initial approval. There can be no assurance that we will receive the required clearances from the FDA for new products or modifications to existing products on a timely basis or that any FDA approval will not be subsequently withdrawn. Later discovery of previously unknown problems with a product or manufacturer could result in fines, delays or suspensions of regulatory clearances, seizures or recalls of products, operating restrictions and/or criminal prosecution. The failure to receive product approval clearance on a timely basis, suspensions of regulatory clearances, seizures or recalls of products or the withdrawal of product approval by the FDA could have a material adverse effect on our business, financial condition or results of operations.

We may not meet regulatory quality standards applicable to our manufacturing and quality processes, which could have an adverse effect on our business, financial condition or results of operations.

As a device manufacturer, we are required to register with the FDA and are subject to periodic inspection by the FDA for compliance with the FDA's Quality System Regulation (QSR) requirements, which require manufacturers of medical devices to adhere to certain regulations, including testing, quality control and documentation procedures. In addition, the federal Medical Device Reporting regulations require us to provide information to the FDA whenever there is evidence that reasonably suggests that a device may have caused or contributed to a death or serious injury or, if a malfunction were to occur, could cause or contribute to a death or serious injury. Compliance with applicable regulatory requirements is subject to continual review and is rigorously monitored through periodic inspections by the FDA. In the European Community, we are required to maintain certain ISO certifications in order to sell our products and must undergo periodic inspections by notified bodies to obtain and maintain these certifications.

In that regard, we are currently taking remedial action in response to certain deficiencies of our quality systems as cited by the FDA in FDA warning letters to us. For example, we received several warning letters from the FDA in 2005 with respect to our global quality-control systems and in 2004 with respect to our auditory product line. In addition, 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 previously issued to us in 2005 was inadequate. As also stated in this FDA warning letter, 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 practices deficiencies described in the letter are reasonably related until the deficiencies described in the letter have been corrected. If we are unable to resolve the issues raised by the FDA in its warning letters to the satisfaction of the FDA on a timely basis, we may not be able able to launch our new class III devices as planned, including our Taxus® Liberté™ drug-eluting stent system in the United States in the second half of 2006.

We may face enforcement actions in connection with these FDA warning letters, including injunctive relief and civil fines. While we are working with the FDA to resolve these issues, this work has required and will continue to require the dedication of significant incremental internal and external resources. There can be no assurances regarding the length of time it will take to resolve these issues. In addition, if our remedial actions are not satisfactory to the FDA, the FDA may take further regulatory actions against us, including but not limited to, seizing our product inventory, obtaining a court injunction against further marketing of our products or assessing civil monetary penalties. If we or our manufacturers fail to adhere to QSR or ISO requirements, this could delay production of our products and lead to fines, difficulties in obtaining regulatory clearances, recalls or other consequences, which could in turn have a material adverse effect on our financial condition or results of operations.

Pending and future intellectual property litigation could be costly and disruptive to us.

We operate in an industry that is susceptible to significant intellectual property litigation and, in recent years, it has been common for companies in the medical device field to aggressively challenge the patent rights of other companies in order to prevent the marketing of new devices. We are currently the subject of various patent litigation proceedings, including the proceedings described in more detail under Item 3. Legal Proceedings. Intellectual property litigation is expensive, complex and lengthy and its outcome is difficult to predict. Pending or future patent litigation may result in significant royalty or other payments or injunctions that can prevent the sale of products and may significantly divert the attention of our technical and management personnel. In the event that our right to market any of our products is successfully challenged, and if we fail to obtain a required license

or are unable to design around a patent, our business, financial condition or results of operations could be materially adversely affected.

We may not be able effectively to protect our intellectual property rights which could have an adverse effect on our business, financial condition or results of operations.

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.

Patents and other proprietary rights are and will be essential to our business, and our ability to compete effectively with other companies will be dependent upon the proprietary nature of our technologies. We rely upon trade secrets, know-how, continuing technological innovations, strategic alliances and licensing opportunities to develop, maintain and strengthen our competitive position. We pursue a policy of generally obtaining patent protection in both the U.S. and abroad for patentable subject matter in our proprietary devices and also attempt to review third-party patents and patent applications to the extent publicly available to develop an effective patent strategy, avoid infringement of third-party patents, identify licensing opportunities and monitor the patent claims of others. We currently own numerous U.S. and foreign patents and have numerous patent applications pending. We also are party to various license agreements pursuant to which patent rights have been obtained or granted in consideration for cash, cross-licensing rights or royalty payments. No assurance can be made that any pending or future patent applications will result in issued patents, that any current or future patents issued to, or licensed by, us will not be challenged or circumvented by our competitors, or that our patents will not be found invalid.

In addition, we may have to take legal action in the future to protect our patents, trade secrets or know-how or to assert them against claimed infringement by others. Any legal action of that type could be costly and time consuming to us and no assurances can be made that any lawsuit will be successful. We are generally involved as both a plaintiff and a defendant in a number of patent infringement and other intellectual property-related actions. We are involved in numerous patent-related claims with our competitors, including Johnson & Johnson.

The invalidation of key patents or proprietary rights that we own, or an unsuccessful outcome in lawsuits to protect our intellectual property, could have a material adverse effect on our business, financial position or results of operations.

Pending and future product liability claims and other litigation, including private securities litigation and shareholder derivative suits, may adversely affect our business, reputation and ability to attract and retain customers.

The design, manufacture and marketing of medical devices of the types that we produce entail an inherent risk of product liability claims. Many of the medical devices that we manufacture and sell are designed to be implanted in the human body for long periods of time or indefinitely. A number of factors could result in an unsafe condition or injury to, or death of, a patient with respect to these or other products that we manufacture or sell, including component failures, manufacturing flaws, design defects or inadequate disclosure of product-related risks or product-related information. These factors could result in product liability claims, a recall of one or more of our products or a safety alert relating to one or more of our products. Product liability claims may be brought by individuals or by groups seeking to represent a class.

We are currently the subject of numerous product liability claims and other litigation, including private securities litigation and shareholder derivative suits including, but not limited to, the claims and litigation described under Item 3. Legal Proceedings. In addition, if the Guidant acquisition is consummated, we will also be subject to certain product liability claims and other litigation of Guidant. The outcome of litigation, particularly class action lawsuits, is difficult to assess or quantify. Plaintiffs in these types of lawsuits often seek recovery of very large or indeterminate amounts, including not only actual damages, but also punitive damages. The magnitude of the potential loss relating to these lawsuits may remain unknown for substantial periods of time. In addition, the cost to defend against any future litigation may be significant. Further, we are largely self-insured for product liability claims and securities litigation. As a result of economic factors currently impacting the insurance industry, meaningful product liability and securities litigation insurance coverage has become unavailable due to its economically prohibitive cost. The absence of third-party insurance coverage increases our potential exposure to unanticipated claims and adverse decisions. Product liability claims, product recalls, securities litigation and other litigation in the future, regardless of their ultimate outcome, could have a material adverse effect on our financial position, results of operations or liquidity.

We derive a significant portion of our revenue from the sale of drug-eluting coronary stent systems and a decline in our market share of drug-eluting stents may adversely affect our results of operations or financial condition.

Drug-eluting coronary stent revenues represented approximately 41% of our consolidated net sales during the fiscal year ended December 31, 2005. We have experienced declines in our U.S. drug-eluting stent revenues during the second half of 2005 as compared to the same period in the prior year largely as a result of a reduction in market share, as well as pricing pressure. Our TAXUS® coronary stent system and Johnson & Johnson's CYPHER® drug-eluting stent system are currently the only two drug-eluting stents available in the U.S. market. During the first three quarters of 2005, we experienced sequential declines in our market share. In the fourth quarter of 2005, our market share stabilized and was relatively consistent with the prior quarter. Our share of the drug-eluting stent market, as well as unit prices, are expected to continue to be adversely affected as additional significant competitors enter the drug-eluting stent market, which began during the third quarter of 2005 internationally and is expected to continue to occur during the second half of 2007 in the U.S. Companies have recently obtained regulatory approval to market and sell their drug-eluting stents in the European market. In July 2005, Medtronic, Inc. received approval from European regulators to begin commercial sales of its Endeavor drug-eluting stent system 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 following Abbott's acquisition of Guidant's drug-eluting stent portfolio, Abbott will sell the XIENCE™ V drug-eluting stent in competition with us. In addition, on February 17, 2006, Conor Medsystems, Inc. received a CE Mark for its CoStar™ paclitaxel-eluting stent system.

A material decline in our drug-eluting stent revenue would have a significant adverse impact on our future operating results. The most significant variables that may impact the size of the drug-eluting stent market and our position within that market include:

The manufacture of our TAXUS® coronary stent system involves the integration of multiple technologies, critical components, raw materials and complex processes. Significant favorable or unfavorable changes in forecasted demand, as well as disruptions associated with the TAXUS® stent manufacturing process, may impact our inventory levels and our ability to provide the TAXUS® stent system in sufficient quantities and mix. Variability in expected demand or the timing of the launch of next-generation products may result in excess or expired inventory positions and future inventory charges, which may adversely impact our results from operations. Also, if the Guidant acquisition is consummated, we expect to share with Abbott rights to Guidant's XIENCE™ V drug-eluting stent program. As a result, delays in receipt of regulatory approvals for the XIENCE™ V drug-eluting stent system, Abbott's inability to supply us with sufficient quantities of the XIENCE™ V drug-eluting stent system or material nonacceptance of these stents in the marketplace could adversely affect our results from operations, as well as our ability to effectively differentiate ourselves from our competitors in the drug-eluting stent market as the leading company with two drug-eluting stent programs.

We may not be successful in our strategic acquisitions of, investments in or alliances with, other companies and businesses, which have been a significant source of historical growth for us.

Our strategic acquisitions, investments and alliances have historically been intended to further expand our ability to offer customers effective, quality medical devices that satisfy their interventional needs. Many of these alliances involve equity investments and often give us the option to acquire the other company or assets of the other company in the future. If we are unsuccessful in our acquisitions, investments and alliances, we may be unable to continue to grow our business significantly or may record asset impairment charges in the future. These acquisitions, investments and alliances have

historically been significant sources of growth for us. The success of any acquisition, investment or alliance that we may undertake will depend on a number of factors, including:

If we are unsuccessful in our acquisitions, investments and alliances, we may be unable to continue to grow our business significantly or may record asset impairment charges in the future.

Our future growth is dependent upon the development of new products, which requires significant research and development, clinical trials and regulatory approvals, all of which are very expensive and time-consuming and may not result in a commercially viable product.

In order to develop new products and improve current product offerings, we focus our research and development programs largely on the development of next-generation and novel technology offerings across multiple programs and divisions, particularly in our drug-eluting stent program. We expect to launch our TAXUS® Liberté™ coronary stent system in the U.S. during the second half of 2006, subject to regulatory approval. If we are unable to develop and launch these and other products as anticipated, our ability to maintain or expand our market position in the drug-eluting stent market may be adversely impacted.

Further, we anticipate continuing our increased focus and spending on areas outside of drug-eluting stent technologies. We believe our focus will be primarily on technologies in which we have already made significant investments, including neuromodulation, endoscopic systems, carotid stenting and bifurcation stenting, but may also extend into other medical device opportunities. However, given their early stage of development, there can be no assurance that these and other technologies will achieve technological feasibility, obtain regulatory approval or gain market acceptance. In addition, due to the substantial amount of debt we expect to incur to finance the cash portion of the Guidant acquisition consideration, there can be no assurance that, if the acquisition is consummated, we will choose to continue to invest in these technologies. A delay in the development or approval of these technologies or our decision to reduce funding of these projects may adversely impact the contribution of these technologies to our future growth.

As a part of the regulatory process of obtaining marketing clearance from the FDA for new products, we conduct and participate in numerous clinical trials with a variety of study designs, patient populations and trial endpoints. Unfavorable or inconsistent clinical data from existing or future clinical trials conducted by us, by our competitors or by third parties, or the market's perception of this clinical data, may adversely impact our ability to obtain product approvals from the FDA, our position in, and share of, the markets in which we participate and our business, financial condition, results of operations or future prospects.

We face intense competition and may not be able to keep pace with the rapid technological changes in the medical devices industry, which could have an adverse effect on our business, financial condition or results of operations.

The medical device market is highly competitive. We encounter significant competition across our product lines and in each market in which our products are sold from various medical device companies, some of which may have greater financial and marketing resources than we do. Our primary competitors have historically included: Guidant (including its subsidiary Advanced Cardiovascular Systems, Inc.), Johnson & Johnson (including its subsidiary, Cordis Corporation) and Medtronic, Inc. (including its subsidiary, Medtronic AVE, Inc.). If the acquisition is consummated, Abbott will become a primary competitor of ours in the interventional cardiology market and St. Jude Medical, Inc. will become a competitor of ours in the CRM market, in addition to the neuromodulation market. In addition, we face competition from a wide range of companies that sell a single or a limited number of competitive products or which participate only in a specific market segment, as well as from non-medical device companies, including pharmaceutical companies, which may offer non-surgical alternative therapies for disease states intended to be treated using our products.

Additionally, the medical device market is characterized by extensive research and development, and rapid 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. We are required to devote continued efforts and financial resources to develop or acquire scientifically advanced technologies and products, apply our technologies cost-effectively across product lines and markets, attract and retain skilled development personnel, obtain patent and other protection for our technologies and products, obtain required regulatory and reimbursement approvals and successfully manufacture and market our products. If we fail to develop new products or enhance existing products, it could have a material adverse effect on our business, financial condition or results of operations.

Because we derive a significant amount of our revenues from international operations and a significant percentage of our future growth is expected to come from international operations, changes in international economic or regulatory conditions could have a material impact on our business, financial condition or results of operations.

Sales outside the U.S. accounted for approximately 39% of our net sales in 2005. Additionally, a significant percentage of our future growth is expected to come from international operations. As a result, 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. Further, international markets are also being affected by economic pressure to contain reimbursement levels and healthcare costs. The trend in countries around the world, including Japan, toward more stringent regulatory requirements for product clearance, changing reimbursement models and more rigorous inspection and enforcement activities has generally caused or may cause medical device manufacturers to experience more uncertainty, delay, risk and expense. In addition, we are required to renew regulatory approvals in certain international jurisdictions, which may require additional testing and documentation. If sufficient resources are not available to renew these approvals or these approvals are not timely renewed, our ability to market our full line of existing products within these jurisdictions may be limited. 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 business, financial condition or results of operations.

Healthcare cost containment pressures and legislative or administrative reforms resulting in restrictive reimbursement practices of third-party payors or preferences for alternate therapies could decrease the demand for our products, the prices which customers are willing to pay for those products and the number of procedures performed using our devices, which could have an adverse effect on our business, financial condition or results of operations.

Our products are purchased principally by hospitals or physicians, which typically bill various third-party payors, including governmental programs (e.g., Medicare and Medicaid), private insurance plans and managed care plans, for the healthcare services provided to their patients. The ability of customers to obtain appropriate reimbursement for their products and services from private and governmental third-party payors is critical to the success of medical technology companies. The availability of reimbursement affects which products customers purchase and the prices they are willing to pay. Reimbursement varies from country to country and can significantly impact the acceptance of new products and services. After we develop a promising new product, we may find limited demand for the product unless reimbursement approval is obtained from private and governmental third-party payors. Further legislative or administrative reforms to the U.S. or international reimbursement systems in a manner that significantly reduces reimbursement for procedures using our medical devices or denies coverage for those procedures could have a material adverse effect on our business, financial condition or results of operations.

Major third-party payors for hospital services in the U.S. and abroad continue to work to contain healthcare costs. The introduction of cost containment incentives, combined with closer scrutiny of healthcare expenditures by both private health insurers and employers, has resulted in increased discounts and contractual adjustments to hospital charges for services performed and has shifted services between inpatient and outpatient settings. Initiatives to limit the increase of healthcare costs, including price regulation, are also underway in several countries in which we do business. Hospitals or physicians may respond to these cost-containment pressures by substituting lower cost products or other therapies for our products. If the Guidant acquisition is consummated, in light of the Guidant product recalls, third-party payors may seek claims and further recourse against us for the recalled defibrillator and pacemaker systems for which Guidant had previously received reimbursement.

Consolidation in the healthcare industry could lead to demands for price concessions or the exclusion of some suppliers from certain of our significant market segments, which could have an adverse effect on our business, financial condition or results of operations.

The cost of healthcare has risen significantly over the past decade and numerous initiatives and reforms initiated by legislators, regulators and third-party payors to curb these costs have resulted in a consolidation trend in the healthcare industry, including hospitals. This in turn has resulted in greater pricing pressures and the exclusion of certain suppliers from important market segments as group purchasing organizations, independent delivery networks and large single accounts continue to consolidate purchasing decisions for some of our hospital customers. We expect that market demand, government regulation, third-party reimbursement policies and societal pressures will continue to change the worldwide healthcare industry, resulting in further business consolidations and alliances among our customers and competitors, which may reduce competition, exert further downward pressure on the prices of our products and may adversely impact our business, financial condition or results of operations.

If the acquisition is consummated, the separation of Guidant's vascular and endovascular businesses from Guidant's other businesses and the integration of Boston Scientific and Guidant following the acquisition may present significant challenges.

Because Abbott will be acquiring Guidant's vascular and endovascular businesses prior to the consummation of the acquisition, these businesses will need to be separated from Guidant's other businesses before the closing of the acquisition. In addition, Boston Scientific and Guidant may face significant challenges in combining operations and product lines in a timely and efficient manner and retaining key Guidant personnel. This integration will be complex and time-consuming, and the separation of the Guidant businesses required by the Abbott transaction will add complexity to the transition process and require the receipt or provision of transitional services. The failure to successfully integrate Guidant's business and ours and to manage the challenges presented by the transition process successfully, including the retention of key Guidant personnel, may prevent us from achieving the anticipated potential benefits of the acquisition.

We will incur significant indebtedness in order to finance the acquisition, which will limit our operating flexibility.

In order to finance the cash portion of the acquisition consideration, we expect to incur incremental borrowings of approximately $8 billion. Our significant indebtedness may:

In addition, the terms of the financing obligations to be incurred by us in order to finance the cash portion of the acquisition consideration will contain restrictions substantially similar to the restrictions contained in our current financing obligations, including limitations on our ability to, among other things:

These restrictions will be applicable to Boston Scientific after the acquisition. In addition, to the extent that our credit ratings are below pre-acquisition levels, borrowing costs may increase, and to the extent that our credit ratings are below investment grade, the restrictions in these financing obligations could be more stringent and could include additional covenants, conditions to borrowing, subsidiary guarantees and stock pledges. A failure to comply with these restrictions could result in a default under these financing obligations or could require us to obtain waivers from our lenders for failure to comply

with these restrictions. The occurrence of a default that remains uncured or the inability to secure a necessary consent or waiver could have a material adverse effect on our business, financial condition or results of operations.

We expect that, if the acquisition is consummated, our credit ratings will be downgraded from our current credit ratings and it is possible that our credit ratings could fall below investment grade.

We currently have investment grade credit ratings. During February 2006, our credit rating was downgraded. The rating agencies have indicated that our credit rating will be further downgraded if the acquisition of Guidant is consummated. Although we expect our credit ratings to remain at investment grade following the acquisition of Guidant, it is possible that the credit rating agencies could downgrade our credit ratings to below investment grade. The credit ratings assigned to our indebtedness affect both our ability to obtain new financing and the cost of financing and credit. If our credit ratings were to be further downgraded, our borrowing costs may increase, we may become subject to more stringent covenants and our access to unsecured debt markets could be limited. In addition, we may not be able to refinance our indebtedness on terms acceptable to us, if at all. Further, in December 2005, we agreed to supplement the terms of our senior notes issued in November 2005 to provide for a potential interest rate adjustment accruing from November 17, 2005 on each series of these senior notes in the event that our credit ratings are downgraded as a result of our closing of the proposed acquisition of Guidant.

If the acquisition is consummated, our stockholders' ownership percentage of Boston Scientific will be diluted and the acquisition will result in dilution to our earnings per share.

In connection with the proposed acquisition, we will issue to Guidant shareholders and Abbott shares of our common stock. As a result of the issuance of these shares of our common stock, our stockholders will own a smaller percentage of our company after the acquisition if the acquisition is consummated. The proposed acquisition will also result in significant dilution to our 2006 earnings per share and may result in dilution to our earnings per share in future years.

Since June of 2005, Guidant has issued a number of product advisories to physicians concerning its defibrillator and pacemaker systems due to reported adverse events and malfunctions that have adversely impacted its sales and market share and, if the acquisition is consummated, could have an adverse effect on our business, financial condition and results of operations.

Since June of 2005, Guidant has issued a number of product advisories to physicians concerning its defibrillator and pacemaker systems due to reported adverse events and malfunctions. For the fiscal year ended December 31, 2005, Guidant reported that sales during the second half of 2005 decreased 14% compared to the same period in 2004, primarily due to the impact of various implantable defibrillator and pacemaker system field actions that occurred in 2005, including certain voluntary product recalls and physician notifications. These product recalls included Guidant's decision announced on June 24, 2005 to temporarily stop selling Guidant's leading defibrillator systems, which were returned to the market beginning on August 2, 2005. The impact of the product recalls resulted in Guidant having a lower market share for implantable defibrillator and pacemaker systems for the second half of 2005 compared to the same period in the prior year. If the acquisition is consummated, there can be no assurance that we will be able to regain that market share or sales, if at all. If we are able to regain Guidant's prior market share and sales, there can be no assurance as to when our market share and sales will return to pre-product recall levels, due to, among other things, customer perceptions of the product recalls, market acceptance of recently launched products, and regulatory and competitive developments. If we are unable to regain market share and sales for implantable defibrillator and pacemaker systems or do not regain market share and sales on a timely basis, these failures could have a material adverse effect on our business, financial condition or results of

operations. There can be no assurance that, if the Guidant acquisition is consummated, we will not have product recalls concerning defibrillator and pacemaker systems (or our own products) in the future or that any product recalls would not have a material adverse effect on our business, financial condition or results of operations.

The FDA, the Department of Justice, the SEC and various state agencies are conducting, and other governmental entities may commence, investigations of Guidant in connection with Guidant's product recalls which could have an adverse effect on the business, financial condition or results of operations of Guidant and Boston Scientific if the Guidant acquisition is consummated.

The FDA, the Department of Justice, the SEC and various state agencies are conducting, and other governmental entities may commence, investigations of Guidant in connection with Guidant's product recalls. While Guidant is cooperating with officials in connection with these investigations, Guidant cannot predict when these investigations will be resolved, the outcome of these investigations or their impact on Guidant or, if the acquisition is consummated, Boston Scientific. An adverse outcome in any of these investigations could include the commencement of civil and/or criminal proceedings involving substantial fines, penalties and injunctive or administrative remedies, including the exclusion of Guidant and Boston Scientific from government reimbursement programs. Additionally, if these investigations continue over a long period of time, they could divert the attention of management from the day-to- day operations of Guidant's and our business, impose significant administrative burdens on Guidant and us and result in additional compliance or other costs. These potential consequences, as well as any material adverse outcome from any of these investigations, could have an adverse effect on Guidant's and our business, financial condition or results of operations.

There are no material unresolved written comments that were received from the SEC staff 180 days or more before the end of our fiscal year relating to our periodic or current reports under the Securities Exchange Act of 1934.

Our world headquarters are located in Natick, Massachusetts. We have regional headquarters located in Tokyo, Japan; Paris, France; and Singapore. As of December 31, 2005, our manufacturing, research, distribution and other Key Facilities totaled more than 7.2 million square feet, of which more than 6.1 million square feet was owned by us and the balance is leased. As of December 31, 2005, our principal manufacturing and technology centers were located in Massachusetts, Indiana, Minnesota, New Jersey, Florida, California, New York, Utah, Ireland, Costa Rica and Japan, and our principal distribution centers were located in Massachusetts, The Netherlands and Japan. As of December 31, 2005, we maintained 26 manufacturing, distribution and technology centers, 19 in the U.S., four in Ireland, one in Costa Rica, one in The Netherlands and one in Japan. Many of these facilities produce and manufacture products for more than one of our divisions and include research facilities.

(in square feet)	Total Space	Owned	Leased
Domestic	6,094,000	5,211,000	883,000
Foreign	1,157,000	964,000	193,000
Total	7,251,000	6,175,000	1,076,000

See Note J—Commitments and Contingencies to our 2005 consolidated financial statements included in Item 8 of this Form 10-K.

ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is traded on the New York Stock Exchange under the symbol "BSX." Our annual CEO certification for the previous year has been submitted to the NYSE.

The following table shows the market range for our common stock for each of the last eight quarters based on reported sales prices on the New York Stock Exchange.

We have not paid a cash dividend during the past two years. We currently do not intend to pay dividends, and intend to retain all of our earnings to repay indebtedness and invest in the continued growth of our business. We may consider declaring and paying a dividend in the future; however, there can be no assurance that we will do so.

There were no shares repurchased under our share repurchase program in the fourth quarter of 2005. There are approximately 37 million shares available for repurchase under our share repurchase program.

The Company paid a two-for-one stock split that was effected in the form of a 100 percent stock dividend on November 5, 2003. All historical amounts above have been restated to reflect the stock split.

See also the notes to our consolidated financial statements included in Item 8 below.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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. 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. This 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 we obtain externally through our strategic acquisitions and alliances.

Our management's discussion and analysis (MD&A) begins with an executive summary that outlines our financial highlights during 2005 and focuses on the impact of drug-eluting stents to our operations. In addition, our executive summary will discuss the significance of the proposed Guidant Corporation acquisition to our future growth. Following the executive summary is an examination of the material changes in our operating results for 2005 as compared to 2004 and our operating results for 2004 as compared to 2003. The operating results are supplemented by an in-depth look at the major issues we believe are most relevant to our current and future prospects, including the proposed acquisition of Guidant. The discussion then provides an examination of liquidity, focusing primarily on material changes in our operating, investing and financing cash flows, as depicted in our statements of cash flows, and the trends underlying these changes. In addition, we will highlight the impact of the potential Guidant acquisition on our future liquidity. Finally, the MD&A provides information on our critical accounting policies.

Our net sales in 2005 increased to $6,283 million from $5,624 million in 2004, an increase of 12 percent. Excluding the favorable impact of $25 million of foreign currency fluctuations, our net sales increased 11 percent. Our gross profit increased to $4,897 million, or 77.9 percent of net sales, in 2005 from $4,332 million, or 77.0 percent of net sales, in 2004. Our reported net income for 2005 was $628 million, or $0.75 per diluted share, as compared to $1,062 million, or $1.24 per diluted share, in 2004. Our reported results included net after-tax charges of $894 million, or $1.07 per diluted share, in 2005 as compared to net after-tax charges of $332 million, or $0.39 per diluted share, in 2004.¹ In addition, our cash provided by operating activities was $903 million in 2005, which includes $750 million paid for the Medinol settlement, as compared to $1,804 million in 2004.

The growth in 2005 resulted largely from a full year of sales of our TAXUS® Express²™ paclitaxel-eluting coronary stent system that we launched in the United States in March 2004 and increased sales of the TAXUS stent system in our Europe and Inter-Continental markets. TAXUS stent sales in 2005 were $2,556 million as compared $2,143 million in 2004, an increase of 19 percent. We have achieved and maintained leading drug-eluting stent market positions within our U.S., Europe

and Inter-Continental markets. Further, due to increased penetration rates and the successful launch of our next-generation TAXUS® Liberté™ paclitaxel-eluting coronary stent system in our Europe and Inter-Continental markets, our international TAXUS stent system sales for 2005 increased by 38 percent as compared to 2004. This increase in sales was offset by decreased TAXUS stent system sales in the U.S. during the second half of 2005, as compared to the same period in the prior year largely due to a reduction in market share, as well as pricing pressure. During the first three quarters of 2005, we experienced sequential declines in our market share. In the fourth quarter of 2005, our market share stabilized and was relatively consistent with the prior quarter. We expect to launch our TAXUS Liberté stent system in the U.S. in the second half of 2006 and our TAXUS Express² stent system in Japan in the first half of 2007, subject to regulatory approvals.

In addition, during 2005, our worldwide Endosurgery group sales increased to $1,228 million from $1,088 million in 2004, an increase of 13 percent. Further, our Neuromodulation division, formed following the June 2004 acquisition of Advanced Bionics Corporation, generated $148 million in net sales during 2005 as compared to $46 million in 2004, which represents the period following the acquisition.

During 2005, we invested a portion of our increased gross profit in various research and development initiatives, particularly related to our 2004 acquisition of Advanced Bionics and our 2005 acquisition of TriVascular, Inc., as well as on projects within our Endosurgery group, including our Endovations™ Endoscopy Suite. We funded additional headcount and programs to strengthen our sales and marketing organization and we made enhancements to our manufacturing and distribution network.

We continued to generate strong operating cash flow during 2005. In addition, due to favorable market conditions, we raised $750 million from the public markets through a November 2005 debt offering. We used cash generated from operating activities and from the public debt issuance to: repay short-term debt obligations; repurchase shares of our common stock on the open market; and fund 2005 strategic alliances and acquisitions.

On January 25, 2006, we entered into a definitive agreement to acquire Guidant Corporation for an aggregate purchase price of $27 billion (net of proceeds from option exercises), which represents a combination of cash and stock worth $80 per share of Guidant common stock. We expect that this acquisition will enable us to become a major provider in the high-growth cardiac rhythm management business, significantly diversifying our revenue stream across multiple business segments and enhancing our overall competitive position. In addition, in conjunction with the acquisition of Guidant, Abbott Laboratories has agreed to acquire Guidant's vascular intervention and endovascular businesses and has agreed 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. The transaction is subject to customary closing conditions, including clearances under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 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.

cited by the FDA prior to the anticipated launch of our TAXUS Liberté stent system in the United States and therefore do not anticipate delays of this product. However, while we believe we can remediate these issues in an expeditious manner, there can be no assurances regarding the length of time it will take to resolve these issues to the satisfaction of the FDA, and any such resolution may require the dedication of significant incremental internal and external resources. In addition, if our remedial actions are not satisfactory to the FDA, the FDA may take further regulatory actions against us, including but not limited to seizing our product inventory, obtaining a court injunction against further marketing of our products or assessing civil monetary penalties.

The following table provides our net sales by region and the relative change on an as reported and constant currency basis:

The following table provides our worldwide net sales by division and the relative change on an as reported and constant currency basis:

We manage our international operating regions and divisions on a constant currency basis, while market risk from currency exchange rate changes is managed at the corporate level.

In 2005, our U.S. net sales increased by $350 million, or 10 percent, as compared to 2004. The increase primarily related to $1,763 million in sales of our TAXUS stent system for 2005 as compared to $1,570 million for 2004. We launched our TAXUS stent system in the U.S. late in the first quarter of 2004 and estimate that physicians in the U.S. have converted approximately 88 percent of the stents they use in interventional procedures from bare-metal stents to drug-eluting stents as of December 31, 2005, as compared to 85 percent at December 31, 2004. The remainder of the increase in our U.S. net sales related to sales growth of $83 million from our Endosurgery group and $75 million from our Neuromodulation division. This increase in sales was offset by decreased TAXUS stent system sales in the U.S. during the second half of 2005, as compared to the same period in the prior year largely due to a reduction in market share, as well as pricing pressure. During the first three quarters of 2005, we experienced sequential declines in our market share. In the fourth quarter of 2005, our market share stabilized and was relatively consistent with the prior quarter.

In 2004, our U.S. net sales increased by $1,578 million, or 82 percent, as compared to 2003. The increase related primarily to $1,570 million in sales of our TAXUS stent system. Declines in our bare-metal stent revenue by $155 million to $59 million in 2004 partially offset this increase, as physicians continued to convert the stents they use in interventional procedures from bare-metal stents to drug-eluting stents, including our TAXUS stent system. Sales from other products within our Cardiovascular division also increased by $49 million, or five percent, during 2004. The remainder of the increase in our U.S. revenues related to sales growth in each of our other U.S. divisions, including $37 million in sales from our Neuromodulation division.

In 2005, our international net sales increased by $309 million, or 15 percent, as compared to 2004. The increase related primarily to sales growth of our TAXUS stent system by $220 million, or 38 percent, in our Europe and Inter-Continental markets. As of December 31, 2005, we estimate that physicians in our Europe and Inter-Continental markets have converted approximately 49 percent of the stents they use in interventional procedures from bare-metal stents to drug-eluting stents, as compared to approximately 40 percent at the end of 2004. Conversion rates have been more gradual in these markets than in the U.S. primarily due to the timing of local reimbursement and funding levels. In addition, we successfully launched our TAXUS Liberté stent system in certain Inter-Continental markets during the first quarter of 2005 and in Europe during the third quarter of 2005. The remainder of the increase in our revenue in these markets was due to growth in various product franchises, including $57 million in incremental sales from our Endosurgery group, and $27 million in sales growth from our Neuromodulation division.

In 2005, our Japan net sales decreased by $34 million, or six percent, as compared to 2004 primarily due to decreased sales from our Cardiovascular division. We have experienced declining coronary stent sales in Japan since a competitor launched its drug-eluting stent in this market late in the second quarter of 2004. Due to the timing of regulatory approval for our TAXUS stent system and government-mandated pricing reductions for other products, we do not expect revenue growth in our existing Japan business until we receive regulatory approval and launch our drug-eluting stent in Japan, which we expect to occur in the first half of 2007.

In 2004, our international net sales increased by $570 million, or 37 percent, as compared to 2003. Excluding the favorable impact of $155 million of foreign currency fluctuations, international net sales increased 27 percent. The increase related primarily to sales growth of our TAXUS stent system by $375 million, or 189 percent, in our Europe and Inter-Continental markets. We launched the TAXUS stent system in these markets during the first quarter of 2003. In addition, in 2004 our Japan net sales increased by $72 million, or 13 percent, as compared to 2003 primarily due to sales of our Express²

stent system, which we launched in Japan during the first quarter of 2004. The remainder of the increase in our revenue in these markets was due to incremental growth in various product franchises, none of which were individually significant.

	2005		2004		2003
(in millions)	$	% of Net Sales	$	% of Net Sales	$	% of Net Sales

Gross profit	4,897	77.9	4,332	77.0	2,515	72.4

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. 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.

	2005		2004		2003
(in millions)	$	% of Net Sales	$	% of Net Sales	$	% of Net Sales

Selling, general and administrative expenses	1,814	28.9	1,742	31.0	1,171	33.7
Research and development expenses	680	10.8	569	10.1	452	13.0
Royalty expense	227	3.6	195	3.5	54	1.6
Amortization expense	152	2.4	112	2.0	89	2.6

In 2005, our SG&A expenses increased by $72 million, or four percent, as compared to 2004. The increase primarily related to: approximately $100 million in increased headcount and higher compensation expense mainly attributable to the expansion of the sales force within our Interventional Cardiology business unit and Endosurgery group and costs related to market development initiatives; $75 million in incremental operating expenses associated with our 2004 and 2005 acquisitions, primarily

Advanced Bionics; $21 million in employee-related costs primarily attributable to optimization initiatives within our human resources function and international divisions; $19 million in stock compensation expense primarily associated with the issuance of deferred stock units in 2005; and $17 million in costs related to certain retirement benefits. Certain charges incurred in 2004 partially offset these increases, including a $110 million enhancement to our 401(k) Plan, and a $90 million non-cash charge resulting from certain modifications to our stock option plans. As a percentage of our net sales, SG&A expenses decreased to 28.9 percent in 2005 from 31.0 percent in 2004 primarily due to the increase in our net sales in 2005.

In 2004, our SG&A expenses increased by $571 million, or 49 percent, as compared to 2003. The increase primarily related to: approximately $200 million in additional marketing programs, increased headcount and higher sales force commission expenses, mainly attributable to our TAXUS stent program and, to a lesser degree, to support our other product franchises; and approximately $40 million due to the impact of foreign currency fluctuations. In addition, our SG&A expenses in 2004 included charges of $110 million attributable to an enhancement to our 401(k) Plan and $90 million resulting from certain modifications to our stock option plans. Further, our SG&A expenses included $40 million in operating expenses associated with our acquisition of Advanced Bionics. As a percentage of our net sales, SG&A expenses decreased to 31.0 percent in 2004 from 33.7 percent in 2003 primarily due to the significant increase in our net sales in 2004.

Our investment in research and development reflects spending on regulatory compliance and clinical research as well as new product development programs. In 2005, our research and development expenses increased by $111 million, or 20 percent, as compared to 2004. As a percentage of our net sales, research and development expenses increased to 10.8 percent in 2005 from 10.1 percent in 2004. The increase primarily related to approximately $60 million in incremental research and development expenses attributable to our 2004 and 2005 acquisitions, primarily Advanced Bionics and TriVascular. In addition, we increased spending on internal research and development projects within our Endosurgery group by $25 million, including increased spending on our Endovations Endoscopy Suite.

In 2004, our research and development expenses increased by $117 million, or 26 percent, as compared to 2003. The increase related primarily to an increased investment of approximately $50 million in our Cardiovascular division, which was mainly associated with our next-generation stent platforms. In addition, our research and development expenses in 2004 included $25 million attributable to our acquisition of Advanced Bionics. The remainder of the growth in our research and development spending reflects investments to enhance our clinical and regulatory infrastructure and provide additional funding for research and development on next-generation and novel technology offerings across multiple programs and divisions. As a percentage of our net sales, research and development expenses decreased to 10.1 percent in 2004 from 13.0 percent in 2003 primarily due to the significant increase in our net sales in 2004.

In 2005, our royalty expense increased by $32 million, or 16 percent, as compared to 2004. As a percentage of net sales, royalty expense increased to 3.6 percent in 2005 from 3.5 percent in 2004. The increase in our royalty expense related to sales growth of royalty-bearing products, primarily sales of our TAXUS stent system. Royalty expense attributable to sales of our TAXUS stent system increased by $27 million to $174 million for 2005 as compared to 2004.

In 2004, our royalty expense increased by $141 million, or 261 percent, as compared to 2003. As a percentage of net sales, royalty expense increased to 3.5 percent in 2004 from 1.6 percent in 2003. The increase in our royalty expense related to sales growth of royalty-bearing products, primarily sales of

our TAXUS stent system. Royalty expense attributable to sales of our TAXUS stent system increased by $137 million to $147 million for 2004 as compared to 2003. In November 2004, we exercised our right under an existing licensing agreement with Angiotech Pharmaceuticals, Inc. to obtain an exclusive license for the use of paclitaxel and other agents for certain applications in the coronary vascular field.

In 2005, our amortization expense increased by $40 million, or 36 percent, as compared to 2004. As a percentage of our net sales, amortization expense increased to 2.4 percent in 2005 from 2.0 percent in 2004. The increase in our amortization expense was primarily due to $25 million in incremental amortization expense from the intangible assets obtained in conjunction with our 2004 and 2005 acquisitions, primarily Advanced Bionics. In addition, our amortization expense included a $10 million write-off of intangible assets related to our Enteryx® Liquid Polymer Technology (Enteryx), a discontinued technology platform obtained as a part of our acquisition of Enteric Medical Technologies, Inc. The write-off resulted from our decision during the third quarter of 2005 to cease selling the Enteryx product.

In 2004, our amortization expense increased by $23 million, or 26 percent, as compared to 2003. The increase related primarily to the amortization of intangible assets from our acquisitions in 2004 of Advanced Bionics and Precision Vascular Systems, Inc. (PVS). Amortization expense for these two acquisitions was $17 million in 2004. As a percentage of our net sales, amortization expense decreased to 2.0 percent in 2004 from 2.6 percent in 2003 primarily due to the significant increase in our net sales in 2004.

Our interest expense increased to $90 million in 2005 from $64 million in 2004 and $46 million in 2003. The increase in 2005 as compared to 2004 related primarily to an increase in average market interest rates on our borrowings. The increase in 2004 as compared to 2003 related primarily to an increase in our average debt levels and in average market rates on our floating-rate borrowings.

Our other, net reflected income of $13 million in 2005, expense of $16 million in 2004, and expense of $8 million in 2003. Our other, net included asset write-downs of $17 million in 2005 and $58 million in 2004 associated with certain investments in and loans to privately held and publicly traded companies. We do not believe that these write-downs of assets will have a material impact on our future operations. In 2004, our other, net included realized gains of $36 million from sales of investments in privately held and publicly traded companies. In addition, our other, net included interest income of $36 million in 2005, $20 million in 2004, and $6 million in 2003. Our interest income increased in 2005 as compared to 2004 due to increases in average market interest rates. Our interest income in 2004 increased as compared to 2003 due primarily to growth in our cash balances.

							Percentage Point Increase
	2005		2004		2003		2005 versus 2004	2004 versus 2003

Reported tax rate	29.5	%	28.9	%	26.6	%	0.6	2.3
Impact of certain charges	5.5	%	4.9	%	1.6	%	0.6	3.3

In 2005, the increase in our reported tax rate as compared to 2004 related primarily to the impact of certain charges during 2005 that are taxed at different rates than our effective tax rate. These

charges include: certain litigation-related charges; purchased research and development; asset write-downs and employee-related costs that resulted from certain business optimization initiatives; costs related to certain retirement benefits; and a tax adjustment associated with a technical correction made to the American Jobs Creation Act.

Management currently estimates that our 2006 effective tax rate, excluding certain charges, will be approximately 23 percent primarily due to our intention to reinvest substantially all of our offshore earnings. However, geographic changes in the manufacture of our products may positively or negatively impact our effective tax rate.

In 2004, the increase in our reported tax rate as compared to 2003 related primarily to the net impact of certain charges during 2004 that were taxed at different rates than our effective tax rate. These charges included: a provision for an extraordinary dividend related to overseas cash balances we repatriated in 2005 pursuant to the American Jobs Creation Act; an accrual for our legal and regulatory exposures; an enhancement to our 401(k) Plan; purchased research and development; and a non-cash charge resulting from certain modifications to our stock option plans. In addition, our effective tax rate was favorably impacted by more revenue being generated from products manufactured in lower tax jurisdictions.

In 2005, we recorded a $780 million pre-tax charge associated with the Medinol litigation settlement. On September 21, 2005, we reached a settlement with Medinol resolving certain contract and patent infringement litigation. In conjunction with the settlement agreement, we paid $750 million in cash and cancelled our equity investment in Medinol.

In 2004, we recorded a $75 million provision for certain legal and regulatory matters, which included the civil settlement with the U.S. Department of Justice, which was paid in the second quarter of 2005.

In 2003, we agreed to settle a number of our outstanding product liability cases. The cost of settlement in excess of our available insurance limits was $8 million. In addition, during 2003, we recorded a $7 million charge related to an adverse judgment in a suit filed by the Federal Trade Commission.

In 2005, we recorded $276 million of purchased research and development. Our 2005 purchased research and development consisted of: $130 million relating to our acquisition of TriVascular; $73 million relating to our acquisition of Advanced Stent Technologies, Inc. (AST); $45 million relating to our acquisition of Rubicon Medical Corporation; and $3 million relating to our acquisition of CryoVascular Systems, Inc. In addition, we recorded $25 million of purchased research and development in conjunction with obtaining distribution rights for new brain monitoring technology that Aspect Medical Systems, one of our strategic partners, is currently developing. This technology is designed to aid the diagnosis and treatment of depression, Alzheimer's disease and other neurological conditions.

The most significant 2005 purchased research and development projects included TriVascular's abdominal aortic aneurysms (AAA) stent-graft and AST's Petal™ bifurcation stent, which collectively represented 73 percent of our 2005 purchased research and development. TriVascular's AAA stent-graft design reduces the size of the stent-graft by replacing much of the metal stent assembly with a polymer that is injected into channels within the stent-graft during the procedure. During the fourth quarter of 2005, management decided to re-design certain aspects of the stent graft to enhance patient safety and to improve product performance. The re-design will result in incremental costs and time to complete

the project relative to those expected at the date of acquisition. We currently expect to launch the AAA stent-graft in the U.S. by 2011 and to incur approximately $200 million of research and development costs over the next five years to complete the project. We continue to assess the pace of development and our opportunities within this market, which may result in a delay in the timing of regulatory approval.

AST's Petal bifurcation stent is designed to expand into the side vessel when a single vessel branches into two vessels, permitting blood to flow into both branches of the bifurcation and providing support at the junction. We estimate the cost to complete the Petal bifurcation stent to be between $100 million and $125 million. As of the date we acquired AST, we expected the Petal bifurcation stent to be commercially available on a worldwide basis within six years in a drug-eluting configuration.

In 2004, we recorded $65 million of purchased research and development. Our 2004 purchased research and development consisted primarily of $50 million relating to our acquisition of Advanced Bionics and $14 million relating to our acquisition of PVS. The most significant in-process projects acquired in connection with our 2004 acquisitions included Advanced Bionics' bion® microstimulator and drug delivery pump, which collectively represented 77 percent of our 2004 acquired in-process projects' value. The bion microstimulator is an implantable neurostimulation device designed to treat a variety of neurological conditions, including migraine headaches and urge incontinence. The cost to complete the bion microstimulator is estimated to be between $35 million and $45 million. We expect that the bion microstimulator will be commercially available within three years. The Advanced Bionics drug delivery pump is an implanted programmable device designed to treat chronic pain. The cost to complete the drug delivery pump is estimated to be between $30 million and $40 million. We continue to assess the pace of development and our opportunities for the drug delivery pump, which may result in a delay in the timing of regulatory approval.

In 2003, we recorded $37 million of purchased research and development. Our 2003 purchased research and development consisted of $9 million relating to our acquisition of InFlow Dynamics, Inc. and $28 million relating primarily to certain acquisitions we consummated in prior years. The in-process projects acquired in connection with our acquisition of InFlow were not significant to our consolidated results. The purchased research and development associated with the prior years' acquisitions related primarily to our 2001 acquisition of Embolic Protection, Inc. and resulted from consideration that was contingent at the date of acquisition, but earned during 2003.

In connection with our 2002 acquisitions, we acquired several in-process projects, including Smart Therapeutics, Inc.'s atherosclerosis stent. The atherosclerosis stent is a self-expanding nitinol stent designed to treat narrowing of the arteries around the brain. During 2005, we completed the atherosclerosis stent in-process project and received Humanitarian Device Exemption approval to begin selling this technology on a limited basis. The total cost for us to complete the project was approximately $10 million.

In connection with our 2001 acquisitions, we acquired several significant in-process projects, including Interventional Technologies, Inc.'s next-generation Cutting Balloon® device. The Cutting Balloon device is a novel balloon angioplasty device with mounted scalpels that relieve stress in the artery, reducing the force necessary to expand the vessel. During 2005, we completed the Cutting Balloon in-process project and received FDA approval for this technology. The total cost for us to complete the project was approximately $7 million.

Coronary stent revenue represented 43 percent of our consolidated net sales during 2005, and approximated $2,693 million in 2005 as compared to $2,351 million in 2004. We estimate that the worldwide coronary stent market will approximate $6 billion in 2006, as compared to $5.9 billion in 2005. Drug-eluting stents are estimated to represent approximately 87 percent of the dollar value of the worldwide coronary stent market in 2005 and 90 percent in 2006. As of the fourth quarter of 2005, we believe that the U.S. stent market has been substantially penetrated and estimate that physicians in the U.S. have converted approximately 88 percent of the stents they use in interventional procedures from bare-metal stents to drug-eluting stents. We have experienced declines in our U.S. drug-eluting stent revenues in the second half of 2005 as compared to the same period in the prior year largely as a result of a reduction in market share, as well as pricing pressure. During the first three quarters of 2005, we experienced sequential declines in our market share. In the fourth quarter of 2005, our market share stabilized and was relatively consistent with the prior quarter. We expect to launch our TAXUS Liberté stent system in the U.S. during the second half of 2006, subject to regulatory approval.

As of the fourth quarter of 2005, we estimate that physicians in our Europe and Inter-Continental markets have converted approximately 49 percent of the stents they use in interventional procedures from bare-metal stents to drug-eluting stents, as compared to approximately 40 percent at the end of 2004. We expect that conversion rates will continue to increase in our Europe and Inter-Continental markets. We successfully launched our TAXUS Liberté stent system in certain Inter-Continental markets during the first quarter of 2005 and in Europe during the third quarter of 2005. We believe our TAXUS Liberté stent system represents a driver of future revenue in these markets. Further, we expect to launch our TAXUS Express² stent system in Japan during the first half of 2007, subject to regulatory approval, where we estimate the size of the market in 2007 to approximate $700 million.

Historically, the worldwide coronary stent market has been dynamic and highly competitive with significant market share volatility. In addition, in the ordinary course of our business, we conduct and participate in numerous clinical trials with a variety of study designs, patient populations and trial endpoints. Unfavorable or inconsistent clinical data from existing or future clinical trials conducted by us, by our competitors or by third parties, or the market's perception of this clinical data, may adversely impact our position in and share of the drug-eluting stent market and may contribute to increased volatility in the market.

We believe that we can maintain a leadership position within the drug-eluting stent markets in which we compete for a variety of reasons, including:

A material decline in our drug-eluting stent revenue would have a significant adverse impact on our future operating results. The most significant variables that may impact the size of the drug-eluting coronary stent market and our position within this market include:

Our drug-eluting stent system is currently one of only two drug-eluting products in the U.S. market. Our share of the drug-eluting stent market, as well as unit prices, are expected to continue to be adversely impacted as additional significant competitors enter the drug-eluting stent market, which began during the third quarter of 2005 internationally and is expected to occur during the second half of 2007 in the U.S.

The manufacture of our TAXUS stent system involves the integration of multiple technologies, critical components, raw materials and complex processes. Significant favorable or unfavorable changes in forecasted demand as well as disruptions associated with our TAXUS stent manufacturing process may impact our inventory levels. Variability in expected demand or the timing of the launch of next-generation products may result in excess or expired inventory positions and future inventory charges.

The trend in countries around the world, including the U.S. and Japan, toward more stringent regulatory requirements for product clearance, changing reimbursement models and more rigorous inspection and enforcement activities has generally caused or may cause medical device manufacturers like us to experience more uncertainty, delay, risk and expense. 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. As also stated in this FDA warning letter, 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 practices deficiencies described in the letter are reasonably related until the deficiencies described in the letter have been corrected. We intend to resolve the quality issues cited by the FDA prior to the anticipated launch of our TAXUS Liberté stent system in the United States and therefore do not anticipate delays of this product. However, while we believe we can remediate these issues in an expeditious manner, there can be no assurances regarding the length of time it will take to resolve these issues to the satisfaction of the FDA, and any such resolution will likely require the dedication of significant incremental internal and external resources. In addition, if our remedial actions are not satisfactory to the FDA, the FDA may take further regulatory actions against us, including but not limited to seizing our product inventory, obtaining a court injunction against further marketing of our products or assessing civil monetary penalties.

There continues to be significant intellectual property litigation in the coronary stent market and medical device industry. We are currently involved in a number of legal proceedings with our competitors, including Johnson & Johnson and Medtronic, Inc. There can be no assurance that an adverse outcome in one or more of these proceedings would not impact our ability to meet our

objectives in the market. See Item 3. Legal Proceedings and Note J—Commitments and Contingencies to our 2005 consolidated financial statements included in Item 8 of this Form 10-K for a description of these legal proceedings.

Our approach to innovation combines internally developed products and technologies with those we obtain externally through our strategic acquisitions and alliances. Our research and development program is largely focused on the development of next-generation and novel technology offerings across multiple programs and divisions. We expect to continue to invest aggressively in our drug-eluting stent program to achieve sustained worldwide market leadership positions. We successfully launched our TAXUS Liberté stent system in certain Inter-Continental markets during the first quarter of 2005 and in Europe during the third quarter of 2005. We expect to launch our TAXUS Liberté stent system in the U.S. during the second half of 2006, subject to regulatory approval. Further, we anticipate continuing our increased focus and spending on areas outside of drug-eluting stent technology. We believe our focus will be primarily on technologies in which we have already made significant investments, including neuromodulation, endoscopic systems, carotid stenting, and bifurcation stenting, but may also extend into other medical device opportunities. However, given their early stage of development, there can be no assurance that these technologies will achieve technological feasibility, obtain regulatory approval or gain market acceptance. A delay in the development or approval of these technologies or our decision to reduce funding of these projects may adversely impact the contribution of these technologies to our future growth.

Our acquisitions and alliances are intended to expand further our ability to offer our customers effective, quality medical devices that satisfy their interventional needs. Management believes it has developed a sound plan to integrate acquired businesses. However, our failure to integrate these businesses successfully could impair our ability to realize the strategic and financial objectives of these transactions. Potential future acquisitions, including companies with whom we currently have strategic alliances or options to purchase, may be dilutive to our earnings and may require additional financing, depending on their size and nature. Further, in connection with these acquisitions and other strategic alliances, we have acquired numerous in-process research and development projects. As we continue to undertake strategic initiatives, it is reasonable to assume that we will acquire additional in-process research and development projects.

In addition, we have entered a significant number of strategic alliances with privately held and publicly traded companies. Many of these alliances involve equity investments and often give us the option to acquire the other company or assets of the other company in the future. We enter these strategic alliances to broaden our product technology portfolio and to strengthen and expand our reach into existing and new markets. The success of these alliances is an important element of our growth strategy and we will continue to seek market opportunities and growth through investments in selective strategic alliances and acquisitions. However, the full benefit of these alliances is often dependent on the strength of the other companies' underlying technology and ability to execute. An inability to achieve regulatory approvals and launch competitive product offerings, or litigation related to these technologies, among other factors, may prevent us from realizing the benefit of these alliances.

Our agreement to distribute certain guidewire and sheath products will expire during the first quarter of 2006. Management has identified some replacements for these products. The sales level associated with the replacement products is expected to be less than that of our previously distributed products.

International markets are also being 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, regulatory, reimbursement or economic environment where we conduct international operations may have a material impact on our business, financial condition or results of operations.

In addition, we are required to renew regulatory approvals in certain international jurisdictions, which may require additional testing and documentation. If sufficient resources are not available to renew these approvals or these approvals are not timely renewed, our ability to market our full line of existing products within these jurisdictions may be limited.

On January 25, 2006, we entered into a definitive agreement to acquire Guidant Corporation for an aggregate purchase price of $27 billion (net of proceeds from option exercises), which represents a combination of cash and stock worth $80 per share of Guidant common stock. We expect that this acquisition will enable us to become a major provider in the high-growth cardiac rhythm management business, significantly diversifying our revenue stream across multiple business segments and enhancing our overall competitive position. In addition, in conjunction with the acquisition of Guidant, Abbott Laboratories has agreed to acquire Guidant's vascular intervention and endovascular businesses and has agreed 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 coronary stent program. The transaction is subject to customary closing conditions, including clearances under the Hart-Scott-Rodino Antitrust Improvements Act 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.

In connection with the acquisition, Boston Scientific will issue to Guidant shareholders and Abbott shares of Boston Scientific common stock. As a result of the issuance of these shares, current Boston Scientific stockholders will own a smaller percentage of Boston Scientific after the acquisition. We expect our weighted average shares outstanding, assuming dilution, to increase from approximately 840 million for 2005 to approximately 1.4 billion following the acquisition. The acquisition will also result in significant dilution to our 2006 earnings per share.

The integration of Guidant's operations and product lines with Boston Scientific will be complex and time-consuming, and the separation of the Guidant businesses required by the Abbott transaction will add complexity to the transition process. The failure to integrate Boston Scientific and Guidant successfully and to manage the challenges presented by the transition process successfully, including the retention of key Guidant personnel, may result in the combined company and its stockholders not achieving the anticipated potential benefits of the acquisition.

In addition, the combined company will incur integration and restructuring costs following the completion of the acquisition as Boston Scientific integrates certain operations of Guidant. Although Boston Scientific and Guidant expect that the realization of efficiencies related to the integration of the businesses may offset incremental transaction, merger-related and restructuring costs over time, no assurances can be made that this net benefit will be achieved in the near term, or at all.

Completion of the acquisition is conditioned upon the receipt of certain governmental authorizations, consents, orders and approvals, including the expiration or termination of the applicable waiting period, and any extension of the waiting period, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and approval under the European Union merger control regulation. These consents, orders and approvals may impose conditions on, or require divestitures relating to, the divisions, operations or assets of Boston Scientific or Guidant, in addition to the purchase by Abbott of Guidant's vascular and endovascular businesses, and could require modification to the terms of the Abbott transaction agreement in a manner adverse to Boston Scientific or the combined company. These conditions or divestitures may jeopardize or delay completion of the Abbott

transaction or the acquisition or may reduce the anticipated benefits of the Abbott transaction or the acquisition. Further, no assurance can be given that the required consents and approvals will be obtained or that the required conditions to closing will be satisfied, and, if all required consents and approvals are obtained and the conditions are satisfied, no assurance can be given as to the terms, conditions and timing of the approvals or that they will satisfy the terms of the merger agreement. Additionally, completion of the acquisition is conditioned on the absence of certain restraining orders or injunctions by judgment, court order or law that would restrain or prohibit consummation of the acquisition. Boston Scientific and Guidant have received recent claims related to the acquisition from plaintiffs seeking an injunction to prohibit consummation of the acquisition and other relief, including monetary damages.

The following table provides a summary of key performance indicators that we use to assess our liquidity and operating performance:

(in millions)	2005			2004		2003

Cash and cash equivalents	$	689		$	1,296	$	671
Short-term marketable securities		159			344		81
Cash provided by operating activities		903			1,804		787
Cash used for investing activities		551			1,622		871
Cash (used for) provided by financing activities		(954	)		439		487
EBITDA*		1,259			1,813		879

(in millions)	2005			2004			2003

Net income	$	628		$	1,062		$	472
Income taxes		263			432			171
Interest expense		90			64			46
Interest income		(36	)		(20	)		(6	)
Depreciation and amortization		314			275			196

EBITDA	$	1,259		$	1,813		$	879

Management uses EBITDA to assess operating performance and believes that it may assist users of our financial statements in analyzing the underlying trends in our business over time. Users of our financial statements should consider this non-GAAP financial information in addition to, not as a substitute for, or as superior to, financial information prepared in accordance with GAAP. Our EBITDA included pre-tax charges of $1,112 million in 2005, $340 million in 2004 and $52 million in 2003.²

Cash generated by our operating activities continues to provide a major source of funds for investing in our growth. The decrease in cash generated by our operating activities in 2005 as compared to 2004 is primarily attributable to the decrease in EBITDA and by changes in our operating assets and liabilities. The decrease in EBITDA in 2005 as compared to 2004 reflects our third quarter 2005 settlement with Medinol, which was partially offset by increased sales of our TAXUS stent system during 2005. We invested a portion of the cash from sales of our TAXUS stent system in our sales, clinical and manufacturing capabilities, and in research and development projects.

Significant cash flow effects from our operating assets and liabilities in 2005 included decreases in cash flow of: $162 million attributable to accounts payable and accrued expenses; $77 million attributable to inventories; $59 million attributable to prepaid expenses and other assets; and $45 million attributable to taxes payable and other liabilities. The decrease in accounts payable and accrued expenses in 2005 as compared to 2004 related to our $75 million provision for certain legal and regulatory matters, which included a civil settlement with the Department of Justice, and our one-time $110 million 401(k) contribution, which were both paid during June 2005. The increase in inventories in 2005 as compared to 2004 related primarily to the accumulation of inventory to fulfill worldwide demand for our TAXUS stent system and our Neuromodulation products. The increase in prepaid expenses and other assets in 2005 as compared to 2004 was attributable to the establishment of a tax-related receivable. The decrease in taxes payable and other liabilities in 2005 as compared to 2004 primarily related to $350 million in tax payments made during 2005 including those associated with cash repatriated under the American Jobs Creation Act and to the expected tax benefit associated with the settlement agreement with Medinol. The decrease in taxes payable in 2005 as compared to 2004 was partially offset by the increase in taxes payable associated with our 2005 earnings.

We made capital expenditures of $341 million in 2005 as compared to $274 million in 2004. The increase primarily related to capital spending to enhance our manufacturing and distribution capabilities. We expect to incur capital expenditures of approximately $400 million during 2006 (excluding Guidant), which includes additional capital expenditures to allow further growth in our Endosurgery group and Neuromodulation division, and certain business optimization initiatives in our human resources function, primarily outsourcing costs.

Our investing activities during 2005 also included: $178 million of net payments primarily attributable to our acquisitions of Rubicon, TriVascular and CryoVascular; $33 million of acquisition earn-out payments primarily associated with prior acquisitions; and $208 million of payments related to our strategic alliances with both privately held and publicly traded companies.

Our cash flows from financing activities reflect proceeds from long-term public debt issuances; repayment of short-term borrowings; payments for share repurchases; and proceeds from option exercises related to our equity incentive programs.

We had outstanding borrowings of $2,020 million at December 31, 2005 at a weighted average interest rate of 4.80 percent as compared to outstanding borrowings of $2,367 million at December 31, 2004 at a weighted average interest rate of 3.38 percent. During 2005, we made net payments on borrowings of $313 million.

Our cash and cash equivalents are primarily held by our non-U.S. operations. In 2005, we repatriated approximately $1,046 million in extraordinary dividends as defined in the American Jobs Creation Act from our non-U.S. operations. The American Jobs Creation Act created a temporary incentive for U.S. corporations to repatriate accumulated income earned abroad by providing an 85 percent dividends received deduction for certain dividends from controlled foreign corporations. As of December 31, 2004, we had recorded a tax liability of $61 million for the amounts we intended to repatriate in 2005 under the American Jobs Creation Act.

In 2005, we repatriated earnings of non-U.S. subsidiaries that did not qualify under the American Jobs Creation Act. The resulting tax liabilities associated with this repatriation were $127 million. In addition, during 2005, we made a decision to repatriate additional amounts from certain of our non-U.S. operations. In connection with this decision, we established a deferred tax liability of $27 million that we believe is adequate to cover the taxes related to this repatriation.

During 2005, we refinanced our revolving credit facilities to extend the maturity of one credit facility and to reduce borrowing capacity by $165 million. At December 31, 2005, our revolving credit facilities totaled approximately $2,020 million, as compared to $2,185 million at December 31, 2004. Our revolving credit facilities at December 31, 2005 consisted of a $1,500 million credit facility that terminates in May 2009; a $500 million credit facility that terminates in May 2010 and contains an option to increase the facility size by an additional $500 million in the future; and a $20 million uncommitted credit facility that terminates in May 2006. Our use of the borrowings is unrestricted and the borrowings are unsecured.

Our credit facilities provide us with borrowing capacity and support our commercial paper program. We had $149 million of commercial paper outstanding at December 31, 2005 at a weighted average interest rate of 4.11 percent and $280 million outstanding at December 31, 2004 at a weighted average interest rate of 2.44 percent. In September 2005, we repaid 45 billion Japanese yen (approximately $400 million) in credit facility borrowings outstanding at a weighted average interest rate of 0.37 percent.

During 2005, we decreased our credit and security facility that is secured by our U.S. trade receivables from $400 million to $100 million, effective April 30, 2005. During the first quarter of 2006, we expect to increase this facility from $100 million to $350 million. The credit and security facility terminates in August 2006. Borrowing availability under this facility changes based upon the amount of eligible receivables, concentration of eligible receivables and other factors. Certain significant changes

in the quality of our receivables may require us to repay borrowings immediately under the facility. The credit agreement required us to create a wholly-owned entity, which is consolidated. This entity purchases our U.S. trade accounts receivable and then borrows from two third-party financial institutions using these receivables as collateral. The receivables and related borrowings remain on the balance sheet because we have the right to prepay any borrowings outstanding and effectively retain control over the receivables. Accordingly, pledged receivables are included as trade accounts receivable, net, while the corresponding borrowings are included as debt on the consolidated balance sheets. There were no outstanding borrowings under the revolving credit and security facility as of December 31, 2005 or December 31, 2004.

In addition, we have uncommitted credit facilities with two commercial Japanese banks that provide for borrowings and promissory notes discounting of up to 15 billion Japanese yen (translated to $127 million at December 31, 2005 and $145 million at December 31, 2004). Approximately $109 million of notes receivable were discounted at an average interest rate of 0.75 percent at December 31, 2005 and $128 million of notes receivable were discounted at an average interest rate of 0.75 percent at December 31, 2004.

As of December 31, 2005 and December 31, 2004, we intended to repay all of our short-term debt obligations within the next twelve-month period.

We had senior notes of $1,850 million outstanding at December 31, 2005 and $1,600 million outstanding at December 31, 2004.

See Item 7A. Quantitative and Qualitative Disclosure About Market Risk for further discussion regarding the treatment of our interest rate swaps.

The remainder of our outstanding borrowings, including capital lease arrangements, was immaterial at December 31, 2005 and December 31, 2004.

We repurchased approximately 25 million shares of our common stock at an aggregate cost of $734 million in 2005, 10 million shares of our common stock at an aggregate cost of $360 million in 2004, and 22 million shares of our common stock at an aggregate cost of $570 million in 2003. Since 1992, we have repurchased approximately 132 million shares of our common stock and we have approximately 24 million shares of our common stock held in treasury at year end. Approximately 37 million shares remain under our previous share repurchase authorizations. Repurchased shares are available for reissuance under our equity incentive plans and for general corporate purposes, including strategic alliances and acquisitions.

During 2005, we received $94 million in proceeds from stock issuances related to our stock option and employee stock purchase plans. Proceeds from the exercise of employee stock options vary from period to period based upon, among other factors, fluctuations in the exercise patterns of employees.

At the effective time of the acquisition, each share of Guidant common stock will be converted into the right to receive (i) $42.00 in cash and (ii) a number of shares of Boston Scientific common stock equal to $38.00, subject to the calculation of the exchange ratio. See Note O—Subsequent Events to our 2005 consolidated financial statements included in Item 8 of this Form 10-K for further details regarding the exchange ratio that will be used in determining the purchase price. Under the terms of the Abbott transaction agreement and at the closing of the Abbott transaction, Abbott has agreed to (1) pay an initial purchase price of $4.1 billion in cash plus potential future earn-out payments for the Guidant vascular and endovascular businesses, (2) make a five-year subordinated loan of $900 million to us at a 4.00 percent annual interest rate, and (3) purchase $1.4 billion in shares of Boston Scientific common stock.

In connection with the financing of the cash portion of the purchase price, various banks have committed to providing up to $14 billion in financing, which includes a $7 billion 364-day interim credit facility, a $5 billion five-year term loan facility and a $2 billion five-year revolving credit facility. The interim credit facility, term loan and revolving credit facility will bear interest at LIBOR plus an interest margin between 0.30 percent (high A rating) and 0.85 percent (low BBB rating). The interest

margin will be based on the highest two out of three of our long-term, senior unsecured, corporate credit ratings from Moody's Investor Service, Inc., Standard & Poor's Rating Services and Fitch Ratings. Of the $14 billion available pursuant to the commitment letter, we expect to borrow approximately $7.1 billion to finance the cash portion of the Guidant acquisition purchase price, which includes the $5 billion five-year term loan facility and $2.1 billion in borrowings under the 364-day interim credit facility. We also expect to use the $900 million loan from Abbott, for a total of $8 billion in borrowings to finance the cash portion of the purchase price. In 2006, we anticipate filing a new public registration statement with the SEC under which we intend to issue senior notes in order to refinance any borrowings outstanding under the interim credit facility and to register shares that we will issue to Abbott. The new five-year revolving credit facility will replace our existing $2 billion credit facilities. We also plan to use cash on hand and cash from the Abbott transaction to fund the cash portion of the Guidant purchase price. If the acquisition is completed, we intend to dedicate a significant portion of our future cash flow from operations to repay our outstanding debt obligations.

We currently have investment grade credit ratings. During February 2006, our credit rating was downgraded. The rating agencies have also indicated that they will further downgrade our credit ratings when the Guidant acquisition is consummated. However, we expect our credit ratings to remain at investment grade levels following the acquisition. Our credit ratings affect our cost of borrowings. If our credit ratings were to be downgraded below investment grade, our borrowing costs may increase and we may be subject to more stringent terms and conditions than those currently contained in our financing arrangements.

In addition, our authorized common stock will be increased from 1,200,000,000 shares to 2,000,000,000 shares in conjunction with our proposed acquisition of Guidant.

The following table provides a summary of certain information concerning our obligations and commitments to make future payments. See Notes D, F, H and O to our 2005 consolidated financial statements included in Item 8 of this Form 10-K for additional information regarding our business combinations, long-term debt, lease arrangements, and subsequent events.

Certain of our business combinations involve the payment of contingent consideration. Certain of these payments are based on multiples of the acquired company's revenue during the earn-out period and, consequently, we cannot currently determine the total payments. However, we have developed an estimate of the maximum potential contingent consideration for each of our acquisitions with an outstanding earn-out obligation. At December 31, 2005, the estimated maximum potential amount of future contingent consideration (undiscounted) that we could be required to make associated with our business combinations is approximately $4 billion, some of which may be payable in our common stock. The milestones associated with the contingent consideration must be reached in certain future periods ranging from 2006 through 2016. The estimated cumulative specified revenue level associated with these maximum future contingent payments is approximately $10 billion. Since it is not possible to estimate when, or even if, the acquired companies will reach their performance milestones or the amount of contingent consideration payable based on future revenues, the maximum contingent consideration has not been included in the table above.

In addition, we are currently considering the exercise of our option to acquire EndoTex Interventional Systems, Inc., a developer of stents used in the treatment of stenotic lesions in the carotid arteries. In conjunction with the acquisition of EndoTex, we would pay approximately $100 million in addition to our previous investments and notes issued of approximately $35 million, plus future consideration that is contingent upon EndoTex achieving certain performance-related milestones. Further, many of our equity investments give us the option to acquire the company in the future or require us to make certain payments that are contingent upon the company achieving certain product development targets or obtaining regulatory approvals. Since it is not possible to estimate when, or even if, we will exercise our option to acquire these companies or be required to make these contingent payments, we have not included future potential payments relating to these equity investments in the table above.

We have adopted accounting policies to prepare our consolidated financial statements in conformity with U.S. GAAP. We describe these accounting polices in Note A—Significant Accounting Policies to our 2005 consolidated financial statements included in Item 8 of this Form 10-K.

To prepare our consolidated financial statements in accordance with U.S. GAAP, management makes estimates and assumptions that may affect the reported amounts of our assets and liabilities, the disclosure of contingent assets and liabilities at the date of our financial statements and the reported amounts of our revenue and expenses during the reporting period. Our actual results may differ from these estimates.

These estimates are considered critical (1) if we are required to make assumptions about material matters that are uncertain at the time of estimation or (2) if materially different estimates could have been made or it is reasonably likely that the accounting estimate will change from period to period. The following are areas that we consider to be critical:

Our revenue primarily consists of the sale of single-use medical devices. Revenue is considered to be realized or realizable and earned when all of the following criteria are met: persuasive evidence of a

sales arrangement exists; delivery has occurred or services have been rendered; the price is fixed or determinable; and collectibility is reasonably assured. These criteria are generally met at the time of shipment when the risk of loss and title passes to the customer or distributor, unless a consignment arrangement exists. We recognize revenue from consignment arrangements based on product usage, which indicates that the sale is complete.

We generally allow our customers to return defective, damaged and, in certain cases, expired products for credit. Our estimate for sales returns is based upon contractual commitments and historical trends and is recorded as a reduction to revenue.

We offer sales rebates and discounts to certain customers. We treat sales rebates and discounts as a reduction of revenue and classify the corresponding liability as current. We estimate rebates for products where there is sufficient historical information available to predict the volume of expected future rebates. If we are unable to estimate the expected rebates reasonably, we record a liability for the maximum rebate percentage offered.

We state inventories at the lower of first-in, first-out cost or market. We base our provisions for excess or expired inventory primarily on our estimates of forecasted net sales levels. A significant change in the timing or level of demand for our products as compared to forecasted amounts may result in recording additional provisions for excess or expired inventory in the future. We record provisions for inventory located in our manufacturing and distribution facilities as cost of sales. Consignment inventory write-downs are charged to selling, general and administrative expense and approximated $15 million in 2005, $10 million in 2004, and $8 million in 2003.

We record intangible assets acquired in recent business combinations under the purchase method of accounting. We allocate the amounts we pay for each acquisition to the assets we acquire and liabilities we assume based on their fair values at the dates of acquisition. We then allocate the purchase price in excess of net tangible assets acquired to identifiable intangible assets, including purchased research and development. The fair value of identifiable intangible assets is based on detailed valuations that use information and assumptions provided by management. We allocate any excess purchase price over the fair value of the net tangible and intangible assets acquired to goodwill. The use of alternative purchase price allocations and alternative estimated useful life assumptions could result in different intangible asset amortization expense in current and future periods.

The valuation of purchased research and development represents the estimated fair value at the dates of acquisition related to in-process projects. Our purchased research and development represents the value of in-process projects that have not yet reached technological feasibility and have no alternative future uses as of the date of acquisition. The primary basis for determining the technological feasibility of these projects is obtaining regulatory approval to market the underlying products in an applicable geographic region. We expense the value attributable to these in-process projects at the time of the acquisition. If the projects are not successful or completed in a timely manner, we may not realize the financial benefits expected for these projects, or for the acquisitions as a whole.

We use the income approach to determine the fair values of our purchased research and development. This approach determines fair value by estimating the after-tax cash flows attributable to an in-process project over its useful life and then discounting these after-tax cash flows back to a present value. We base our revenue assumptions on estimates of relevant market sizes, expected market growth rates, expected trends in technology and expected product introductions by competitors. In arriving at the value of the in-process projects, we consider, among other factors, the in-process projects' stage of completion, the complexity of the work completed as of the acquisition date, the costs

already incurred, the projected costs to complete, the contribution of core technologies and other acquired assets, the expected introduction date and the estimated useful life of the technology. We base the discount rate used to arrive at a present value as of the date of acquisition on the time value of money and medical technology investment risk factors. For the in-process projects we acquired in connection with our recent acquisitions, we used the following risk-adjusted discount rates to discount our projected cash flows: in 2005, 18 percent to 27 percent; in 2004, 18 percent to 27 percent; and in 2003, 24 percent. We believe that the estimated purchased research and development amounts so determined represent the fair value at the date of acquisition and do not exceed the amount a third party would pay for the projects.

We record intangible assets at historical cost. We amortize our intangible assets subject to amortization, including patents, licenses, developed technology and core technology, using the straight-line method over their estimated useful lives. We review these intangible assets quarterly to determine if any adverse conditions exist or a change in circumstances has occurred that would indicate impairment or a change in their remaining useful life. We also review our indefinite-lived intangible assets at least annually for impairment by calculating the fair value of our assets and comparing the calculated fair values to the respective carrying values.

We test goodwill during the second quarter of each year for impairment, or more frequently if certain indicators are present or changes in circumstances suggest that impairment may exist. In performing the test, we calculate the fair value of the reporting units as the present value of estimated future cash flows using a risk-adjusted discount rate. The selection and use of an appropriate discount rate requires significant management judgment with respect to revenue and expense growth rates. We have not recorded impairment of goodwill in any of the years included in our consolidated statements of operations.

As of December 31, 2005, we had investments in 66 strategic alliances totaling $594 million. As of December 31, 2004, we had investments in 58 strategic alliances totaling $529 million. These assets primarily represent investments in privately held and publicly traded equity securities. We account for investments in companies over which we have the ability to exercise significant influence under the equity method if we hold 50 percent or less of the voting stock. We account for investments in companies over which we do not have the ability to exercise significant influence under the cost method. Our determination of whether we have the ability to exercise significant influence over an investment requires judgment.

As of December 31, 2005, we held investments totaling $85 million in three companies that we accounted for under the equity method. Our ownership percentages in these companies range from approximately 21 percent to 28 percent. As of December 31, 2004, we held investments totaling $61 million in two companies that we accounted for under the equity method. Our ownership percentages in these companies range from approximately 25 percent to 30 percent.

Factors that we consider in determining whether we have the ability to exercise significant influence include, but are not limited to:

For investments accounted for under the equity method, we initially record the investment at cost, and adjust the carrying amount to reflect our share of the earnings or losses of the investee, including all adjustments similar to those made in preparing consolidated financial statements. Amounts recorded to adjust the carrying amounts of investments accounted for under the equity method were not material to our statements of operations in 2005, 2004 or 2003. When we do not have the ability to exercise significant influence over an investee, we follow the cost method of accounting.

We regularly review our strategic alliance investments for impairment indicators. Examples of events or circumstances that may indicate that an investment is impaired include, but are not limited to, a significant deterioration in earnings performance; a significant adverse change in the regulatory, economic or technological environment of an investee; or a significant doubt about an investee's ability to continue as a going concern. If we determine that impairment exists and it is other-than-temporary, we will reduce the carrying value of the investment to its estimated fair value and will recognize an impairment loss in our consolidated statements of operations. Our exposure to loss related to our strategic alliances is generally limited to our equity investments, notes receivable and intangible assets associated with these alliances.

We utilize the asset and liability method for accounting for income taxes. Under this method, we determine deferred tax assets and liabilities based on differences between the financial reporting and tax bases of our assets and liabilities. We measure deferred tax assets and liabilities using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

We recognized net deferred tax liabilities aggregating $110 million at December 31, 2005 and $18 million at December 31, 2004. The liabilities relate principally to deferred taxes associated with our acquisitions and earnings of our non-U.S. subsidiaries to be remitted in the future. The assets relate principally to the establishment of inventory and product-related reserves, purchased research and development, net operating loss carryforwards and tax credit carryforwards. In light of our historical financial performance, we believe these assets will be substantially recovered. See Note I—Income Taxes to our 2005 consolidated financial statements included in Item 8 of this Form 10-K for a detailed analysis of our deferred tax positions.

We reduce our deferred tax assets by a valuation allowance if, based upon the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. We consider relevant evidence, both positive and negative, to determine the need for a valuation allowance. Information evaluated includes our financial position and results of operations for the current and preceding years, as well as an evaluation of currently available information about future years.

We provide for income taxes payable related to earnings of our foreign subsidiaries that may be repatriated in the foreseeable future. Income taxes are not provided on the unremitted earnings of our foreign subsidiaries where such earnings have been permanently reinvested in our foreign operations. It is not practical to estimate the amount of income taxes payable on the earnings that are permanently reinvested in foreign operations. Unremitted earnings of our foreign subsidiaries that are permanently reinvested are $2,106 million at December 31, 2005 and $1,005 million at December 31, 2004.

We provide for potential amounts due in various tax jurisdictions. In the ordinary course of conducting business in multiple countries and tax jurisdictions, there are many transactions and calculations where the ultimate tax outcome is uncertain. Judgment is required in determining our worldwide income tax provision. In our opinion, adequate provisions for income taxes have been made

for all years subject to audit. Although we believe our estimates are reasonable, no assurance can be given that the final tax outcome of these matters will not be different from that which is reflected in our historical income tax provisions and accruals. Such differences could have a material impact on our income tax provision and operating results in the period in which such determination is made.

We are involved in various legal and regulatory proceedings, including intellectual property, breach of contract, securities litigation and product liability suits. In some cases, the claimants seek damages, as well as other relief, which, if granted, could require significant expenditures. We accrue costs of settlement, damages and, under certain conditions, costs of defense when a loss is deemed probable and such costs are estimable. Otherwise, we expense these costs as incurred. If the estimate of a probable loss is a range and no amount within the range is more likely, we accrue the minimum amount of the range. Our accrual for regulatory and litigation-related costs that were probable and estimable was $20 million at December 31, 2005 and $99 million at December 31, 2004. See further discussion of our individual material legal proceedings in Item 3. Legal Proceedings above and Note J—Commitments and Contingencies to our 2005 consolidated financial statements included in Item 8 of this Form 10-K. As of December 31, 2005, a range of loss associated with these individual material legal proceedings can not be estimated due to uncertainty surrounding the outcome of the proceedings.

We are substantially self-insured with respect to general, product liability and securities litigation claims. In the normal course of business, product liability and securities litigation claims are asserted against us. We accrue anticipated costs of litigation and loss for product liability and securities litigation claims based on historical experience, or to the extent specific losses are probable and estimable. We record losses for claims in excess of the limits of purchased insurance in earnings at the time and to the extent they are probable and estimable. Our accrual for product liability and securities litigation claims was $15 million at December 31, 2005 and $13 million at December 31, 2004. Product liability and securities litigation claims against us will likely be asserted in the future related to events not known to management at the present time. The absence of significant third-party insurance coverage increases our exposure to unanticipated claims or adverse decisions. However, based on product liability and securities litigation losses experienced in the past, our election to become substantially self-insured is not expected to have a material impact on our future operations.

Management believes that our risk management practices, including limited insurance coverage, are reasonably adequate to protect us against anticipated general, 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.

We accrue employee termination costs associated with an ongoing benefit arrangement if the obligation is attributed to prior services rendered, the rights to the benefits have vested and the payment is probable and the amount can be reasonably estimated. We generally record such costs into expense over the future service period, if any. In addition, in conjunction with an employee termination, we may offer voluntary termination benefits to employees. These benefits are recorded when the employee accepts the termination benefits and the amount can be reasonably estimated. Other costs associated with exit activities may include costs related to leased facilities to be abandoned or subleased and long-lived asset impairments.

During 2005, we recorded charges associated with exit activities of approximately $40 million. These charges included costs primarily attributable to employee terminations and outsourcing costs

within our human resources function and international divisions; and a $10 million write-off of intangible assets related to our Enteryx Technology.

The recognition of charges associated with exit activities requires our management to make judgments and estimates regarding the nature, timing, and amount of costs associated with the planned exit activity. Management's estimates of future liabilities may change, requiring us to record additional restructuring charges or reduce the amount of liabilities already recorded. At the end of each reporting period, we evaluate the remaining accrued balances to ensure their adequacy, that no excess accruals are retained and that utilization of the provisions are for their intended purposes in accordance with developed exit plans.

During 2004, the FASB issued Statement No. 123(R), Share-Based Payment, which is a revision of Statement No. 123, Accounting for Stock-Based Compensation. Statement No. 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees and amends Statement No. 95, Statement of Cash Flows. In general, Statement No. 123(R) contains similar accounting concepts as those described in Statement No. 123. However, Statement No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the consolidated statement of operations based on their fair values. Pro forma disclosure is no longer an alternative. Alternative phase-in methods are allowed under Statement No. 123(R). We adopted Statement No. 123(R) on its effective date of January 1, 2006 using the "modified-prospective method." Under this method, compensation cost is recognized (a) based on the requirements of Statement No. 123(R) for all share-based payments granted on or after January 1, 2006 and (b) based on the requirements of Statement No. 123 for all unvested awards that were granted to employees prior to January 1, 2006. We expect to apply the Black-Scholes valuation model in determining the fair value of share-based payments to employees, which will then be amortized on a straight-line basis.

As permitted by Statement No. 123, for periods prior to January 1, 2006, we accounted for share-based payments to employees using Opinion No. 25's intrinsic value method and, as such, generally recognized no compensation cost for the granting of employee stock options, except as disclosed in Note L—Stock Ownership Plans to our 2005 consolidated financial statements contained in Item 8 of this Form 10-K. Accordingly, the adoption of Statement No. 123(R)'s fair value method will negatively impact our statements of operations. The impact of adoption of Statement No. 123(R) cannot be quantified at this time because it will depend on the level of share-based payments granted in the future, expected volatilities and expected useful lives, among other factors, present at the grant date. However, had Statement No. 123(R) been effective in prior periods, the impact of that standard would have approximated the impact of Statement No. 123 as described in our disclosure of pro forma net income and net income per share in Note A—Significant Accounting Policies to our 2005 consolidated financial statements included in Item 8 of this Form 10-K. Statement No. 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under currently effective accounting literature. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after adoption of Statement No. 123(R). While we cannot estimate what those amounts will be in the future (because they depend on, among other things, when employees exercise stock options), the amount of operating cash flows recognized in prior periods for such excess tax deductions was $28 million in 2005, $185 million in 2004 and $154 million in 2003.

Further, most of our stock option awards provide for immediate vesting upon retirement, death or disability of the participant. We have traditionally accounted for the pro forma compensation expense related to stock-based awards made to retirement eligible individuals using the stated vesting period of the grant. This approach results in recognizing compensation expense over the vesting period except in the instance of the participant's actual retirement. Statement No. 123(R) clarified the accounting for

stock-based awards made to retirement eligible individuals, which explicitly provides that the vesting period for a grant made to a retirement eligible employee is considered non-substantive and should be ignored when determining the period over which the award should be expensed. Upon adoption of SFAS No. 123(R), we will be required to expense stock-based awards over the period between grant date and retirement eligibility or immediately if the employee is retirement eligible at the date of grant. If we had historically accounted for stock-based awards made to retirement eligible individuals under these requirements, the pro forma expense disclosed in Note A would not have been materially impacted for the periods presented.

As the management of Boston Scientific Corporation, we are responsible for establishing and maintaining adequate internal control over financial reporting. We designed our internal control system to provide reasonable assurance to management and the Board of Directors regarding the preparation and fair presentation of our financial statements.

We assessed the effectiveness of our internal control over financial reporting as of December 31, 2005. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework. Based on our assessment, we believe that, as of December 31, 2005, our internal control over financial reporting is effective at a reasonable assurance level based on these criteria.

Ernst & Young LLP, an independent registered public accounting firm, has issued an audit report on management's assessment of internal control over financial reporting and on the effectiveness of our internal control over financial reporting. This report in which they expressed an unqualified opinion is included below.

Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting

We have audited management's assessment, included in the accompanying Management's Report on Internal Control over Financial Reporting, that Boston Scientific Corporation maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Boston Scientific Corporation's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management's assessment and an opinion on the effectiveness of the company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management's assessment, testing and evaluating the design and operating effectiveness of internal control and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management's assessment that Boston Scientific Corporation maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Boston Scientific Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Boston Scientific Corporation as of December 31, 2005 and December 31, 2004, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2005 of Boston Scientific Corporation and our report dated February 24, 2006, expressed an unqualified opinion thereon.

We develop, manufacture and sell medical devices globally and our earnings and cash flow are exposed to market risk from changes in currency exchange rates and interest rates. We address these risks through a risk management program that includes the use of derivative financial instruments. We operate the program pursuant to documented corporate risk management policies. We do not enter into derivative transactions for speculative purposes. Gains and losses on derivative financial instruments substantially offset losses and gains on underlying hedged exposures. Furthermore, we manage our exposure to counterparty nonperformance on derivative instruments by entering into contracts with a diversified group of major financial institutions and by monitoring outstanding positions.

Our currency risk consists primarily of foreign currency denominated firm commitments, forecasted foreign currency denominated intercompany and third-party transactions and net investments in certain subsidiaries. We use both nonderivative (primarily European manufacturing operations) and derivative instruments to manage our earnings and cash flow exposure to changes in currency exchange rates. We had currency derivative instruments outstanding in the contract amount of $3,593 million at December 31, 2005 and $4,171 million at December 31, 2004. The decrease in the outstanding amount of our currency derivative instruments is primarily due to the maturity of hedge contracts. We recorded $176 million of other assets and $55 million of other liabilities to recognize the fair value of these derivative instruments at December 31, 2005 as compared to $70 million of other assets and $129 million of other liabilities recorded at December 31, 2004. A 10 percent appreciation in the U.S. dollar's value relative to the hedged currencies would increase the derivative instruments' fair value by $129 million at December 31, 2005 and by $163 million at December 31, 2004. A 10 percent depreciation in the U.S. dollar's value relative to the hedged currencies would decrease the derivative instruments' fair value by $157 million at December 31, 2005 and $190 million at December 31, 2004. Any increase or decrease in the fair value of our currency exchange rate sensitive derivative instruments would be substantially offset by a corresponding decrease or increase in the fair value of the hedged underlying asset, liability or cash flow.

Our earnings and cash flow are exposed to interest rate changes on U.S. dollar denominated debt partially offset by interest rate changes on U.S. dollar denominated cash investments. We use interest rate swaps to manage our exposure to interest rate movements and to reduce borrowing costs by converting either floating-rate debt into fixed-rate debt or fixed-rate debt into floating-rate debt. We had interest rate swaps outstanding in the notional amount of $1,100 million at December 31, 2005 and $1,600 million at December 31, 2004. Our interest rate swaps hedge against potential changes in the fair value of certain of our senior notes and are designated as fair value hedges. The decrease in the notional amount of our interest rate swaps is due to the maturing of hedge contracts related to our $500 million 6.625 percent senior notes, which we repaid upon maturity during March 2005. To recognize the fair value of these interest rate swaps, we recorded $21 million of other assets and $7 million of other liabilities at December 31, 2005 as compared to $32 million of other assets and $1 million of other liabilities at December 31, 2004. A one percentage point increase in global interest rates would decrease the derivative instruments' fair value by $74 million at December 31, 2005 as compared to $84 million at December 31, 2004. A one percentage point decrease in global interest rates would increase the derivative instruments' fair value by $80 million at December 31, 2005 as compared to $92 million at December 31, 2004. Any increase or decrease in the fair value of our interest rate sensitive derivative instruments would be substantially offset by a corresponding decrease or increase in the fair value of the hedged underlying liability.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in millions, except share data)

DELAWARE (State of Incorporation)		04-2695240 (I.R.S. Employer Identification No.)
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:
COMMON STOCK, $.01 PAR VALUE PER SHARE		NEW YORK STOCK EXCHANGE
(Title Of Class)		(Name of Exchange on Which Registered)
Securities registered pursuant to Section 12(g) of the Act: NONE

PART I
	ITEM 1. BUSINESS	1
	ITEM 1A. RISK FACTORS	22
	ITEM 1B. UNRESOLVED STAFF COMMENTS	32
	ITEM 2. PROPERTIES	32
	ITEM 3. LEGAL PROCEEDINGS	32
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	32
PART II
	ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	33
	ITEM 6. SELECTED FINANCIAL DATA	34
	ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	35
	ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	62
	ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	63
	ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	113
	ITEM 9A. CONTROLS AND PROCEDURES	113
	ITEM 9B. OTHER INFORMATION	114
PART III
	ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY	115
	ITEM 11. EXECUTIVE COMPENSATION	123
	ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	131
	ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	134
	ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES	135
PART IV
	ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	136
SIGNATURES		142
EX-10.47 ABBOTT TRANSACTION AGREEMENT
EX-10.48 AMENDMENT NO. 1 TO ABBOTT TRANSACTION AGREEMENT
EX-10.49 AMENDMENT NO. 2 TO ABBOTT TRANSACTION AGREEMENT
EX-10.50 AMENDMENT NO. 3 TO ABBOTT TRANSACTION AGREEMENT
EX-10.51 AGREEMENT AND GENERAL RELEASE OF ALL CLAIMS
EX-10.52 FORM OF FOURTH AMENDMENT TO 401(K) RETIREMENT SAVINGS PLAN
EX-10.53 BOSTON SCIENTIFIC EXECUTIVE ALLOWANCE PLAN
EX-10.54 BOSTON SCIENTIFIC EXECUTIVE RETIREMENT PLAN
EX-10.55 AMENDED AND RESTATED COMMITMENT LETTER
EX-10.56 FORM OF DEFERRED STOCK UNIT AGREEMENT (2000 LONG-TERM INCENTIVE PLAN)
EX-10.57 FORM OF DEFERRED STOCK UNIT AGREEMENT (2003 LONG-TERM INCENTIVE PLAN)
EX-12 RATIOS OF EARNINGS TO FIXED CHARGES
EX-21 LIST OF SUBSIDIARIES AS OF 2/15/2006
EX-23 CONSENT OF ERNST & YOUNG, LLP
EX-31.1 SECTION 302 CEO CERTIFICATION
EX-31.2 SECTION 302 CFO CERTIFICATION
EX-32.1 SECTION 906 CEO CERTIFICATION
EX-32.2 SECTION 906 CFO CERTIFICATION

	High		Low

2005
First Quarter	$	35.19	$	28.67
Second Quarter		30.80		27.00
Third Quarter		28.95		23.05
Fourth Quarter		27.33		22.95
2004
First Quarter	$	44.12	$	35.86
Second Quarter		45.81		37.32
Third Quarter		42.70		32.12
Fourth Quarter		39.46		33.36

Year Ended December 31,		2005		2004		2003		2002			2001

Operating Data
	Net sales	$	6,283	$	5,624	$	3,476	$	2,919		$	2,673
	Gross profit		4,897		4,332		2,515		2,049			1,754
	Selling, general and administrative expenses		1,814		1,742		1,171		1,002			926
	Research and development expenses		680		569		452		343			275
	Royalty expense		227		195		54		36			35
	Amortization expense		152		112		89		72			136
	Litigation-related charges (credits), net		780		75		15		(99	)
	Purchased research and development		276		65		37		85			282
	Total operating expenses		3,929		2,758		1,818		1,439			1,654
	Operating income		968		1,574		697		610			100
	Income before income taxes		891		1,494		643		549			44
	Net income (loss)		628		1,062		472		373			(54	)
	Net income (loss) per common share—basic	$	0.76	$	1.27	$	0.57	$	0.46		$	(0.07	)
	Net income (loss) per common share—assuming dilution	$	0.75	$	1.24	$	0.56	$	0.45		$	(0.07	)
	Weighted average shares outstanding—assuming dilution		837.6		857.7		845.4		830.0			802.8

As of December 31,		2005		2004		2003		2002		2001

Balance Sheet Data
	Cash, cash equivalents and marketable securities	$	848	$	1,640	$	752	$	260	$	185
	Working capital		1,152		684		487		285		275
	Total assets		8,196		8,170		5,699		4,450		3,974
	Borrowings (long-term and short-term)		2,020		2,367		1,725		935		1,204
	Stockholders' equity		4,282		4,025		2,862		2,467		2,015
	Book value per common share	$	5.22	$	4.82	$	3.46	$	3.00	$	2.49

(in millions)	2005		2004

Short-term debt	$	156	$	1,228
Long-term debt		1,864		1,139

Gross debt	$	2,020	$	2,367
Less: cash, cash equivalents and marketable securities		848		1,640

Net debt	$	1,172	$	727

	Payments Due by Period
(in millions)	1 Year or Less		2-3 Years		4-5 Years		After 5 Years		Total

Debt principal^*	$	156	$	4	$	2	$	1,852	$	2,014
Interest payments		100		200		200		846		1,346

Debt, including interest		256		204		202		2,698		3,360
Operating leases †		47		56		9		2		114
Purchase obligations†,††		102		15						117
Minimum royalty obligations††		3		6		4		8		21
Total	$	408	$	281	$	215	$	2,708	$	3,612

As of December 31,		2005		2004

Assets
Current assets
	Cash and cash equivalents	$	689	$	1,296
	Marketable securities		159		344
	Trade accounts receivable, net		932		900
	Inventories		418		360
	Deferred income taxes		152		241
	Prepaid expenses and other current assets		281		148

Total current assets			2,631		3,289
Property, plant and equipment, net			1,011		870
Investments			594		529
Other assets			225		142
Intangible assets
	Goodwill		1,938		1,712
	Technology—core, net		1,099		942
	Technology—developed, net		209		200
	Patents, net		338		339
	Other intangible assets, net		151		147

Total intangible assets			3,735		3,340

Total Assets		$	8,196	$	8,170

As of December 31,			2005			2004

Liabilities and Stockholders' Equity
Current liabilities
	Commercial paper		$	149		$	280
	Current maturities of long-term debt			1			502
	Bank obligations			6			446
	Accounts payable			105			108
	Accrued expenses			1,124			902
	Income taxes payable			17			255
	Other current liabilities			77			112

Total current liabilities				1,479			2,605
Long-term debt				1,864			1,139
Deferred income taxes				262			259
Other long-term liabilities				309			142
Commitments and contingencies
Stockholders' equity
	Preferred stock, $.01 par value—authorized 50,000,000 shares, none issued and outstanding
	Common stock, $.01 par value—authorized 1,200,000,000 shares, 844,565,292 shares issued at December 31, 2005 and December 31, 2004			8			8
	Additional paid-in capital			1,658			1,633
	Deferred compensation			(98	)		(2	)
	Treasury stock, at cost — 24,215,559 shares at December 31, 2005 and 9,221,468 shares at December 31, 2004			(717	)		(320	)
	Retained earnings			3,410			2,790
	Accumulated other comprehensive income (loss)
		Foreign currency translation adjustment		(71	)		(34	)
		Unrealized gain on available-for-sale securities, net		26			2
		Unrealized gain (loss) on derivative financial instruments, net		67			(51	)
		Minimum pension liability		(1	)		(1	)

Total stockholders' equity				4,282			4,025

			$	8,196		$	8,170

			Common Stock			Additional Paid-In Capital												Accumulated Other Comprehensive Income (Loss)
			Common Stock						Deferred Compensation			Treasury Stock			Retained Earnings						Comprehensive Income (Loss)
			Shares Issued	Par Value					Deferred Compensation			Treasury Stock			Retained Earnings						Comprehensive Income (Loss)

Balance at December 31, 2002			414,882,413	$	4	$	1,250					$	(54	)	$	1,394		$	(127	)
Comprehensive income
	Net income															472					$	472
	Other comprehensive income (expense), net of tax
		Foreign currency translation adjustment																	69			69
		Net change in equity investments																	52			52
		Net change in derivative financial instruments																	(44	)		(44	)
		Net change in minimum pension liability																	1			1
Issuance of common stock							(179	)					512			(73	)
Issuance of restricted stock, net of cancellations										(1	)		1
Stock split effected in the form of a stock dividend			414,882,413		4											(4	)
Repurchases of common stock													(570	)
Tax benefit related to stock options							154
Amortization of deferred compensation										1

Balance at December 31, 2003			829,764,826		8		1,225						(111	)		1,789			(49	)	$	550

Comprehensive income
	Net income															1,062					$	1,062
	Other comprehensive income (expense), net of tax
		Foreign currency translation adjustment																	16			16
		Net change in equity investments																	(48	)		(48	)
		Net change in derivative financial instruments																	(3	)		(3	)
Issuance of common stock			14,800,466				132						149			(56	)
Issuance of restricted stock, net of cancellations							1			(3	)		2
Repurchases of common stock													(360	)
Tax benefit related to stock options							185
Step-up accounting adjustment for certain investments																(5	)
Stock-compensation charge for certain modifications							90
Amortization of deferred compensation										1

Balance at December 31, 2004			844,565,292		8		1,633			(2	)		(320	)		2,790			(84	)	$	1,027

Comprehensive income
	Net income															628					$	628
	Other comprehensive income (expense), net of tax
		Foreign currency translation adjustment																	(37	)		(37	)
		Net change in equity investments																	24			24
		Net change in derivative financial instruments																	118			118
Issuance of common stock							(113	)					207
Common stock issued for acquisitions							(5	)					129
Issuance of restricted stock, net of cancellations							114			(115	)		1
Repurchases of common stock													(734	)
Tax benefit related to stock options							28
Step-up accounting adjustment for certain investments																(8	)
Amortization of deferred compensation							1			19

Balance at December 31, 2005			844,565,292	$	8	$	1,658		$	(98	)	$	(717	)	$	3,410		$	21		$	733

Year Ended December 31,			2005			2004			2003

Operating Activities
Net income			$	628		$	1,062		$	472
Adjustments to reconcile net income to cash provided by operating activities:
	Gain on sale of equity investments			(4	)		(36	)
	Depreciation and amortization			314			275			196
	Deferred income taxes			4			30			(31	)
	Purchased research and development			276			65			37
	Tax benefit relating to stock options			28			185			154
	Stock-compensation expense, including expense for certain modifications			13			62			1
Increase (decrease) in cash flows from operating assets and liabilities, excluding the effect of acquisitions:		&nbs

							2005 versus 2004				2004 versus 2003
(in millions)	2005		2004		2003		As Reported Currency Basis		Constant Currency Basis		As Reported Currency Basis	Constant Currency Basis

United States	$	3,852	$	3,502	$	1,924	10%		10%		82%	82%

Europe	$	1,161	$	994	$	672	17%		17%		48%	35%
Japan		579		613		541	(6%	)	(4%	)	13%	6%
Inter-Continental		691		515		339	34%		28%		52%	44%

International	$	2,431	$	2,122	$	1,552	15%		13%		37%	27%

Worldwide	$	6,283	$	5,624	$	3,476	12%		11%		62%	57%

							2005 versus 2004		2004 versus 2003
(in millions)	2005		2004		2003		As Reported Currency Basis	Constant Currency Basis	As Reported Currency Basis	Constant Currency Basis

Cardiovascular	$	4,498	$	4,107	$	2,168	10%	9%	89%	84%
Electrophysiology		132		130		113	2%	2%	15%	12%
Neurovascular		277		253		223	9%	9%	13%	9%

Cardiovascular	$	4,907	$	4,490	$	2,504	9%	9%	79%	74%

Oncology	$	207	$	186	$	166	11%	11%	12%	8%
Endoscopy		697		641		580	9%	9%	11%	7%
Urology/Gynecology		324		261		226	24%	24%	15%	13%

Endosurgery	$	1,228	$	1,088	$	972	13%	13%	12%	9%

Neuromodulation	$	148	$	46		N/A	222%	222%	N/A	N/A

Worldwide	$	6,283	$	5,624	$	3,476	12%	11%	62%	57%